SPRINGFIELD — Illinois video gaming terminals generated nearly $2 billion in revenue in the fiscal year that ended June 30. They have become a key revenue source for cities and towns, which receive a 5% cut of what's generated from machines within their jurisdictions.
Though this arrangement can mean hundreds of thousands of dollars — and millions, in some cases — for local governments, some cities and towns have grown frustrated with the relative “crumbs” they receive and are seeking a deeper cut.
Such cities have upped the ante, pushing a penny “amusement push tax” on each bet placed on video gaming terminals.
Oak Lawn near Chicago was first, approving the tax in 2019. It was followed by Tinley Park and Waukegan in 2020.
Decatur is the latest to move forward with the tax, approving an ordinance earlier this month that would take effect Oct. 1.
"It's really amazing that the city gets the crumbs while we bear all the fallout in our community," said Decatur City Councilman Bill Faber before voting to approve the ordinance. "It's a totally, totally disastrous piece of state legislation that has been imposed on all of our cities."
More could follow, with groups like the Illinois Municipal League touting the penny-per-push tax as another revenue source for cash-strapped local governments. But at the same time, the tax has garnered significant backlash from terminal operators and business owners, who say it hurts their bottom line.
Mike Monseur, the owner of nine Godfather's Pizza and Dew Chilli Parlor locations in Central Illinois, said he was "disappointed" by Decatur's move and worried similar efforts could spring up across the state. He said the timing is bad coming out of COVID-19.
"While (bars and restaurants) may appear to be busy now and the gaming's doing well now, they're still recovering," Monseur said. "It's going to take a year or two for many restaurants — and there could be many more that are going to close — to recover from this."
'A patchwork of different taxes'
Illinois lawmakers, wary of the development of a patchwork of local taxes and regulations, are poised to put a lid on the issue. Legislation that would make video gaming taxes an "exclusive" function of the state passed the House in June but stalled in the Senate.
But state Rep. Bob Rita, D-Blue Island, the point person for gaming legislation in the Illinois House, said lawmakers would likely take another bite at the apple, "especially as more and more communities start to do it and then we start to see the effects of what it will do to video gaming as a whole through the state."
“What it ultimately could do is potentially affect the funding for the infrastructure bill that was passed in 2019," Rita said. “But also, it'd (create) a patchwork of different taxes that are put on by the municipalities versus having a state tax.”
With legislative action possible during the fall veto session in October or sometime next year, the IML has encouraged local governments to consider the tax, even as a pair of lawsuits brought by terminal operators work through the courts.
The issue is both one of state versus local control and of how a video gaming pie that becomes more lucrative each year gets sliced.
As of July 2020, the tax on video gaming revenue is 34%, with 5% set aside for municipalities and the rest going toward a state fund for capital projects. The remaining two-thirds is split between establishments and terminal operators.
The state's cut was previously 25%, but was raised to 29% in 2020 following the signing of an omnibus gaming law in 2019, which was meant in part to fund the Rebuild Illinois capital construction program. Local government's share did not increase.
But, in a nod to municipalities, terminal operators and businesses, the state allowed for an additional sixth video gaming terminal to be installed at each establishment and upped the maximum wager from $2 to $4.
Even with a pandemic-induced two-month shutdown, Illinois video gaming machines posted a record $1.93 billion in net terminal income from $23.3 billion wagered in fiscal year 2021, a 21% increase from the previous record in fiscal year 2019.
This resulted in $658 million in tax revenue, with $561 million going toward the capital projects fund and $97 million towards local governments
Gamblers lost $38.8 million across 498 terminals in Decatur, according to a report from the Commission on Government Forecasting and Accountability.
This made Soy City the video gaming capital of Illinois, just barely edging out Rockford and Springfield. This high level of gaming activity netted each city about $1.9 million in tax revenue.
Before passing the "push tax" ordinance, Decatur Mayor Julie Moore Wolfe acknowledged that "it does bring in a tremendous amount of revenue to our city even though we're among the smallest of those in getting basically our cut of of the money that is spent in these gaming machines."
A new $700,000
But the city sees more dollar signs. Decatur city manager Scot Wrighton estimated that, conservatively, the tax could net the city another $700,000 annually.
Moore Wolfe has already floated using the funds toward neighborhood revitalization efforts and the demolition of dilapidated housing.
But not all are happy about this newfound revenue source. Some say it is unconstitutional.
The Illinois Gaming Machine Operators Association and slew of terminal operators have lawsuits pending against the taxes impAosed in Oak Lawn and Waukegan.
Decatur city officials conceded there's a good possibility that the city could also be sued. But, with state legislation pending that could ban local governments from enacting such taxes, the city is rolling the dice.
"Decatur is not business friendly ... and they're not alone in Illinois," Monseur said.
Nearly $5.4 million alone was gambled at Godfather's in Decatur between July 2020 and June 2021, according to state records. This generated about $443,550 in net terminal income, with about $22,177 flowing to city coffers.
Monseur said he bought the location about 15 years ago from corporate, which was preparing to close it. But, the advent of video gaming has breathed new life into the business, which employs about 15 to 20 people in Decatur.
But, the push tax has Monseur rethinking his continued investment in Decatur.
"I think we got about a year left on our lease," Monseur said. "We're going to take a long hard look at it. We already closed one store there because it's just too expensive to operate in Decatur."
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