Illinois Expansion No Sure Thing
In an announcement that shocked the Illinois horseracing industry, Churchill Downs said high taxes and a “hyper-competitive" gaming market made it “untenable” for it to pursue a gaming license at Arlington Park (l.)—although the historic racetrack had been lobbying for casino gaming for years.
The expansion of gaming in Illinois is leading to some expected and unexpected consequences.
In a surprise move, officials at Churchill Downs Inc. recently announced that Arlington International Racecourse in Chicago will not seek a gaming license, though the historic racetrack has lobbied more than a decade to be allowed to offer casino gaming.
Churchill Downs CEO Bill Carstanjen said the company objected to a state law that would require the track to dedicate a portion of casino revenue to racing purses—a provision that’s not required by other gambling operations.
Carstanjen said, “Notwithstanding our steadfast commitment to the Illinois thoroughbred racing industry, and despite the good faith intentions of everyone involved in the passage of the Illinois Gaming Act, the economic terms under which Arlington would be granted a casino gaming license do not provide an acceptable financial return and we cannot reasonably proceed.
“The Chicagoland market has seen a significant proliferation of video gaming terminals over the last several years, and now faces the potential introduction of five new gaming facilities as well as increased gaming positions at existing casinos and video gaming outlets,” Carstanjen continued. “Arlington would enter this market with an effective tax rate that would be approximately 17.5 percent to 20 percent higher than the existing Chicagoland casinos due to contributions to the thoroughbred purse account.”
He concluded, “This disadvantage in a hypercompetitive gaming market, coupled with substantial licensing and reconciliation fees and new, unviable horse racing requirements in the Illinois Gaming Act, makes construction of a casino at Arlington financially untenable. It is with a heavy heart that we conclude that we can’t make this work.”
Carstanjen said horseracing would continue at the 91-year old Arlington Park at least through 2021, and the venue will apply for a sports betting license. He added that all options will be considered regarding the racetrack’s future, including moving its racing license to another community in the Chicago area or in Illinois.
As recently as August 1, Carstanjen said in an investors’ call that Churchill Downs would apply for at least some of the 1,200 gaming positions racetracks are allowed under Illinois’ new gaming law. “The timing and full scope of the plan are still being sorted out,” he said.
Arlington Heights Mayor Tom Hayes said he believes Churchill Downs is unwilling to compete with Rivers Casino in nearby Des Plaines, in which it owns 61 percent stake and where it recently announced expansion plans. Hayes said, “I’m a glass-half-full kind of guy. I’m looking at it as a positive. I’m hoping that we’re going to have Arlington International Racecourse in town for another hundred years.”
But in a statement, the Illinois Thoroughbred Horsemen’s Association (ITHA) said, “We are stunned and profoundly disappointed by Churchill Downs’ decision not to pursue supplemental gaming at Arlington Park in order to do its part to grow jobs and economic opportunity for thousands of Illinois men and women both at the track and throughout the state’s agribusiness community.”
ITHA noted that for more than a decade, Arlington Park sought casino gaming to help boost revenues and purses. Now that the state will allow it, Churchill Downs has “astoundingly” declined to seek a casino license, the statement said. “The company evidently plans to instead abandon its commitment to racing in Illinois and focus solely on its stake in the Rivers Casino and potentially other Illinois casinos not yet developed. Churchill has snubbed not only the working men and women of thoroughbred horse racing whose collective livelihood depends on live racing, but also all of the elected officials it has so intensely lobbied over the last decade.”
ITHA said Churchill Downs should be required to forfeit “the enormous financial advantages it enjoys by virtue of its now-annulled commitment to Illinois racing”—including millions of dollars in property tax breaks and a potential sports-betting license—which won’t help racing purses.
Horseracing advocate and former governor Jim Edgar recommended Churchill Downs sell Arlington. ”I wish Churchill would sell the track to somebody else if they don’t want to be in the horseracing business, but they don’t want to take a chance on competition to the casino. It hurts not only horsemen, but the whole state and the revenue coming in for infrastructure. Churchill is a business, and I think it’s pretty obvious they’re in the casino business. They own a big chunk of the casino down the road in Des Plaines and they’d rather do that.”
State Rep. Mark Walker, whose district includes Arlington Park, said, “It remains to be seen how well Chicago rolls out its casino, if it does. I think it’s risky for Churchill. I don’t know whether this is some kind of negotiating tactic. It doesn’t seem to be, but we’ll see. I love Arlington Park. I want to see it succeed.”
Although Churchill Downs won’t seek a gaming license at Arlington Park, it announced, together with Rivers Casino, that it will apply for a license to operate a casino in Waukegan. Hawthorne Racecourse in Stickney and Fairmount Park in Collinsville have applied for a gaming license, according to the Illinois Gaming Board.
Illinois’ two other existing racetracks, Hawthorne in Stickney and Fairmount Park in Collinsville, both have applied for casino licenses, according to the Illinois Gaming Board.
State Senator Terry Link said he told Carstanjen he hoped Churchill Downs would move forward with a racino while pursuing the Waukegan license. Link said he’s “not totally surprised” by the announcement. ”All these developers want more. If we would’ve said no taxes, they probably still would’ve asked for more. And in a true business world, I don’t blame them. But if we keep on giving this away, why are we even doing it?”
Meanwhile, the various aspects of the expanded gaming law are the prime topics among officials in Waukegan, Rockford, Bloomington and Danville, Illinois.
Under the state’s new expanded gambling law, Waukegan is one of six Chicago suburbs selected to have a casino. The city only has released the number of proposals it has received—six to date—not the developers’ names or details of their proposals.
Three of the six developers have released their own information, including North Point Casino, partnering with Warner Gaming; Potawatomi Hotel & Casino; and Churchill Downs, partnering with Las Vegas-based Full House Resort’s American Place.
At the recent Waukegan City Council meeting, opponents and supporters spoke regarding Tap Room Gaming owner and former state Senator Michael Bond, who is partnering with Warner Gaming on the proposed North Point Casino.
Some opponents noted of the nearly $400,00 donated since December 2018 to aldermanic candidates across Waukegan’s nine wards, 85 percent came from four groups connected to Bond or the video gambling industry, according to campaign disclosure forms. Four of the six candidates who received the money were elected.
North Point Casino is promoting its proposal through Facebook ads, a website and public endorsements, including one from the Black Chamber of Commerce of Lake County and one from the Lake County Building and Construction Trades Council. Black Chamber of Commerce of Lake County Director Arthur Gass, a pastor at Missionary Baptist Church, said, “We do know a casino will be coming to Waukegan, a reality that the community must accept.” He said he opposes gambling but his focus has to shift to making sure Waukegan residents are given priority in hiring as well as employee diversity.
Gass said his group has urged Waukegan City Council to recommend only the North Point proposal to the state, but Mayor Sam Cunningham said he plans to forward two to four proposals. City Attorney Bob Long said Waukegan could not recommend a single developer even if it wanted to. That would risk the Illinois Gaming Board rejecting the bid, and opening up the process again, to be run by the gaming board, or possibly selecting another community to host the casino, Long noted.
American Place also has launched a website about its proposal, which would include a 75,000 square-foot-casino, upscale boutique hotel with a helipad and private entrance, and a 1,500-seat entertainment center .
A short list of finalists was due to be released last week, according to city staff. Interviews with those candidates will be held after Labor Day and a public hearing will occur in late September. The council will then select the finalists and forward those recommendations to the Illinois Gaming Board by October 25.
Cunningham—who also received donations from Bond’s Tap Room Gaming during his mayoral campaign—said he played no role in the casino selection process. He said city staff and recently hired Chicago-based C.H. Johnson Consulting will recommend “the best product for Waukegan.”
Cunningham also questioned whether some aldermen’s concerns about the proposed North Point Casino had less to do with the project itself and more to do with Bond.
“Is it really anti-Michael Bond or anti-the project? If it’s anti-Michael Bond, then you’re not being the leaders that I need you to be. In this business, we’ve all got feelings that we don’t like, but you’re supposed to do what’s in the best interest for Waukegan,” he said.
Churchill Downs and Rush Street Gaming have proposed River Casino Waukegan, which would include a 1,625-position casino at Fountain Square, a former shopping mall, plus a sportsbook, poker room and Luxbar, an “upscale gastropub.” The project would create more than 1,200 permanent jobs and 900 construction jobs, and raise more than $150 million in annual revenue for the local economy.
Rush Street Gaming CEO Greg Carlin said, “We’re happy to be considered to develop and operate what we know will be a leading entertainment destination for the city of Waukegan, Lake County and the state of Illinois.” He added that a second Illinois Rivers Casino “creates a synergy in the market” that would attract gamblers throughout the region, “complementing–rather than cannibalizing–current local video gaming operators.”
Rockford also has been targeted as a casino host city. It’s located in Winnebago County, where that board recently passed a resolution in support of a location on I-90. Board Member Jas Bilich, who presented the resolution, said, “We’re trying to make sure we put this in the greatest revenue-generating location. That’s what a lot of constituents brought to my attention, as well as all the other city officials from city of Loves Park and Machesney Park.”
But Board Member Daniel Fellars added, “We want a competitive bid situation, we want a competitive process, we don’t want to tilt the scales in any one location. I don’t know what’s the right location for the county, all I know is I don’t think the county board has any business weighing in at this point.”
Video gambling machines are the focus in Danville and Bloomington. In Danville, aldermen are considering changing an ordinance that would deny a liquor license to any business that generates more than half of its revenue from video gambling. Under state law, a business must have a liquor license to host video gambling terminals.
The ordinance change is meant to discourage so-called gambling “cafés” from opening, in order to protect existing businesses and organizations like the American Legion, Veterans of Foreign Wars and Knights of Columbus, which don’t solely depend on gambling revenue but still need it to survive.
City officials considered grandfathering in existing businesses that receive more than half their income from gambling. However, liquor licenses cannot be transferred to a new owner when a business is sold, making a business less attractive to any potential buyer.
As a result, Mayor Rickey Williams Jr. said city staff are reviewing how other municipalities, including Champaign and Urbana, have written their ordinances regarding liquor licenses and gambling venues, hoping to find a solution.
“We do not desire that we become a gaming-café community, but how do you do that while protecting existing businesses?” Williams said.
In Bloomington, city council members recently voted to end the year-long-plus moratorium on issuing new video gaming licenses. The ordinance allows a maximum of 60 businesses with video gambling machines—meaning only eight more can be approved. City Attorney Jeff Jurgens said, “The documents call for it to be a first-come, first-serve basis. It’s going to be whoever is in line when the clerk’s office opens at 8 a.m., and it might be one of those situations similar to where you file your nominating petitions with the state Board of Elections.”
The council cut the license fee for fraternal organizations from $500 to $250. It also determined that all license holders, including large truck stops, will be allowed to have up to five gambling machines, although the new state law allows large truck stops to have 10.
Peter Pontius, director of loss prevention and compliance for B and B Amusement, which operates gaming machines at the Pilot Truck Stop, said that decision will drive truckers out of town, sending thousands of dollars in revenue to neighboring communities.
“McLean, Lincoln, Maroa, Chenoa, Decatur, Farmer City, LeRoy, and the list goes on. All those municipalities are going to have the ability to have 10 games at their large truck stops, which they all do. So, why are we allowing those dollars to leave Bloomington?”
Mayor Tari Renner said he preferred to let the market determine the right number of video gambling machines, but said he would not use his veto power. Councilwoman Kimberly Bray said, “I don’t think everybody got everything they wanted in this, but I thought the process worked very well, and I’d like us to replicate this process for some other topics that are going to be coming up as well.”