Forget development on the south or west side: the privately owned Chicago casino is likely going downtown | On Culture | Chicago Reader

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Forget development on the south or west side: the privately owned Chicago casino is likely going downtown

Why are we doing this again?

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Here's how the casino business usually works: the suckers have to walk through an actual door and spend a few hours in a more or less cheesy facility participating in the process of their own fleecing.

And here's how it's working in Chicago: the casino's still no more than a neon-flashing hypothetical, but the city's already been suckered.

What happened? Once upon a time a few months ago, when she was still a candidate for mayor, Lori Lightfoot had a lofty, reform-minded concept for a casino in Chicago. It would be an engine of economic development, churning out jobs and bringing resources to neighborhoods in need, and it would be owned by the city.

That last part, about city ownership, had also been floated by her predecessors, Mayors Emanuel and Daley, who had failed to get approval from the Illinois legislature for the first casino in the city. It was so important to Lightfoot that she made it part of her campaign speeches and put it in writing: city ownership would be "imperative."

But when push came to shove down in Springfield in June, soon after her mayoral victory, that imperative somehow dropped away.

The state legislature passed, and Governor J.B. Pritzker approved, an expansion of legal gambling in Illinois so vast it'll nearly double the state's existing gaming capacity in casinos, bars, and newly created "racinos" (combination racetrack-casinos), while it also opens a Pandora's box of legal sports betting, not only in thousands of kiosks in and around stadiums, but right there on your cell phone. Illinois could be the Nevada of the midwest.

The casino approved for Chicago, however, emerged as privately—not city—owned.

Governor Pritzker said this was done "at the city's request," though this was barely noticed in the postapproval hoopla. The Chicago casino deal was touted as a win for city and state government, which would each get one-third of its annual "adjusted gross revenue"—the amount of wagering money left after bets are paid off. The other one-third would go to the private owner, who would use it to pay expenses and profit from the remainder (as well as from restaurant, bar, and hotel business).

The public conversation didn't dally on this point; it was immediately herded on to the question of where in the city the casino should be located. The legislation stipulated a feasibility study (reportedly at the mayor's request), and Lightfoot proposed five locations to be evaluated. Her list consisted of four south-side sites—the former Michael Reese Hospital grounds, the former U.S. Steel site, the Harborside International golf course, and the former location of the Robert Taylor Homes—and one on the west side, at Roosevelt Road and Kostner Avenue. Lightfoot also launched a more general online survey for public input (chicago.gov/casinosurvey).

Already popular downtown locations and the McCormick Place convention center were out of the mix; the governor voiced his opposition to the latter as a distraction to conventioneers.

The time frame for analysis was accelerated, with the feasibility study to be commissioned by the Illinois Gaming Board within two weeks and completed in 45 days. The city would pay for the study, which would evaluate only the mayor's five suggested sites. Union Gaming Analytics, a Las Vegas gambling industry consulting firm, won an ostensibly competitive bid for the work. The competition, it turned out, was late in submitting their bids and disqualified.

The study, released last week, came to a startling conclusion. None of the five sites considered would be profitable enough to make a casino financially feasible. With projected profit margins of 3 percent or less, they wouldn't even be able to get the financing to get the place built.

To be successful, the consultants concluded, a Chicago casino would have to be located downtown, where tourists would be likely to visit it. And even then, they said, given the "onerous" tax burden the legislature had stipulated, it was unlikely to be profitable enough to get financed.

But they had a suggestion: drop the city's one-third revenue share, and a downtown casino could be in the hefty 20-plus percent range of annual profit that's typical of the industry.

So here's where we stand now: locked into private ownership, but without a feasible neighborhood location and minus the city's one-third slice of the anticipated revenue pie. In other words, suckered into giving up the exact selling points that made the deal seem worth doing. And what are the long-term effects? Bigger profits and a prime location for the private casino owner, while the city gets some low-paying jobs likely to be offset by the social costs of a hugely expanded predatory industry.

Lightfoot, who has personal and former business connections to people in the gambling industry, says the city will go back to the legislature this fall to "fine-tune" the law (even though the expansion has already cost her all her Springfield leverage). The Illinois Gaming Board has 90 days from the time it received the study to come up with recommendations for those changes, and Union Gaming Analytics has suggested one: If the law were changed, the city could, in fact, be the casino owner, trading its one-third tax on adjusted gross revenue for any possible profits; financing the casino development with municipal bonds (thereby transferring all the risk to the public); and hiring a professional gaming company to run the operation.

If that's how the chips fall, here's a safe bet: the operating contract will be lucrative.   v

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