Aurora, Elgin pinched by declining gambling revenues

Gambling is all about money.

Gamblers want to win it. Casinos are in business to make it. Municipal and state governments get their share of it through taxes on casino revenue.

In good times, gaming taxes help pad municipal and state budgets. But in tough times, like now, decreased gaming tax revenue causes some governments to cut costs and look for other revenue sources.

Aurora, home to the Hollywood Casino, and Elgin, which has the Grand Victoria, have seen a steady slide in tax revenue in the last few years.

In Aurora, the city removed capital improvement projects such as neighborhood street resurfacing from the list of expenses funded by gaming tax revenue, city spokesman Kevin Stahr said.

In Elgin, several nonprofits whose funding is tied to the riverboat's fortunes have seen a drop in money.

Statewide, casino revenue dropped about 32 percent in three years, said Tom Swoik, executive director of the Illinois Casino Gaming Association, which advocates for the state's casinos.

He blames the state smoking ban for about 20 percent of that decrease, and the economic downturn for the rest. The ban went into effect Jan. 1, 2008, outlawing smoking at all indoor public places.

Neither casino returned calls for comment.

In 2008, Elgin received $26.8 million from casino proceeds, which dropped to $22.15 million in 2009, and will fall to an estimated $18.96 million this year. City analysts predict only $16.5 million next year.

The number of projects Elgin funds from riverboat money is expected to drop to 77 next year from 110 in 2008.

The Grand Victoria — from the outset the biggest earner among Illinois casinos — brought in $436.7 million in 2007. That dropped 22 percent in the year after the smoking ban went into effect; by 2009, revenue fell 13 percent more, according to state figures.

In 2007, the Hollywood brought in $272.6 million. In 2008 that dropped 19 percent to $220 million and another 8 percent to $202.4 million in 2009. The casino's monthly revenues have decreased this year when compared to the same month in 2009, including a nearly 6 percent drop in November revenue, which this year totaled $14 million.

In the past decade, Aurora's gaming tax revenue peaked in 2002, when the city received $16.3 million from in Hollywood taxes. By the end of 2010 Aurora projects getting $10.4 million from the same taxes, 36 percent off the peak.

The first tax is levied on gross revenue each casino makes after paying its winners, Swoik explained. The second tax charges casinos for each person who enters the facility.

Municipalities receive 5 percent of adjusted gross revenues and $1 for each casino visitor. The state also receives a percentage of the two taxes.

Historically, gaming taxes have been one of Aurora's top five revenue sources, Stahr said. When Hollywood Casino was generating more money for the city, Aurora spread the revenue further than it can afford to now.

“Back in 2002, the city was able to rely on gaming tax revenue to fund regular capital improvements, which include neighborhood street resurfacing,” Stahr said. “As the gaming tax revenues have declined steadily, the city has needed to look at other revenue sources to fund capital improvements, which has obviously put an additional strain on the city's budget.”

Aurora still pays some of its debt and funds downtown and economic development initiatives using gaming tax revenue, Stahr said. Grants to social service agencies also come from the fund.

Gambling expansion legislation under consideration in Springfield that would install slot machines at racetracks would further hurt existing casinos, Schock said.

Schock, Aurora Mayor Tom Weisner and Des Plaines Mayor Martin Moylan are part of a coalition of mayors from nine towns, called “Cities Against Slots at the Tracks,” and have lobbied against establishment of so-called “racinos” at venues like Arlington Park.

Des Plaines is home to Illinois's newest casino, slated to open in mid-2011.

“We are certainly opposed to the expansion of casinos and ‘racinos', because of what it's going to do to the existing casinos,” Moylan said. He said Des Plaines is anticipating $25 million annually from the casino.

“Some of the expansion being discussed is irresponsible and frankly not very productive,” Schock added. “It's taking away revenue from one revenue producer to another.”

He said he would be in favor of scaled-down gambling expansion that could allow Chicago, Waukegan and the south suburbs to have casinos.

State Rep. Linda Chapa LaVia, of Aurora, said she does not think gambling can be the answer to financial struggles experienced by suburban municipalities or the state.

“It's not exactly sustainable,” she said. “So what we need to do is go after things that we know are going to be there in the future.”

Stahr said Aurora expected the decrease in gaming revenue this year, and is trying to control costs to deal with it.

“Just trying to keep a logical eye on expenditures is really the best way we can kind of offset that loss in revenue,” Stahr said. “From a revenue standpoint, we are trying to make strides in economic development.”

With the new Des Plaines casino coming on line in 2011, Weisner said he expects Aurora's gaming tax revenue to also feel the effects of increased competition.

“That will affect us without a doubt,” Weisner said. “Our future prospects are not exactly rosy in that regard.”

• Daily Herald staff writer Steve Zalusky contributed to this report.