/>iOn May 31, 2011, the Illinois legislature approved Illinois Senate Bill 744 (the “Bill”) to expand gambling in Illinois. The Bill now goes to Governor Pat Quinn for approval, veto, or amendatory veto. If the Governor exercises an amendatory veto—striking some but not all provisions in the Bill—the amended Bill will return to the legislature where it will need only a majority vote in each house to pass in amended form.
Overview
The Bill permits five new casinos, including one located in and owned by the City of Chicago. Illinois will also see increased gaming positions, an option for existing riverboats to convert to land-based casinos, a mechanism for the issuance of a provisional license of Video Gaming Terminal site locations, and slot machines at the Chicago airports and Illinois horse racing tracks. In addition, the Bill offers tax incentives to build land-based casinos and offers a dollar-for-dollar tax credit of up to $2,000,000 for renovations at existing casinos.
Expanded Riverboat and Casino Gambling
The Bill creates five new land-based or riverboat casinos (“Casino”) in the State of Illinois. Highlights of the Bill include:
- Five New Casinos. The Bill authorizes a Casino to be built in Chicago, Danville, Park City, and Rockford, and one of the following townships in Cook County: Bloom, Bremen, Calumet, Rich, Thorton, or Worth Township.
- Riverboat to Land-Based Casino Conversion. Upon approval of the Illinois Gaming Board (“IGB”), existing riverboat casinos may be converted to land-based casinos.
- Lake Michigan Open to Riverboats. Riverboat gambling would be able to take place on Lake Michigan.
- Temporary Facilities. Casinos may conduct gaming at temporary facilities for up to two years while permanent facilities are being built or while renovations to an existing facility are being made.
- Par-A-Dice Relocation. The Par-A-Dice casino will be permitted to relocate from its location on the Illinois River south of Marshall County to either Tazewell County or to a river-border municipality within 10 miles of its original location that is already conducting gambling operations.
Increased Gaming Positions
The City of Chicago will be allowed 4,000 gaming positions to be distributed among the City Casino and the airport locations. All other Casinos in the State (including existing riverboats) will be allowed 1,600 positions (up from 1,200) until January 1, 2013, and 2,000 positions thereafter. If some Casinos do not purchase all of their available positions, those additional positions may be available to Casinos that do purchase all their positions. Existing Casinos may purchase positions for $12,500 a piece.
Casino Licensing Fees and Application Process
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Licensing Fees. A $100,000 initial licensing fee will be charged for each new Casino. An additional fee of $25,000 will be charged for each gaming position in Cook County, and $12,500 will be charged for each gaming position in all other counties.
- Reconciliation payment. Another licensing payment will be due four years after operations begin. This will be equal to 75% of Adjusted Gross Receipts (“AGR”) for the most lucrative 12-month period of operations, minus the total initial amount paid for each gaming position.
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Changes to the Licensing Application Process. Applications to the IGB for a new Casino owners license will require disclosure of more information than the existing process, including:
- The history and success of the applicant in developing tourism, creating jobs, and meeting commitments to local community-based organizations.
- A plan to mitigate any adverse affects the proposed facility may have.
- A record of compliance with discrimination and labor laws.
- A plan for the utilization of minority- and female-owned businesses and concerning the hiring of minorities and females.
- Evidence that the applicant used best efforts to reach a goal of 25% minority and 5% female ownership representation.
Creation and Mandate of the Chicago Casino Development Authority
The Bill creates the Chicago Casino Development Authority (the “Authority”), charged with owning a Casino in Chicago and contracting with a third party to operate and manage the Casino. The Authority will be governed by a five-member board (the “Board”) appointed by the Mayor of Chicago. The Board will appoint an executive director who will manage the business, properties, and employees of the Authority. Other important mandates for the Authority include:
- Airport Slots. The Authority may operate slot machines at airports under the control of the Chicago Department of Aviation. Slots would only be allowed beyond security checkpoints. The combined number of gaming positions at the airport and the Chicago Casino cannot exceed 4,000.
- Operator Contract Proceeds. 50% of the total amount received by the Authority from the operation of the Chicago Casino will be used to pay expenses related to medical assistance for Illinois children and pharmaceutical aid for disabled persons.
- Bonds. The Authority may issue bonds to pay for the Casino.
Contracts with the Chicago Casino
The bidding process for contracts to develop or operate the Chicago casino will be rigorous. It will be sealed and competitive, and the Board may make eligibility to submit proposals contingent on minimum financial and investment requirements. A request for proposals will be issued, and all bids will be made available to the public. Award of the contract will be subject to the approval of the IGB.
- Other Contracts. All contracts with the Authority exceeding $25,000 are subject to a similar process save for individualized exceptions giving some discretion to the Board.
- Disclosure Requirements. Bidders for all contracts with the Authority are required to disclose the identity of all persons with a beneficial interest of more than 1% of the total distributable income of any company having any interest in the contract. Exceptions are made for publicly traded companies. Bidders and those entering into contracts of more than $10,000 must also disclose all political contributions by affiliated persons or entities.
Electronic Gaming at Horse Racing Tracks
Operators of any Illinois horse racing track may now apply for an electronic gaming license. Details include:
- Number of Positions. Racetracks can operate up to 1,200 gaming positions in Cook County, and 900 gaming positions in any other county. Additional positions may be available for licensees who purchase all their positions if any positions are left open by other licensees in the State.
- Extent of License. Licensees can conduct electronic gaming at their race track from 8:00 a.m. to 3:00 a.m. (the following day) on days when it conducts live racing or simulcast wagering on U.S. races.
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License Fees. A license to conduct electronic gaming will cost $100,000 and last four years. In addition, each gaming position will cost $25,000 in Cook County, and $12,500 in all other counties.
- Reconciliation Payment. Another licensing payment will be due four years after operations begin.
- Retention of License. To continue to be eligible for the electronic gaming license, the licensee operating at each racetrack must promote live racing and horse ownership through marketing and promotional efforts. The amount spent on such efforts must equal the amount spent on it in 2009 plus the amount of the pari-mutuel tax credit received in the prior calendar year. Other requirements include conducting at least 240 live races each year, requesting more racing days than requested in 2009, and maintaining medical expense liability insurance for thoroughbred jockeys.
- Temporary Facilities. Licensees may conduct gaming at temporary facilities for up to two years while permanent facilities are being built or while renovations to an existing facility are being made.
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Increased Horse Racing.
- Horse racing will be allowed on Sundays.
- Horse racing at the Illinois State Fairgrounds in Springfield can expand from an annual event during the State Fair to a three- to nine-month season depending on market conditions and funding.
- Sangamon County Fairgrounds can run up to nine-month seasons.
Licensing Restrictions for Casinos and Race Tracks
- Labor Peace Agreements. Race tracks with more than 10 employees filing for an electronic gaming license must file proof of a labor peace agreement with each labor organization representing food and beverage, hospitality, custodial, and maintenance workers. Those bidding to operate the Chicago casino must file the same proofs for labor organizations representing casino and hospitality workers in the State.
- Diversity Programs. Every casino owner, operator, electronic gaming, and supplier licensee must establish a diversity program to ensure non-discrimination in the award of contracts. Programs should aim to award 20% of the dollar value of all contracts annually to minority-owned businesses, and 5% to female-owned business. An affirmative action plan for hiring must also be in place.
New Taxes and Tax Credits
- Electronic Gaming Admission Fee. A $3 per person tax will be imposed for admission to electronic gaming facilities, payable by the electronic gaming licensee.
- Surcharge for Sale of Assets. Beginning in 2011 and through 2019, licensees under the Illinois Horse Racing Act of 1975 and electronic gaming licensees under the Illinois Gambling Act will pay a surcharge on income arising from the sale or exchange of capital assets, depreciable business property, real property used in the trade or business and certain intangibles. The surcharge will be equal to the amount of federal income tax liability attributable to those sales or exchanges. Limited exceptions to the surcharge exist.
- Privilege Tax Changes for Riverboats and Electronic Gaming Operations. Changes will be made to the privilege tax rates for all businesses conducting riverboat gambling or electronic gaming operations beginning January 1, 2012. Tax rates are based on AGR:
| Table Games — January 1, 2012 - June 30, 2013 | |
| AGR | Privilege Tax Rate |
| 0 to $25M | 12.0% |
| $25M to $50M | 19.5% |
| $50M to $70M | 24.5% |
| $70M and up | 16.0% |
| Table Games — Beginning July 1, 2013 | |
| AGR | Privilege Tax Rate |
| 0 to $25M | 10.0% |
| $25M to $50M | 17.5% |
| $50M to $70M | 22.5% |
| $70M and up | 16.0% |
| All Other Games — January 1, 2012 - June 30, 2013 | |
| AGR | Privilege Tax Rate |
| 0 to $25M | 12.0% |
| $25M to $50M | 19.5% |
| $50M to $75M | 24.5% |
| $75M to $100M | 29.5% |
| $100M to $150M | 34.5% |
| $150M to $200M | 39.0% |
| $200M and up | 44.0% |
| All Other Games — Beginning July 1, 2013 | |
| AGR | Privilege Tax Rate |
| 0 to $25M | 10.0% |
| $25M to $50M | 17.5% |
| $50M to $75M | 22.5% |
| $75M to $100M | 27.5% |
| $100M to $150M | 32.5% |
| $150M to $200M | 35.0% |
| $200M and up | 40.0% |
- Privilege Taxes for Land-Based Casino Gambling. Privilege taxes for land-based casino gambling will differ from riverboat and electronic gaming facilities.
| Table Games — January 1, 2012 - June 30, 2013 | |
| AGR | Privilege Tax Rate |
| 0 to $50M | 12.0% |
| $50M to $100M | 19.5% |
| $100M to $140M | 24.5% |
| $140M and up | 16.0% |
| Table Games — Beginning July 1, 2013 | |
| AGR | Privilege Tax Rate |
| 0 to $50M | 10.0% |
| $50M to $100M | 17.5% |
| $100M to $140M | 22.5% |
| $140M and up | 16.0% |
| All Other Games — January 1, 2012 - June 30, 2013 | |
| AGR | Privilege Tax Rate |
| 0 to $50M | 12.0% |
| $50M to $100M | 19.5% |
| $100M to $150M | 24.5% |
| $150M to $200M | 29.5% |
| $200M to $300M | 34.5% |
| $300M to $400M | 39.0% |
| $400M and up | 44.0% |
| All Other Games — Beginning July 1, 2013 | |
| AGR | Privilege Tax Rate |
| 0 to $50M | 10.0% |
| $50M to $100M | 17.5% |
| $100M to $150M | 22.5% |
| $150M to $200M | 27.5% |
| $200M to $300M | 32.5% |
| $300M to $400M | 35.0% |
| $400M and up | 40.0% |
- Race Track Electronic Gaming Tax. An additional pari-mutuel tax will be imposed on licensees at Illinois race tracks utilizing electronic gaming whose daily pari-mutuel handle increases from 2011 levels.
| % above the average daily pari-mutuel handle for 2011 | % tax imposed on the increased pari-mutuel |
| At or below 2011 average | 1.5% |
| Up to 125% | 2.0% |
| 125%-150% | 2.5% |
| 150%-175% | 3.0% |
| 175% or more | 3.5% |
- Horse Racing Fund Insufficient Funds Tax. Race track licensees will now be invoiced for the amount of total funds in the Horse Racing Fund that is insufficient to meet the annual operating expense of the Board. The invoice will be proportionate to the amount of pari-mutuel wagering handled by the licensee, and will be paid 50% from their account and 50% from their purse account.
- Renovation and Construction Credit. A dollar-for-dollar credit will be available to currently existing owners licensees for renovations or construction up to $2,000,000.
- New Taxes Backstop Credit. If new tax obligations for owners licensees result in a lower after-tax AGR than they received in 2012, then privilege taxes will be reduced. Limitations apply, but the backstop is aimed at returning after-tax AGR to at least 2012 levels in these circumstances.
Other Notable Provisions
- Provisional Video Gaming Licenses for Various Locations. The Bill requires that video gaming licenses be made available on a provisional basis to truck stop establishments, fraternal establishments, and veterans establishments. A fee of $100 is required for the provisional licensure requests.
- Changes to Illinois Gaming Board. The Illinois Gaming Board will have oversight and enforcement responsibility for all riverboat and casino gambling, as well as electronic gaming in the State of Illinois. The Board’s five members will include someone with experience as a senior officer at a company and have no more than three members from the same political party.
- Compulsive Gambling Problem Programs. Programs helping to treat and prevent compulsive gambling will be put into place subject to appropriations.
- Depressed Communities Economic Development Board. An eight-member advisory board within the Department of Commerce and Economic Community will be created to make recommendations about grants from the Depressed Communities Economic Development Fund.
- Auditor General Jurisdiction Expanded. The Auditor General is required to conduct an Audit of the Chicago Casino Development Authority.
- Internal Control Approval. All internal controls submitted by licensees must be approved or denied by the IGB within 60 days of receipt. If the IGB takes no action the internal control is deemed approved.
