Illinois lawmakers appear to finally have reached the elusive compromise that long has prevented the state from seriously threatening Northwest Indiana's casino industry.
The solution: lots more gaming — everywhere.
On Sunday, the Democratic-controlled Illinois Senate voted 46-10 for legislation authorizing six new casinos in the state, including a Chicago mega-casino and a south Cook County casino, additional slots in bars, casinos at horse racing tracks, slots at O'Hare and Midway airports, legal sports wagering and higher taxes on all of it.
Democratic Gov. J.B. Pritzker has signaled he intends to sign the massive Senate Bill 690 into law when it reaches his desk. It previously passed the Democratic-controlled House, 87-27.
"Legalizing sports betting and expanding gaming will create jobs up and down the state," said Pritzker, who estimated the legislation will produce up to 10,000 new jobs across Illinois and generate funds to support $45 billion in capital improvements, including new and renovated state buildings, schools and other facilities.
But precisely what the Illinois measure means for Northwest Indiana's five casinos, the tax revenue they pay to the state and local governments, and the fate of their several thousand Region workers, is not yet certain.
"We know it's going to hurt," said Matt Bell, executive director of the Casino Association of Indiana, a trade group whose membership includes most of the state's gaming facilities.
"Chicago is an absolutely critical market for northern properties, and, obviously, more pressure from our western border will impact us across the state," Bell said.
"But we have great operators who are used to competing very hard against each other. This will be a new and unprecedented level of competition from outside of the state."
Bell said he's grateful the Indiana General Assembly this year authorized the relocation of Gary's Majestic Star casinos from Lake Michigan to a to-be-determined land-based site, likely adjacent to the Borman Expressway. The legislature also approved other gaming tax and regulatory changes, including a new Terre Haute casino, to make Indiana casinos viable against Illinois, Michigan, Ohio and Kentucky.
"Obviously there will be an adjustment (due to Illinois). But I think we have folks that are going to compete very hard to maintain the business they've attracted from that market, to make their properties a great destination for that customer," Bell said.
Gary casino still a go
That includes Spectacle Entertainment, owner of the Majestic Star casinos, which is continuing to move forward with its plans to construct a new Gary casino, previously announced as a $300 million investment, including a 200-room boutique hotel.
John Keeler, Spectacle vice president and general counsel, admitted Monday that the Illinois gaming expansion is "not the best news in the world."
"We're just trying, like everybody else, to digest what it really means, and kind of reconfigure where we are and where we're going in light of the passage of that bill," Keeler said. "We're still committed to do something in Gary on land, and to compete in Terre Haute."
Keeler said it's premature to say whether Spectacle will scale back its Gary casino plans. House Enrolled Act 1015 requires Spectacle to make a minimum $150 million investment in a new Gary casino, with 35% of the money dedicated to non-gaming amenities.
"It's a risk that we knew was out there," he said. "It obviously changes the market dynamics quite a bit. But we've spent a lot of time, a lot of resources, a lot of hard work getting to where we are. We're not going to walk away from it."
In fact, Keeler believes the non-gaming amenities may be what sets Indiana's casinos apart from their new Illinois brethren.
Just as the Blue Chip Casino in Michigan City weathered new tribal casinos in New Buffalo, Michigan, and South Bend by adding a spa and other resort features, so too might a new Gary casino become a multi-day destination rather than just a building to visit for a few hours.
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"We want to try to develop as classy a place as we can that the market will support," Keeler said.
Gary Mayor Karen Freeman-Wilson said she's confident "the market will support a viable land-based casino in Gary" and she vowed to "continue to work with Spectacle to bring that to pass."
The mayor and state Sen. Eddie Melton, D-Gary, also said the increased competition from Illinois reinforces the plan for Gary to move away from relying on casino revenue and to instead focus on other economic development opportunities, such as the reshaping of Buffington Harbor into an intermodal transit hub once the Majestic Star casinos are relocated.
"We believe both these endeavors will do much to strengthen our regional casino value as well as protect, and even grow Hoosier jobs," Melton said.
"It is our sincere hope that our neighboring state's latest policies do not affect the positives steps we're making to preserve and grow our own regional and state economy. Every resident in this community should know we are committed to working proactively and passionately to continue to lead in a way that secures opportunity for us against any threats that should arise, today or tomorrow."
Uncertain financial impact
Hammond Mayor Thomas McDermott Jr., whose city is home to Indiana's largest and most profitable casino, anticipates Hammond's Horseshoe may "take a haircut" from a new Chicago casino.
"It's not wonderful. But we've been expecting it for a long time, and it finally happened," McDermott said. "When Pritzker got elected and the new mayor of Chicago took over, it seemed like all the stars were aligning."
But McDermott expects most of the impact of the Illinois gaming expansion will hit the casinos in East Chicago, Gary and Michigan City harder than Hammond, due to the Horseshoe's location immediately adjacent to the Chicago Skyway.
"Could we lose 20%? Yeah, it's possible. Could we lose more? Possibly," he said. "But people still are going to gamble at Horseshoe."
In fact, McDermott expects Hammond will lose more revenue when state-imposed property tax caps take full effect in Lake County in 2020 than the city will see vanish as a result of the Illinois gaming expansion.
McDermott also suggested that it probably will be years before the new Illinois casinos are operating. For example, when Illinois legalized slots in bars in 2009, it took until 2012 for the reels to start turning.
"We should be blessed that it didn't happen five years ago, I guess, because that casino would be up and running right now," he said.
On the other hand, Mike Hicks, an economics professor at Ball State University, who studies the tax and economic effects of casino openings, is considerably less optimistic.
He believes the Region will get "clobbered" by the new Illinois competition since data show approximately 70% of the gamblers at Northwest Indiana's casinos live in Illinois.
Hicks said it's unlikely they'll continue traveling across the state line to visit an Indiana casino when there's one much closer to home, especially if the south suburban casino is located adjacent to Interstate 80 and more easily accessible than the Region's Lake Michigan casinos.
"Who is going to drive past a casino to go to Lake County?" Hicks said. "The newer ones tend to attract more people, particularly in the early stages after they're opened."
At the same time, Hicks said because Illinois is planning to "tax the bejeezus" out of its casinos to address its other fiscal needs, Indiana casinos could profitably offer higher slot payouts and more generous promotions to continue attracting Illinois patrons.