In an unexpected turn of events, Chicago city council members including allies of Chicago Mayor Lori Lightfoot blocked her plan to allow sports betting in or near five stadiums and tax the revenue at 2 percent.
Forecasters said the bets would generate $400,000 to $500,000 annually for the city, based on an estimated $25 million in annual revenue. However, city analysts noted the tax would bring the total rate on sports betting gross revenue to 19 percent; gaming revenue already is taxed at 15 percent for the state and 2 percent for Cook County.
Alderwoman Pat Dowell, chairwoman of the budget committee, said, “I just think $400,000 to $500,000 a year to the city of Chicago is really paltry, even when you add in the licensing fee that these guys are gonna have to pay. It seems like peanuts for an industry that is growing.
“I sort of feel like I did when we licensed shared housing and the Ubers and the Lyfts and all of those guys. We’re not getting the full financial benefit of these companies, which started out small and then grew and we’re sort of locked into an amount. Two percent is not satisfactory to me.”
Alderman Greg Mitchell said he doesn’t oppose sports betting but believes the city is moving “too fast” and “too early” and needs to know how sports betting will impact a downtown casino.
However, he agreed that taxing sports betting revenue at 2 percent is “not a sufficient reward for the risks we’re taking. We’re moving entirely too fast and the upside is very minimal.”
He added, “We have to be more prudent with not only how we spend our money, but with what agreements we enter into in order to generate sustainable revenue to the city. We really need to take a step back. There are too many unknowns. The risk-reward is just not there. It’s too little.”
Lightfoot’s Deputy Floor Leader, Alderman George Cardenas, also said 2 percent was “not enough” and the city was “rushing” a sports betting ordinance with no minority participation. Alderman David Moore asked, “What is in it for the black people? Five folks which are very wealthy, are going to get even more wealthy without having a direct impact on minorities.”
Lightfoot responded the 2 percent tax would be enough to cover city regulatory and infrastructure costs. She stated, “We’re in good shape to move this forward. And I look forward to making sure that we get our fair share of the revenues from this.”
Another controversial topic at the meeting was a consultant’s study indicating sports betting would have an impact of just 1 percent on casino revenue. However, none of the council members had seen the report. Lightfoot has repeatedly claimed sports betting would not “cannibalize” revenue from a Chicago casino. Alderwoman Emma Mitts, chairwoman of the License Committee, then abruptly ended the meeting.
The study, commissioned by the Illinois Gaming Board to review the feasibility study of a Chicago casino, determined sportsbooks at or near the city’s five professional sports stadiums would not negatively impact revenue for the city from a Chicago casino.
Gaming analyst Grant Govertsen, whose firm conducted the study, testified to at the meeting, “While sports betting has proliferated throughout the U.S. over the last few years, we have not seen any meaningful cannibalization of casino revenue as a result. We expect a similar dynamic to be seen in Chicago.”
Also at the meeting, lobbyist John Dunn, former director of intergovernmental affairs under Mayor Richard M. Daley, spoke on behalf of Neil Bluhm, whose Rush Street Gaming company is part of two separate groups competing for the Chicago casino license. Bluhm’s Rivers Casino in Des Plaines already has a sportsbook that Bluhm claims would lose business if sports betting is legalized in Chicago.
Dunn said for every $1 Chicago would receive from the 2 percent tax on sports betting gross revenue, the city would lose up to $4 in casino revenue, money necessary for shoring up police and fire pensions funds. Dunn said, “Desperate to get this approved quickly, they’ve added a 2 percent tax to give a little cover. Don’t be fooled. This is a fig leaf that won’t begin to make up for the city’s loss. The city will lose $10 million to $12 million per year. The Chicago casino will have a revenue drop of as much as $80 million a year, which jeopardizes the entire feasibility of your casino. Focus on what’s best for Chicago taxpayers.”
Bluhm himself told the Chicago Sun-Times, “That 2 percent is nothing. It’s small potatoes. The 2 percent will be somewhere in the area of $1 million. But we believe and have studies that say that the loss of casino revenue will be in the area of $11[million or $12 million a year. While people are betting on sports at Wrigley Field or United Center, they won’t be at the casino betting on casino games. While they’re there, they walk around and play slot machines. They play roulette. They play blackjack. That’s the big money for both the city and state.”
The ordinance, proposed by Alderman Walter Burnett, would allow sportsbooks at Wrigley Field, Guaranteed Rate Field, Soldier Field, United Center and Wintrust Arena. “We would start getting money immediately with the sports facilities rather than waiting for a casino to be built,” Burnett said.
