Illinois casinos get shaft (again)

Jun 6, 2006 5:10 AM

They’re at it again in Illinois where the time for diplomacy has passed and casino owners and some state and business officials are glaring at each other across a wide gulf of differences in the Chicago area.

The issue in this case is a variation on a familiar theme — the state’s effort to help the troubled but politically connected thoroughbred racing industry.

The owners of the four casinos that serve the Chicago market have decided to take the state to court. The companies include Harrah’s, MGM Mirage and Penn National.

They "boiled over," so to speak, in the wake of legislation that taps their casinos for an extra three percent of revenues to help the racing industry.

Pressure from Gov. Rod Blagojevich was crucial to getting the bailout measure passed during the closing days of the legislature. The Guv’s action was enough to generate a giant eye-roll on the part of casino bosses who have previously noted that with friends like Blagojevich they don’t need any more enemies in Springfield.

The three percent of gaming revenues that will go to the racing industry is estimated to add up to about $32 million with roughly half of that coming from Penn, which has two of the four casinos affected by the levy.

The situation probably says something about the Harrah’s rationale for deciding to invest nearly a half-billion dollars upgrading its Hammond, Indiana property, which is actually the closest of all the gambling halls in question to downtown Chicago.

Most company officials offered thoughts only with the promise of anonymity. As one noted, "Suing the state where you do business is not normally a great idea."

But a state-sanctioned business trying to keep from getting run over by circumstances has to do what it has to do.

The legislation singles out the Hollywood and Argosy casinos in Aurora and Alton owned by Penn National, the Harrah’s casino at Joliet and the Hyatt-MGM Mirage casino in Elgin. They serve the Chicagoland market.

How did it happen that just these four casinos were targeted by the measure?

"I’ll tell you," said one of the incensed resort executives. "It’s because the lobbyists who helped push this through are from Chicago."

He added, "I want to know how they think they can get away with taxing one for-profit industry to help another for-profit industry?"

Letting the question hang for a moment before going on, he said, "It may be just a little illegal."

He continued, "There is no question the racing industry needs help, but its leaders need to get their act together and a tax like this is not ultimately going to solve anyone’s problem."

Beyond the borders of New Jersey, Nevada and Mississippi, the thinking behind some casino tax policies occasionally resembles a storyline from the Twilight Zone.

But as another executive with one of the four companies bringing suit cautioned, "You never know when a lawmaker in some other state is going to take a long look at what Illinois has done and conclude, hey, that’s a good idea."

So the four have gone to state court rather than merely give the issue a laugh and decide that it is all too silly for words.

What Illinois lawmakers did is like slapping a tax on auto manufacturers to help the struggling builders of horse-drawn buggies.

Or it’s like slapping a tax on designer ice cream to help the manufacturers of the stuff you buy in grocery stores.

It’s also why gaming’s biggest companies have decided to focus their expansion plans on just a few states such as Nevada.