Why some suburbs are rushing to get a new gambling tax on the books
The idea of a municipal penny-per-push tax on video gambling machines is proving infectious, as more Illinois communities rush to stay ahead of pending state legislation aimed at vaccinating the industry against the new trend.
Schaumburg and Hoffman Estates officials this week followed the lead of their neighbor Hanover Park and approved push taxes effective May 2022.
Amid criticism from gambling terminal operators and establishments that house the machines, officials in both Northwest suburbs said their immediate goal is to preserve their right to impose the tax if needed in the future. Their votes came as a bill works its way through the state legislature that could outlaw new push taxes.
"If we don't take any action, we will be forever banned at this point from being able to use this," Schaumburg Mayor Tom Dailly said before his board's 5-0 vote. "Had this not come up at the state level -- the state wanting to ban this -- we would not be having this conversation today."
The state House passed an omnibus gambling bill on June 1 that tentatively set that day as the deadline for any new municipal push taxes in home rule communities. However, the legislation has yet to be taken up by the Senate or signed by Gov. J.B. Pritzker. That could occur during the imminent veto session.
Schaumburg village staff members last week told the village board's finance and general government committee that the legislation could take effect immediately but not retroactively. Therefore, any push tax approved before the bill becomes law could remain.
Meanwhile, copies of Hanover Park's push tax ordinance, which tentatively begins Jan. 1, have been requested by Elk Grove Village, Carol Stream and Glendale Heights, Village President Rod Craig said.
Unlike Schaumburg and Hoffman Estates, Hanover Park is not taking a hands-off approach to using the tax.
"We're trying to get some more money so we don't have to raise property taxes," Craig said. "We haven't raised them in Hanover Park in five or six years. We're at a point where our streets are atrocious."
During September 2021, Hanover Park took in about $19,592 from 46 machines at eight locations. Schaumburg earned $11,639 from 60 machines at 11 locations and Hoffman Estates took in $46,812 from 147 machines at 25 locations.
Under state law, 5% of gambling machine revenues go to municipalities, 25% goes to the state, and the Video Gaming Terminal Central Communication System, to which all machines in the state connect, collects 1%. The remaining 69% is evenly split between the machine operator and the establishment hosting the machine.
Travis Akin, co-director of the Support Main Street Illinois Coalition, is among the critics of the push tax. He said his organization is working from a calculation that municipalities imposing the tax could see a 250% increase to their revenue. He believes that will be at the expense of the terminal operators and the hospitality businesses that host them.
"I think from our perspective, the businesses being affected by this have gone through the worst year of their lives," Akin said. "There is a willingness on the part of establishment owners to work with municipalities. There's just a fundamental disagreement that this should be the way to do so."
Joliet, Waukegan and Oak Lawn are among the other communities that have adopted push tax measures.
In contrast to Schaumburg's 5-0 approval, the Hoffman Estates village board was divided 4-3 in favor.
Hoffman Estates Trustee Gary Stanton, who voted against the tax, voiced concerns the village could be sued by gambling interests, as has been the case with Waukegan and Oak Lawn.
While village Corporation Counsel Art Janura said Hoffman Estates would not be exposed to paying damages until it begins collecting the tax, Stanton noted the village could still be on the hook for any legal fees incurred in defending itself.
Gambling companies and businesses that host video gambling terminals also are lining up against push taxes.
Rick Heidner, who owns Gold Rush Gaming, the third largest video gambling machine operator in Illinois, said the tax would significantly tear into the industry's 5% profit margin.
"This would definitely be a setback," Heidner said. "A lot of municipalities are just kneejerking and thinking 'extra money, extra money.'"
Jennifer Strang, owner of The Hideout tavern in Schaumburg, said the tax would be as bad for businesses like hers that rely on the machines to attract customers and earn additional revenue.
"There's no reason to add such a harmful tax," she said.