Chicago’s first casino is being billed as a pension solution. But it won’t be enough.
As the City Council gives the green light to Bally’s, a look at the financials show revenue would provide 9% of the $2 billion needed for pensions.
By Becky Vevea, Mariah Woelfel
Chicago’s first casino is being billed as a pension solution. But it won’t be enough.
As the City Council gives the green light to Bally’s, a look at the financials show revenue would provide 9% of the $2 billion needed for pensions.
By Becky Vevea, Mariah WoelfelA Chicago casino passed Wednesday, with city officials touting it as a way to pay for the retirements of city workers.
“This revenue source in my opinion, is probably one of the last larger pieces of revenue that we will be afforded – short of increasing the property taxes – to meet these [pension] obligations,” said Ald. Jason Ervin, 28th Ward, one of the 41 aldermen who voted in favor of the casino.
But the money collected in gambling and entertainment taxes will only be a drop in the massive bucket the city needs to fill each year in order to pay for the pensions of its current and former employees.
Chief Financial Officer Jennie Huang Bennett put it simply during a City Council meeting earlier this week.
“This one casino project will pay for approximately 9% of our $2.3 billion pension contribution and reduce the likelihood that the city will need to raise property taxes in the future for pensions,” she said Monday.
On one hand, 9% coming from one single development is impressive. But, Ald. Tom Tunney, chair of the special casino committee, cautioned it’s not a panacea: “Down the road, we’ll still have to find more revenue.”
That’s underpinned by the fact that even in 2028, when the city is expecting to rake in the full estimated amount in casino revenue, it will still fall about $40 million short of its required pension payment, due to annual increases, said Huang Bennett.
Aldermen approved Lightfoot’s choice by a vote of 41 to 7. Earlier this month, the mayor selected Bally’s Corporation’s proposal to construct a $1.74 billion casino, hotel and entertainment district at Chicago and Halsted. It still needs license approval from the Illinois Gaming Board and City Council will need to approve construction details.
City officials estimate the casino will bring in roughly $200 million in tax revenue each year by 2027. Ald. Brendan Reilly, 42nd Ward — who voted against the casino — said the city’s projections are unrealistic.
“This casino is going to have to be on super steroids,” he said, outlining his own back of the envelope calculations showing the casino would need 13,000 gamblers to bet $1,500 every single day of the year in order to hit the city’s $200 million projection.
Huang Bennett noted that the gambling portion of the city’s estimates is only $130 million and the rest would come from property taxes, hotel and restaurant taxes.
In materials provided to aldermen, city officials gave a breakdown of what revenues they’re hoping the casino will generate. It shows the $40 million payment Bally’s has promised to pay upfront, which officials say will be used in next year’s budget.
Revenue estimates are significantly smaller early on, hovering around $55 million, while Bally’s operates a temporary casino at the Medinah Temple in River North.
The $200 million is also not a guarantee, under the terms of the so-called Host Community Agreement passed by City Council today.
“This is a promise and that’s really all it is,” said Ald. Brian Hopkins, 2nd Ward, who voted against the casino Wednesday. “ We’re doing this to generate $200 million a year. What if we don’t?… There’s no guarantee and it doesn’t sound like we have any real recourse if it doesn’t materialize.”
On Friday, Tunney, 44th Ward, likened the revenue projections to another time politicians looked to gamblers to help fix public finances.
“It’s not like we get the lottery and then fully fund our schools,” he said, referencing a move in the 1980s by the state legislature to direct lottery revenue to the state’s common education fund.
The non-partisan governmental research organization Civic Federation is also wary of the city’s plan to rely on gambling revenue to pay its pensions.
“It would provide some significant budgetary relief, but it’s by no means going to solve the city’s ongoing financial challenges,” Civic Federation President Laurence Msall told WBEZ. “Gambling is an inherently unreliable source of funding your government.”
Msall pointed to an analysis by the Civic Federation that showed revenue at existing Illinois casinos plummeted during the COVID-19 pandemic, underpinning the “volatility depending on activity.”
The Civic Federation analyzed revenues from the existing 11 casinos in Illinois and found that in the last year, all of them combined generated $339.6 million in tax revenue for state and local governments.
There’s hope Chicago’s casino revenues will dwarf others around the state due to its high concentration of people and tourists, but “that’s not guaranteed,” Msall said.
“The gaming experience has been changing quite rapidly because of technology,” he noted. “The state of Illinois has authorized a number of new gaming operations both sports gambling, ‘Racinos,’ which would be racetracks with gambling operations, and additional casinos around the state of Illinois.”
In Chicago, aldermen recently legalized sports betting with an ordinance that will create betting lounges at the city’s major sports stadiums, for instance.
But it’s not just competition from other casinos that could change how much revenue is ultimately generated.
“The entertainment dollar is competitive,” Msall said. “Chicago has a long history of theater, restaurants and other entertainment concert venues… Dollars spent in the casino would tend not to be dollars spent in other restaurants or other entertainment venues.”
The aldermen who voted against the casino are: Brian Hopkins, 2nd Ward; Anthony Beale, 9th Ward; Edward Burke, 14th Ward; Raymond Lopez, 15th Ward; Byron Sigcho Lopez, 25th Ward; Brendan Reilly, 42nd Ward; and Michele Smith, 43rd Ward.
Becky Vevea and Mariah Woelfel cover Chicago politics for WBEZ. Follow them @beckyvevea and @mariahwoelfel.