Casino Giants Express Interest in Chicago Integrated Resort Project
Posted on: October 29, 2020, 09:32h.
Last updated on: October 29, 2020, 02:49h.
Chicago Mayor Lori Lightfoot (D) sent out a request for information (RFI) in early September for her city’s casino integrated resort. Several of the country’s largest gaming companies heeded the call.
MGM Resorts, Wynn Resorts, Hard Rock International, and Chicago-based Rush Street Gaming are among the casino operators that replied to the RFI. Only Rush is currently operating a casino in Illinois, its Rivers Casino in Des Plaines.
The RFI asked the casino heavyweights a series of questions on what their integrated resort (IR) might look like should they be awarded the lone downtown gaming license. The companies were asked what sort of minimum acreage would be needed, what an ideal location would offer, how the city’s existing assets, such as its sports stadiums, hotels, entertainment, and cultural attractions could be leveraged, and specifics on the actual resort.
This RFI, the first step in our planning process, allows for experienced industry participants to provide relevant information to the City,” Lightfoot’s administration explained.
The Chicago IR casino was authorized under legislation signed last year by Illinois Gov. J.B. Pritzker (D). Along with the downtown casino project, five smaller casinos were approved in the Chicago suburbs of Waukegan, Rockford, South Suburbs, Williamson County, and Danville.
Tax Reductions Render IR Attractive
Soon after the Chicago IR was approved with Pritzker’s signature, a feasibility study conducted by Union Gaming was conducted. It concluded that the casino would be quite unattractive to the gaming operators with the financial wherewithal to build such a large resort. Union found that gaming revenue would be subject to an effective tax rate of 72 percent.
The gross gaming revenue (GGR) tax includes a 33.3 percent “privilege tax” on the downtown casino earmarked to fund pensions for first responders. That tax is in addition to the 38.7 percent rate on GGR.
Profit margins in a “best-case scenario,” would “likely equate to a few pennies on the dollar,” Union said.
Lightfoot successfully petitioned state lawmakers to amend the city casino’s tax structure. The new rate is between 22.5 percent to 74.7 percent on slot machines, and 15 percent to 35 percent on table games. The final number is dependent on the casino’s total GGR.
The adjustment has made the Chicago casino more attractive to the aforementioned casino operators. A city spokesperson said 11 responses were received. In addition to the casinos, R2 Companies, a private equity real estate firm based in Chicago, and Christiansen Capital Advisors, a New York-based consulting firm that works in the gaming industry, submitted RFIs.
When Illinois moved to expand commercial gambling in and around the Windy City, state politicians certainly didn’t expect the process to be clouded by a pandemic. COVID-19 continues to threaten global economies, and that will cause the casino giants to pause making a substantial investment in building a casino in Chicago — a development that could cost upwards of $1 billion.
Lightfoot’s administration is nonetheless touting the untapped Chicago gaming market.
Chicago provides a unique opportunity to create a world-class tourist destination within the City. With approximately 9.5 million residents, the Chicagoland region ranks 3rd in the US in population. Chicago’s GDP of $671 billion is greater than that of Sweden, Poland, or Argentina,” the casino RFI site explains.
“In fact, if Chicago were a country, it would be one of the top 25 largest economies in the world. Yet, despite these powerful statistics, the City’s gaming market remains untouched,” the RFI opportunity adds.
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