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Entries in Gaming Tax Revenue & Expenditure Policy (2)


Journal Calls for Approval of Bogusz' Proposed Gaming Revenue Resolution

Time to Protect Casino Revenues

Friday, June 1, 2012

No matter what side of the casino equation you’re on – for or against them – as long as Rivers Casino remains highly profitable, millions of new dollars will flow into Des Plaines’ city treasury every year.  How much money depends on how well the “riverboat” operation is run, which by all accounts is very well, and on future action by the state legislature.

Lawmakers are currently in the midst of wrestling with economic issues of epic proportions ranging from pension and Medicaid reform to casino expansion.  We should know in a day or two whether the number of casinos in the state – capped several years ago at 10 – will be increase to as many as 15.  The controversial bill also calls for allowing slot machines at the state’s six horse race tracks. 

Should any part of the bill pass, it will have a profound effect on Rivers Casino’s ability to continue to make a big profit.  Since it’s opening last year, it has regularly been the No. 1 casino in the state profitwise.  Allowing more casinos and slots at race tracks will unquestionably cut into Rivers’ ability to make money and that in turn will cut into Des Plaines’ take of the 5% host community Wagering Tax and $1 per person Admissions Tax.  All indications point to the belief that when the year ends and the city has to pay the state $10 million from casino tax income following by 40% of what’s left to 10 disadvantaged communities, Des Plaines will be left with about $4 million.  Proposed legislation could dramatically alter that formula resulting in a more favorable funding picture for the city or dilute the ability of all 10 casinos to rack up big profits as competition increases.  We’ll have to wait and see what happens. 

For the last year, Des Plaines officials, led by Mayor Marty Moylan and Finance Committee chairman Ald. Matt Bogusz (3d), have been crafting a proposed city policy that would establish firm rules on how that $4 million should be spent starting Jan 1, 2013 and beyond. Because of the instability of casino revenue, such a policy makes sense.  For two years, many aldermen have advocated spending that newfound cash only on “one time” items such as street, sidewalk, and anti-flooding sewer improvements.  Allocating those funds to things like employee salaries and pet projects is too risky, they say.  We agree. 

As reported in this Wednesday’s Des Plaines edition of the Journal & Topics Newspapers and in March, a formal proposal is before aldermen to establish a firm policy earmarking casino money only for specific projects such as infrastructure improvements and paying off the city’s still high debt.  City council will consider this policy at its next regular meeting on Monday, June 4. 

What aldermen have yet to do is engage in a serious public debate on the proposal championed by Bogusz and Moylan and then state clearly their opinions. 

We believe the foundation of the proposal is sound.  Through honest, concentrated debate a good, city policy can be adopted for now and for years to come.  Those currently serving on city council, including the mayor, will all be replaced some day.  Term limits and time guarantee that.  The next city election is in the spring of 2013.  Half of city council could be replaced by then and by 2015, the elected board may have all new faces. 

City leaders need to take the appropriate steps to protect the integrity of future casino revenue and to assume that the city’s financial picture remains sound. 

The time to do so is now.  



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.”