High tax rates seen as barrier to building Chicago casino

An analysis of potential sites for a new casino in Chicago has concluded that tax rates contained in the casino’s enabling legislation would likely make the casino financially unfeasible to private companies, introducing the possibility that the casino may not be built without additional legislation.

The analysis, conducted by the Las Vegas-based consulting firm Union Gaming Analytics, could signal that casino operations launched by racetracks may not have a sizeable competitor in the core of Chicago for some time. The legislation that enabled the new casino also included authorizations for Illinois racetracks to add slot machines, table games, and sports-betting operations to their facilities.

The analysis called the enabling legislation’s tax and fee structure for the new casino “very onerous,” citing a provision in the legislation that allows the state to collect a 33 percent “special privilege” tax on the casino’s adjusted gross receipts. That tax is in addition to taxes that the state collects on other casinos, and it was applied to the new Chicago casino given the facility potential location in the densest part of the city.

Hawthorne Racecourse has already canceled its spring 2020 Thoroughbred meet in order to focus on renovating its facility to open a casino and sports book, perhaps by the late fall of next year. Fairmount Park, which is located just across the river from St. Louis, Mo., is also planning to capitalize on the new law by adding 900 slot machines.

Churchill Downs has not yet announced whether it will apply for casino or sports-betting licenses at its Arlington Park northwest of Chicago. Earlier this year, the company closed a transaction to buy a majority stake in the Rivers Casino 14 miles away from the racetrack, a facility that is the highest-grossing casino location in the state.

While the analysis said that private operators would not be expected to build a casino under the existing tax rate, it did suggest that the city of Chicago could issue bonds to fund the construction of the facility and then contract its operation to a private company as a feasible alternative.