More gambling negotiations under way

Quinn's office playing active role in finding compromise

January 20, 2012

As lawmakers prepare for their spring legislative session, supporters of expanding gambling in Illinois say they are working toward an agreement that may finally resolve one of the state’s longstanding items of unfinished business.

If approved, the compromise could clear the way for five new casinos — in Chicago, Rockford, Lake County, south Cook County and Danville.

Representatives of the state’s casinos, the horse racing industry, and the offices of Gov. Pat Quinn and Chicago Mayor Rahm Emanuel met Wednesday in Springfield to seek common ground on a gambling bill. Their negotiations, which began last month, may result in a deal that does not include slot machines at race tracks, the final hurdle to getting a bill signed into law.

Talks are ongoing, and race track executives say they still want slots at their facilities, but they are discussing options that would instead give the racing industry a more stable and accessible revenue stream enforceable by the courts, participants in the negotiations said.

Quinn continues to oppose slots at the tracks because he said allowing track owners to build "mini casinos," as he describes them, would create an "excessive gambling climate" in Illinois. His stance is forcing an exploration of revenue alternatives. If the talks stall, proponents of more gambling said they will work toward a supermajority, or three-fifths vote, in the House and Senate to override an anticipated veto from Quinn. The legislature convenes on Jan. 31, but a vote on gambling is not expected until late spring.

On Wednesday, about 35 lobbyists and lawyers met in a private conference room in the Capitol, with another meeting scheduled for next month. One idea being discussed is a contractual “impact fee” from the casinos to the racing industry that avoids the legislature altogether.

Tim Carey, president of Hawthorne Racecourse, a thoroughbred track in Cicero, said he would prefer to come to an agreement directly with the casinos because it would be more enforceable. “Let’s do it by contract,” he said. “What do we need the legislature for?”

Impact fees and subsidy laws have failed in the past. Illinois casino owners went to the U.S. Supreme Court over a 2006 law that required the state’s top earning casinos to give 3 percent of their proceeds to the tracks. The case was settled last August with the racing industry finally getting about $140 million that had been held in an escrow account while the case moved through the courts.

Race tracks also were supposed to receive 15 percent of the earnings from Illinois’ newest casino in Des Plaines, based on a 1999 law. But the state, which collects the money, hasn't shared it yet, even though the new casino opened in July.

The idea behind revenue sharing is to help the state’s five race tracks, which sustain an industry of farmers who grow hay, veterinarians, breeders and employees of their restaurants and properties. The tracks — some of which have operated since the 1920s — say they need the ability to install slot machines to compete with other states that have allowed such “racinos.”

Time is running out, particularly for harness racing in Illinois, horsemen say. Breeding horses requires enough confidence in the business to make an investment of several years, they say.

Attendance and revenue at Illinois tracks have declined since land-based casinos were legalized in 1999.

Representatives of the Illinois Harness Horsemen’s Association said they are willing to explore the possibility of a subsidy from the casinos, rather than slots at tracks, to stabilize their industry, which they describe as on the brink of shutting down. The flow of revenue, they said, would have to be guaranteed.

“It’s well into the hundreds of millions of dollars that the legislature acknowledges we should be getting, yet for one reason or another, we haven’t gotten anywhere near what we should have gotten by law,” said David McCaffrey, president of the association. “We are extremely skeptical we can get an ironclad agreement. The days of ‘don’t worry about it, you’ll be taken care of’ are over.”

In his Feb. 22 budget address, Quinn is expected to announce further spending cuts to most state agencies. The state’s budget crunch and Emanuel’s push for a taxpayer-owned Chicago casino to ease money constraints in the city are driving the discussions toward a workable casino bill.

But it may take the participation of Emanuel himself, one participant said, to nudge negotiations over the finish line.

Quinn outlined his perimeters for an acceptable gambling expansion bill in October. Most of his concerns have been addressed in a revised bill, including more oversight by the Illinois Gaming Board, a more flexible timeline for casino licensing and no slot machines at the Illinois State Fairgrounds or Chicago’s two airports.

Slots at the tracks remain the sticking point. The governor said he would veto a gambling bill passed last spring.

Quinn has one influential group on his side: the existing casinos, which also want to block slots at the tracks. Casino representatives said they would lose significant revenue if gamblers could play slots at the tracks, some of which are located near casinos. The casinos are willing to consider impact fees, but only if they come from the five new casinos proposed statewide.

“Isn’t that nice of them to forego the revenue of the new casinos as opposed to the existing ones?” said Carey, the Hawthorne executive. “I don’t know that they have any interest whatsoever in paying an impact fee.”

Tom Swoik, executive director of the Illinois Casino Gaming Association, said the proposed five new casinos already will hurt the industry’s bottom line.

“If there is another way the racing industry could be assisted, then we would not be opposed to that. But it depends on what way that is. We are already going to be impacted by additional facilities,” Swoik said.

Reducing the tax burden on the existing 10 casinos or allowing them to expand might be two ways to coax them into supporting a new bill, sources involved in the negotiations said.

The track owners want a long-term solution, not a handout, according to Jack Kelly, a lobbyist who represents Balmoral and Maywood race tracks. They view slot machines as key to their survival.

“There is a long history that shows subsidies are not sustainable,” Kelly said.

Track owners still believe they might be able to change the governor’s mind on slot machines. Quinn recently hired Gary Hannig, a former state representative from downstate Illinois, as his liaison to the legislature and point man in gambling negotiations.

Hannig has attended meetings with the group, the first time in more than a year a representative of Quinn’s office has been so involved in compromise talks.

Ultimately, legislators will decide whether Illinois expands its gambling venues. Dozens of lawmakers hold a deep stake in the issue because their districts either host existing facilities that are major employers in their communities or they hope to get a casino under the proposed legislation.

“The racing industry by itself or the casino industry by itself has pretty good luck killing bills,” Swoik said. “But unless we get together on something, it probably isn’t going to pass.”

Kristen McQueary covers state government for WBEZ and the Chicago News Cooperative.