06/01/2011 3:38PM

Illinois gaming expansion bill's impact on purses tough to determine

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CHICAGO – Gaming-expansion legislation passed by the Illinois legislature on Monday and Tuesday allowing racetracks to open slot-machine casinos would provide a desperately needed boost to the racing industry here, but probably would not provide enough revenue to entirely reshape the racing landscape in Illinois.

The legislation, Senate Bill 744, is far from a sealed deal. Gov. Pat Quinn has 60 days from the bill’s passage Tuesday to sign or veto the legislation. Gaming expansion would help narrow the state’s vast budget deficit and is being trumpeted as a boon to employment and local communities. While Quinn favors the creation of a downtown Chicago casino – something that’s part of the bill – he has spoken out against what he calls the “top-heavy” nature of the bill.

Indeed, SB 744 roughly would triple the number of electronic gaming machines operating in the state by awarding five new casino licenses to go with the 10 already issued. Racetracks in Cook County, including Hawthorne and Arlington, could add 1,200 devices – or gaming positions as they’re called in the legislation – while other racetracks, including defunct Quad City Downs and the State Fairgrounds in Springfield, could install 900 devices. Expansion on such a scale surely would decrease the average amount handled per machine, which stood at about $116,000 in 2010. After paying winners, the Illinois gaming industry had revenue of $1,201,876,124 through electronic gaming devices in 2010, a decrease of almost 4 percent from 2009.

The uncertain nature of gaming business makes projecting SB 744’s impact on purses difficult to determine. Tony Petrillo, Arlington’s general manager, said estimates ranged between $10 million and $20 million in annual purse contributions from slots at Arlington.

“We really don’t know what the number is going to be,” said Petrillo, who added that “$20 million seems high.”

Racetracks would pay between 12.75 percent and 26 percent of adjusted gross receipts (the percentage goes up the higher the slots handle) from slot machines into purse accounts, and 12 percent of that money is dedicated to the breeding industry. Using the $10 million estimate, Arlington’s 86-day meet in 2011 would see a purse increase of a little more than $100,000 per day. Average daily purses at the ongoing meet will average about $175,000.

Tim Carey, president of Hawthorne, said that purses at his track could rise to $225,000-$250,000 per day with slot revenues. Hawthorne, Carey said, paid purses at about $142,000 per day last fall.

Carey said that Hawthorne would accept the full complement of 1,200 gaming positions, if the bill is signed into law. Petrillo declined to detail specifics concerning the plan at Arlington, which is a Churchill Downs Inc. property. Petrillo said “all options” would be considered for a space to house racetrack slots. Carey said that the west end of Hawthorne’s grandstand, which has been shuttered for several years, was the leading candidate to become a slots parlor.

The bill says that the Illinois Gaming Board has 120 days to review a license application for casino gaming, and the entire licensing process could take six months. Racetracks can run temporary slot parlors while constructing a permanent site, and the tracks have 15 months from the date of licensing to get their permanent facility running. There’s a $50,000 application fee and a $100,000 licensing fee, but the big money comes in fees paid per gaming position. Those are $25,000 per machine in Cook County and $12,500 everywhere else, meaning that 1,200 positions will cost Arlington or Hawthorne $30,000,000. Add up the fees for all the potential new positions, and one can see why legislators in a cash-strapped state approved the bill.

Still, even if the legislation is signed into law, its full impact won’t be felt for years.

“Personally, I don’t see that this is going to have any immediate impact other than something really positive on horsemen planning where they want to be in 18 months,” Petrillo said. “Look down in Louisiana. It took two years [after racetrack slots were installed] until you saw an effect on the track.”