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Amid talk of expanding casinos, Illinois gambling at crossroads

Monday, April 4, 2005 7:03 AM CDT

ALTON (AP) - Since its inception in 1991, riverboat gambling has delivered an economic bonanza in Illinois, generating billions of dollars for casino owners and for state and local governments hurting for cash.

But now Illinois gambling is at a crossroads.

The nine riverboats are paying the nation's highest casino tax, and they have seen sharp declines in attendance and revenue. Many have cut jobs and services while competing casinos in Indiana and Missouri are thriving.

At the same time, Illinois policymakers are weighing whether to expand gambling to Chicago, and opponents are calling more loudly than ever to abolish gambling. Riverboat owners and their hometowns warn that if the state doesn't lower the tax rate the results could be disastrous.

"If the governor sticks with his plans of 70 percent taxes, we're not going to get any expansion of the boat and things are going to die," said Don Sandidge, mayor of Alton, where Illinois' first riverboat casino, the Alton Belle, opened in 1991.

The lure of casinos, for governments and gamblers alike, is money. Lots of it.

More than 245 million people have visited Illinois casinos since 1991, according to the Illinois Gaming Board. They've left behind $16 billion at the slot machines, blackjack tables and roulette wheels, and the casinos have paid more than $5 billion of that to state and local governments in taxes.

All that cash has prompted lawmakers to take a larger share. In 2002, the state's graduated tax rate for casinos topped out at 50 percent. In 2003, it spiked up to 70 percent - double the nation's second-highest rate, in Indiana. It generated $700 million for state coffers last year.

The casino industry responded with an economic slide it hopes will persuade legislators to back off.

Protesting the higher taxes and trying to preserve some of their profits, the casinos have cut more than 3,000 jobs, sliced wages and benefits by $50 million and cut back hours, services and improvement projects.

The results have been dramatic. The boats' adjusted gross receipts have dropped more than 6 percent over the last two years, admissions were down more than 18 percent, and local tax revenue from the boats declined more than 8 percent. The tax rate is structured so casinos pay more in taxes as their revenues climb. Cutbacks meant less money coming into the casinos but also less money for the state.

Last year, the only casino number increasing statewide was the state's take of the revenue, but the 26 percent rise in casino tax dollars was only about half of what lawmakers hoped to get.

Casino owners say as long as they're asked to fork over so much money, there's no incentive for them to invest in the boats or encourage more patrons to come aboard.

Casinos and their allies contend the tax increases, and the boats' decision to cut back, have pushed Illinois gamblers into neighboring states. Data from Indiana and Missouri show significant increases in attendance and revenue at their casinos over the last two years.

In Alton, just across the Mississippi River from St. Louis, a nearly $1 million decline in local tax revenue from the Alton Belle has forced city officials to cut dozens of vacant city jobs.