Tue 04/26/2022 09:53 AM
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Relevant Document:
Casino Evaluation Report

During a Monday, April 25, hearing before the Chicago City Council Special Casino Commission, city CFO Jennie Huang Bennett discussed the benefits of developing a casino within the city of Chicago and warned that the only viable alternative revenue source to meet future pension obligations would be to increase city property taxes.

The hearing took place after city officials announced last month that they have selected a short list of three proposed projects from five original proposals. The three shortlisted project proposals, all located in downtown Chicago, are Bally’s Corp. at the Tribune site, Hard Rock at the ONE Central site and Rivers 78 at the 78 site. Bennett said that the two projects that did not make the final round were cut largely because of concerns about the impact their operations would have on the Metropolitan Pier and Exhibition Center convention district. The RFP calls for the development of an “integrated casino resort with a hotel, restaurants, shops, and entertainment venues.”

Last month, the city also released an evaluation report, which contains the following overview of the original five proposals:
 

Bennett noted that Chicago has been pursuing a casino for more than 30 years. “Every year that the city of Chicago does not have a casino open, the gaming activity that already exists goes to casinos in the state of Indiana to the tune of $331 million a year. Put another way, the state of Illinois gaming dollars are funding Indiana’s essential services,” Bennett said.

Bennett said the casino project, once fully operational, is expected to provide $200 million annually in direct city revenue, an additional $25 million to other city agencies and an additional $200 million to the state. The CFO said the casino project is also expected to generate economic activity that would increase sales tax revenue and include community investments.

The city CFO warned that “billions in lost revenue” would result from “inaction and the inability to execute” the project.

In fiscal 2022, $1.4 billion, or 61%, of the city’s $2.3 billion pension obligation is being paid through property taxes, and an additional $329 million is funded by Chicago’s main corporate fund.

“In short, the revenues generated from the casino project will allow the city to avoid raising taxes, in particular property taxes, one the few viable revenue sources to address a pension liability of this magnitude,” Bennett said.

Under questions from City Council members about potential alternatives to the casino, Bennett reiterated that the property tax is the only “viable” alternative revenue source, given the magnitude of Chicago’s pension obligation. Bennett also said there is also no time to be exploring alternatives, because the pension obligation is already a burden for Chicago taxpayers.

“The burden is here. We are working very hard to get to structural balance within this next budget cycle, which then starts to get us on a stable pathway as it relates to our finances, that will allow us to get to better credit ratings and an improved pension funding situation,” Bennett said. The city CFO said it will be “very difficult” to achieve a structural balanced budget without the casino project.

Although the casino is expected to eventually provide about $200 million annually to Chicago, Bennett noted that under the current RFP process, a temporary casino is not expected to be operational until 2023 and 2024 and a permanent casino between 2025 and 2026.

Because of this schedule, the upfront budgetary relief offered by the casino proponents “is of significant importance” because city officials would use it “in essence to get to that steady state level” of $200 million annually that Chicago expects once casino operations are in full swing. Proponents have offered upfront payments of $25 million to $50 million to the city, according to the evaluation report.

Since the evaluation report was published, the city has continued to negotiate with proponents; Bennett said she could not discuss any terms that may have changed. “Ultimately we are working to negotiate a better proposal from what we had in the evaluation report,” Bennett said.

Several council members discussed concerns raised by residents in some of the affected wards today; two members said there is significant opposition to the project in at least two of the affected neighborhoods. Resident concerns center on traffic issues, disruption to local businesses and gambling addiction.

Bennett said that as part of the RFP process, the city is negotiating funding to support community benefits, including job training and gambling addiction counseling, and said the administration intended to return to the City Council committee to help determine how best to structure and oversee this funding.
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