New Illinois legislation could expand of the casino business

Jun 14, 2011 3:09 AM

A Mirage Resorts executive had three words for new Illinois legislation that could generate a widespread expansion of the casino business and add a large casino in downtown Chicago.

"Compelling… very compelling," said Senior VP Alan Feldman, who noted Chicago is one of those rare U.S. travel destinations with existing wide appeal to both business and pleasure travelers.

There is already a lot to do and see in Chicago. It is not one of those depressed cities struggling to pull itself from the muck of hard times.

The plan that has been approved by lawmakers would add several casinos, including a casino in Chicago, slots at O’Hare and Midway airports and at the state’s six existing tracks. Existing dockside casinos would also be allowed to expand the number of games and slots.

But there is still so much that is very uncertain and that fact was captured in the remark of the senior Caesar executive who generally shared Feldman’s optimism concerning the possibilities but confided, "Quinn is the wild card here. We don’t know what he is going to do."

Gov. Pat Quinn has not yet received the bill, but has made it clear he thinks it goes too far and has declared himself willing to listen to opinions about how the measure might be "right-sized" enough to get his signature.

Senate President John Cullerton, D-Chicago, put the bill on hold, something he is allowed to do since he voted for it, and there is time for lawmakers to consider their options before they return to Springfield in a few weeks.

Caesars and MGM have good reasons for perhaps taking different views of the legislative process that produced the recently passed measure.

Caesars operates three casinos relying heavily on Illinois business – two are in Illinois but the biggest and the one closest to downtown Chicago is its Horseshoe Casino in Hammond, Ind. Other Caesars casinos are in Joliet and Metropolis.

MGM’s only Illinois involvement at the moment is its passive half interest in the Grand Victoria in the Chicago suburb of Elgin. MGM acquired it in the 2005 purchase of Mandalay Resorts, but immediately moved to put it in trust with Illinois-based Hyatt in charge of operations.

MGM bosses at that time were very busy elsewhere, trying to breathe life into the concept that would eventually become CityCenter. But nothing was any more important at that time than its budding Macau partnership with Pansy Ho.

But the tax-them-till-they-howl policy toward Illinois casinos has been a major turn-off for MGM, just as it has been for other casino owners there. Several of the casino companies even went to court when the legislature levied an additional tax on casinos in the Chicago area to benefit racetracks.

When the tiered tax levy went to 50 percent of gross gaming revenues of the biggest operators, most of those companies downsized on their own to stay below the level that triggered the 50 percent.

Penn National is another of the Nevada licensees doing business in Illinois, a fact that recently caused its CEO Peter Carlino to grumble it brought him no joy to admit Penn has three casinos there.

Still, the Chicago area is a unique metropolitan market with much potential, a fact that probably persuaded MGM to retain its small grip on a piece of the Illinois gambling business.

You never know when things might change, the MGM strategists concluded as they busied themselves elsewhere.

Talk and plans aimed at expanding Illinois gaming have come up annually, but Rep. Lou Lang, the Skokie Democrat who sponsored the bill that awaits some likely repair work, said this is the year when all the pieces seemed to magically come together.

Attitudes and the shape of the gaming industry with an interest in Chicago have all changed over the years. It was nearly 20 years ago Caesars World, Hilton and Circus Circus proposed a joint venture that would have added some ten thousand hotel rooms to the Chicago skyline.

Gaming executives familiar with the torturous process of Illinois politics say Chicago Mayor Rahm Emanuel’s support of the Chicago casino was a factor. He went to the trouble of personally lobbying some of the forces that made a difference.

"I’m not sure (former Chicago mayor Richard) Daley ever really cared about casinos, but it has been different with Emanuel," who argued that a new business able to create some 10,000 jobs should be welcomed.

Las Vegas will ultimately benefit from expansion in Illinois that is engineered in such a fashion that operators there can enlarge the market and not simply cannibalize existing locals business. MGM, Caesars and Penn, are just three of the casino companies to launch or upgrade cross-marketing programs during recent months.

The Caesars executive speculated, "Airport slots – something they should have done long ago – would probably be the most immediately accretive, what with the numbers of people moving through O’Hare and Midway daily."