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Video gambling impacts riverboat revenue

Published: Tuesday, Aug. 12, 2014 9:28 p.m. CDT • Updated: Wednesday, Aug. 13, 2014 2:01 p.m. CDT
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(Sandy Bressner - sbressner@shawmedia.com)
Ben Johnson of North Aurora plays on a video gaming machine at the Little Red School House Bar and Restaurant in North Aurora.
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(Sandy Bressner - sbressner@shawmedia.com)
Joe Rudy of Sycamore plays a video gambling machine at the Winners Circle Bar and Grill in Maple Park.
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(Sandy Bressner - sbressner@shawmedia.com)
Ben Johnson of North Aurora plays on a video gaming machine at the Little Red School House Bar and Restaurant in North Aurora.
Caption
(Sandy Bressner - sbressner@shawmedia.com)
Video gambling machines are shown at the Winners Circle Bar and Grill in Maple Park.

The popularity of video gambling is eroding Kane County’s Riverboat Fund, leading to a plan to cut about 8 percent a year through 2020 for the fund’s internal and external grants, said John Hoscheit, a Kane County Board member from St. Charles and chairman of the committee that oversees the funds and grants. 

In 2010, revenue received through its agreement with the Grand Victoria in Elgin was more than $6.5 million. This year, it’s less than $3.3 million. The culprit is a perfect storm of factors, with video gambling leading the way, officials said.

Hoscheit said the expansion of video gaming is likely the biggest factor. But, he said, so is the turndown in the economy, additional competition from the Rivers Casino in Des Plaines and an additional state tax on casinos that reduced their profit.

“Video gaming is a major impact,” Hoscheit said. 

Tom Swoik, head of the Illinois Casino Gaming Organization, said the expansion of video gambling has caused statewide casino revenue to fall 42 percent since 2008 and an additional 7 percent drop in 2012-13.

“That is the first full year of video gaming,” Swoik said. “We think a large percentage was due to all the new [gaming] positions out there. It is having a significant impact on us.”

Casinos are allowed 1,200 gaming positions at each of the state’s 10 casinos, which adds up to 12,000 opportunities to gamble, he said.

But the state also allows 18,000 video gaming positions, Swoik said, the equivalent of 15 new casinos and a saturation point, he said.

“The other thing is convenience,” Swoik said. “Why would you drive half an hour to a casino when you could go down the street? Some people prefer to do that.”

Swoik also said casinos pay a graduated state tax based on revenue, from 15 percent up to 50 percent.

Video gaming, he said, pays 30 percent.

So if the casinos lose $1 million in business to video gambling, then the state loses taxes that the casino would have paid to it, he said.

• • •

Zack Stamp, a lobbyist for the Machine Coin Operators Association said he did not know whether the turndown in casino revenue could be tied to the increase in video gaming.

“Maybe there’s a correlation, but not a causation,” Stamp said. “I understand the riverboats are down, and we are having some impact, but we need more data if they are going to draw that conclusion. ... We just don’t think we are the ones hurting riverboats.”

As to a gambling saturation level, Stamp said there was a “theoretical number out there.”

“Saturation – I don’t know what that is,” Stamp said. “People choose to do video gaming because that is what they want to do. I don’t know that we want to restrict people’s choices to a boat or a bar or a restaurant.”

Kane County allows video gambling and has 11 licensed establishments in unincorporated areas. These include the Blackberry Bar and Grill in Blackberry Township near Elburn, Blue Boar Inn in Aurora Township near Montgomery, Calamity Jane’s of Sugar Grove Township, Winner’s Circle in Virgil Township near Maple Park and Batavia Moose Lodge 682 in Batavia Township.

Batavia, Geneva, St. Charles, Kaneville, Big Rock and Campton Hills are the six municipalities that do not permit video gambling. Sixteen in the county allow video gaming, including Elburn, Burlington, Sugar Grove, Virgil, South Elgin, North Aurora, Montgomery, Maple Park and Lily Lake.

Sugar Grove Village President Sean Michels said video gaming was approved, and it has been successful.

“We have not seen an adverse impact, and it’s helped the American Legion,” Michels said. “We’ve been approached by coffee shops and gas stations, and we have respectfully declined because it just did not seem right.”

In Batavia, a final vote on whether to allow video gambling is expected at a meeting set for Monday, Mayor Jeff Schielke said.

“I’m very disappointed of the state’s handling of the whole issue,” Schielke said. “They were supposed to have the technological backbone power to monitor all the machines, and that has never been developed.”

Another problem, he said, was the state gaming board was going to have stringent examination of applicants. 

“There is no guarantee of how background checks are being done. I have no comfort level that this is being handled in a good manner,” Schielke said.

If the council approved it, however, the mayor said he would not veto it, but he won’t sign it, either.

“I can’t in all honesty put my name on it,” Schielke said. “Not signing it is the same as vetoing it. The lack of a signature is a veto ... but the council can override [the veto] with 11 votes.”

In St. Charles, a recent request by the St. Charles Moose Lodge 1368 to allow limited video gaming for charitable organizations or other private clubs in the city was rebuffed by two aldermen – 2nd Ward Alderman Rita Payleitner and 4th Ward Alderman James Martin – and went no further.

Mayor Ray Rogina said he believes the council should have given the request to staff for “a reasoned approach on the subject.”

“I suppose, at the end of the day, that is the thing that bothers me most – that the conversation is not taking place,” Rogina said. “I asked, ‘Is there a motion?’ And there was no motion. And that was that.”

Rogina said the Moose had gambling machines removed by the city once it passed a total ban on gambling devices in 2010.

Payleitner called that type of gambling “suckers’ games” and said she was opposed because the city should not benefit from people losing money to gambling.

“I don’t think a municipality should be benefiting by getting proceeds from somebody’s losses – and that is what we would be doing,” Payleitner said. 

Donald Ramsell, attorney for the Moose, said Payleitner’s comments were an insult to business owners who belong to the Moose or VFW to be called suckers and “those who could least afford to lose the money.”

• • •

Though Kane County also receives some tax benefits from video gambling, Hoscheit said it is for capital projects, not operations.

The real hit to the Riverboat Fund will have consequences for the county’s internal and external grant applications, Hoscheit said.

“What we got from the riverboat was as high as in the tens of millions [and is] now down to $3 million,” Hoscheit said. “With a proliferation of video gaming, there will be no further growth in revenue and continuing decline.”

Among the $4.4 million recommended for internal grant requests are about $500,000 for the Child Advocacy Center, $480,000 for Domestic Violence Court and nearly $567,000 for the Drug Court.

Among the $1.1 million in external grants approved in 2013 were $30,000 for the Association for Individual Development, $50,000 to the Batavia Parks Foundation for the renovation of the Batavia Riverwalk, $50,000 to CASA Kane County for volunteer training and case management, $65,000 to St. Charles for a green infrastructure project along the Fox River and $15,000 to the Maple Park Public Library for an outdoor drop box, flooring and accessibility updates, records show.

“More will be turned away because we won’t have the resources,” Hoscheit said. “And we have no control over it.”

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