Gambling for jobs;
legalizing casinos in Chicago

By TOBY ECKERT

Chicago Mayor Richard M. Daley spun a political roulette wheel in March when he embraced a proposal to build a $2 billion casino complex in the heart of the Windy City. Despite the would-be developers' hope for quick action by the General Assembly on legalizing land-based casinos, the little white marble is still going around and around. It's expected to come to rest when lawmakers take up the issue in earnest during their brief "veto" session. Daley has issued an ultimatum on the project — either it's approved this fall or it's dead.

As the session approached, the odds were against Daley. Gov. Jim Edgar is a staunch foe of the project. He holds the trump card — a veto — and says he will throw it down if casino legislation reaches his desk. That threat has strategists on both sides of the aisle predicting a tough throw for the casino.

• "Without Governor Edgar signing on, both Democrats and Republicans will be cautious," said Gary LaPaille, chief of staff to House Speaker Michael J. Madigan (D-30, Chicago). "With lukewarm support or no support from the governor, it's going to be very hard."

• "It's going to have a lot of trouble on both sides of the aisle," House Minority Leader Lee A. Daniels (R-46, Elmhurst) told the Chicago Tribune in September. "If the governor isn't in favor of it, it's going to have a lot of trouble passing."

• The same sentiment prevails in the Senate. While lameduck Senate President Philip J. Rock (D-8, Oak Park) has embraced the proposal, his counterpart. Senate Minority Leader James "Pate" Philip (R-23, Wood Dale), says GOP lawmakers aren't likely to support it.

Reflecting the lukewarm reception from leadership, few rank-and-file lawmakers have jumped on the casino bandwagon. The developers' case may have been set back considerably in August, when the Better Government Association of Chicago, a staunch foe of the casino, leaked a memo prepared by lobbyists for the casino companies. The 28-page document contained some unflattering descriptions of lawmakers. For instance, it said Rep. Ellis B. Levin (D-5, Chicago) is "disliked by almost everyone" and called Rep. Charles G. Morrow III (D-32, Chicago) "independent and pompous."

Yet, it's imprudent to declare a project dead before a vote is taken, especially one with so much economic muscle behind it. With Illinois lingering in recession, many law makers will find it hard to pass up the 66,000 new jobs and $500 million in tax revenue the casino companies say their project will produce. Also, the number of lame-duck lawmakers will be larger than usual this year, taking some of the political sting out of the vote. "I'd probably be more surprised than less surprised if it hit my desk," Edgar said. "But there's a lot of pressure being put on, a lot of money being spent to hire lobbyists."

Indeed, the casino companies won't give up without a fight. They even believe they can get to Edgar. "I don't think the governor has had the benefit of all the information," said Joseph Frederick, senior vice president of Hilton Hotels Corp. "If we can find a way to present this information to him, he may change his mind."

Most observers were caught off guard last spring when Daley suddenly announced his support for the project, proposed by Hilton and Las Vegas-based Caesars World Inc. and Circus Circus Enterprises. After all, Daley had signaled his opposition to gambling in Chicago two years earlier, when he turned down an offer to include the city in a bill that legalized riverboat gambling.

Some speculate that Daley wants to erect a lasting monument to his administration that would mark him as a fitting heir to his father's legacy. After all, everywhere one turns in Chicago are reminders of the massive projects undertaken by the late boss Richard J. Daley. But aides say the mayor is motivated by more immediate concerns, namely, the erosion of Chicago's job base and new challenges to its convention and tourism industries. "The mayor's a realist," said Gery Chico, Daley's chief of staff. "The times being what they are, if we don't do something to bring more jobs into the city and state, we're going to be in real trouble."

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As thousands of people were lining up to apply for minimum wage jobs at Loop hotels, along came the promise of a glittering new industry. The developers said they would erect a 2.5-million-square-foot casino and entertainment complex, at no cost to the city or state. In the words of Circus Circus President Glenn Schaeffer, the project would be "a new dream city," "an urban theme park" and "a prolific creator of jobs."

The statistics were alluring. During construction, the project would create 13,500 direct jobs and 24,000 spinoff jobs for material suppliers. Once in operation, the casino would need 18,000 workers, who would be paid an average of $25,000 to $27,000 a year, not including tips and benefits. Another 48,000 jobs would be created at companies that would supply the operation with food, liquor and gaming equipment. Ten million visitors a year would flock to Chicago. New blood would flow into a convention industry facing stiff competition from Atlanta, Orlando and other up-and-coming Sunbelt cities. Chicago and the state would get $500 million to $600 million in new tax revenue. "This project will give Chicago and Illinois a sustaining edge in the 21st century growth industry of tourism," Schaeffer said at a legislative hearing on the proposal. "It will put Chicago on the A-list of travel destination cities worldwide. This is a steady and reliable source of revenue deriving from a leading spot in the worldwide tourism industry."

While Schaeffer's words were a sweet song to many, they were a clanging alarm bell to Illinois' fledgling riverboat gambling industry and established horse racing interests. Still struggling to carve out their markets, the riverboat developers saw the casino as a death threat. So did the horse racing tracks, whose profits had declined sharply after gambling boats were launched in Iowa and Illinois. Others took note that the city's own study of the casino indicated the new jobs for Chicago would come at the expense of 2,300 jobs downstate. "There is a cost to all of this," warned Ed Duffy, president of the Arlington Park and Quad City Downs race tracks. "As much as they want to show you the new jobs and the new revenues for the city of Chicago, what it will do to drive the economic engine of the city, it will, in fact, come at the expense of jobs and towns downstate that are very dependent upon the horse racing industry and the riverboat industry."

Illinois has seven horse racing tracks and 21 off-track betting parlors. The industry employs 9,640 people statewide and each year produces about $70 million in tax revenue for the state and $7.1 million for cities. The state's five riverboat casinos have produced 3,600 jobs in hard-pressed river cities like Peoria, Rock Island and Joliet. So far, they have contributed $27.4 million in tax revenue to the state and $11.2 million to their port cities. Once all 10 boats are in the water, the industry is expected to generate 10,000 jobs and $120 million in annual tax revenue.

Including the Illinois Lottery, legalized gambling now produces about $700 million in direct and indirect tax revenue. So why not add more? Critics respond that the state has reached its saturation point for gambling. Any new forms, like a land casino, would simply take a slice of the demand that's already out there, creating little, if any, new revenue. Some studies suggest the casino would drain 20 percent of the horse racing industry's profits. To date, no serious studies have been done to determine how the project would affect the floating casinos, but riverboat operators insist they would be badly hurt since they would lose gamblers from Chicago, a major market for most of the boats.

"Riverboat legislation was proposed to help downstate river cities develop economically. To in a very short time take that away would be a mistake," said Robert Swaim, a lobbyist hired by several of the riverboats. "It's a new industry. It's just like opening a small restaurant on one side of the town and then having a big super-restaurant open on the other side. You're going to lose some business."

Those arguments carry a lot of weight with Edgar, a native of downstate Charleston. The Republican governor is a big fan of horse racing but has been cool to other forms of legalized gambling. He opposed riverboat gambling, but now that it's here he says the state should make the most of it. "My concern on an economic point of view is, first of all, how many jobs are we going to lose?" Edgar said. "The numbers we're looking at versus the number they say they're going to develop, I think we could end up being a net loser of jobs in this state. There's no doubt it could help Chicago. But as governor, I have to worry about the whole state."

The casino developers dispute such conclusions. First, they say, the casino complex will be an international tourist draw. It will create a new market for gambling in Illinois. Second, they insist the casino can co-exist with the horse tracks and the riverboats. Testifying on behalf of the casinos at a legislative hearing, University of Chicago economist George Tolley estimated horse wagering would drop by only 4 percent once the casino was in operation, based on experiences in New Jersey and other models. As for the riverboats, they will supposedly benefit from a spillover of tourists, much like smaller casinos around Las Vegas have thrived.

To show their good will, the casino developers have offered to give horse racing interests a piece of the action by allowing off-track betting at the casino. They also have promised to try to convince the General Assembly to reduce the tax on riverboat gambling revenues from 20 percent to 10 percent, the same amount the casinos are willing to pay the state. By mid-October, none of the offers had been accepted.

Since persuasion hasn't worked, the developers have started pointing out that competition for Illinois' gambling dollar is creeping closer and closer. In particular, they note the proliferation throughout the Midwest of casinos operated by American Indian tribes. The Chicago casino could make Illinois the region's dominant gambling market, overshadowing the competition. "We're the epicenter of the population of the Midwestern part of the United States," said Hilton's Frederick. "There are 16 million people within a day's drive or flight of Chicago. We shouldn't forfeit the opportunity that we have in this great state and this city to more progressive, far-thinking people with more courage and will."

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Indeed, Rolling Meadows and East St. Louis have been approached by an American Indian tribe eager to build a casino in Illinois. Edgar said he would reject those plans too, especially since federal law makes it nearly impossible for states to regulate tribal casinos. "There's no way you can control them," he said. "They can do whatever they want."

Beyond the economic concerns lie questions about the social costs of the casino. Gambling has always carried the onus of crime, from the Mafia to petty prostitution. Casino opponents have seized on that image to score points with the public. At a speech in April to the Illinois Alcoholism and Drug Dependence Association, Illinois State Police Director Terrence Gainer estimated a casino in Chicago would add at least $100 million a year to the cost of law enforcement in the city.

The casino developers quickly trotted out their own study, conducted by Jeremy Margolis, State Police director under former Gov. James R. Thompson. Margolis said Las Vegas has one of the lowest crime rates in the nation and noted that the Chicago casino would be small compared to the casinos in the desert playground. As opposition to the casino mounted, the developers began more and more to portray their proposal as a benign addition to Chicago's nightlife. They compared it to the small casinos that dot large European cities.

Moreover, the developers stressed that 80 percent of their complex would be devoted to non-gaming entertainment, like virtual reality theaters, sports and puppet shows for the kids. "What we're looking at is building something that in no way resembles anything that you would see in existence today," Frederick said. "This international entertainment complex is one of a kind. It is not Las Vegas, it is not Atlantic City. It is something designed to fit into the fabric of Chicago."

Edgar's not buying that argument either. For him, the casino invokes memories of the days when Chicago was a wide-open city, run by the likes of Al Capone. It also prompts comparisons to Atlantic City. While casinos have brought new jobs and new revenue to the seaside town, they have failed to be the cure-all the developers promised. "I'm not sure why they'd want to try to open up those old wounds and create that kind of image about a city I think for too long has been maligned for what happened in the '20s," Edgar said. "Why take that chance? Why take a city that I think is a world class city and tie its future to something I think is not the most desirable image to have? I don't think the economic answer for Chicago or the state is one mega-project. You don't necessarily build a strong economy by one big industry."

The governor also fears that the casino will nudge open the door to other forms of gambling — like video poker — and lead to the eventual legalization of land casinos down-state. Those two possibilities have been mentioned by several downstate lawmakers as likely tradeoffs for their votes on the casino. "I've got other cities that are already saying, 'Hey, if we're going to give it to Chicago, we want it in Rosemont, we want it in Waukegan,'" Edgar said. "I've had legislators say they've been approached by some officials downstate saying, Tf they're going to have it up there, we want it here.' We're talking about opening up casino gambling to the entire state."

As a possible vote on the casino was nearing, the developers turned up the heat on legislators by threatening to take their project to another state. Echoing Daley, Hilton's Frederick said the companies would indeed pack up their plans and leave if the proposal fails during the veto session. They would then feel free to shop around. "We have no option," Frederick said. "If it's the mayor's dictate that this project not continue after that date, then we have to respect that. We'd prefer to be in Illinois, we'd prefer to be in Chicago. But if these other states court us, we'd be remiss if we didn't follow up."

The companies already have been contacted by other states, Frederick said. He wouldn't name them in mid-October, but Indiana and Wisconsin have been mentioned as possible destinations. The prospect of a neighboring state gaining from Illinois' loss may indeed sway some legislators. But it doesn't move Edgar. He notes that the Indiana legislature has been cool to proposals to legalize casino gambling. And in Wisconsin, a casino would face competition from already established American Indian casinos.

In the end, with each side making threats and throwing around figures that are ultimately impossible to verify independently, the vote will probably come down to a leap of faith for most lawmakers. Both Daley and Edgar appear to recognize that. Daley asked recently: "How long are we supposed to go on this? Another two years begging to put people to work in Illinois?" Edgar said: "We could both argue till the cows come in, but you may not know until it's built and then it's too late. If I'm right and they're wrong, we're gonna have a mess. If they're right, I guess we'll all live happily ever after."

Toby Eckert is a Springfield correspondent/or the Peoria Journal Star.

16/ December 1992/ Illinois Issues