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Monday
Mar262012

Memo: Ald. Bogusz Proposes Gaming Tax Revenue & Expenditure Policy

 

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Background: In July of 2011, Rivers Casino began operations in the City of Des Plaines.  A portion of gross revenues generated by the casino are collected in the form of Wagering Tax (5% of Gross Receipts) and Admissions Tax ($1 per person); these revenues are then remitted to the City’s newly formed Gaming Tax Fund. 

In an effort to win the tenth and final gaming license, the City of Des Plaines entered into a Business Development Agreement (BDA) with the Illinois Gaming Board.  This agreement stipulated that Des Plaines pay $10,000,000 to the State of Illinois and 40% of remaining gaming tax revenues to designated revenue sharing communities.  Alderman Bogusz said, “This agreement guaranteed 30 years of revenue to the State and sharing communities, placing all risk on Des Plaines.  Mayor Moylan knows this and is working hard to represent our interests in Springfield.”  

Illustration: The City of Des Plaines’ portion of gaming revenue is most vulnerable to declining gross receipts. By way of comparison, the State’s highest grossing casino – Elgin’s Grand Victoria Casino – peaked at $436MM in 2007 when there were only nine active casinos.

Issue:  There is no financial policy in place to handle these new revenues.  Without one, revenue can be used to supplement the city’s operating budget and fund pet projects.  “Casino revenue should not be allowed to pay for essential city services as it’s not a dependable revenue source.  Funding city salaries or pet projects with this revenue would be reckless and the opposite of what neighbors want from the casino.” said Alderman Bogusz.  Year-over-year, historical data from comparable communities suggests a 40-70% swing is common in revenue to the municipality.

“To help demonstrate, take a look at ten years of history from some of our State’s comparable casinos.  If you apply the BDA that we’ve been made to operate under ($10MM to Illinois and 40% to sharing communities) you can see dramatic volatility in year-over-year municipal revenue despite the economic conditions.”

Proposal:  On Thursday, March 29th, the Finance & Administration Committee will review a proposed Gaming Tax Revenue and Expenditure Policy that will:

  • Demonstrate fiscal responsibility to the taxpayers of Des Plaines
  • Promote significant investments in infrastructure and begin to eliminate burdensome debt
  • Prevent fuzzy accounting and eliminate the possibility for misuse
  • Provide Council policy direction to City Staff as they begin the 2013 budget process
  • Insulate Casino Revenue from pet projects and short-term spending
  • Allow the Gaming Tax Fund to function apart from support of the General Fund
  • Defend the City’s gaming revenue from downstate political forces
  • Protect the integrity of the General Fund Reserve
  • Enhance the City’s standing during regular credit rating adjustments

“Following the 2012 budget process, I brought this concept to staff.  Since then, I’ve worked with our dedicated City Manager (acting), Finance Director, Finance & Administration committee member, and 3rd Ward Residents to develop this Gaming Tax Revenue and Expenditure Policy.”

“The burden of this Casino was placed on the taxpayers of Des Plaines.  We must demonstrate that we’re investing these new dollars wisely.  Infrastructure like flooding mitigation, sidewalks, streets, and sewers enhance the value of our city and return that value back to the taxpayers.  The elimination of debt accumulated in years past helps to mitigate risk while keeping taxes low.”

“Let’s get off on the right foot before the first casino dollar is spent.  Des Plaines should never be forced to make a personnel or essential city service decision based on how hot the craps tables have been.  If we let these dollars go straight to the General Fund without a plan, we’d be throwing the dice.” 

“Mayor Moylan is working hard to protect our City’s interests in Springfield and I’m fighting to protect those revenues back home.”  

 

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