Overshadowed in the early Wednesday morning drama of the Illinois House of Representatives approving a budget that included changing the sports betting taxation method to progressive rates ranging from 20% to 40%, the passage of HB 4951 also increased the state tax on video gaming terminals (VGTs) by one percentage point to 35%.
There was little pushback to the increase during the floor debate over the whole bill, which included a raft of other tax revenue items that received extensive back-and-forth in the lower chamber. The one percentage point increase is expected to provide $50 million in state taxes, which would also mean $10 million in local taxes based on the current 83-17 split of Net Terminal Income (NTI) tax.
The nearly 47,600 machines in operation across the state have provided the biggest share of the $415.4 million in state gaming tax revenue thus far in 2024, accounting for $290.1 million in the first four months. The $50 million in local taxes generated from VGT play is also notably higher than the $33 million in similar levies from casino gaming.
But video gaming terminals will have a large say in two avenues Illinois has yet to travel when it comes to gaming tax revenue: Their expected eventual entrance into Chicago and whether they can — or invested parties will let them — co-exist with online casino gaming.
Can Chicago be a toddlin’ VGT town?
The most notable part about the state and local taxes VGTs generate in Illinois is where they are not. Chicago does not have VGTs within its city limits, as they are currently bared by city ordinance.
Both the city and the state have started paths for legalization. In the city, Mayor Brandon Johnson’s office put out a request for qualifications (RFQ) last month to find respondents who would serve as gaming consulting advisors. That raises the question of whether Johnson — who backed having VGTs in Chicago during his mayoral campaign — wants video gaming terminals in the city to help plug budget shortfalls and whether his office is confident Bally’s casino — projected to open in September 2026 — can meet its promised projections of $200 million in annual tax revenue for the city at full maturity.
The City of Chicago is already receiving tax revenue from Bally’s temporary casino, which opened at Medinah Temple last September, but the $4.1 million in local taxes raised through the first four months of the year is tracking to be well short of the $35 million Johnson estimated for his 2024 budget. Additionally, Bally’s will be racing against the clock to have its permanent venue in the River West neighborhood of the city open in 2026. It just recently gained control of the Tribune Publishing Plant site where the casino will be built but already has had to make substantial alterations to its original $1.7 billion proposal made to the city.
At the state level, there are bills both in the House and Senate dealing with VGTs, to different ends. Rep. Kam Buckner filed HB 5791 in March, which would amend the Video Gaming Act so that a licensee or applicant would not be in “violation of the Act or specified rules and shall not be subject to disciplinary action for operating a gaming device if operation of the gaming device is in compliance with and not considered gambling under the Criminal Code of 2012.” This serves as an “out” for establishments in the city that have had sweepstakes machines — which is considered part of “grey gaming” with questionable legality — and would want to apply for VGTs should the city lift its ordinance.
In the upper chamber, Sen. Donald DeWitte filed SB 3172 in March in which a municipality with a population over 1 million cannot pass an ordinance banning VGTs within the corporate limits of the municipality. But the more controversial aspect of his bill comes with the distributon of Net Terminal Income (NTI) tax.
As opposed to the standard distribution of 83% to the state and 17% to the local municipality, DeWitte’s bill would allocate 83% of the NTI in the municipality to the Regional Transportation Authority and the remaining 17% to the municipality. Public transportation has been a hot-button topic in Chicago, and transit authorities across the state are facing a fiscal cliff of more than $700 million when federal funding expires next year.
Both bills are currently in committee. It is unclear if either will gain any traction or momentum before the General Assembly’s veto session in the fall.
Internet casino gaming continues to lurk in the background
Though Illinois is a gaming market seemingly ripe for expansion given how sports betting has evolved into one of the top three largest markets in the U.S. since launching in March 2020, stakeholders in the tavern and food service industries view internet casino gaming as a threat. The gaming expansion bill Illinois Gov. JB Pritzker signed in 2019 allowed for non-truck stop establishments to have a sixth video gaming terminal, which has contributed to VGTs being the primary source of gaming tax revenue in the state. Truck stops are allowed up to 10 VGTs at their locations.
For the second consecutive General Assembly, there are internet casino gaming bills in both houses facing uncertain futures ahead of the fall veto session. Rep. Edgar Gonzalez filed HB 2239 in February, and there is a companion bill (SB1656) filed by Sen. Cristina Castro in 2023. Both bills have had only a first reading, with Gonzalez’s bill re-assigned to the House’s Rules Committee in April and Castro’s currently in the Senate’s Gaming, Wagering, and Racing Subcommittee.
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