By TOBY ECKERT
After languishing in dry dock for nearly two years, Illinois' experiment with riverboat gambling is expected to hit the water this month, with the Alton Belle Casino churning up the muddy water of the Mississippi River and, state officials hope, churning up new revenue for strapped state coffers.
After months of promises and sales pitches, it's time for the riverboat developers to deliver. Following the Alton boat into the water sometime later this year or early in 1992 — depending on whether developers meet their timetables — will be two other Mississippi River boats based in Rock Island and Jo Daviess County and a fourth boat based in East Peoria on the Illinois River. All four operations were given preliminary approval last year by the Illinois Gaming Board, which regulates the riverboat gambling industry. A second round of boats — to be based in the Des Plaines River cities of Joliet and Channahon and in the Fox River city of Aurora — should also hit the water in 1992, bringing the state's riverboat fleet to seven.
When the concept of legalized riverboat gambling was sold to Illinois lawmakers in January 1990, supporters promised that the state and local governments would reap huge tax windfalls from the riverboats' profits and that aging river cities would see their economies revived by floating casinos and riverfront developments that would attract flocks of tourists and create thousands of jobs. (The bill contained a wagering tax that would give the state 20 percent of a riverboat's gross receipts. The port cities or counties would, in turn, get a quarter of that. In addition, the state and local governments would each get a $1-per-customer head tax.)
The Senate sponsor of the legislation, Denny Jacobs (D-36, Moline), estimated state and local governments would divvy up $40 million once all 10 boats authorized under the law were in the water, that developers would invest about $200 million in riverfront improvements, and that 2,500 new service jobs would be created. Opponents countered that the revenue projections were overly optimistic, that it was unethical for the state to promote a new type of gambling, and that the floating casinos would attract criminals ranging from prostitutes to organized crime bosses.
In the end, Jacobs' assessment seemed to capture the imagination of more state and local officials than the opponents' doomsaying. Even Gov. Jim Edgar, a leading skeptic of the economic benefits of gambling, programmed $4.3 million worth of riverboat gambling revenue for the state into his fiscal 1992 budget. (Officials at the Bureau of the Budget have since conceded that is an overly optimistic forecast since boats are getting into the water much later than originally planned.)
It hasn't exactly been smooth sailing for the state or the port cities over the past year and a half. The Gaming Board — appointed by former Gov. James R. Thompson to implement the riverboat gambling law — has been the target of criticism by lawmakers impatient with the slow pace of getting licenses approved for would-be developers. Illinois failed to get its boats on the water first and is facing stiff competition for tourism and gambling dollars from casino boats already operating in neighboring Iowa. And some developers have made changes in their plans that have angered state and local officials.
Iowa beat Illinois into the water by four months, launching three Mississippi River casinos on April 1. Two more boats were launched in subsequent weeks. Jacobs, standing on the Davenport, Iowa, dock where The President riverboat was about to cast off, grumbled that the Illinois Gaming Board had sabotaged his plans to beat Iowa onto the Mississippi. It was only the latest skirmish of a highly publicized war of words between Jacobs and Gaming Board administrator Morton Friedman. The two men
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have clashed over nearly every aspect of the law's implementation, from the secrecy of the board's deliberation to the length of the background checks that are meant to keep unscrupulous businessmen and organized crime figures from getting apiece of the action.
Jacobs accused the board of "dragging its feet" on the background checks, thus delaying the start of riverboat gambling in Illinois by months. "Being second, so to speak, isn't worth as much attention from the media," Jacobs said, observing the dozens of reporters from all over the United States who had come to Iowa for what was billed as an historic event. Friedman was quick to respond to Jacobs' allegations. He said the state's prime concern should be protecting the "integrity" of the gambling industry. "To engage in an unseemly race with Iowa would have been stupid," he said. "I don't think it will hurt at all."
The Iowa boats had drawn more than 646,000 visitors by the end of June and grossed more than $12.5 million. The Iowa Racing & Gaming Commission estimates that 2,000 jobs have been created in the port cities of Davenport, Bettendorf, Dubuque, Clinton and Fort Madison. "To be honest, I think it's going amazingly well," said Chuck Patton, director of Iowa riverboat gambling.
Competition for the Illinois boats could be coming from another neighboring state, as well. Last spring, the Missouri legislature legalized riverboat gambling on the Missouri and Mississippi rivers. Final approval, however, is subject to a statewide referendum scheduled for November 1992. Observers of Missouri politics expect the law to win voter approval since other forms of legalized gambling have been widely accepted in the conservative state.
Mississippi and Louisiana, which also have legalized the industry, are other potential competitors for gambling dollars. Indeed, like the lottery, riverboat gambling fever could spread nationwide. Other states eyeing the industry include Wisconsin, Pennsylvania and Ohio.
None of the Illinois developers publicly express any concern that boats in neighboring states will cut into their business. "With a base of 25 million people to draw from [in the Midwest], I don't think it's going to make a difference," said David Patterson, general manager of the Jo Daviess Riverboat Corp., which will dock a gambling boat on the Mississippi River near Galena, already a popular tourist destination. "If the competitors jell and they do a good job, people will want to check out the other operations. We're more worried about the competition doing a shabby job, because then people will be more reluctant to come and check us out." Other developers say that Illinois will attract a different, more "serious" gambling clientele since, unlike in Iowa, no limits are put on how much gamblers can bet or lose.
What will tourists find if they come to check out the Illinois boats? When the Gaming Board met for two days in Chicago last winter to decide who would get the first round of boat licenses, the commissioners and the media were treated to slick presentations that touted multimillion dollar riverfront developments; sprawling, gilded paddlewheelers overflowing with slot machines and gambling tables; and jobs, jobs, jobs. Hearings in July on the second round of boat licenses saw more of the same.
Indications that some of the scenarios outlined last winter may have been a bit too rosy started to emerge in early spring, when developers of the Alton Belle Casino quietly scaled back their plans. What was to be a brand new 2,500 - passenger boat became a 600-passenger refitted dinner cruise boat from West Palm Beach, Fla. Job creation estimates were reduced from 500 to 200 and tennis star Jimmy Connors — widely believed to be the economic muscle behind the project — dropped himself from the list of investors.
Besides alienating some business interests in downtown Alton, the revisions angered the Gaming Board, prompting Friedman to send a memo to all four boat developers, reminding them to keep the board informed of all changes in their plans. At the July hearing, the Alton developers said the smaller boat could eventually be supplemented by a second boat or replaced by a larger one.
The folks in Alton, though, are lucky compared to the citizens of economically devastated East St. Louis, the only Illinois city that was guaranteed by law to get a riverboat but has seen its hopes frustrated. The Gaming Board turned down an application by Louisiana developer Joe Terrell after learning that Terrell was once the target of a federal grand jury probe of corruption among Louisiana public officials. (He was never indicted.)
The board also raised questions about the roles then-East St. Louis Mayor Carl Officer and then-city attorney Eric Vickers, played in the city' s endorsement of Terrell's plans. Friedman said Vickers was a longtime friend and business associate of Terrell and that Vickers and Officer refused to consider plans put forward by the Conelly Group, which operates The President in Davenport. Terrell appealed the board's decision, and the case is being reviewed by an administrative law judge. That could keep the board from awarding an East St. Louis license for some time, thus crippling an important aspect of the state's efforts to bail out the city.
The industrial center of Sauget, just across the Mississippi from St. Louis, also has seen its plans for a riverboat stymied. A development planned by the influential Sauget family — for whom the town is named — and several other investors has been put on hold until federal and state environmental officials can determine whether land around the docking site is contaminated by hazardous waste generated by the town's heavy industries and chemical plants.
Most of the other developments have been progressing more smoothly. Despite some initial public opposition, Jo Daviess Riverboat Corp. is starting to develop facilities at Frentress Lake, located on the Mississippi River between Galena and East Dubuque. The developers plan to build a 1,500-passenger boat and a reception center with a restaurant, lounge and gift shop. They aren't releasing any revenue estimates, but they expect 700,000 to 1.4 million visitors during their first year of operation.
In Rock Island, hotel developer D. James Jumer is planning a replica of the Boatworks restaurant and river excursion facility he operates on the Illinois River at Peoria. The Rock Island complex will consist of a 900-passenger sternwheeler for gambling and three other boats holding a restaurant and lounge, offices and
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ticket windows. Jumer also has an option on a piece of downtown property near the riverfront that could be used for other developments, such as a hotel. The operation is expected to generate 350 jobs. Like the Jo Daviess group, Jumer will not disclose a revenue estimate.
Jumer lost his bid to base a gambling boat in Peoria to the Greater Peoria Riverboat Corp., headed by East Peoria businessman Dale Burklund. (State law prohibits a developer from fully controlling more than one riverboat gambling operation, forcing Jumer to choose between Rock Island and Peoria.) That greatly disappointed Peoria city officials, who were counting on a riverboat to rejuvenate the riverfront and downtown. However, under an agreement worked out between Jumer and Burklund, Jumer became a minority investor in the East Peoria group, and the cities of Peoria and East Peoria will split the tax revenue generated by the boat.
Burklund broke months of silence in early July by announcing his plans for the East Peoria riverfront. They call for a 1,200-passenger sternwheeler with four decks, two casinos, a dining room and a lounge; development of a 66,000-square-foot landing with support facilities; and construction of a 132-room hotel. The corporation expects to draw 600,000 visitors a year and produce 800 jobs. East Peoria city officials also have been planning extensive riverfront improvements, including a marina, parks and hiking and hiking trails, and have said Burklund's plans are integral to their fruition.
Established casino developers from Las Vegas, Reno and Atlantic City became part of the picture in July, when they were given preliminary approval to develop riverboats on the fringes of suburban Chicago. The owners of the Sands Hotel and Casino of Atlantic City plan to put two 500-passenger boats on the Fox River at Aurora. They also have proposed a $25 million development in downtown Aurora, including a restaurant and riverwalk. They told the Gaming Board they expect to generate 2,400 jobs.
The Fitzgeralds Group, which operates three casinos in Reno and Las Vegas, is developing a boat for the Des Plaines River at Channahon, four miles downstream from Joliet. Their plans call for a 550-passenger cruise ship and development of a 55-acre entertainment and recreation complex. Job estimates were put at 400.
The third preliminary license awarded in July went to the Des Plaines Development Corp., headed by John Q. Hammons, a hotel developer from Springfield, Mo., who also owns a casino in Reno. Hammons plans to dock boats at the riverfront in downtown Joliet. Preliminary plans called for the construction of two 500- passenger paddlewheelers, a pair of hotels, an office complex, a dockside restaurant and shops.
Assuming all seven developments are ultimately given final approval by the Gaming Board, three licenses will be left to award. One of them, of course, is reserved for East St. Louis, but developers in Sauget, Moline and Metropolis remain interested in the other two slots. So far, Chicago-area legislators have been unable to convince their colleagues to lift the statutory ban on riverboat gambling in Chicago and on Lake Michigan.
Assessing the progress of the developments already underway has been difficult because of the cloak of secrecy thrown over most of the Gaming Board's documents. The original riverboat gambling legislation exempted the board from most provisions of the state's Freedom of Information and Open Meetings acts, making it nearly impossible to obtain anything but the most superficial information about the developments.
That will change, however, if Gov. Jim Edgar signs a piece of legislation passed by the General Assembly that is meant to address some of the problems and complaints that have arisen since the passage of the original law. The so-called clean-up legislation (Amendment 22 to Senate Bill 1086) would require the Gaming Board to release an array of information upon written request, including the criminal records of license applicants, detailed descriptions of development plans and any connections applicants may have to public officials, including campaign contributions they have made.
The legislation also would allow boat owners to extend credit to gamblers, allow them to possess gambling equipment on shore for training workers, and give circuit courts the power of judicial review over Gaming Board decisions. Edgar may balk at the last provision. Friedman has insisted that the Fourth District Court of Appeals in Springfield retain the judicial review power it was given in the original law. He wants a single body of law to be developed and fears that local courts may be reluctant to hand down rulings that may adversely affect the developers and, hence, the local economy. "There is no current body of casino case law on the books in Illinois," Gaming Board spokesman Jim Nelson said. "We will have 10 gambling boats scattered throughout the state, and it's important that we develop a consistent body of case law."
The freedom of information provisions in the clean-up legislation could make it easier for the press to ferret out corruption in the industry, including any organized crime activity, a prime concern of many riverboat gambling opponents. Nelson said that so far, State Police background checks of the applicants and their finances have turned up no evidence of criminal infiltration, although Terrell, the would-be East St. Louis developer, was alleged to have had contact with a New Orleans mob boss. "We're constantly on the lookout for it," Nelson said.
The St. Louis Post-Dispatch reported in March that a union that could be involved in organizing riverboat gambling workers in Illinois — Hotel Employees and Restaurant Employees International — was being investigated by New Jersey officials for alleged ties to the mob. Nelson noted that the Gaming Board has no power to investigate or license unions that organize Illinois boats. "To try to get in and license every entity would make the process endless," he said.
Clearly, there are many questions still to be answered about riverboat gambling. Will it be a long-lasting tourist attraction and revenue boon, or will it be a short-lived fad? Will competition, particularly along the mighty Mississippi, squeeze out some of the boats? Will their operators stay above board or, like gambling mavens elsewhere, fall victim to organized crime? Will the ban on gambling boats in Chicago and on Lake Michigan hold, particularly if Wisconsin legalizes gambling boats? Place your bets. The dice are rolling,
Toby Eckert is a Springfield correspondent for the Peoria Journal Star.
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