May Be a Way Forward for Illinois Tracks

Bob Kieckhefer

There may yet be a way forward for racetracks as part of gaming expansion in Illinois.
 
The General Assembly in its spring session approved a bill that would allow a land-based casino in the Chicago Loop, four other casinos around the state, year-round racing and gaming at the state Fairgrounds in Springfield and slot machines at O’Hare and Midway airports – and at the state’s racetracks.
 
Gov. Pat Quinn made unfriendly noises as soon as the bill was passed and the measure has been held in the Senate while all parties look for a deal the governor could okay.
 
Earlier this week, Quinn dropped the hammer.
 
Tracks won’t get slots on his watch, he said, nor will he go for the Fairgrounds or the airport deals. If regulation is beefed up to meet his standards, he said, he will OK the rest of the expansion. He strongly reiterated Oct. 18 that he will not approve slot machines for racetracks.
 
But downstate legislators won’t vote for a gaming package unless it provides help for racing and, by extension, the agribusiness that supports it. Several key supporters quickly said Quinn’s requirements effectively killed the bill.
 
Meanwhile, Chicago Mayor Rahm Emanuel needs the money promised by the Loop casino that Quinn says he would support. And Quinn certainly could use the revenue from licensing fees and taxes on that land-based gaming palace and the four other new casinos.
 
What to do?
 
If this is all politics and Quinn really meant to kill the whole bill, there’s not much that can be done. But if he really is open to a compromise – and if race track owners are, too – either or both of two things could be part of compromise that would provide revenue to tracks without setting them up in the slots business.
 
One potential funding mechanism actually is already in place and would require only implementation. That’s a plan – long ago approved by the legislature – to give tracks a slice of the revenue from the original “10th casino” license. There’s a long and, in many ways, irrelevant history to this but, in short, tracks are legally entitled to some of the revenue generated by the new Rivers Casino that opened in Des Plaines this summer.
 
The money already is accumulating in a reserve fund at the rate of several million dollars a month. The hitch is that this money isn’t an additional hit to the Rivers Casino. It’s a diversion from the gaming tax that otherwise would come to the state. As such, it goes into the General Revenue Fund and the legislature needs to formally appropriate it to the tracks.
 
Given the state’s dire fiscal condition, it was generally assumed that money would be “swept” into general spending, as have funds from many other special accounts held by the state. But if the governor and the legislature agree to abide by the original intent of the existing law, it could be a patch to substitute for slots revenue.
 
It appears that solution is what Quinn intends to offer tracks in the upcoming fall veto session.
 
“The law provides them an annual amount of money to support horse racing,” the governor told the Arlington Heights Daily Herald Tuesday. “We can look at that amount from year to year. That’s what legislatures do.”
 
And that’s precisely why tracks won’t like that plan: It would require annual action by the General Assembly. Each year, the appropriation would be subject to whims of lawmakers or the need to fund other programs. In effect, race track appropriations would be competing for state dollars with health care for the poor, education and prison guards.
 
A better, but more politically difficult, solution would be re-enactment of “impact fee” legislation. Several years ago, lawmakers awarded tracks a small percentage of the profits of the state’s largest casinos. The casinos fought that assessment in court for years but finally lost and some $140 million that had been held in escrow was released to tracks late in the summer to boost purses and fund improvements.

Reinstituting that levy would be a more reliable funding source for racetracks than the “10th license” alternative because it wouldn’t require annual action. It also might have some appeal to casinos because, while it would be an added drain on their profitability, such a compromise wouldn’t set up the tracks as competition for slots gaming. Also, the original form of the bill passed this spring reduced the tax rate on most casino revenue anyway, although Quinn also said he didn’t like that idea, either.
 
The downside for tracks is that they would not draw added customers as they might if they had their own casino games. Arlington Park, in particular, long has sought to remake itself into a “destination” over and above racing and a casino might be a step in that direction.
 
The fee has expired and it would take legislative action to renew it. But whacking casinos again might be an easier vote for most lawmakers than diverting funds from the state’s coffers.
 
If either of those alternatives was implemented, that still would leave the unique situation of year-around racing and gaming at the state Fairgrounds in Springfield – with revenue earmarked for the state fair, county fairs and other agricultural programs. Support from central Illinois lawmakers will be essential to passing any compromise and that support is questionable at best if Springfield is left out of the equation.
 
In announcing his “principles” for gaming expansion, Quinn specifically said he would not approve the Fairgrounds provisions. That might be the area in which he must compromise.

 

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