Springfield, Illinois, has a dilemma. The city wants more tourism, employment opportunities, capital investment, tax revenues, and a new hotel. Fortuitously, Springfield is in position to request a casino license from the state. To some a casino seems like a perfect solution. To others, such as the city’s video lottery terminal (VLT) operators, a casino is a very bad idea.
The city has a successful VLT industry; its 750 games generate $50 million in annual revenue for bowling alleys, bars, taverns, and restaurants. Each establishment can have up to six machines; many credit VLTs with being the difference between profit and failure. They do not want the competition that casino slot machines would bring. Then again, they do understand that Springfield needs a new hotel and has been unable to attract a developer. A casino could add the needed hotel rooms and provide an additional tourist attraction for the city. A casino would also pay taxes, employ people, and make a sizable capital investment in Springfield.
What is a city to do? Springfield has come up with a unique plan to have its cake and eat it too: It’s considering a casino with table games and sports wagering, but no slot machines.
For most cities in Illinois, it would be a no-brainer to ask the state for a casino license. For a long time, Chicago looked to a casino for additional rooms, tourism, jobs, and investment. Bally’s Corporation, awarded the license, will invest $1.6 billion in the building, while will take 3,000 constructions workers to complete; when open and operating, it will employ 3,000 people full time. In addition, the city expects to collect $200 million a year in taxes. A temporary casino is being readied to open in 2023 and the permanent one is expected in 2026. The city is touting a Bally’s casino as a success story before the first gambler walks through the door. Other cities have similar, but smaller, projects underway.
The upside of a casino is attractive to Springfield city leaders, but the VLT operators see only downside. In their minds, a casino would take business from them and possibly even force some of them to close. That would indeed be ironic, a reversal of the state’s gaming narrative since VLTs were first authorized.
The Video Gaming Act passed in 2009 and the first games were put into play in October 2012. That month, 712 games generated $1.3 million in gaming revenue. The following year ended with 13,374 VLTs in operation, which generated $300 million in revenue. In 2021, the more than 41,000 games generated $2.474 billion in GGR. Year-to-date in 2022, there are 44,100 VLTs and $1.017 billion in GGR. It is quite a success story for Illinois and small-business owners. On the other hand, it is not such a success story for casinos in the Land of Lincoln. In 2012, casinos in Illinois generated $1.6 billion in GGR, in 2021, $1.2 billion. Casino revenue has decreased every year since VLTs were introduced.
The dilemma is actually a common one. Casinos and other forms of commercial gaming depend on the disposable income of the gamblers. That is a finite amount of money. When casinos become legal in a state with horse racing, horse racing suffers. Casinos also limit the growth of state lotteries. By the same token, whenever they are introduced, VLTs take business from all other forms of gaming. That has certainly been true in Illinois. The Springfield solution, a casino without slots, is not viable, but neither is it a surprising idea.
While Springfield contemplates eating and keeping its cake, another idea is swirling around the legislature that eventually will impact all other forms of gambling in Illinois. The phenomenal growth of mobile sports betting is stimulating discussions on igaming. In August, Illinois generated $47.7 million in sports betting GGR and $7.7 million in taxes from a handle of $564 million; over 90 percent of the handle was wagered remotely. Illinois’s handle was the second largest in the country in August; only New York had more money wagered remotely on sports in the month. The big three states of igaming are currently generating more than $100 million a month in GGR. For Illinois with a 35%-45% tax rate, that would be $35 million-$45 million a month in taxes.
Regardless of Springfield’s decision, the cake it is relying on for nourishment and entertainment will most likely be eaten by someone else. It won’t happen next year or probably the year after, but sooner or later, the lawmakers will be back to the golden goose, looking once again for a golden egg. There is no free lunch and someone will need to pay for igaming, just as casinos are paying for the VLTs and racetracks paid for the casinos.