When Des Plaines beat out Waukegan for what was supposed to be the 10th and final casino license in Illinois more than a decade ago, it transformed the northwest suburb, then best known as the home of the first McDonald’s, into the state’s gambling mecca.
With increased competition and shrinking casino revenues, the title — and local tax windfall — may be far less meaningful in the years ahead.
Launched in 2011, Rivers Casino, a glitzy edifice built over a shallow pit of water near the Tri-State Tollway, quickly became the state’s top-grossing riverboat casino, generating more than $400 million annually in gaming revenue.
Des Plaines’ share of that pot is nearly $70 million of tax revenue, money the city has used for infrastructure projects such as roads, water mains and sewers. But with six new Illinois casinos authorized by a recently approved gambling expansion bill, there is concern that Des Plaines’ take may dry up.
“In the short term, we’ll be just fine, because it will take a couple of years for other casinos to get up and running and earning revenue,” Des Plaines City Manager Michael Bartholomew said. “But what happens after that, I don’t know.”
The gambling expansion bill, signed into law by Gov. J.B. Pritzker in June, opens the door to everything from sports betting to so-called racinos at horse racing tracks. It provides for six new casino licenses and allows existing casinos to increase the number of gaming positions, measures aimed at reversing a decline in casino revenues statewide.
Casino proposals have surfaced for Waukegan, Danville, Rockford and for a south suburban location in either Hazel Crest/Homewood, Lynwood or Matteson. A Chicago casino has yet to get any traction, in large measure due to what analysts say is a prohibitive tax structure, including a 33.3% cut for the city, versus a 5% local tax rate for other casino towns.
Last month, the Illinois Gaming Board recommended the state consider making modifications to the terms of the Chicago casino to make it more financially feasible for developers.
The gaming board has set an Oct. 28 deadline for applications for the new casinos, excluding Chicago.
Casino revenues falling: Illinois casino revenues peaked at $1.98 billion in 2007. Since 2012, when standalone slot and poker machines were allowed in bars, restaurants and truck stops, casino revenues have steadily declined.
Today, Illinois has 30,000 video gaming terminals — the most of any state — and video gambling generates more revenue than casinos.
For fiscal year 2019, which ended June 30, video gaming revenue topped $1.59 billion, while adjusted gross receipts for Illinois’ 10 casinos dropped to $1.35 billion, according to the annual wagering report issued by the state’s Commission on Government Forecasting and Accountability.
Adding six new casinos will likely hurt the existing ones, according to gambling industry consultant Frank Fantini.
“If you put casinos in Rockford and Waukegan, there will be casino patrons who previously went to casinos in the Chicago area that will now be staying closer to home,” Fantini said. “The new casinos are going to do more to take business from existing casinos than they are to grow the market as a whole.”
Rivers brought in $440 million in adjusted gross receipts during fiscal 2019, more than double the $175 million of its nearest competitor, Harrah’s Joliet. The Des Plaines casino has applied to increase its number of gambling positions from 1,200 to 2,000 — the maximum allowed by the expansion bill — in a bid to maintain revenue and offset the draw of new casinos.
Harrah’s Joliet & Metropolis, the Casino Queen in East St. Louis and the Grand Victoria in Elgin also applied for 800 additional gambling positions, the gaming board said.
Chicago real estate developer Neil Bluhm, whose Rush Street Gaming built and operates Rivers Casino — despite selling a 61% stake to Louisville-based Churchill Downs in March — said casino revenues in Des Plaines have likely topped out.
“We’re going to spend probably $150 million or more to expand Des Plaines, and we doubt that we will make as much revenue as we’re making today,” Bluhm said. “That’s because of all the new competition.”
Rush Street Gaming is among the bidders for a Waukegan casino license.
Slots pay for sewers in Des Plaines: Despite having the top-grossing casino in the state, Des Plaines is still a long way from Las Vegas, with few visible signs of a gambling windfall. Beneath the surface, Rivers has paid substantial dividends for the city through improved sewers, water mains and other far from glamorous infrastructure projects.
Rivers has generated $184 million in local gaming tax revenue since the casino opened in July 2011, but only about $66 million has stayed in Des Plaines, a result of a 30-year agreement struck with the gaming board. Under the deal, Des Plaines gives the first $10 million in local tax revenue to the state, sharing 40% of the rest with 10 disadvantaged Cook County communities, such as Ford Heights, Robbins and Harvey.
The state agreed to cut Des Plaines’ annual payment to $5 million after a south suburban casino opens as part of the expansion bill.
In 2018, Des Plaines collected $25.1 million from casino operations, including a 5% tax on wagering and a $1 admissions tax, according to city financial records. It kept about $9 million.
“Of all of the casinos in the state, we are the only ones that have a sharing agreement — nobody else has to share,” Bartholomew said. “But certainly I cannot complain about getting $9 million every year.”
One of the largest projects funded as a result of casino revenues was a second supply line to bring Lake Michigan water to Des Plaines, saving the city about $3.6 million a year, Bartholomew said.
The most visible contribution to the city, though, may be a $2.2 million donation to renovate the city-owned Des Plaines Theater, a century-old venue envisioned as the centerpiece for a planned restaurant and entertainment district.
But adjacent economic development has been harder to find. A planned hotel at the casino site was never built.
“I can’t say that somebody has specifically said they’re going to locate their business close to the casino because it’s here,” Bartholomew said.
No high rollers at Café La Cave: Quantifying the economic benefit of the casino for nearby restaurants, hotels and retailers is more art than science, but one longtime Des Plaines restaurateur had a ready number when asked.
“There has been none. Zero,” said Gus Sutter, 63, owner of Café La Cave, an imposing 50-year-old steakhouse with a cocktails sign out front and an old school ambience inside.
Located across the street from the Allstate Arena and directly under the flight path of a steady stream of jets landing at nearby O’Hare International Airport, Café La Cave features tuxedoed waiters, a grottolike dining room, a bar made for martinis and a pricey menu with such classics as chateaubriand and rack of lamb.
Tino Gomez, a veteran server who has worked at Café La Cave for 45 years, waits on diners in the main dining room of the restaurant on Oct. 8, 2019, in Des Plaines. Café La Cave owner Gus Sutter said his restaurant doesn’t benefit from the nearby casino.
Tino Gomez, a veteran server who has worked at Café La Cave for 45 years, waits on diners in the main dining room of the restaurant on Oct. 8, 2019, in Des Plaines. Café La Cave owner Gus Sutter said his restaurant doesn’t benefit from the nearby casino. (Stacey Wescott / Chicago Tribune)
In its heyday in the 1970s, Café La Cave was frequented by “movie stars, politicians, sports figures and Mafia members,” Sutter said.
He was hoping to add high rollers to the reservations list when Rivers opened, but with several upscale restaurants inside the casino, that never quite played out.
“The high rollers are comped at the casino for all their food, so we certainly understand why they would stay there to eat,” Sutter said. “They have to get back at the casino somehow for all the losses they’ve incurred.”
Rosemont mayor: We’re better off without casino: In 2008, Des Plaines and Waukegan were battling for the state’s only unused casino license, which had remained dormant for years after a proposed Rosemont facility was denied by regulators amid mob allegations.
Rosemont Mayor Brad Stephens, whose father and mayoral predecessor, Donald Stephens, led the lengthy, unsuccessful battle to land a casino, said the village has moved on — and is better off without it.
“Once they awarded Rivers in Des Plaines, we shifted gears and said ‘OK, we’re done,’” Stephens said.
The village redeveloped the land it had put aside for the casino as a 200,000-square-foot entertainment and restaurant complex, which opened in 2012. An adjacent shopping development, Fashion Outlets of Chicago, opened in 2013.
Stephens said the two developments combined bring in about $20 million in annual revenue for the village.
“I think we benefit Rivers more than it benefits our hotels and restaurants,” Stephens said. “Rivers ends up being an amenity to the hotel. It’s something to do at night.”
High hopes in Waukegan: When Des Plaines won the state’s 10th casino license in December 2008, spurned Waukegan officials vowed they would not pursue another casino for the far northern suburb. But with the expansion bill, Waukegan wants back in the game.
“We have been fighting this battle to get a casino up here since 1992,” said Waukegan Mayor Sam Cunningham. “It’s a new day now and we’re expecting to capitalize on this opportunity.”
The city is reviewing casino proposals from American Place, North Point Casino, Potawatomi Casino and Rivers Casino, with a special council meeting scheduled for Thursday to determine which ones it will submit to the gaming board for approval. A consultant hired by Waukegan rated the American Place casino proposal by Las Vegas-based Full House Resorts as most beneficial to the city.
Full House offered the highest price to buy the city-owned land to build the casino. Its American Place proposal also included a 1,500-seat entertainment and conference center, something Cunningham said would be an important tourism draw for Waukegan.
All four proposals are planned for development at the fallow 32-acre Fountain Square shopping complex. In 2003, Waukegan bought the property — once the home of Lakehurst Mall — to house the casino that eventually went to Des Plaines.
The American Place casino proposal by Las Vegas-based Full House Resorts includes a 75,000-square-foot casino, a high-end boutique hotel with a helipad and private entrance and a 1,500-seat entertainment center that could host concerts, conferences and private events.
The American Place casino proposal by Las Vegas-based Full House Resorts includes a 75,000-square-foot casino, a high-end boutique hotel with a helipad and private entrance and a 1,500-seat entertainment center that could host concerts, conferences and private events. (American Place)
Rivers had the highest projected revenue for the Waukegan casino, at $215 million annually. That would generate about $11 million in local gaming taxes, with Waukegan keeping 70% and sharing the balance with neighboring North Chicago and Park City.
Rush Street’s Bluhm said a Rivers Casino would bring 1,200 jobs and about $150 million annually in economic impact to Waukegan and Lake County.
“Waukegan will not make as much revenue as Des Plaines, just because of its location,” Rush Street’s Bluhm said. “But the impact to Waukegan could be even bigger than the impact to Des Plaines because frankly, Waukegan is in more need of economic development than Des Plaines was.”
Cunningham said Waukegan will look to use the gaming tax revenue for a long list of infrastructure projects, as well as paying down municipal debt. But he sees the casino development as more transformational to a city still haunted by decades-old plant closings, such as Outboard Marine and Johns Manville, which took away thousands of jobs, and left Waukegan with polluted Superfund cleanup sites along its lakefront.
In fact, Cunningham is hoping to reinvest some of the casino funds into Waukegan’s since-remediated Lake Michigan shoreline, turning it into a tourist attraction as well.
“We can, in about 10 years, become the northern Navy Pier of Lake County,” Cunningham said.