All right. Good morning, everyone. Happy Monday. And we definitely are grateful to to be in the room today as we start this subcommittee on revenue again.
Grateful for everybody on a Monday. OK, Mr. Blakemore, we get away from you.
So as we get ready to start this meeting, first of all, I want to say to my colleagues, thank you all so much for all that you all do.
And we're going to have a meeting today. The purpose of today's meeting is to hold a subject matter to discuss VGT, video gaming, terminal tax, as well as the revenue ideas proposed to this body by my colleagues.
No votes will be taken, but there's going to be a lot of extensive presentations about this.
And so to establish a quorum, I would like to call the role Vice Chair Pat Dow, President Alderman Daniel LaSpada, Alderwoman and Chair Michelle Harris, Alder Julia Ramirez,
Chairwoman Jeanette Taylor, Alderman Ronny Mosley, Chairman Michael Rodriguez, Alderman Byron Cicho Lopez, Vice Mayor Walter Burnett, Chairman Jason Irvin,
Chairwoman Rosanna Rodriguez-Sanchez, Alderman Bill Conway, Alderman Anthony Cazada, Chairman Andre Vasquez, Alderman Timmy Knudsen, Alderman Matt Martin.
There are 10 members present, include myself. We have a quorum.
So Alderman Irvin Moore are none members, along with Alderwoman Lee, who are, well, Alderman Moore is present today.
But Alderman Irvin and none member Lee are requesting remote participation.
Can I have a motion to allow these members to attend?
So motion made by Alderwoman, I mean, Chairwoman Dow, so move all those in favor, say aye.
All those opposed, in the opinion of the chair, the ayes have it.
Can we confirm that Chairman Jason Irvin is online, along with Alderwoman Nicole Lee?
Yes, I'm here.
Thank you so much.
I'm here as well, Chair.
Thank you so much.
At this time, we're going to begin our public comment.
Oh, oh, my bad.
I'm so sorry, Alderman.
Alderman Cardona, none member, present as well.
My bad.
So at this time, we have four public speakers.
And our first public speaker will be Mr. George Blakemore.
To members of this committee, I'm going virtual.
Corruption and fraud and abuse.
Now I'm trying to come in on the game.
I mean, somebody suggested maybe at the airport, the games that are being played here, the games that are being played right here, right here.
So that's why it's very important for a man of Mr. Blakemore's stature to be present at these meetings.
Mr. Blakemore, are you a Democrat?
No.
Mr. Blakemore, you got on that red hat.
Are you a Republican?
I went red in February.
But what is your main purpose?
To go black.
Black.
Go to the black ghetto.
You see no economic development at all.
Oh, but you have black faces in high places, no economic development at all.
So you're playing a game here, and I know your game.
I can't even hardly walk down the street, Mr. Blakemore, hey, Mr. Blakemore, hey, man,
you with all that old colored stuff that's painted.
We see you.
We hear you.
We appreciate you.
So that's why you treat me like you do.
I'm being very effective.
The power of one.
One star can light up the dark.
One, the power of one.
So again, it's another dog and pony show.
You are trying, with these video machines, you don't have no business to put the machines in.
I'm talking about specific to your black ones.
And then, if you do have business, you sell out your brothers and your sisters.
It's just terrible down here.
And when you get around white folks, they're not your true kinfolk.
You need to bless yourself.
You need to do for yourself.
And you need to become a selfish people.
Self-preservation is the first law of nature.
And in a few minutes, when that time goes out, somebody says, beep, beep, beep, beep, beep, beep, beep, beep.
You sit down.
Now, you're all a clown down here.
You're black.
A totally clown.
Totally out of disconnectedness to the ancestors.
If the ancestors could see you, oh, they wouldn't like what you're doing.
One day, I'm going to be an ancestor.
And one day, you're going to be an ancestor.
So, you've got to check yourself, you black one, before you wreck yourself.
You're a disgrace to the ancestors.
Again, so, I'm at a...
Thank you, Mr. Blakemore.
At this time, we will have Mitchell for public comment.
My name is Mitchell, and I own and operate some group of corned beef sandwiches, shops in the Chicago suburbs.
I've lived in the city for the past eight years.
I'm here today as one of the many small business owners who wants to expand into the city of Chicago.
But because of the rising costs of running a restaurant, it would be difficult to do without video gaming.
The economic reality of running a small restaurant today has changed drastically since COVID.
Labor costs are at an all-time high.
Between increased minimum wage requirements and difficulty of hiring and retaining qualified staff, payroll has become a major burden.
Food costs continue to rise due to inflation and supply chain instability.
Deli meats, breads, and other staples that we rely on have seen double-digit increases over the past two years alone.
Insurance premiums, especially general liability and workers' comp, also have spiked, adding thousands of dollars to our annual operating budget.
Utility bills, property tax, and regulatory compliance costs further erode already thin profit margins.
Given these cost pressures, opening new locations to Chicago is currently not physically or financially viable.
Sixty percent of all business failures in the first two years are due to cash flow problems.
Without additional revenue like video gaming, we simply cannot justify the investment or risk expanding into the city of Chicago.
In the suburbs, video gaming terminals help subsidize the cost of running a food service business.
They are not a luxury.
They are essential to everyday-to-day operations.
Neighboring municipalities Cicero, Berwyn, Oak Lawn, and dozens more already have video gaming and are benefiting from the tax revenue.
Chicago is losing business jobs and tax dollars to the suburbs because it refuses to modernize its policies.
Legalizing video gaming in Chicago would bring fairness to small operators like myself and many others and allow us to compete.
Legalizing video gaming would not only help small businesses survive, it would allow us to grow, hire, and contribute more to the local economies.
It would increase the city's tax basis without raising taxes and help funding services without burdening its citizens, such as myself.
I want to bring my successful sandwich shops to Chicago, but I cannot do unless the city supports small businesses by legalizing video gaming terminals.
As you guys already know, a lot of bars and restaurants in Chicago already have these machines in them, but the city is just straight-up missing out on revenue.
I urge this subcommittee to support and legalize video gaming in Chicago so small business owners like myself and many others can participate in the city's economic growth.
Thank you.
Thank you so much.
At this time, we're going to have John Harris.
Good morning and thank you.
John Harris, resident of Chicago 1221 West Lexington, here representing the Illinois Council on Problem Gambling.
On behalf of the Illinois Council on Problem Gambling, I would like to thank you for your attention to the important topic of video gaming terminals
and the potential introduction into the city of Chicago.
ICPG is a gambling-neutral organization.
We neither support nor oppose gambling expansion, including the introduction of VGTs.
Our mission at ICPG is to promote awareness, education, and resources for those impacted by problem gambling
while supporting responsible gambling and harm reduction practices across the state of Illinois.
Should the city move forward with allowing VGTs, we respectfully urge the council to consider implementing measures
that support harm reduction and responsible gambling.
These measures could include, number one, prominent display of responsible gambling resources,
such as the Are You Really Winning campaign and the 1-800-GAMBLER helpline within all establishments hosting VGTs,
and two, basic training on gambling disorder for all VGT operators and staff.
ICPG offers a free self-paced one-hour training program that can be made available to owners and employees to help them recognize the signs of gambling-related harm
and know how to respond appropriately.
Chicago has an opportunity to set a statewide standard for responsible gambling policy in relation to VGTs.
By implementing these practical and evidence-informed measures, the city can lead by example in balancing economic development with public health and consumer protection.
Thank you for your consideration of these recommendations.
ICPG remains available as a resource and partner in promoting education and prevention throughout the state.
Sincerely, Dave Wall, Executive Director, Illinois Council on Problem Gambling.
Thank you.
Thank you so much.
At this time, we will have Kimmy Jordan.
Good morning.
Good morning.
Farrell Hall, Chair Dial, and committee members.
My name is Kimmy Jordan.
I work at Valley Chicago Casino in Environmental Services.
I am a lifelong Chicago living in the 16th Ward.
I am also a member of Unite Here Local One Chicago Hospitality Union.
Thank you for the opportunity to address the committee.
I do not support expanding video gaming terminals beyond Chicago Casino Airports.
However, before I say more about that, I want to share some of my story, which in many ways, the story of many people in Chicago, in the city.
For 20-plus years, I worked at the Cass Hotel as a housekeeper supervisor.
Like thousands of Chicagoans, I was laid off in March of 2020 when the pandemic hit.
COVID-19 shuttered hospitality for one year, then 18 months, then two years, and more.
I could not have imagined what it would take for the hospitality industry to reopen once again.
We saw a glimmer of hope when Governor Prisker signed the casino bill in July of 2020.
The promise of good gaming hospitality jobs felt like a hopeful sign for a warm summer breaking through the dark days hospitality has taken such a hit in our city.
Many of us were laid off for more than two years, but we did not give up on hospitality.
Unite Here members slowly returned to work to their good union jobs.
As hotels and other properties reopened, people were recalled from layoffs.
Some of you remember supporting the Right to Return Ordinance, signed by Mayor Lightfoot on June 25, 2021, four years ago.
The Comeback Ordinance, as it was called, preserved the right to return to work for many hotel workers who have been laid off.
In 2022, when the Chicago Casino bidders surfaced, I went to information meetings and listened to the bidders at town hall meetings.
I watched hours of city council meetings on Zoom while many of you put Bally's on the spot and questioned them vigorously.
I was grateful that so many of you cared about ensuring good jobs for Chicagoans, and I felt confident that we were aligned in our interests.
I was so proud when the casino orders passed.
I felt confident that Bally's would hold and be held to creating good jobs.
I was hired at Bally's in September of 2023.
I need to tell you, we have collectively made these good jobs.
Thank you for all of you here who supported the Chicago Casino.
Two years later, our Unite Here members at Bally's have union benefits, union health care, pension, legal service,
and union benefits, and union benefits.
citizenship training, excellent wages, all union contract.
We have made these good jobs, and that's a great post-pandemic feeling.
So to be honest, when I heard Chicago was considering legalizing video gaming terminals
beyond Chicago, casino, and the airports, my heart sank.
We have good jobs at the casino, good union jobs, approximately 140 people,
some who look like me and some who don't, black, brown, white, immigrants,
Chicago people of all ages, soon enough, when the permanent casino,
there will be jobs for many other Chicagoans who are counting on the promise
of good Chicago casino.
I don't believe.
Please finish.
Absolutely.
Thank you.
I don't believe that more video gaming terminals will help us.
I believe that legalizing expansion beyond Chicago casino and airports will slowly
eat away at our good hospitality jobs and reduce the number of future jobs
in the permanent casino.
We worked hard to get these Chicago casino jobs right and good hospitality jobs
back on track.
Please do not undo what we did together.
Chicagoans are counting on us.
Thank you so much.
At this time today, you all, the meeting will be broken up into three different
presentations, different movements.
Our first one that we're going to have is a dialogue conversation and a presentation
on exactly what BGT taxing looks like.
And so today, we have Christensen Capital Advisors, forgive me if I pronounce it wrong,
on the findings of their gaming consultant report, which was published and will be available
for everyone in your inbox.
It's present today.
Secondly, we hear a presentation from Director Oda Gray and the City Council Office of Financial
Analysis on revenue proposals submitted by members of this body and analyzed by them.
And then thirdly, and lastly, we'll hear a brief presentation about additional revenues,
ideas submitted by the finance team.
So first, VGT number two, we will hear from specific ideas submitted by Alders.
And then thirdly, we're going to hear from additional ideas outside of both the Alder and
VGT from the finance team of the city.
And so today, again, it's no votes will be taken, but this information will be very pivotal.
And so at this time, we're going to have our first presentation around VGT with Annette
Guzman, Jill Jaworski, Sebastian Sinclair, who is the president of Christian Capital Advisors.
Jill Jaworski is our CFO.
Annette Guzman is our budget director.
And in addition to that, we're adding Pat Doerr, who's the executive director of Hospitality
and Business, the association here in Chicago.
In addition to that, we're adding John Canham.
He is the director at Gold Rush Gaming.
And so first, we will have our presentation.
In addition to the others that we've invited to the box.
So at this time, we'll turn it over to you all for our VGT presentation from our consultants.
Great.
Thank you so much, Chair Hall.
I want to do a brief introduction of Christensen Capital Advisors and Sebastian Sinclair, who's
seated with us here today.
And then Sebastian will get into the meat of the presentation of the analysis that he and
his firm completed for the city on video gaming terminals.
Christensen Capital Advisors is a specialized firm focused on economic forecasting and analysis.
They provide consulting services to government agencies, private firms, and other entities,
including law firms, investors, and corporations.
I just want to note, this was, you know, when we went through a process to hire Christensen Capital
Advisors, we interviewed a number of firms who were all highly qualified.
One of the things that we thought was important was the fact that because Christensen has worked
for not just governments, but also the private sector, that they have a broad range of experience
and can bring multiple perspectives to bear.
We thought that was a very important qualification in hiring them.
They regularly do the type of market studies that we had them do today, assist governments in also
developing regulatory regimes and request for proposals for gaming license contracts.
Sebastian Sinclair, who is here with me today, is the president of Christensen Capital Advisors,
whom he has been with as president for 26 years.
I'm going to read briefly some parts of his resume to illustrate how experienced he is.
Again, Sebastian Sinclair has been with Christensen Capital Advisors since 1993 and president since 1999.
In that capacity, he has conducted studies of the economics, financial structure,
and valuation of existing and proposed gambling facilities and industries.
Mr. Sinclair has extensive experience in the development and application of quantitative computer models,
geographic information systems, which you often hear as GIS,
and specializes in the economics, business model, strategic financial analysis,
and economic forecasts of legal gambling industries,
including traditional forms and sports betting, iGaming, and iLotteries.
Some illustrative projects include Mr. Sinclair advised the state of New York
regarding the award of four casino licenses, including creating gaming zones in the state,
determining a one-time licensing fee payable for the estimated market size,
and evaluating the economic projections and business plans of all applicants.
For the District of Columbia, he did an in-depth analysis of the value of the district's lottery system
and an evaluation of the benefits, as well as issues associated with privatizing the lottery system.
For the state of New Jersey, he provided the Office of the Treasurer with an analysis of the feasibility of VLTs at the Meadowlands
and how such newly authorized device might mitigate the exporting of consumer gaming dollars to its neighbors.
He did some major studies regarding lotteries for the state of Indiana, the state of Kansas,
and for the state of Illinois.
He provided advisory and consulting services to assist in selecting a third-party manager
to run the day-to-day operations of the Illinois lottery,
including the proper structure of the management relationships,
assisting in drafting a request for proposal, developing selection criteria and tools,
and assisting in the valuation of offers and support in contract negotiation.
He also has numerous publications and has been invited to speak at many conferences as an expert in the industry
and as a graduate of NYU.
So with that, I will turn it over to Mr. Sinclair to walk through the analysis
and some of the results that he did on his video gaming study,
which also includes updating projections for the Valleys Casino.
There is a very extensive report, about 80 pages, that he has put together,
and you will be receiving a copy of that as well.
Thank you.
Good morning.
Thank you for allowing me to speak for you today.
As Jill described, we were hired to do an assessment of the revenue potential of VGTs
and the impact they would have on Valley Chicago.
Just to take a moment and go into the methodology of how we did that,
we started by generating new estimates of what the Valley Chicago would look like to establish a baseline
in the absence of VLTs, VGTs, excuse me.
We then assessed what the revenue potential was of VGTs in the city of Chicago,
taking into account the current market environment of the casinos that exist now or just recently open,
including those that are in the suburbs.
And the way that we did that is you essentially create a map that shows the spending
and where the spending comes from, where it goes to casino facilities, where it goes to VGT facilities,
and then you overlay the new Valley Chicago facility on that map,
and then you generate new estimates for that casino.
And then in turn, you do the same thing again with the establishment of VGTs in Chicago.
Next slide.
So our key findings from that analysis were that, and this is not just our analysis,
there are several analyses that have been done of VGTs in Illinois,
including a report that's done annually for the legislature that described all forms of gambling in Illinois.
And what I don't – I'm not aware of any study conducted by any consultant or any economist
that has not concluded that – they may not use the term that VGTs and casino slot machines are close substitutes
as the term that we use.
We've also – Jill, I neglected to mention – we've also worked for the Illinois Gaming Board
in regard to the undue concentration of terminal operators in the state of Illinois.
And as part and parcel of that, we had to do analyses of how VGTs and slot machines relate to each other,
because if they are close substitutes, that comes into consideration
when you're looking at the concentration of machines in general.
So within –
Illinois. But to get back to, we are not the only ones that have come to this conclusion that,
you know, VGTs and slot machines are very interchangeable. And if for anyone that's
familiar with the devices and has looked at them, they look very similar. The primary differences
are the limitations on the number of machines where most establishments can only have five
and truck stops, excuse me, truck stops can have five, large truck stops can have 10.
The devices are very similar from a simple consumer perspective. And so what we did is we
also looked at other jurisdictions. We looked at Pennsylvania, Louisiana, Montana, I should say
other jurisdictions that have what we call distributed machines, sometimes called convenience
gambling. And although the results were similar in those jurisdictions, we felt that the most
comparable to you is what's what has happened in Illinois in the years between 2012 and 2024.
And what we found, and actually I won't go to the next slide, and you'll see this on our next slide,
is that there's a negative and significant impact on slot machines at casino, in the casino environment,
with the authorization of VGTs, with the deployment of VGTs. There is, does not appear to be a
measurable impact on table games or sports betting.
And although, you know, you know, some patrons, there is significant, there is some crossover between
slot gaming and table gaming. They, they do tend to attract different patrons. But again, so I wouldn't
go as far to say that it does not impact table gaming, but it is, it is so small to be that we can't
measure it. So then we took, we, oh, and I should have said before, we estimated the tax revenue at each
stage of the process. So when we generated status quo projections for the Chicago casino, we also
generated tax, the estimated tax revenues to the city of Chicago based upon those projections. We did
the same thing with VGTs. Now, an important point, which is the second one in this slide, is that the city
collects a great deal more revenue for every dollar through a slot machine than it would
through a VGT, according to the current statutes. And in essence, it works out to for every dollar
that would be transferred to a VGT machine, excuse me, for every dollar that is lost from the casino
slot machines, four more dollars would have to go through VGTs, or roughly, almost four million,
four dollars, to get you back to, back to equal. The other element to consider is that, based upon the
HCA, we're not lawyers, so I can't comment on this, but there's a distinct possibility that the four million
dollars that's currently contributed by Bally's annually will go away if the city decides to opt in the VGTs.
So, and we'll get into this in a little more detail in some of the, in some of the
preceding slides, but our final result was that, at the end of the day, our baseline case is, when you
take all those factors into consideration, you end up with just slightly revenue, slightly revenue
positive, in terms of what the city collects, to slightly negative, depending upon the year, because
another factor, as we'll get into a little later, is that, unlike a casino, VGTs don't open all at once.
As we've seen in Illinois, you have a sort of rush the first two or three years, and then things start
to slow down, in terms of the growth within the industry, and that's the growth in supply, and that
gets it closer to the various citizens that are in those neighborhoods. So, there's a little bit of
difference in terms of the timing of the economics, and how that would impact city revenues, and even
casino and VGT revenues on an annual basis. And lastly, based upon our reduced revenue projections,
because of the impact of VGTs, we estimate that probably Bally's Casino, mostly, again, from, you know,
slot machine attendance, some of the bars, but would lose about 390 jobs in response to how they would
change their facility to respond to this additional competition from VGTs. So, the next exhibit is what
I was talking about before, and this shows slot machine and VGT revenues in Illinois from 2012 to
2024. And what you can see here is that, as VGTs begin to develop, the overall market grows
considerably, but the casinos, the existing casinos, it was 10 until relatively recently,
the EGT revenues decline, EGT, excuse me, EGD revenues decline in the face of this new competition.
Now, this is for...
Just to jump in, the EGD is the, is the, what it means, the slot machines in the casinos.
Yeah, electronic gaming devices. That's the term that they use here in Illinois. I, sorry,
I use those interchangeably from time to time. I apologize. Now, we're showing this exhibit,
but for time, and as you'll see in our final, in our report, we also did this for every county
that has been impacted by VGTs, and they look very similar to that chart for the statewide total.
So, then, to get down to our key findings, as I, as we said before, the, I have to take my glasses
off to read because I'm farsighted. So, in the base case for 2026, we estimate a decline in city
revenue of minus 2.43 million. It kind of goes up, again, because what's happening there is you have
an increase in VGT revenues, while you're also, because the casino has just opened, they are ramping
up as well. So, it's, again, these things sort of change on an annual basis, but growing to at nine,
almost nine and a half million in 2029. But then, as what we, it gets into what we call a stabilized
year for casinos, and this is common practice within the industry for forecasting a new casino
project, or actually a new hotel works the same way. You do an estimate based upon a mature year,
which is typically year three. That is because it takes time, particularly for a tourism type
development, to establish itself in the marketplace. There is a greater variance between the first year
and the third year. And it, again, it varies a bit from operator to operator. Some facilities ramp up
faster, some don't, you know, some make mistakes when they open. So, that's, that's always, it's common
practice within this, within this industry to, to focus on the year three. And that's when your casino
begins to mature. So, what happens there, it, but with VGTs, there's still going to be a growing, as we've seen
in Illinois over, from 2012 to 2024. Even though the growth has slowed down considerably, we're, the last, I think
in 2024, you still had a 3% increase in the number of establishments and the number of VGTs, which was
down 5% from the previous year, which is exactly what we predict here.
Hold on one second. What did you say now?
I was only going to ask, sir, are we saving all of our questions to the end?
Yeah, we're going to save our questions to the end. Thank you so much.
Okay. And just to continue, so the, I'm sorry, to go back to what we were talking about, to, as to why
do some of these things come, why these things come about is, again, it's the four times differential
in the tax rate, the loss of $4 million annually, potentially, and the, oh, decreased revenue from
slot machines at Bally's. Yes. Okay. And this slide, the VGT impacts on casinos, this goes back
to the bar chart that I showed you before when I was, I was saying that they look very similar. This
is the end result. And as you can see, if you look at the growth rates between 12 and 24 and the
compound average growth rates, they're in a very tight range, which means they're very consistent
across all these casino markets, as we've observed within, over the past 13 years, I believe.
GR stand for?
Oh, compound average growth rate.
Okay. Thank you.
Yeah. So the column in the middle is the total difference, the decline over that, I think it's
a 10-year period. And then the annual growth decline or the annual decline is in the right-hand
column. Hold on one second. What we want to do is, I got you with your questions for sure,
but maybe you want to just write them down so we can, it's a 17, you know, I got you though,
you're the first one. Sure.
Okay. And then on the next slide, we show our VGT projections, which if you go down to the bottom,
you can see that we project, I'm going to do the first full year rather than 2026, because
2026 is a partial year. Of 360 million in 2027, growing to 907 million by 2035.
5026, growing to 907 million by 2035.
5026, growing to 907 million by 2035.
5026, growing to 907 million by 2035.
And that's the net terminal income, so the actual income slots, but not the tax.
That's correct.
Yes, and the tax revenue is below that on the bottom line,
and that is, again, using the first full year, about 19 or 18, can't read it quite, yeah, 18,
and then growing to 46, 47 almost in 2012.
Excuse me, 2024, you're right.
Yeah, and that amount, the range from the 18, 19 million up to the 47 is the amount of taxes
that the city would receive from the terminal income.
That's correct.
There's two lines there.
There's like a total VGT tax, that's the total tax collected, and then the Chicago shares at the bottom.
The state gets, I believe it's 30% approximately, or there's 30% tax,
and they get the majority of it, and we get about 5.15%.
5.15%, yes.
And then on the following slide, which I think my pages are messed up.
Oh, yeah.
Which one do you want to get?
The Chicago casino.
Oh, yeah.
Okay, that's where we're at.
Except I can't find it in my notes.
Oh, here it is.
I apologize.
My pages got messed up.
So in this exhibit, we show, we redo the tax projections for the Chicago casino with VGTs
based upon the impacts on casino slot machines, as mentioned before, of about 4.13% per year.
And that works out to a change in city revenue of minus 17, almost .8 million in 2027, and minus 48.5 in 2035.
And that's just the redaction of the taxes collected from the casino based upon the impacts of VGTs.
Okay, and then lastly, we're asked to conduct an ancillary analysis on some of what we call ancillary impacts of video gaming terminals,
and that includes the impacts on municipal revenues, such as a decrease sales tax.
I should say increase or decrease, depending upon how it goes, such as, you know,
the possibility of somewhat crowding out from spending on VGTs that impact spending on other goods.
And what we did is we did what's called a difference-in-difference analysis,
and we looked at five different jurisdictions and, excuse me, municipalities in Illinois that had populations over 50,000,
five that have VGTs, and five that do not.
And we did, again, over this 2012 to 2024 period, we looked at the sales tax collections in those jurisdictions.
And what we found is that there was no discernible impact that we could see.
In some instances, cities, municipalities that had VGTs, sales tax revenue actually increased, and vice versa.
So, again, there was no clear correlation between authorizing VGTs and a decrease in sales tax revenue for the municipalities that authorized them.
We also did a similar analysis with municipal expenses, and, again, the results were inconclusive.
There may be a slight decline, but it was hard to determine.
Again, lastly, we also looked at crime rates using FBI data.
And, again, over that 12 to 24 period, looking at those 10 different jurisdictions, those that have VGTs versus those that don't,
we could not find a clear correlation between an increase in crime in those municipalities that authorized VGTs.
Lastly, we look at problem in pathological gambling.
And this is a difficult topic from a researcher's point of view.
And when I say it's difficult, and this is in my opinion as someone who's been doing this for 30 years, the research is somewhat lacking.
And it tends to be one-sided.
And from my perspective as a researcher that's sort of indifferent on the subject, it's hard to draw conclusions.
There have been numerous studies that have been done in numerous states that assess the economic impacts of all forms of gambling, casinos, VGTs, et cetera.
But they all come to wildly different conclusions.
So, from our point of view, that makes it very difficult to quantify.
That said, there are qualitative things to consider.
And that is, I think I mentioned this before, sometimes VGTs are referred to as convenience gaming.
And what that means is that they're very close.
Whereas, you may have to travel half an hour or an hour to get to a casino, usually most of your VGT patrons are coming from around the corner.
So, that means your revenue is coming from the local area.
So, again, I am not an expert on problem in pathological gambling.
But I find it hard to accept that when you have a form of revenue that is – excuse me, a form of gambling that is widely available and widely present in neighborhoods, that you're not going to see an increase in problem in pathological gambling in those areas.
But, however, I cannot quantify what those impacts will be.
And I think this is finally the last thing.
When we are – when we completed our report, I think around in May, late May, early June, after the city had a chance to review it, they looked at our 2026 numbers and they said, well, hold on a second.
We don't think we can get the pieces in place to authorize VGTs in Chicago in the timeframes that you have.
Because what we were initially projecting is that an ordinance passed sometime between now and the fall.
And so, what that means from a practical standpoint is that means the Illinois Gaming Board can start accepting applications as soon as that ordinance is in place.
So, if an ordinance was passed between now and September on October 1st, for example, the IGB could accept applications.
Well, actually – well, they wouldn't accept applications.
It's a better way to put it.
Someone could apply, but until the ordinance is in place, the IGB is not even going to consider it.
Because it's not in compliance with the ordinance in the city of Chicago.
So, that would – in essence, the way that works, the IGB's process plus the time typically it takes for a VGT facility to open.
In this 2025 model, we're talking probably April, possibly even March or February for maybe a few facilities to open within the city of Chicago.
Now, what we've been asked to do is to change that assumption that we had and to assume that the city opts in on January 1st, which means the IGB would not accept applications until that time.
And what, in essence, that does is that pushes that – all those dates forward about three months.
And that means that – so, you wouldn't have facilities, establishments opening in Chicago until July at the earliest.
And there would be very few because it's also important to mention that there are 100 – I think it's roughly 100 – about 100 applications a month – or it's 150.
150 applications a month that the IGB receives.
And that's right now without the city of Chicago.
So, in real short strokes, they're going to get flooded with applications on January 1st.
So, that's going to slow – of that process, that's going to slow down.
Chicago has to get in the queue, so to speak.
So, at the end of the day, what that does is that shifts a lot of the revenue forward in 2026, and that flows into 2027, and then things start to get back to normal in terms of revenues in 2028, 2029.
So, again, very shortly, all it does is it shifts the numbers forward three to six months.
Thank you, Sebastian.
I'm going to flip to a couple summary slides here.
I think the other component of that analysis that we asked is that we made an assumption that, in addition, we probably would have our own licensing framework in the city to some degree.
The way the statute works at the state level is the local municipality could pass VGTs and have their own requirements on top of the state's,
or they could have no additional requirements, and it's just the Illinois Gaming Board's requirements.
But we were assuming there probably would be some things that people would want and would require for, you know, additional – whether it's restrictions or types of licensing requirements that are just with the city.
So we assumed that it would take us six months to fully stand up our own internal operations through BACP, where we would, you know, of course, hire people to monitor that and implement everything.
So that's the other part that's involved in that additional analysis is sort of thinking.
Thank you.
through a little bit of additional time that would come through a city licensing framework.
And then obviously if there was no city licensing framework, that wouldn't be an impact.
But we assumed that it was likely that there would be.
And so moving forward, I just wanted to conclude in summary with a couple things.
And a lot of you have seen this slide before because we talked about this during some of the briefings
that we had about a month ago.
But when we think about, you know, video gaming, you know, there's pros and cons.
You know, the pros is that we would gain a new revenue stream that doesn't, oh, thank you, Annette,
that doesn't exist today.
You know, we also have, you know, potential gain for existing businesses in Chicago.
So, you know, the bars, restaurants that are establishments that would want to bring in VGTs,
they have an opportunity to add that and increase their, you know, profitability and their competitiveness.
On the other hand, the, you know, negatives, you know, pretty simple.
We would gain VGT revenue, but we know we would also lose casino revenue.
And the biggest challenge that we have in that regard is the taxing framework at the state level.
So when we looked at the, one of the slides had the taxing framework for slots and it said 17.5% to 20.4%,
there's, you know, a certain number of the, I don't remember the exact number.
Ethan, do you know how much income comes in before we flip to set from 17.5% tax on the slots to higher?
Do you remember?
Ethan Gilman, economic development in the mayor's office.
Are you asking about the, if we were to increase the tax rates?
Yeah, when do we hit the threshold to go up in tax from 17.5% to over 20% on slots?
At the casino?
Uh-huh.
We could send around the actual table through the chair, but they're on tax escalators.
So when the casino hits certain revenues, we make higher taxes.
Yeah, so right now, if you look at the temporary casino, when we get our tax revenues in the first few months of the year,
they look like they're, they look like when you compare to the other months, they look like they're lagging a lot,
but it's because they're getting taxed at 17.5%.
But once we hit the 20%, which starts after a few months, it jumps up.
Now, in the permanent casino, we're going to hit those numbers really, really fast.
We're going to get over that 17.5% to the 20%.
So essentially, kind of how we think about it is generally, on casino slots, we're going to be taxing 20%.
And on the VGTs, it's 5.15%.
So that differential is really what is, like, causing this challenge with seeing the net revenue not really go anywhere, you know,
because, you know, you look at it, it's like, okay, you can get up to $48 million, you know, after, you know, 10 years,
you're looking at $48 million in taxes from VGTs.
And that's going to be a lot more gaming than the amount of people that are going to the casino and doing slots.
But the loss of some, you know, few thousand people not going to the casino to do slots because of that tax differential
essentially wipes out that revenue.
So that's the negative is we have this differential taxing framework that results in a situation where we're just not net going to make any revenue.
Or, you know, maybe we make $10 million one year or maybe we lose $5 million one year.
But, I mean, net, net, it's just not moving the needle a lot.
The other negative is what impact it could have on the casino, which we're estimating a loss about 390 jobs there.
And so, lastly, I think additional considerations, just worth, you know, thinking about what impact if we passed VGTs it would have on the casino project.
You know, it's a $1.7 billion investment.
So, you know, when this project was approved years ago, you know, there's a lot of reasons why it was approved.
You know, number one, we want to generate revenue that is being generated by our surrounding communities.
We want that revenue to go to our police and fire safety pensions.
That's where the money that we get from temporary casino taxes and we get the permanent casino taxes, it's going into pensions.
It's an important source of funding for us, particularly as we think about our ability to keep making that pension advance payment.
And so, you know, we go into this wanting this project to succeed.
I think the third piece I was going to mention is economic development.
It's going to generate a lot of jobs.
It already has generated a lot of good jobs at the temporary casino.
The permanent one will generate a lot more.
And so those are sort of the things that, you know, were the goals when that casino was established.
And, you know, we're here today, you know, approximately one year before it's going to open.
And I think all of us still have those same goals in mind, that it will be very successful, that it will drive tax revenue to us, and that it will drive employment and opportunity in the city.
So those are the goals we have.
And if we introduce VGTs, you know, there may be some impact on how Bally's finishes out that casino.
You know, as we, you know, was mentioned earlier, we know there will be an impact on jobs.
Will they put as many gaming positions in?
Will they employ as many people?
Will the revenues in entertainment be built out in the same way?
Or will they be less because they're expecting fewer patrons?
Those are impacts that are things that are worth consideration.
Also, the impact to the host community agreement, which is our contract with Bally's.
You know, one of the things that they do is they pay us $4 million every year in addition to the tax revenue that we get to use for public safety projects.
$2 million of that in the area around the casino.
$2 million of that in other parts of the city.
That would be highly at risk because they get to open up that contract again if we do VGTs.
And then I think we just always want to consider what is the kind of gambling environment that we want to have.
Chicago has been very, very slow to, you know, put in place available gambling.
Much of the state has moved at a much faster rate than we have.
And so when we think about this, we were slow to get to the casino.
Now we're, you know, seriously talking about VGTs is what is the character and environment that we want to have overall when we think about gaming in the city.
So those are just additional factors that we think are worthy of consideration and, you know, debate by all of those who are in the room today.
And with that, I will conclude.
And do you have any answer questions?
Absolutely.
So at this time, I did see a couple of my colleagues that had their hands up.
We're definitely going to acknowledge them.
And then we have with us again in the box one from hospitality, one from gaming industry, which they give their presentation after these questions.
So you was very adamant.
We want to start with you, second ward, and fire away.
First ward.
Don't tell Hopkins.
Expanding my boots.
No.
First ward.
First ward.
Love it.
First ward only.
I did want to ask if we could go back to first the slide that was looking at VGT versus, I think they're EGT is the, or EGD is the technique.
This one right here.
Yes.
I was curious to understand this slide better because, and we talked about this in a different committee meeting, but it looks like slot machine revenue in general, like I can't see further back from 2010.
But it looks like slot machine revenue was either stagnating or increasing at a slower pace and that VGTs have really been an expansion space for revenue.
I'm curious to try to understand how much this represents VGTs filling that gap, how much of it is taking away from slots, or how much just represents a change in gaming behavior preferences for those who do choose to spend their money in this way?
Okay, that's a very good question.
All right, so at 2010, you're right, through 2012, it was relatively flat, but there's something else you've got to consider, and that is in that time period, you only had 10 riverboat licenses in Illinois, and you were restricted to those 10 licenses, and they only had 1,200 gaming positions.
That was what they were allowed until the Illinois Gaming Act expanded that.
So what you, and you're absolutely right, it was a very, it was very slow growth, but it was because these facilities were capacity constrained.
So what happens when you authorize VGTs in those areas is that VGTs soak up that excess demand, and it starts slowly.
The only reason it starts slowly is because the rollout of VGTs is slowly.
If you could wave a magic wand, and all of a sudden there were 10,000 establishments, I shouldn't, no, there's only 10,000 now, 3,000 establishments, let's say, in Illinois, that gap would, you wouldn't have this slow rollout.
Rollout, because again, the casinos were restricted, they couldn't grow.
A good example of this is Rivers.
Rivers used to win, I don't have the numbers off the top of my head, I think it was around 400 million, until they opened their expansion.
And they also, like Chicago, restricted, there were no VGTs allowed at Des Plaines until 2019.
So, again, to...
So, again, to...
To get at what you're saying and explain how it works on this chart, as I said at the beginning,
the VGTs are soaking up that excess demand that the casinos could not develop.
If they were allowed to expand back in 2012 to double in size, then NVGTs didn't exist.
Well, the dynamics change, but I think you get at what I'm saying here?
I think I do.
I think at some point, like an interesting, because we're talking about expansion of positions at the same time,
and I think an interesting analysis to be able to look at would be revenue per hundred positions.
Because I don't know if this is like VGT revenue for like 20,000 slots against 10,000 like VGT positions.
To understand like that kind of performance.
You have that actually.
You have that in the Illinois Gaming Report.
It's called win per slot per day and win per table per day, and that shows you.
And when high units, high values of win per unit, whether it's a slot machine or whether a table game,
that is an indication of imbalance of supply in the market.
When that number is high, it means those machines and those tables are very busy.
Now, as you add, like if you take the same number with VGTs, and it's not in the reports, but you can calculate it based upon the revenues and the number of machines,
and then you just had to factor in the number of days per year.
And that tells you the win per units.
But just to finish off, the win per units for VGTs are very much lower.
It's just like $80, $70, just compared to $200 in a casino environment.
One other item that we don't have in the presentation, but it is in the report that you guys are all going to receive,
is that I think what you were sort of getting at is like is some of this growth a change in behavior with like people maybe not going to casinos as much or something like that.
And so the other way of looking at this to measure like what is the actual impact on slats is to look at the casinos and say what's been the impact on table games.
So as VGTs have grown, has table gaming gone down?
And it hasn't.
So table gaming has continued to go up.
And so that's where you can see that the VGT, that somebody who is gambling using a VGT, is different from the person who's gambling doing table games.
And so sort of that attraction to the casino, that's continuing to go up.
But you do see that the use of slots at the casino is going down because people are able to do that somewhere else.
Well, and they're very different price points as well as my understanding between the two.
I have two other questions and I'll pass the mic.
Could we go to the slide that looks at revenue per casino?
It's the one where I asked about the annual growth rate as well.
Might be a couple on from here.
There it is.
So this is what concerns me.
And I know it's tangential to VGT broadly.
But it suggests and perhaps more than suggests that traditional gaming and traditional casinos are seeing consistent across the board declines in revenue.
Is that an accurate reading of this slide?
In EGD, slot machine revenue.
Yes.
So this is specific to EGD revenue.
Yes.
And this is, is this regardless of, do we know how this compares against VGT revenue in these areas?
It's, oh, it's grown.
Yeah.
It's grown throughout the state.
Okay.
These casinos against the VGT, the EGD revenue.
What does the revenue position for these casinos look like more broadly?
Well, it's actually in our report, as it, you can see it.
The previous slide just showed the state.
We have the exact same chart for every county that has been impacted by casinos.
So it shows you that information by year.
Yeah.
So I had one other question.
Then I hope someone will be asking the jobs question because I don't want to just hog the mic.
But I feel like understanding is very interesting.
I was curious if you could share about Rockford because my understanding is that Rockford as a city sees $97 million roughly in casino revenue despite having VGTs that generate about $2.1 million for the city as well.
Are they an outlier or like how are they achieving that kind of balance in revenue between casino and VGT positions?
I don't have the numbers right off the top of my head.
I'm just, you know, you're $97 million.
One of the things with Rockford, you have to understand, and that, again, is also in the report because we look at Waukegan, Rockford, and even though it's very early days, around Wynn Creek, which is Hazelwood and Homewood.
Thank you.
These are relatively new developments.
So what we expect, and you can see it now, VGT revenues are starting to go down in those places like Rockford, like Homewood.
And East Hazel Crest and Waukegan.
But we're just at the very beginning because Rockford's permanent property, permanent facility opened this past fall, I believe, the fall of 2024.
So we're just beginning to see that now.
But what I think will happen eventually, and as we discussed in the report, you can see from the data, VGT revenue will start to go down because these things can compete both ways.
It goes back to that issue of VGTs and slot machines being close substitutes.
They are always in competition with each other.
Sometimes one part of the industry has a leg up.
Sometimes the other one does.
East Hazel Crest and Homewood.
But I expect that Wind Creek is going to have a very large impact on the VGTs in those areas.
Okay.
One of the interesting things, you know, with Illinois is that we have examples of where there were casinos in place and then VGTs were introduced.
We have places where there were VGTs and then casinos were introduced.
You know, the opposite introduced so that you can – so the impact has been – there's a lot of data that they were able to use at Christensen Capital to do all this analysis.
And you do – you're able to see the impact on both directions.
But we do – I mean, I guess the good thing about us being, you know, slow is that we let the rest of the state generate a lot of data for us in the meanwhile to look at.
All right.
All right.
Before we go forward, I definitely want to acknowledge Alderman Cicho Lopez, who's requested remote participation under provisions of Rule 59.
Can I have a motion to allow him to attend?
So move by Chairman Vasquez.
At this, all in favor, say aye.
Any opposed?
I think the aye's got it.
Alderman Cicho Lopez, you online?
Well, we're probably having – all right.
At this time, I want to acknowledge Chairman Vasquez.
Thank you very much.
Can you go back to slide nine, please?
Okay.
So I guess my question kind of – we're going to be piggybacking off each other through this whole thing, as my guess.
Is there a comparable where there are no VGTs and what the blue would look like?
We don't have one.
I can give you a rough idea what it is, and that is that it actually looks a lot like the first blue bars there, 2010 to 2012, which is a pretty slow growth in slot machines.
That is due to sort of a phenomenon within the industry.
That's common not just in Illinois but everywhere.
As patrons, casino patrons or gamblers are aging out, younger people are playing table games more than they play slot machines.
So from – but it's consistent across all jurisdictions that there's still growth in slot machines, but it's pretty low.
So it's somewhat, for lack of a term, kind of plateaus a little bit is what it looks like, right, whereas you see a whole bunch of red growth because there's more distribution points.
People are using it.
It's closer to them, yeah.
Something else that's interesting that I appreciate is the table games either stay the same or they're growing.
Separate from revenue of any different games, just door swings, people going to the casino as opposed to not.
Is there a record of that?
Does that go up, down if VGTs are around?
Yeah, we didn't specifically look at that.
But no, in general, it's still going up, although probably not as much because we can't track that because it is an admission tax, and we have the admission taxes in our report.
I haven't looked at that historically, so don't totally hold me to this, but I believe admissions are still increasing but, again, almost comparable to that revenue in slot growth.
Yeah, and the reason I ask is, like, you know, people play games, like I said, the gas stations, they play them on their phones, people go to the casino because people going to the casino want the experience more than just the gaming part.
And so if we're in a world where you're not losing any headcount of who's going to these places and they're ultimately making revenue off of the experience and you're seeing this growth in VGT, it kind of makes sense to expand all possible opportunities.
And so I do understand that although the casino, we're able to get more revenue off of it as a percentage, given the increasing amount of usage on VGT, I get that the numbers might not look like they even now and they're slightly increased or less, but why snooze on more people using it?
When it pertains to the actual percentages of revenue, right, you guys mentioned 17% to 24% off of the casino.
Is that correct?
Two zero point four percent.
Two zero.
Okay, thank you for that.
How is that determined?
Is that the...
IGB, the board, how did that – or is that the contract with the casino?
It's the statute.
Okay.
And then similarly for VGT, right?
Well, I know it's different because VGTs are – and that's why the number varies is because the state has a graduated tax on slot machines.
So after you hit a certain level, you pay more in taxes, whereas VGTs are just a straight tax.
Got it.
But those are determined by the same state body.
So I guess my question is what's the strategy on going to Springfield to make some tweaks on those numbers?
Because if you're going to have more distribution points, why not change the percentage of what you get off of each?
Yeah, I want to make a point on that.
And certainly you guys can have a lot of conversations about that with IGA and amongst yourselves.
The state gets a much, much larger percentage than we do of the revenue from VGTs.
So, you know, they're getting, what, five, six times what we are getting.
And so it's highly in the state's interest for there to be VGTs in the city of Chicago.
And the tax framework is not favorable to us.
So I think the fact that it's in the state's interest and they would generate a lot of money opening up this market is something that you, you know, should be thinking about in that type of push for legislative changes at the state.
That's why the good Lord invented negotiations.
So that way you can figure out, right, if there's an interest in them and us having more distribution of the VGT so they can get their revenue, then it makes for a perfect conversation to figure out what the split is.
Right.
I just don't know how that's all been engaged, those conversations.
Is there anybody from IGA or anyone who can report back on what that's looked like?
I definitely get that answer to you.
Okay.
Yeah, absolutely.
Real quick, you had a point of information, Chairman.
What the fully loaded VGT in the city of Chicago would generate of the total 33% or 35% taxable portion of the take.
A fully matured market.
I'm not sure what you mean by the 33% and 35%.
So the state, the tax, the tax component is like 35%, right?
The venue gets a third, the operate, the gold rush gets a third, and then there's this other 35% that goes between the split between the state and the municipality.
Chair Irvin, if we look at, this is hard to see, I know you guys are getting copies of all this on slide 12.
When we look out at 2035, so a 10-year frame out, so that's sort of assuming a mature market, a very mature market at that point.
We've got $907 million in net terminal income, and we show total VGT tax, 35% is $317 million, of which $46 million would go to the city under the current framework, meaning that the balance of that $270 million would be going to the state.
Okay.
My apologies, Chairman Vasquez.
What is the take for the state overall?
You have eyes in the back of your head, huh?
Yeah, he does.
I know him.
I've been knowing this guy for years.
That's true, that's true.
So he'll do it all the time, so he'll indulge us this one time.
Yeah.
What's the state's take in total?
So their take, well, for that year, for instance, would be about $200 million.
No, no, no, just generally today, what is their take?
Oh, with all the VGTs that exist.
Yeah.
Okay.
I don't know.
Do you know that?
Not off the top of my head.
It's very easy to get.
You can just go to their reports.
That's why we called you.
Yeah.
Oh, well, we will look that up for you.
Don't worry.
We'll get that answer.
Thank you, Mr. Chairman.
All right.
We want to get back on track.
We have a chairwoman down.
I still have my time.
Oh, you have more.
I'm sorry.
That was a point.
Thank you.
So I guess my question is, if we have IJ from Springfield here, wondering if we can get an
update on how the conversation has been going related to Casino, would that be okay?
I'm just saying, yeah, so can we get him on the mic?
So, I mean, we submitted guests before the meeting.
I didn't know about him coming.
So what we can do is get you a question, and then we get you an answer for sure.
Yeah, yeah.
But my question is –
Can I recommend that that be a conversation that you follow up on after the hearing?
Some transparency for that.
All right.
So, okay.
Next one.
How did you guys come up with 390 jobs?
We did it – again, this is a – and it's a rough estimate because you have to try to
assume what Bally's is going to do in reaction to it.
But – so the way we estimated it, not to get too difficult, is we looked at the impact
on slot machines, which don't employ as much as tables.
And what we did is we essentially said, okay, they're probably going to reduce about half
of those positions related to the loss in slot revenue.
And that's how you get – I think it's 13%.
What we didn't do, which is a possibility depending upon how – again, how Bally's
reacts, because they may increase the number of table games, which requires more employees.
But to answer your question really shortly is we basically just took the impact on revenues
and cut it in half.
So you guys guessed.
So the reason why I ask that is there's no commitment to these slot machine workers,
right?
Or is there?
Not that I'm aware of.
Okay.
So the number 390 just seems made up because there's no commitment on who's actually working
the slots.
You have no idea who's being cut from the slots.
And to your point, people get to be hired to run the tables.
So that number seems to me not real.
I would call it an estimate, a real estimate, right.
But it's based on what?
You don't know how many people were actually working –
It's one of the things, though.
It's upon the client of Slaughter.
We asked Christensen Capital to make a reasonable estimation of what the impact would be on
employment because one of the things that we do think is valuable about the casino is
it is going to generate a lot of jobs.
So we have seen estimates from Bally's on the number of jobs, and they provide those
to us, based on their assumptions about full operation of the casino.
So we did not ask Bally's to tell us what they thought the impact would be.
But we know that based on the data and what's happened in other communities is that there
would be less activity there.
And that's why we wanted to come up with some assumption.
It could be lower.
It could be higher, but we're just trying to come up with a reasonable idea of what
the range of an impact could be.
But for some points you're stating, meaning people are still going to be coming.
There may be more people coming over time, and it's not like you've got a person standing
next to each slot.
So if you've got more people coming, you still have to take care of them, which means
you still have to hire for that experience.
So I just don't – if you could share through the chair any methodology on how any of those
numbers would come to you, I'd greatly appreciate it.
And that's all I've got.
Thank you, Chairman.
Thank you so much.
And to answer the question, last year, VGT brought in $3 billion, and the state took
30 percent of that.
All right.
So Chairwoman Dow, then Chairwoman Taylor.
Thank you, Chairman Hall.
This is not my area of expertise, so I do have some questions.
All of your data is based on assumptions or from reading reports that you might get from
the Illinois gaming people.
Do you do interviews with the casinos themselves?
No, I do not.
I rely upon empirical data.
And I make – you use the word assumptions.
I always make as few assumptions as possible in this type of analysis.
Okay.
I was looking at the chart on 11, page 11, and I noticed that Rivers Casino, which I will
admit I've been to a number of times, is not on this list.
And my understanding is that Rivers has not been losing any money since COVID.
Is that accurate?
If you mean Rivers has increased in revenue, which is another way of saying that, yes, they
have.
Okay.
And even with the Bally's here in Chicago, the temporary facility, they've still increased
their dollars, correct?
That's correct.
All right.
And VGTs are legal in Des Plaines?
As of 2019, yes.
Okay.
What impact would that have on this chart?
What's the – well, and actually –
What's what Rivers look like?
See, we excluded Rivers from this, and that's described in this report, because until 2019,
there were no VGTs in Des Plaines.
So they were not impact, or they were impacted less.
And again, this is described in detail in the report.
We determined that – excuse me, I'm blanking on – oh, Rivers, excuse me.
Rivers was a non-comparable, and that's why we did not include it here.
And there was another aspect to that.
It wasn't just Des Plaines.
As you know, it's very close to here, where you do not have VGTs.
So again, it comes back to this fact that Rivers, unlike all the other ones on this list,
has not been impacted, or –
very, only very slightly impacted from the presence of VGTs.
Okay.
Would that be some information we could get to the chair?
Yeah, could you definitely, definitely, because I have a question about that too.
That information to the chair that she asked.
As I said, it's right in here.
Yeah, everyone is getting copies of the full report, which is about 80 pages,
and gets into detail about all of these, all of this data and this analysis.
And so, you know, why were these picked and, you know, why was rivers not included in that?
Because there's not a lot of VGTs impacting them.
For the size of rivers, I think it's another way to look at it.
The size of rivers, the number of VGTs impacting them is small,
and it has only been over a shorter period of time.
So remember, if it started, you know, five years ago, there's a ramp-up time.
To getting all the VGTs in place.
So it's not as significant an impact as in smaller casinos in areas with a larger number of VGTs.
Thank you for that.
I want to go back to that, but I want to honor Chairwoman.
And by the way, you all, all the colleagues, it's in your inbox now.
All 80-something pages.
You all have a copy of it this morning.
Yeah.
You're going to have so much fun reading it.
Yeah, it's a good one.
I have other questions.
Yes, ma'am.
Oh, okay.
Yes, ma'am.
I'm sorry, Chairwoman.
Okay.
So my second question is, some people don't go to the casinos.
Some people don't go to the bars to do VGTs.
They do it online.
Do we collect any dollars from online gambling?
No.
Is that something that other cities do?
Is that something in your experience?
There are other jurisdictions very recently that have authorized, that made legal internet gambling, but very few.
Is that a lucrative, could we generate enough money to, you know, perhaps help us in our budget situation?
It generates revenue, certainly.
Yes.
Can you, through the chair, let us know some cities where that is happening?
Yeah.
Chair Dowell, one of the things that we're going to talk about later in the hearing is online sports wagering.
So there's a couple categories.
There's online sports wagering.
There's iGaming.
We have an analysis done on online sports wagering.
The state did just authorize in their budget taxing online sports wagering, and we've done an analysis.
There's no legal prohibition from us doing it, and so we have numbers on what we think that would generate.
Not sports specifically, Bill.
That's what we have for today.
So we don't have iGaming analysis done for today, but we do have an aspect of online gambling.
We have that aspect for today.
Thank you for that.
And I guess my last question is, in the presentation, it says that VGTs are banned in the city of Chicago.
Why am I seeing these stations and gas stations, and those are supposed to be banned?
Correct.
So you're talking about, like, the sweepstakes machines, which fall into a gray area in the law.
They are not – this is not – if we had a lawyer here, they'd give you a better answer.
They're not authorized, but they're not specifically banned in the same way, like, VGTs, the way they are described in everything in the legislation.
It is – you know, they're banned unless a community votes to allow them.
The sweepstakes machines have a – you know, they've tweaked the way they do them, like, where you're not supposed to get paid, you know, out of the machine.
But I know you're giving me that look because I know that a lot of them, they do pay you right there.
But – so they operate in a little bit of a gray area.
It is an area that the city has a lot of interest in seeing better legislation around.
We think it's very problematic.
Okay.
Those are my questions.
Thank you.
No doubt.
Chairwoman Taylor.
Thank you, Chairman.
I voted no on a casino because I knew exactly what was going to happen with this casino, that you've got all of these surrounding cities that are putting in casinos that offer free parking, free of lots of things, and we cannot offer that.
And so I'm going to ask the question, but it seems like Bally's is not doing well.
It is not doing what it said it was going to do.
Am I correct?
Well, I can't answer it referring to what they said it was going to do.
I can tell you that the city employed a consultant to do projections, and it is not meeting those projections.
That's clear.
It's probably about half right now, the revenues that we're getting.
Some things that we've determined are the reasons why is there are fewer people going to the casino, but not a lot fewer.
So I want to say, and I'll have to double-check the numbers on this, but it's around 90% of the people we expected to go to the casino do go.
But one of the big differences is they spend about half the amount of time there than in a typical casino in Illinois.
And so in a typical casino, you do have the restaurants and the entertainment and everything, and that temporary casino, because it's so space-constrained, does not have all that.
It has like a couple small restaurants in that it doesn't have any other entertainment, those kind of things.
And so the people who are going there kind of go in, gamble, and leave.
They don't stay as long because they don't get the full entertainment experience.
And so we do have – we did ask Christensen to create new projections for us for the permanent.
They are lower also than the original projections from the prior consultant, so we think we have a much more realistic view of how the permanent will do.
But they are also way higher than the temporary.
There's going to be way more gaming slots.
It is going to be a beautiful facility with a lot of entertainment options.
So we do still expect that the permanent, you know, will do well.
But certainly, I think, as you mentioned, there are competitive – there's a lot of competition in the region for it.
But we are – you know, the city of Chicago, you know, 2.7 million residents, very, very dense.
We expect there will be a lot of folks who live in the city that leave the city now to gamble that will stay here.
We continue to have people that live in the city that go places other than the temporary casino because, again, they get a different experience going to different ones.
So we think having a place that will offer that experience will be good.
And also people who are tourists, they're here for conventions, things like that.
We certainly expect to grab some of that business too.
I can add some color to that if you don't mind.
By way of experience, I can – we've advised many states on these – on casinos in general.
And every time a state or a municipality or any jurisdiction wants to authorize a temporary casino, I advocate against it.
Every temporary casino that I have ever seen has always underperformed projections.
That's point one.
Point two is – and it's again –
Are you sure?
Am I sure?
Yes.
Because what about the Waukegan temporary?
It's doing – it's still a little bit under, but you're right.
And this point two is important because it's a distinction why Waukegan is doing better because they have a tentpole structure, which, again, is a wide open floor.
They are not restricted in the way that this one is.
Because the second point I was going to make is that casinos, what I call retrofits, where they try to put them in an existing building, also perform very poorly.
Casinos are designed in such a way that you flow through the property, and they're very good at getting you to the places that they want you to be.
Now, I'm not trying to point any fingers at anyone here.
It goes back to what I said.
I think that temporary – unless you're really hard up for the money, you're better off to focus on the permanent because that is where I think the temporaries end up being more of a distraction than anything else.
But you're right.
Waukegan is an exception, although they are also underperforming their projections, not by nearly as much.
But, again, these sprung structures, I haven't been yet, so I haven't seen it, but they tend to do very well because they have that big, wide open design.
So I voted no to a casino because I knew this was going to happen because of all the competition that is around this.
You talked about the video game and are illegal in the city of Chicago.
I can name you 10 in my ward right now.
And so what are we doing to make sure that we are taxing those machines that are currently here and then talk about there has to be some conversation about not saturating them in certain communities because we know what's going to happen.
It's the same thing that's happened with marijuana and everything else that is supposed to be for us to develop the communities.
They go in certain communities.
They're saturated.
We get the permit.
But right now in my ward, I can take you to three different liquor stores because that's where they are and show you those machines that have been there for five plus years that we have not made a dime on.
I feel like this presentation is telling us, excuse me, not to tax VGTs or make them, you know, us make them legal.
That's why I feel like this is.
What I would want to see is for you all to have a conversation with Bally's about this because I feel like they are going to be harmed when it comes to jobs.
That's quite clear.
But we're also being harmed, putting in all this revenue into a space that is not working for the city or is not generating the money that was promised to the city.
And so we are in a rock and a hard place because I do not want to see people lose their jobs.
But I also don't want us to miss out on another opportunity to tax something that's going to be in our community.
Can you go back to the slide that talks about the crime and the different, this, yeah, you said problem gambling.
We may not be quantified.
The city should recognize that neighborhood level machines gaming will likely result in increasing cost of problem gambling, treatment prevention, social welfare programs, and loss of productivity.
What I want to see us say in that, if you have those gaming machines, first I want to see a limit in stores.
So I hope this is something that we actually go to so we can say a store cannot have more than three to five machines.
That's it.
I want to see that.
That's number one.
I would say three, but it's my ward.
My ward is a little different.
I would want to say that those stores also have to have security.
If you get those machines in your store, there should automatically be security that you're paying for, and it's some of those things to be mandatory, because we are in a budget deficit, and I get we pulling from everywhere.
But there should have already been, and I blame every administration that has allowed these machines to sit in our wards and our community, and we got no money off of them.
And so I want to see, and I'm asking this to the director and the CFO, us have a conversation with Bally's as well, because as far as I'm concerned, the advertisement on Bally's sucks.
I see more advertisement for other casinos than I see for the one that's in my city.
I've seen no real push for them to say that this actually is in Chicago.
And you think about this, when you go to those other casinos, you don't pay for parking.
We charge people to park, so I'm going to pay to gamble, I'm going to pay to eat, and I'm going to pay to park.
Why would I come to this?
But we told y'all this before y'all agreed to this.
And so I want to see y'all do something different.
And bringing Bally's to the table before we decide on bringing these video games is a conversation you should have.
Because ultimately, those are two different type of revenues that we're going to depend on.
And to Alderwoman Dow point, I want to see us be paid or us be able to tax when folks from the city of Chicago download those apps.
Because those apps are big and huge.
What is that, Drab King?
And it's another really big one.
People download them and gamble all the time.
We should be able to get money off of.
Yep, on that, so I'm just going to walk through a couple of things on your point.
So I'm just going to start with that one, is that we will be discussing later today in this hearing putting in place a tax on DraftKings and those type of things on sports gambling.
So we've done the analysis on that, and we have the information and projections about that.
So we will be discussing that.
The sweepstakes machines right now live in a gray area, and that's why enforcement is challenging, because they're not strictly illegal in the simplest sense.
And so that is something that we agree, and the administration agrees.
We do need legislation around that.
And, like, the legislation at the state level around VGTs has a lot of these kind of limitations, like the number of VGTs per establishment being limited at five unless it's a large truck stop, those kind of things.
Liquor license must be 21 and over, you know, like a restaurant could do it, but they'd have to have, like, a separate space where it could be 21 and over, you know, kids in that space where the VGTs are.
So there are aspects in the state law about VGT.
So what I'm hearing you say is that, number one, we have to figure out how to legislate these other gray machines.
And, two, legislating them, either making them illegal, or if we make them legal, we've got to have restrictions on how they operate and on density, just like we would have restrictions on how we operate VGTs.
I think another point is one of the things that we talked about earlier is our expectation is if the city did authorize VGTs, most likely we probably would want our own restrictions on top of the states.
And that's why we assumed it would actually take us that extra few months because we would have to get BACP involved in that.
There would be a discussion on what those restrictions would be.
But things like density, I think, are the type of things that should be thought about in the context of what would the city authorize.
So all of those are really important points.
The one other thing that I want to say is this presentation isn't designed to say no to VGTs.
What this presentation is designed to say is if we think about bottom line revenues to the city, we don't expect it will make a big impact because we also have a casino that taxes at a higher rate.
But that doesn't mean there aren't other reasons to do them.
And so, you know, particularly if you think about it in the context of passing legislation with a tighter regulatory framework around sweepstakes machines so that we don't have the illegal machines and we do have legal ones, that gives us more control over what's going on in our communities.
Because it's like you said, we understand liquor stores, gas stations, all kinds of places have them, and we have no control right now.
And that's something that would be better if we do.
The aspects of what VGTs would do for our local businesses are, you know, the businesses we expect to have VGTs would be bars and restaurants primarily.
And we know that, you know, for any bar or restaurant that would want to have it and they're near a suburb that has it, they're facing a competitive pressure that is challenging.
So those are all things that are, you know, positive impacts to us having them.
So this is just really like we were asked, you know, previously to do an analysis on this.
And, you know, we went through the process to hire a good firm, do a very thorough analysis, see what the numbers are.
And let me say this, because when you put up those, I don't even see the one that Alderwoman, and there are a couple of other ones that should have been up there.
So I feel like this presentation is disingenuous, and that's Alderwoman Taylor, I can't speak for anybody else.
Because when you're doing analysis, you look at all the best and you look at all the worst, and that's not what we gave us.
There are a bunch of casinos that are not even there.
And so how are you asking me to make a judgment based on an analysis that's, to me, flawed, that does not give me all the information that I need to make a conscious decision to say whether we need to do this or not.
And so that is, that's no disrespect to you, because I'm going to be honest, we send a lot of money on consulting, and the consulting doesn't lead us in the right direction.
It helps us make bad decisions.
And I'm just, I'm not willing to do that to the taxpayers, because we're going to get this, we're going to be in what, one point something billion dollar in deficit, and we're going to make a decision.
Either we're going to go after the people that we do business with, or we're going to go after the constituents who live in our community.
And I'm all for going after them, not the constituents that I'm paid to serve.
And so what I would ask in the future is for us to have a couple of more briefings, but us also get a clear picture of looking at everything that is available, that is around.
Because if we would have done that when we first started talking about the casino, I don't think we would have went in the direction of even having a casino.
And it's been talked about years before, I've even became alderman, because it has not panned out the way that we said it's going to panned out.
And the people who I feel sorry for are the workers, because that's who ultimately going to suffer, and somebody going to have to pay.
Thank you, Chairman.
Thank you so much, Chairman.
Before I go to Alderman Cardona and Alderman Moore, it's been mentioned a couple of times.
Let me ask you this.
The state said that these sweepstakes machines are illegal, correct?
It is based on the information we have received, is that it's a gray area where they are not specifically legal and not specifically illegal.
That is our understanding.
Got you.
So it's.
It's a gray area. But needless to say, they're functioning as we know it.
Gas stations all over the city of Chicago, and they have been essentially cannibalized the casino because of the fact that people feel more comfortable, even though it's dangerous going there.
So have you all taken into any account? I'm talking to Mr. Consultant on how much money is lost with these sweepstakes, great machines that are functioning right now and making money.
The problem is that you can't because it's all illicit. There is no data. So no one really knows. And that goes for, you know, it's heroin, cocaine, same thing.
You can't analyze things that you can't collect data on. So the short answer is there's really no way of knowing.
And to clarify, too, we're not making an assumption that they are not affecting the casino that we have now or other casinos throughout the state.
So I don't want to say we're not assuming they're not affecting it. I'm sure they are in the same way, just in the same way as VGT.
So I think we but as we don't have the data to, but we're not assuming that they don't.
Gotcha. OK. Cocaine. That's different. All right.
Alderman Cardona, definitely.
Thank you, Chairman. I thought I heard heard the same thing that you heard.
Could you, in regards to my colleague, Alderman Taylor, could you tell us what's the difference between sweepstakes and VGT, gaming?
What's the difference between the machines?
I'm going to ask Ethan to answer. He has a better explanation of all the minute differences.
Ethan Gilman, Economic Development, the mayor's office.
So just before I get to that question, there are certain municipalities that have made sweepstakes illegal.
Also, I think the Illinois Gaming Board has introduced legislation in the past to clarify the illegality of sweepstakes machines at the state.
That does not move forward at this time. So they still operate in the gray area.
I don't personally know the specific differences between a sweepstakes machine and a VGT machine,
but we can get that very easily and pass that to the chair.
There was a point of information real quick. Yes, Chairwoman.
Point of information. Is a VGT machine more than card games?
You know, like you see poker. Are they more than that?
Yeah, they're multi-game. So you can play a virtual spinning reel. You can play video poker.
Anything you find in a casino that's not a table sport, you could find in a VGT.
That's going to vary from establishment to establishment, but yes, for the most part, that's true.
All right. Thank you.
Okay, back to you.
Okay, so the VGT has multiple casino games compared to the sweepstakes, which is slots.
I couldn't tell you about sweepstakes. I've never seen them, but in other jurisdictions, the way – again, they vary,
but they're not supposed to pay out in cash.
So they say, but they do. We're losing a lot of money through sweepstakes,
and I think we should, as a council, start looking to drafting some ordinance on that.
But also, here's my other question that Chairman Pat Dalla asked.
It's Rivers. They had VGT machines when Rivers was established, or the VGT come after when Rivers was established.
Are you talking about Des Plaines?
Yes.
Yeah. There were no VGTs when Rivers was established.
So now they do have VGT, and have you seen the income or the revenue stream off, like how you had projected over there?
Because this is the reason I'm asking, because it's the closest casino to us,
and Lawn Des Plaines and all these restaurants and bars, they have VGT machines.
So I'm asking you, have you seen the revenue decline or increase or just stay the same?
Yeah. I would have to look into that. I believe it may have declined slightly.
But, again, we didn't look at that specifically because we determined it was a lesser comparable than the other 11 that we have up above.
Well, when you do get it, please get it to the chair, because it would be interesting to see that comparison.
Yeah. Simple IGB data.
Okay. Honestly, like my colleague here, Chairman Taylor, said,
we need to get a grasp of this.
I believe, like, if the city does do this, I believe it should just be in restaurant and bars,
not in grocery stores or gasoline.
And they should be tied into a PPA license because it's more controlled.
But, again, we need to not saturate the market but have a control on this because then we can't dictate what's going on.
So when we look at this further into licensing, we should look at PPA license tied into this.
And that's all I have.
Thank you.
It's unconfirmed, though, but Alderman Rivers has gone up.
There hasn't been a decline of any kind of concern, nowhere near what seems to be projected.
All right.
Alderman Moore.
Thank you, Chairman.
We were able to get the numbers and even many of the casinos.
I could probably answer the casino question, but I'm not for sure because I don't really know 100%.
What is the equity makeup in these spaces for both VGT and EDT?
I didn't quite hear that question.
One more time.
One more time.
Yes.
What's the equity makeup?
Like who's operating and owning in these spaces?
Do we have those numbers?
We got the dollars of who's making what, but who is making it?
You got the amounts, but who's making it?
What's the equity makeup?
Well, it's owned by the establishment.
So let's say you had a bar or a restaurant.
It's their property.
I'm sorry.
I get that.
So the people that you get your information from because you say you collect that data,
you don't get the information of who's operating, what's the equity or racial makeup of these places.
So what you're asking is, is the Illinois Gaming Board, when they show the revenues, do they have a breakdown of the owners of the licenses?
Absolutely.
And what the, you know, whether they're an MBE, WBE or not?
Absolutely.
No, I do not know if the Illinois Gaming Board collects that data.
We can look and see if they do.
Please do, because we're going to be, you know, making decisions on making somebody rich.
And I just want to make sure that, you know, that there's equity in the space and that we are accounting for that.
So that information is very important, CFO.
Yeah, we'll take a look and see if they collect that for sure.
Thank you.
I mean, I think the other thing to think about is the data on VGTs is from the entire state.
And not all the state is as diverse as we are.
And so just from a population standpoint, you know, I think you're going to see if we if they have that data, it'd be different by region.
Yeah.
Because they cannot all be Chicago.
Little name I wish.
I know that.
Is that it?
Yes.
Well, thank you so much, Mr. Chair.
I want to acknowledge Chairwoman Stephanie Coleman.
Thank you, Chairman.
Absolutely.
Sounds good saying that, Chairman Hall.
Well, I want to just piggyback a little bit with Chairwoman Taylor and even Chairman Dow on the rivers.
So rivers was not included, although they are closest in proximity, I believe, to President Pro Tem Sam Nugent.
So if we can get some data regarding the rivers, because if from my understanding.
Their revenue has increased.
Their profit margin has increased.
I also want to highlight Wind Creek.
I may or may not have visited Wind Creek.
I may or may not have gone to my favorite barbecue restaurant, Bernice's Barbecue.
Shout out to them in Country Club Hills.
And took it to a relative at Wind Creek.
And I was just overwhelmed at the support.
And I know for a fact that the Southland, that they are VGT'd at every business.
And interesting enough, the restaurant also has the six terminals, and they are just 12 minutes away from the casino.
And I don't see it being a problem.
There was a line waiting for those terminals, as well as a line at Wind Creek getting inside of the casino.
So I would love a study.
I know that they just opened, so maybe at that 12-month mark.
And then I'd also like to request for BACP to provide us a list, because it sounds like VGT, especially in this committee, that this is very much so possible.
I'd like to know, what are the on-site consumption licensees for the city of Chicago?
I would love citywide, but I'm interested in wards 3, 4, 5, 6, 7, 8, 16, 17, 18, 20, 21, 24, 27, 27.
28, 29, 37, 46, 47, and 49.
What is it?
That sounds like some lottery numbers.
First question, what are you asking for from those boards?
Sure.
At the gas station with illegal machines.
Yeah.
So specifically the 20, I like citywide, but I would like to focus.
But I got that part.
I think somebody.
On-site consumption licensees for the city of Chicago.
On-site consumption license.
Because those will be the, I guess, prioritize.
They're eligible.
They would be eligible, correct?
And we want to make sure that those that are interested in participating with VG terminals, that they are a priority.
You just want to know how many there are?
Yes.
I like a list of on-site consumption licensees.
Yeah.
But I think one of the things that is worth pointing out again is that when we think about the impact on the casino, remember that the real impact is driven by the fact that at the casino, the tax rate we get is four times what it is on the VGTs.
So we're not saying that there isn't demand to play.
There is demand.
We see that, especially that chart that shows, you know, everything going up.
We see that there's aggregate level of demand for this kind of gaming.
It's that when you can game in your neighborhood, some people will not go to the casino.
And we only need a small number of people not going to the casino for it to wipe out all the money we get from the VGTs.
And that's why it shows revenue neutral.
So it's not that we don't think there will be demand.
We think there will be demand at the casino.
We think there will be demand in the neighborhood.
But with the taxing framework that we have to deal with at the state, we are not seeing that we're going to make much more money.
That doesn't mean we shouldn't have them.
And as people have brought up, that can be a very strong argument for going to the state to try to get changes, negotiating with them to get changes in their legislation that would make it more favorable for us.
Because if we had a different percentage, even if it was only 10% and 5%, but what if it was 15%, then we're going to see all of a sudden we are making money.
It's going to be, you know, this and plus.
And that's – so those are the issues of Framer.
But we do expect there will be demand.
For sure, Jill.
And I understand, CFO, we are getting the short end of the stick.
However, Ann is better than Nan, okay?
We're getting nothing for sweepstakes.
Right.
There are gas stations.
There are liquor stores.
They have become a haven for crime that have sweepstakes machines at our local liquor stores.
They're hiding behind the signage, which is something that we're working on at city council, withholding owners accountable for the aesthetics, especially on the southwest sides.
So I think this is something we definitely have to look at and consider, considering the revenue that we have lost for almost 10 years now with sweepstakes.
And then is it of your opinion or position that the customer that goes to a VGT terminal in their local restaurant or bar that put $5, $10, or maybe even $20 in the machine is the same customer that will go to Bally's?
Oh, we know that they're not always the same.
You know, we know that.
We just know that we'll lose some casino gamblers.
And that's why it just – the numbers end up kind of washing out.
It's not saying that all of these people are people who would go to Bally's.
It's saying that the differential doesn't have to be that large on the casino because of that tax rate problem, that it kind of means that the revenues, they wash each other out.
But, again, we're just trying to show here what the financial analysis is.
The financial analysis doesn't say don't do it.
It just says we're not getting $100 million in our budget next year, right?
It's more like understand the realities of what we expect to get.
But it's not saying don't do it because there's a whole bunch of other things.
And I think what you're talking about is the same thing as Alderman Taylor, which is a comprehensive look at how do we crack down on what we don't want, get what we do want, and tax it, and that every year we don't, we're just giving up revenue.
You know, and we've been doing that for years and years and years.
So all of those things, I think, are 100% accurate.
We just want to have a clear view on if we move forward, what do we think it means for our budget, you know?
And what we're saying is it doesn't move the budget a lot.
That's okay.
It doesn't have to.
It's got – there are other reasons to do it.
Okay.
Thank you.
Thank you, Chairman.
Absolutely.
We have two more that are going to present.
One is going to speak to the impact on the hospitality industry.
Other is actually in the gaming industry, which we have shared.
But in concluding, I do want to suggest to our consultant, it's clear that the alders in this committee and even those who are non-committee, number one, want more clear, concrete data around Rivers Casino.
Rivers is clearly the closest model, and there are reports that are public that suggest that Rivers has not dried up, and in actuality, they've grown as a result of the expansion of BGT around that casino.
And so with you being a consultant and independent, definitely reporting back to myself and my colleagues the definitives on that.
Secondly, sweepstakes machines are supposed to give out prizes, not cash.
And there's been no comprehensive data in here to show potential locations, potential amounts.
I mean, I believe if you ask the alders in the room, they can tell you locations and where, as you heard Jeanette Taylor say, Chairwoman Taylor, that this is a problem.
And so to pin what I'm hearing, BGTs as the source of a deficiency in income for Bally's is inaccurate when there's already a black market for this with money that's unaccounted for.
So a true analysis on that would be helpful.
The third thing that's concerning about this report, which was mentioned, is that Bally's is failing.
It's evident that the traffic ain't there, the money ain't there, and even when making a claim about jobs being lost, there was no validity in that.
And so to the future, Bally needs to come and give an account on what's going on with Bally's because it's not clear to the colleagues nor myself what exactly is the problem.
Because to identify BGT as a problem when it's evident that they got more problems is kind of concerning.
So I want to echo what was already said and then also pivot to our consultants.
So our first consultant is Pat Doerr, who is Executive Director of Hospitality and Restaurant.
And so could you share with us some of the impacts of what BGT could do in the hospitality industry?
Thank you.
Yes.
Thank you very much, Chairman.
I will speak probably faster than I'd like because this is already a long hearing, but I'm happy to take questions after.
I'm from Pat Doerr, Director of the Hospitality and Business Association of Chicago.
We are a chamber of commerce of locally owned bars, music venues, and restaurants in Chicago, as well as beverage alcohol partners, including major Chicago headquartered beer companies.
We understand the city commission to study, but we urge the city leaders not to hide behind this spreadsheet.
The fact that Rockford and Rivers Casinos are not included in some of this analysis is just glaring.
And I say that as a history major who never did statistics.
They are the best comps for our market going forward.
Beyond that criticism, let's look at how thousands of real-world businesses, bars, and restaurants across Illinois have already demonstrated the value of video gaming to their small businesses and their local government.
That data should be informing this decision-making.
Data like the fact Cicero, the city of Cicero, realized $1.5 million in revenue.
Rockford realized $2.1 million in VGT revenue.
They are much smaller than Chicago.
It is not a wild inference that we could make far more than this $4 million that Bally's may or may not pay us with state license and legal video gaming in this city.
On behalf of my coalition of small business owners and hospitality employees and owners, we simply ask, why are we being left behind?
Across Illinois, from Niles to Morton Grove to Blue Island, Cicero, and Rockford, video gaming terminals have provided essential supplemental revenue to these job-creating bars and restaurants.
These are not massive corporations like we're discussing here when we talk casinos.
These are locally-owned, family-owned businesses, and for over a decade, the Chicago City Council has left them out of state-licensed, legal, heavily taxed video gaming revenue, and here's how we paid the price for that.
The last alder to speak asked, how many on-premise licenses does this city have?
We have 773 tavern licenses as of the end of June.
That's down from over 1,000 right before the pandemic.
We have 2,786 incidental, mostly restaurant liquor licenses now.
That's down from a peak of over 2,900 right before the pandemic.
In the spirit of clarity and full disclosure, if they go and look at these numbers, they will look higher for 2020, but that's a data glitch because those licenses were all extended during COVID.
We are down 30,000 jobs in the leisure and hospitality industry since the pandemic.
I know I feel for the 390 people who might hypothetically...
I know I feel for the 390 people who might hypothetically...
lose their jobs at Bally's. I'm not sure I agree that could happen because I haven't seen this
report to just hit your inboxes. But I would very, very, very much like to see 5, 10, 15,000 more
Chicagoans employed in video poker offering establishments around the city. What else does
this city council not going into state licensed video poker mean? 95 municipalities in Cook County
alone have opted in. 24 municipalities have opted out in the whole county and five aren't
applicable, have other restrictions. Most of the municipalities that have opted out are like
Winnetka, Wilmette, Glenview, Park Ridge, cities with vastly higher property tax bills than the
city of Chicago has. I'm not here asking you to pass a grocery tax. I'm not here asking you to pass a
property tax increase. I am here asking you to let our bars and restaurants opt in to legal video
poker that thousands of other state establishments offer. Specific to the sweepstakes machine issue,
they're all over the place. You can't sell a gas, you can't sell beer at a gas station in the city of
Chicago due to local ordinance, but you can have five video poker sweepstakes machines. That's absurd.
If you have a claw machine in a liquor license bar or restaurant in the city, you have to have a
couple hundred dollar city sticker on it. At the very minimum, maybe it's time to slap the city
stickers on these sweepstakes machines so we can find out how many there are. I would also submit
to this body, the Chicago Police Department does thousands of underage sales to minor stings on
liquor license businesses to ensure they are not selling to minors. Those officers could also be
tasked to look for those machines and get us a reliable count and who has them. It's an excellent
question on an entirely unregulated industry, and the resources are already there to pick up that
data thanks to the CPD sales to minors program. The last, and I could go on and on about this
report just based on those slides we saw already. Chicago does, members of city council, already
benefit from state licensed legal video poker. Much of the money from legal video poker goes to
build Illinois bonds, which are used for infrastructure projects across the city.
In a May state house gaming committee hearing, there was bipartisan irritation from our house
elected officials that Chicago has been getting that build Illinois bond money, but it hasn't been
contributing VGT income to it. You would have, in my opinion, a much stronger hand in your discussions
with Springfield if Chicago finally came in to support those build Illinois bonds that helped this city
and the entire state. I don't mean to be overly hostile with my testimony today. It has been a
decade without VGT and we have been here today and Bally's has been mentioned multiple times and isn't here.
My last unsolicited suggestion for this body, sorry second to last, a hearing with the finance
committee or the subcommittee on revenue with Bally's in the near future would be helpful because they
have ditched the minority investor requirement following a lawsuit and that certainly seems it would open up in a
negotiation with them to being tolerant of at least some state licensed video poker in this state.
The very last suggestion I have, nobody's leaving the airport to go to the city's casino.
Bally's has first dibs on putting some of their 4,000 approved slot machines in the airport.
They're building the casino. Hopefully they have the bandwidth to install their slot machines in both
our airports and generate revenue there. The Las Vegas airport pulls in 33 million dollars a year from
the slot machines in their airports. I'm not saying Chicago can do Vegas numbers, but in the time
coming up, it would just make so much sense if this body required Bally's to pay or play and put those
machines that they can out in the airports or appear before you and explain why not. They're behind
security. They're monitored. Nobody's coming all the way from O'Hare to play 50 bucks on a slot machine
and go back to your security. In conclusion, I am happy to answer any questions you may have after
the other expert, and I'll be reaching out through the chair with information on all of this, including
what each of the 90 municipalities in Cook County already make from BGT for the body's consideration.
Thank you for your time. Thank you. Before I go to the next, I would like to acknowledge
a Route 59 request from Chairwoman Pat Dow. Can I have a motion to some move by Chairwoman Harris?
All in favor, say aye. The ayes have it. Thank you. Chairwoman, are you online?
Yes, I am. Thank you, Chairman. Thank you so much. Now we have, secondly, from the gaming industry,
John, could you please share your perspective on? Thank you. Thank you, Mr. Chairman. So my name is
John Cannon. I work for Gold Rush Gaming. I'm an executive there. Hold on one second. We did have
a question before you did from Chairman Irvin. My apologies. I didn't see your hand, Chairman.
No, no. I had stepped out of the room, so I wasn't exactly sure if you had got to me or not. Just a
couple of questions. So if the tax rate with the city was commiserated with what we were getting at
this casino, does that change your position on the feasibility of doing this? One thing I think
is really important is we're not putting out a position on VGTs, whether we should or shouldn't.
No, no. It's actually for him. Yeah. What is that? What is that? I don't think he's got a position
on whether we should or should not either. I don't. It would increase the revenue significantly.
Okay. So then if it's a revenue question, does the... Actually, let me correct that a little bit. It
depends upon who the money comes from, because if it's coming from the establishments and or the terminal
operators, it's going to impact the numbers because it's going to change the economics of a VGT
establishment. Just to give you a point of information. I understand your point, but I think
that it will... I don't think we could advocate for that level of change when we have a nice chunk
of change that we could just potentially negotiate between the state and the city on the split. So I'm
not trying to get into the operator's pocket, not trying to get into the... I don't know what the
other people are called, the other party's pocket, but between the 35% that the state and the
municipality splits, if those things equate or bring us to the same level that we're taxing
at the slot machines, number one, how much revenue does that generate? And then does that
change the dynamics of what you have presented as far as job loss and what does it offset? How does that
play out? Well, you just multiply the new rate by the numbers that we have. That's arithmetic.
And again, if it's not coming from the terminal operators or the establishments themselves,
it's going to result in an increase in revenue of, well, roughly four times, right? Because we
discussed the differential between the two. That would reduce the state's take to about 15
from 35, I think, if I'm doing the math correct. Does that answer your question?
Approximately. Approximately. We can provide those numbers through the chair.
Okay. I think... No, hold on, hold on, hold on. We're here to talk about revenue.
You guys don't have numbers. This is crazy. Like, you all wouldn't anticipate if we had a state
equator that what that number would be? I mean, that's... We have run the numbers.
Well, what's the number? So...
Does somebody over there got the number?
We can take the VGT revenues and for every 5% more tax, just we can double them. So if we go back...
Do I need to calculate? What's the number? Let me calculate it here since we can't figure... Hold on.
Let me get my calculator up. So... So how much would we project?
Yeah. Well, I think two points of clarification, Alderman. So we... The report that our consultant
did was based on the existing tax rates, right? We ran the numbers based on the current scenarios.
We have the numbers and can send them easily through the chair. If we assume different changes
in tax rates, the question is, what change in the tax rates, right? So if there's...
If you want to assume that we take 50% of the state, we can quickly run those numbers and send
those through the chair. If we want to assume that we take 42% of what the state gives us,
we can run those numbers. It just depends on what the actual tax rate change would be.
The numbers that we have in our analysis are to the existing tax rates. But we are happy to send
numbers to the chair on any change in the tax rates as well.
Yeah, I understand that. And I understand we are looking at what the existing tax structure is,
but it didn't take a rocket science to figure out that that was going to result in a losing
conversation. But I think the point is that if we want to seek new amounts of revenue or even
send that gentleman sitting to your left there down to Springfield and say, hey, we might want to
make some adjustments. We need to understand the policy implications of what that looks like,
right? And this is not meaningful. I knew that the revenue at 5% was going to be a loser if we had
to get four times as much action to break even. But we know this is not possible. So the question comes
down to how do we find the reasonable ask between the state to make this all work? I mean,
this is crazy that we don't have, we haven't thought past.
just what the current tax structure is, unless the whole end of this conversation was designed
to just say, hey, let's not do VGTs when we've got a whole body of people that are clamoring
to do this. And the only thing we can say is that, oh, the tax revenue just doesn't equate.
We've got to figure out a way to make this work because you've got businesses in the city that
are looking for the revenue. You've got a city council that's looking for additional revenue
and to come to the table and just say, no, but how do we get there? I think that's not what we
want to, we really want to try to find solutions here, not just say no to what we already know the
answer to be. So I'm just disappointed that we don't have any more information other than what
the status quo is, which we already knew was a no-go. So Chair Irvin, we'll get that table
distributed. I mean, I think just if we look at what we've got on, I think I'm on the wrong slide
here. If we look at what we've got on slide 12, so if we assume, say, for instance, that we get double
what we have now, so instead of the 5.15 frigging 10.3%, if we're looking at 27, we'd be about $38
million in revenue. And then if we're, you know, moving to 28, you know, we're looking at, you know,
getting closer to 60 million in revenue, you know, about 54 million. So not going to be a lot of
difference next year. I mean, we're showing, you know, 3 million. Okay. So you get to six or seven,
but again, ramp up year, it's, you know, it takes time to get them out into establishments. But we
would definitely be starting to see amounts that would have a difference to our budget. So even at
5% or even at just doubling what we have, you know, obviously if we've got 15%, now we're like
tripling it. And so if we're thinking worried about a break even now, everything that we can go above
is netting money to the city. So it's a positive. So if I'm just looking at your, your chart here,
um, 2026 basically is a break even operation. If we were to implement such, uh, 2027, uh, and if
we're just looking at the $4 million, uh, change from, um, the casino of that, uh, $4 million pot,
um, that there would be a pickup in, in revenue. However, it would not be a substantial pickup
until year. What you're saying is year five or six based on this. Yeah. Right. Yeah. And I think
one of the things, Sebastian, you were saying is that you see a lot of, a lot of, uh, the historic
pattern has been that they all ramp up over time, the number of VGT establishments. But in that first
three years you see kind of a lot of them licenses get, um, get granted and the machines, uh, get
placed into service. And so, you know, we, you know, you, you get to get past that, you know,
third year and be more, you're still seeing growth, but more stabilized.
And Alderman. So we do have some numbers that we ran, which are in front of me now,
if we were to double the effective rate, um, and of course no change to the market. So just taking a
higher percentage of the, of the state share, 20, 29, we'd make about, you know, 38 million, uh,
2030 around 39, um, increases, you know, relevant to these numbers, but around 39 million in the
aggregate, if we were to double the effective share. So if the effective share was around 10%,
um, if we were to triple our effective share, again, similar to those numbers, um,
to an effective rate around 15%, it of course be even higher. So around 58 million in 2028 and it
increased or in 2028, uh, correct. And increases, uh, beyond that. Again, this is if we just take a
higher percentage of the, of the state share, um, not if we make any changes to the market. Um, and
again, that's just taking these, uh, numbers and adjusting our effective tax rate up, um, as a
supplemental analysis. The state's total take on, um, this revenue is, is what annually today?
Um, that was a number that, uh, Alderman Hall actually got from somebody. You said it was,
um, about a billion dollars. Is that correct?
Estimate. Yes. Yeah. And then also we have John who, well, he was from the state team, but estimate,
yes, a billion. Absolutely. So the state is taking in a billion overall of which, uh, 18% or 14,
was that 14%? 14.7. 14% goes to the municipality. Is that, is that accurate? Yes. Is the billion
dollar number accurate? I don't know. I didn't generate that. That sounds roughly accurate to
me. How do you not know what the state takes? Because I can't keep these numbers in my head
all the time. There are lots of numbers. Yeah. Sebastian to do an analysis of this region,
of this city, of what would happen here. Not of what is, not of the aggregate impact at the state
level. That isn't the, and while that data, there's a ton of data you'll see in the report. We didn't
ask him to come here prepared to talk about the state. Well, we, we, we have to have some
conversation with the state if we want this to work, right? If the state is missing out on
millions of dollars from the city of Chicago, uh, we need to know and understand what their overall
position is. And also, uh, if we were to look at doing some level of a trade or, um, increasing
municipal rates across the, across the state, um, there, there may need to be some understanding
of what the overall revenue picture looks like. I mean, I don't think in a vacuum, we can go down
there and ask for additional money for the city of Chicago's gaming without creating some level of
parity for other municipalities throughout the state. I mean, I don't know how we get that
done without giving the other municipalities something. Where's the director? The only thing
I would say to that is, you know, the thing that has consistently come up whenever we talk to the
state about any revenues, um, is that they're wholly uninterested in reducing their revenue share
of existing revenues, right? So there are a lot of municipalities that already have these VGTs
established at the rate, uh, that's currently in place. Um, and so, uh, it'll be, I think having the
conversation about what the city of Chicago should get in establishing it, uh, you know, to begin with
is a different conversation than trying to change what the state currently does in other municipalities,
just because just in our conversations, they're just very uninterested in reducing any of their
existing revenue shares. Well, I don't know if, if, if it will be an overall reduction, if we're opening
up, you know, theoretically, what might be 40% more revenue for the state in its entirety, um, by
potentially giving up a small portion of that to other municipalities may be a winning hand, but we
can't have a logical conversation because we don't know what the numbers are. So I'm just, I'm just trying
to think through how do we increase the city share of this, because I'm in agreement that
under the, under this scenario, you, you don't do it because you ultimately kill yourself, but there
has to be a scenario that actually makes sense to the state that makes sense to the city, but also
has to make sense to other municipalities throughout the state in order for, in order for this to, uh,
in order for this to work. And this is just dealing with this issue alone. So that's why I'm a little
more interested in the, in the overall numbers, because again, we have to leave some room, uh, for
both the state and for other municipalities. I mean, us just crossing our hands and saying, no,
when we are participating in the, in the bonding and other things is, is, you know, we, we need to come
up with some better solutions on, on that front specifically. So, um, overall, uh, we talked about the job
loss and, and how you arrived at that. Um, are there any other examples where, um, the VGTs do not
cannibalize the land-based or river, riverboat casinos?
Not that I've seen.
So then ultimately for us, it's a, it's a math problem on, on a tax rate that makes sense and
is comfortable for us not to, uh, not to overall lose, lose money. And what is the, what are you,
what do you believe the point of people shifting from the, uh, I'll call the land-based, uh, slot
machines to the VGT? What is that leakage look like over time between the two devices?
Well, when you say leakage, I think that if we're talking about the same thing, that would be the
4.13% that we use for the decline in casino revenues as VGTs ramp up. And that, is that
compounded annually or is that, that's something that's compounded annually? So at what point does
that level out? It will level, well, essentially when VGT revenues level out.
VGT. VGT revenues. OK. Right. Because then your impact isn't going to increase.
OK. So then based on this chart here, we're saying that maturation in the Chicago market would take approximately 10 years.
Roughly. It actually because VGTs are still growing in that last year by three percent.
OK. It's a relatively small. But you're right. At that point, the impact on the casino is very small.
And but you're saying that the impact annually is four percent, which then brings us to almost at 50.
Well, that would be would be roughly 60, 40 over over time with the amounts going to the VGTs versus going to our land based casino.
That's about right. OK. And so therein is some level of a math problem that can be solved as to what those numbers need to look like
in order for this deal to make sense for us to go down a route of using VGTs as a revenue source versus continuing doing both.
And so is that an analysis that somebody is going to perform well about about the rates and how does the compounded 4.1 percent decrease in slot machine activity impact on the VGTs?
What does that equate out to financially for us in today's tax structure and what would that tax structure have to look like in order for that to even a break even and then B to begin to make money?
That's that's the question. Yes, we can provide that. OK.
Yeah, that's what I read off earlier, and we're happy to send you the full table to the chair on the additional tax rate analyses.
Again, to your prior question as well, the state made about one billion in net terminal.
Well, there was about one billion of net terminal income tax last year.
The state made eight hundred eighty four million of that and local municipalities made about one hundred fifty two million across the entire state.
So that was the prior data point. But we can also share the additional tax rate analysis to the chair.
What was the state's number again? The state made eight hundred and eighty four million in tax in twenty twenty four.
Also eight eighty four. And here they potentially pick up another two eighty.
So what a quarter. Oh, point of information. What was your number? You just said.
These numbers are from the Illinois Gaming Board website. How much VGT revenue the state earned in twenty twenty four.
One billion in total VGT tax, which is the number you gave that I just gave the state and municipal.
Put municipality split. Eight hundred eighty four million and one hundred fifty two million.
Right. But no. So the state pulled in one point for local municipalities, two hundred and sixty nine.
And then one point seven was a total. According to the February 7th release from the board from Illinois,
the press release from the gaming board just to be accurate in this own record.
I can. Your state number. You says a billion seven.
So for the state total is one point seven, according to the press release from the Illinois gaming board.
One point seven billion total. Absolutely.
And money that in tax revenue for the state and of which municipalities received what?
At that one point seven, they brought in two hundred and sixty nine million.
That's what the municipalities received. So the balance of the money then.
Which is the one point. Right. Four three went to the state.
And that was for twenty twenty four. OK. All right.
Go ahead. I'm OK. I just want to.
She's requested a rule fifty nine.
Alderwoman Sam Nugent pro temp.
Do I have a motion to allow her to join? So moved.
So moved by Chairman Irvin. All in favor, say aye.
I believe the eyes have it. She has a question as well.
Are you online, Madam Pro Temp, are you online?
Yes. Can you hear me? Oh, can we turn up?
Yes. Oh, I think it's you. Is that better?
There we go. OK, thank you, Chairman.
Is it OK if I ask my question now? Yes, feel free. Absolutely.
Thank you. Thank you for letting me in. And thanks to the folks in the room for the presentation.
Um, what I'm wondering is more a legislative question.
And that's, um.
Have we ever gone down to Springfield and fought for us to own the VGT license so we could potentially get a bigger cut of this?
Is that something we might be willing to do?
Yeah, that's what the discussion has been around, that, um, it would be more financially beneficial to the city if, uh, the state, uh, legislation, if new legislation was passed that modified the percentage splits.
But, like, are we willing to do that as the city? Or is that something we're comfortable moving forward with?
Um, I don't see any reason why we would not. I mean, I think that that's, uh, you know, a decision that, you know, ultimately, uh, will get made by somebody other than myself.
But based on the conversations I've had, um, I think that is something that the city would be interested in supporting.
Okay, because I guess as we're, you know, I know there's a lot of conversations surrounding whether VGT negatively impacts the casino.
And I have thoughts on that. But, um, for us to get a bigger share, there is this, there's a major component of Springfield in there.
And, um, I think we should also be open to maybe allowing the city to own the terminals or a third party own the terminals so we can get a bigger cut.
But I think we have to be more creative, like, more creative legislatively because we're, we're such a big economic driver.
Um, so I just put that out there as, um, something I think is, is worth looking into.
Thank you so much. Is there, is there any more questions?
Uh, no, I'm good. Thank you, Chairman.
Okay. Uh, Chairwoman Harris.
Just for the record, I don't know if anybody has this. How many jobs are generated by V, um, VGT terminals?
I, you can get the number of licensed individuals from the Illinois Gaming Board, the terminal handlers.
Um, that'll give you a rough estimate, but I don't, I couldn't tell you, like, how many people are employed at Excel.
Do you know who Excel is? They're one of the terminal operators, the largest one in the state, actually.
Um, but I believe they've issued studies of their own that list some of their employments.
So you could probably piece it together.
Okay.
But as far as I know, that's the only information that's available.
Thank you.
I think what we don't necessarily know is, like, inside of an establishment, if you have a bar and you add, you know, three VGT terminals, do you change your employment, you know, or is it something that your existing employees are, you know, able to handle that, whatever increased workload is related to those, or do you bring on another person?
So I don't think that, uh, um, there may be some industries, industry associations that have done that kind of work, but, you know, we don't have access to that particular data.
Okay.
Um, before I go to John, I have one more question for you.
And then, um, just for those who are still with us online and present, we still have, uh, as a part of this hearing, the ideas shared by the alders, the towing and storage fee, the rides, shares, zone expansion, congestion, surcharge, that is, online sports, wagering tax, liquor tax, garbage fee.
All of those are to come, uh, workers' compensation, vacant property, uh, registration platform, streetlight advertisement, procurement vehicle, uh, auction increase.
As I said, uh, towing and storage fees, worker compensation loss, portfolio transfer and workers' compensation light work.
All of these are to come, and I think we can get them done in an hour.
But before I, um, turn it over to John, who's from Gold Rush, let me ask you, um, quick question.
Has any casinos closed as a result of expansion of VGT?
No, not that I'm aware of.
That you could directly attribute to that, unless you know, sometimes close.
Has any municipalities that you can remember, have they banned VGT as a result of the casinos?
Well, yeah, I mean, here.
And, well, I guess you couldn't say it as a result of casinos, but, um, Des Plaines would be an example.
Rivers has been in business since 2008.
When the VG, when the VGA Act went into effect, they banned VGTs.
So that would be an example there.
Then they later changed their money.
Then they changed their money.
Exactly.
All right, so, um, John is from, uh, Gold Rush.
Uh, could you state your name for the record?
And, uh, whatever you would like to share, we have a few questions, and we got a host of other things right behind you.
Thank you so much, John, for sticking around.
Thank you, Mr. Chairman.
Um, once again, my name is John Canham.
I'm, uh, I work, I'm an executive at Gold Rush Gaming.
I've been in the...
the casino and VGT industry for over 40 years, so I think I bring a unique perspective to
both the casino side and the VGT side.
I've worked internationally, hence the strange accent you're hearing today.
I'm from London, England, but I've been, I work in London, I've worked in the Bahamas,
I've worked in Cyprus in the Mediterranean, cruise ships, and I came to the U.S. in 1994
to open a casino in Baton Rouge, Louisiana, work in Louisiana, Mississippi, Kansas City,
and then I came to Illinois to run Prairie State Gaming, which is the fourth largest VGT
operator in the state, in 2015.
I joined Gold Rush in 2022.
So I think I can bring some good perspectives to this.
I did look at the study, I think it's a very interesting study, a lot to unpack in that
study, of course, and just some things that come immediately to mind.
First of all, just to talk about VGTs in the state, it is a $3 billion industry, a billion
does go to the state and municipalities in tax revenue each year.
It's the most profitable private public partnership in the history of Illinois.
It's a uniquely profitable arrangement for both the operators, for the locations, and for
the state.
And I think it would be disingenuous to think it wouldn't succeed in Chicago as well.
Now, just to talk about some of the things I noticed from the slides, and obviously I
don't want to discredit a very, very in-depth analysis, but all of those casinos that show
declines in revenue are 40-year-old facilities.
They're river boats.
We call them the boats.
They're still boats, most of them.
No one wants to go to these places.
They haven't reinvested money.
They're dull.
They're dingy.
They're just cash cows for the casino companies for these many, many years.
And that's, I think, a lot of the reason they've declined in revenue.
They're just old and stayed, and they haven't kept up with the times.
When you look at the rivers, which has increased revenue since it opened, had no issues because
it was exciting.
It was vibrant.
And it stayed up with the times.
And in 2019, they actually increased their positions.
They didn't say, oh, these VGTs are eating our lunch.
They continue to grow.
You look at the casino Hollywood, both the Hollywood casinos are now moving their facilities
to land-based facilities to compete.
They're not saying we can't compete with VGTs.
They're saying we need an updated, vibrant, newer place to play.
And I think that's why we're seeing no one stopped the Windstaff, sorry, a Wind Creek Casino
from locating in a VGT, I guess, where there's a lot of VGTs in action right now.
That didn't deter them, it didn't deter Rockford, and it didn't deter Waukegan.
They're all building land-based facilities.
So no one's worried about VGTs except, it seems, for Chicago.
So that's kind of a strange situation.
I think that we also have to realize that that's a $300 million VGT revenue impact to
the state eventually.
Now, I know Chicago only gets 5% of that, and maybe that at some point will get changed.
You can always, you know, go down and, as someone said, negotiate.
But what I believe is, you should also see that Chicago is part of the state of Illinois.
The state is desperate for revenue.
Some of that, wherever they get $100 million in VGT revenue, will come back to Chicago as
well in a capital project or whatever else.
So I don't think you should just look at it in a vacuum and say, we're only getting 5%,
we shouldn't do it.
Now, talking about projections, I think somebody already said that the Bali projection is 50% off
already.
These studies I've watched over the years, they're just a shot in the dark, to be honest.
They're like trying to predict the weather.
Half of them are 50% off, 50% over.
No one gets these right.
I know there's a lot of analysis goes in, but there's so many variables, there's so many
factors that if Bali's already off by 50% on their projections, what's to say the permanent
casino won't be off by 50% on its projections?
So my friend Pat here does a lot of great explaining about how beneficial this is to
the city's small businesses.
And it's incredible what it does.
It keeps them in business.
60% of small businesses go out of business within the first two or three years.
This helps them stay in business that little bit longer, lets them get roots and develop
themselves.
All of that revenue that they get stays in the state as well.
It gets reinvested.
There's a multiplier factor of probably 1.5.
I think there was a study by the IGMOA that said of the $2 billion revenue to the state
in 2022, it became a $3 billion increase to GDP.
So that revenue stays in the states.
You're helping 2,000 plus, maybe 3,000 small businesses in the city of Chicago, as opposed
to one business that we're trying to defend here as Bali's that may or may not make it.
So those are some of the things I wanted to just bring to your attention.
But I really feel the VGTs will be a success in the city.
They will not cannibalize as much as you think.
Someone mentioned the sweepstakes revenue.
Undefined.
Could be hundreds of millions.
It may just be a straight offset.
We get rid of the sweepstakes.
We add VGTs.
We're taking away an unregulated entity and we're replacing it with a taxable entity.
That's just a win-win for the state and for the city.
So these are things that it's very hard to define.
Obviously, every projection I see, they're usually off by hundreds of millions.
And I think this will be any different.
But I really believe that VGTs will be a great addition to the city of Chicago.
Thank you so much.
Anyone have any questions for any of our guests?
All right, Mr. Chairman Irvin, I made a mistake.
And I want to appreciate Annette for bringing this to my attention.
And Ethan mentioned it earlier.
The state only – we generated only $1.1 billion for the state in VGT alone,
in which $955 million went to the state and $164 million went to the municipalities.
So that's for VGT, period.
Now, when you add the sports books and everything else,
that number goes to the 1.4 that I mentioned, so forth and so on.
So, again, for the record, I made a mistake.
And I appreciate you, Annette and Ethan, thank you.
Again, $1 billion solo for VGTs, $955 to the state, $164 to the local government.
And so, all in all, what we did find out today was there's still work to be done.
I think we can get there.
I think we will get there.
But these factors of everybody's perspective is what democracy looks like.
Difference doesn't mean deficient, and we'll get it right.
So thank you all so much.
And I appreciate you all for spending three hours of your life in city council.
And so we are now getting ready to switch the conversation today to the submitted proposals
of revenue ideas from the alders.
Specifically, again, we have seven ideas that were submitted by the alders of the city.
A link was sent at the beginning of the year, something new that we're doing.
And these seven things are centralized accident towing and storage, increased towing and storage
fees, procurement vehicle auction, streetlight advertisement, vacant property registration
platform, workers' compensation, light work, workers' compensation loss, portfolio transfer.
With us today will be a host of people.
If you give me a second, let me, there we go.
We got Janice Oda-Gray, who's the chief administrative officer, Daniel Firestorm, the deputy administration
officer from the Office of Budget and Management.
Also, we have, please forgive me if I get it wrong, Yuting Ming, who's a legislative budget
analysis from COFA, KDO2, who's a legislative budget analysis from COFA.
Also, we have with us two guests, Malcolm Weems, as long, in addition to Early Walker, who will
give perspective.
You all can come in the box as well, especially when we talk about the towing fee increase.
So you can join them in the box.
Y'all too?
Yep.
All right.
All of these will be available for those of you that are watching online, Alders, those
who present, it'll be in your inboxes.
And again, I'm grateful for the proposals that you all submitted.
Janice, you've been great to work with.
Dan, you've been great to work with.
Chairman Irvin, great office to work with, along with Chairwoman Dow.
And so the proposed ideas are what they are.
They're going to provide some analysis to them.
And in the meantime, in addition to that, it's clear that we're going to have some follow-up
meetings around VGT, the casino, sweepstakes machines, and a host of other things in the
city.
All right.
So as we get this together, again, thank you all so much for joining us.
And take it away, Janice.
Thank you so much for the introduction.
We're going to start talking about, go to the next slide, please.
How we got here, the overview and proposal process.
How we got here, we had an anonymous form that the aldermen submitted to COFA, and we requested
it from them, and we had a deadline of March 2025.
And by doing that, by doing that, we accepted these submissions, and then COFA actually did
a preliminary analysis on all of this.
And we looked at it, and we looked at other cities and other places that had similar proposals,
and that's how we came up with our analysis.
It is preliminary.
Keep in mind, it is preliminary.
COFA offers objective analysis for each proposal, providing context and revenue estimates published.
in our revenue resources on our website.
Keep in mind, also, the inclusion does not represent COFA's endorsement.
Next slide.
I think you already mentioned all of the seven proposals,
but we had actually an eighth one.
We just didn't mention it because they just finished talking about it for the past three hours.
So these are the seven, the centralized accident towing and storage,
the increased towing and storage fees, the procurement vehicle auction,
streetlight advertisements, vacant property registration platform,
workers' compensation light work, and workers' compensation loss portfolio transfer.
Now we're going to start with the first one, and Dan will be doing that.
Dan Fristrom, Council Office of Financial Analysis.
So the first one we have up is the centralized accident towing and storage.
The proposal that came to us would require a centralized accident-related tows
within city facilities and create a uniform pricing and improve transparency,
protect consumers, and establish a significant revenue stream for the city.
Some key considerations would be the city lots and towing services
currently managed by the contractor.
The contract currently is set to expire in 2026.
Accident-involved vehicles are not required to use the city towers
or use city-operated auto ponds.
So unauthorized towing operators often tow vehicles independently to independently own lots,
leading to unregulated fees, difficulty for owners finding their vehicles and locating them.
As far as implementation, we would have to solicit bids for a partnership of contract
or adjust the current contract, as well as develop the fee collection
and potentially advertisement process.
Looking at revenue estimates here, we are taking some assumptions here.
We are using 90,000 traffic crashes, which was reported by CDOT for 2023,
and we conservatively assume one in three crashes, or 30,000,
would result in a city-managed tow under the new centralized program.
We also assume each vehicle is stored for two days in this specific scenario,
and storage revenue increases with additional storage days.
So as you can see in the chart below, the current rate is $150 for the tow and $25 per day of storage.
And then if you look underneath it, we have other examples if we were to, you know, increase this further.
So the current rate may not accurately reflect the city's annual revenue,
as many traffic, you know, many of these traffic crashes are handled by the private or unauthorized operators, if you will.
These revenue projections assume all accident-related towings are successfully captured under the centralized system
and that the city retains 100% of the fees.
So the actual city revenue will vary depending on the negotiated revenue sharing split with the contractor.
So next up, the second one that was submitted to us would be an increase in the storage and towing fees.
So increase the storage fees to generate new revenue and better line charges with the actual cost of service.
The city currently shares towing revenue with a third-party vendor under contract expiring in 2026,
with the same rates that I already spoke of earlier, with the $150 for vehicles under $8,000
and $250 for vehicles over $8,000, as well as $25 per day for the under $8,000 and $50 per day for over that.
So with roughly 100,000 vehicles towed annually, modest increases could yield significant revenue gains,
and any fee increases must carefully balance deterrence with affordability and fairness.
So as far as the implementation, there would need to be an amendment to the municipal code to authorize these revised fee amounts,
potentially renegotiate the towing contract to reflect new rates,
and coordination between finance, police, streets, and sand for the rollout and communication.
So there are some concerns.
In conversations with OBM, they've noted that the current process is operating at a loss once factors such as the personnel
for streets and sanitation employees that are operating within the loop is plus the loss that the city takes on tows outside of the loop
where the private towing companies operate, as well as the contracted storage fee.
So OBM estimates that the city would need to increase towing and storage fees by 10% just for the current operation to recapture expenses to the city.
So the city currently operates on an average loss of approximately $1.5 million annually.
So we would need to see this 10% increase just to break even.
OBM also notes that these amounts have not changed since 2004.
And so the following estimates, we have a flat rate and a percent increase.
So the proposal that was submitted to us by city council was for a straight flat fee.
And as far as far as our calculations, we have got from the streets and sanitation that roughly about 95% of vehicles towed are cars under this 8,000-pound threshold.
So the current revenue for all vehicles is approximately $15.5 million.
So the final city revenue will depend on the negotiated revenue shares, of course.
So the first one we just did, this was what was submitted to us by city council, which was just a fee increase of $50 for both vehicles under and over $8,000.
We used the amount of vehicles that streets and sanitation provided us to come to a total annual revenue of approximately $20.5 million.
And so underneath it, though, we did it as a percentage, as the 10%.
And in conversations with OBM, it looked like they were looking at more of a percentage and not a flat fee amount.
So the annual storage revenue with an increased flat fee rate option is laid out here.
So at the top chart, it would be the additional $10 per day for cars, an additional $25 a day for trucks.
And that would bring in a total of $3.7 million approximately.
And then below it, we have it as a percentage, which it seems OBM seems to be in line with.
So we have both the 10% showing $2.8 million approximately, and if we went to 20%, around $3.15 million.
Before we go to the next idea, we have with us, again, two guests, Malcolm Wienes and Early Walker.
Could you both state your name for the record and your perspective and commentary on this proposal?
Go ahead.
Yes, thank you so much, Chairman.
My name is Early Walker.
I'm Senior Vice President of Vehicle Management Solutions, who is the parent company to United Road slash E&R Tone that does the city of Chicago Tone.
My name is Malcolm.
Good afternoon, Chairman.
My name is Malcolm Wienes.
I own Techquity Partners.
I am a partner of VMS and URT.
And I guess to add commentary, because I'm having a hard time.
I'm a little old.
I can't see from this angle.
But basically, the rates, and it looks like they were presented similar to what we were offering, there hasn't been an increase in quite some time.
But on top of that, to have more local minority businesses actually participate, you have to have a rate that is competitive for them to want to take the work.
Mr. Walker has started a towing business.
He understands this business very well.
But the economics and the incentivizing people to actually want to do this has become a problem because of the rates being so low.
So what we were offering, or at least proposing, was a $100 increase to the...
current tow fee. And what we did was we provided a spreadsheet to kind of show you all the difference
in tow rates in different cities, some much smaller than Chicago. And a lot of them have
not only tow and storage fees, but they have additional fees, administrative fees, things like
that. So if we were to go from the $150 to $250 and from the $25 to $50, we would still be in the
medium, the mid-range, right, really of what total fees a city charges. And what we looked at,
we were seeing that you all were using 90,000 tows. I think we were using a conservative 60,000
tows. And that would actually bring about net about $9 million to the bottom line for the city.
So, you know, again, I apologize because I thought I had my good glasses. But what you're all looking
at is something that is reasonable. I would also add that 40% of the tows are for people that don't
even live in Chicago, right? So, you know, there's a bit of more revenue from out-of-towners, you know,
parking in the wrong spot and all that good stuff. In addition to the things that you saw here,
we're just working on behalf of the city. The other issue that you were talking about,
the crashes and things like that, we also had submitted something previously because we know
that's a problem. But that's outside of the current contract right now. Just want to make the – so that
people don't think it's the same. Anything you want to add, Mr. Walker?
Absolutely. Thank you, Malcolm. So, I would just like to echo that in addition to what he stated.
Our biggest goal here is to – and I sat down actually personally myself with several minority business
owners who have towing companies. And our goal is to get to 100% MBE utilization. Well, the only way I
should say we're able to do that is by increasing the fee. That was the biggest issue with all of the
contractors is that we were not able to compensate them enough. Of course, as Malcolm stated, this rate
has been the same since 1989. Nothing price-wise is the same since 1989. So, the cost of workers,
the cost of trust has changed since 1989. So, in addition to, of course, the city benefiting from
this, this will be a huge impact in the minority and MBE community.
Can I add one more thing, Alderman?
Yes.
Mr. Chairman, the other piece here is like storage fees go all to the city. There's no revenue sharing
for storage fees at all. So, you know, if there is some thought process on what is more money to
the bottom line for the city, storage fees are 100% the city fees.
To the city. Yep. For the sake of time and cutting across it, do you all have anything else you want
to add? No.
Okay, great. No. So, the chair has a question. Both chairs have a question. And then we get right
back to Janice. So, Chairman Irvin and then Chairwoman Coleman.
So, just quickly, I know we're looking at a percentage fee increase. One is at 10%, the other
at 20% just on the storage amounts, which Mr. Walker just stated hasn't been increased since
1989. What is the median for large metropolitan cities? What does that look like today? Even if it
is, it could be 120% because, again, we're kind of, you know, ours hasn't changed in a while.
What is the median fee today? And if you guys have looked at that, what would that project out
in additional revenue?
Malcolm has that.
I actually have some numbers to give you. So, I want you all to think of this because
Los Angeles is a bigger city. It's a wide city. They do a lot more toes than Chicago. So,
they have a basic fee of $195. Their storage fee is $60. And then they have what's called
a notification and lien fee of $70, right? So, when you add all of those up, it'll actually
come up to, you know, I think $325 or something like that. But if you look at Atlanta, Atlanta
is $228 for a tow. And I'm using the basic tow for a small vehicle, just to give you some
kind of numbers. But $228, storage fee is $33. And then they have a notification lien fee
of $91.
Hold on. Just a quick question, Mr. Williams.
Yes.
The notification, is that automatic?
That a notification?
Is that sold?
It's a municipality. It's not always.
So, you towed a car. So, you know, we towed, we have a day of storage. The notification comes
when. Is that a day time or is that day one?
So, the notification came as a result of state law that was passed that basically now any
lien holder has to be notified by the towing agency within two days. So, of course, with
the two-day notice now, the, you know, the fee of that has increased. So, that's the whole
reasoning of the notification. We don't charge that. That's not something that we're charging
for. That is something else, additional revenue. You know, additional revenue. We didn't even
get into that. But Malcolm was just pointing out that there is an additional revenue.
So, if I come and pick up my car, you tow it today and I come get it tomorrow, do I get
hit with that notification fee? Or is it after you all have kept the car for two days and
then you make that notification?
We're not charging it.
I'm just saying it's automatic. It's automatic fee that goes out when the.
Oh, okay. Administratively, automatically, the letter goes out. Okay. Got it. Yes, sir.
All right. Yeah. So, we don't do that here. I just want to talk on the high end. So, San
Francisco, $297 for a tow, $77 for a storage fee, $304 for an admin fee, and $70 for a notification
and lien fee. So, that's the far end, right? And because Chicago is not charging an ad
admin fee or a notification or lien fee, you're really talking about the tow and the storage,
right? And again, our recommendation was to go to $250 and $50, which would be a total
of kind of $300. And that still puts you in the middle of a lot of these cities that actually
are much smaller. Like Las Vegas is a much smaller city, of course, than Chicago, things
like that. Los Angeles makes their money because they're doing so many more tows.
Correct. Thank you. Before I led to the Chairwoman Coleman, we wasn't even in first grade,
Chairwoman Coleman, before the last time they even changed. Ouch. Ouch. Ouch.
Chairwoman Coleman. At least we can laugh today because it was real thick up in here about nine
minutes ago. You were, you were, you were swerving Irvin.
So, Janice, and you all can get back to the presentation, but I almost wish you could just
do pass because if I, my ears hurt correctly, you said we're missing. We're at a 1.5 annual loss.
We don't like to lose money considering the budget that we are up against, but considering the 1989
numbers of the 150 toll, is that still applicable for the $25 storage fee? Has that price been the
same for the same? Everything's been the same. We've been at the same price since 1989.
And there are no African-American, no Latino, no black or brown subcontractors in this industry
doing business with the city of Chicago because clearly we're not competitive. So here's an incentive.
We do have some, right? But we can have more and our goal is to get to 100%. The biggest issue here is
the pricing. When we tell them what we can pay based off of what we're receiving, they're usually,
the answer is no. They can get a different, an easier toll job that will pay more money, right?
So that's why sometimes if you wait on it. Or privately.
Or privately. That is correct. That is correct.
I'm not on this committee, but I sure wish you could do pass.
Thank you, Chairman. Coming soon. Coming soon. All right. Thank you so much. Back to you, Janice.
Thank you all. You all are good. Thank you so much for three hours of your life.
Okay. Number three. So another one of the ones that we got from the Alders is a proposal about procurement
for vehicle auctions. So this would shift city-run vehicle auctions to a private contractor model
by hiring a professional auctioneering service to manage impounded vehicle auctions.
The proposal suggests the contractor would oversee planning, promotion, bidder registration,
compliance, and financial reporting. So some considerations here is that the city generates
revenue from auctioned vehicles and under the proposed service model would continue to receive
a portion of these revenues. City auction revenues total approximately $1.36 million in 2024,
but this is inclusive of all sales, I believe, and the vehicle-specific data is unavailable,
making the revenue impact unclear here. The contractor fees is 15% on bids over $10,000,
which is what the proposal that we were given that this would just go towards, you know,
those bids over $10,000. However,
uh,
And we don't think it's near that. I'll get into that in the next slide.
The city would have to issue an RFP, host competitive bidding process and vendor selection and oversight required to avoid conflicts of interest with the existing towage and storage vendors.
So the proposal that we were giving, we kind of lay out a scenario of bid prices with $100, $1,600.
And then once we get to that $10,000 is when that additional fee of that 15% kicks in, that 15% compensation for the contractor of vehicle bids higher than $10,000.
So, however, the proposal does not make clear if sales under $10,000 are submitted to the city.
The percentage of bid price is in addition to the price paid for contracting overall services.
The average bid price in number of auctioned vehicles are not publicly available.
And minimum bid prices for vehicles currently available on the city's auction website for April 2025 range from $100 to $1,600.
So if you're looking at the chart, it's, you know, the proposal given to us would kick in on vehicles over $10,000.
But in just, you know, looking on what's out there now, most of these sales were between $100 and $1,600.
And, you know, which would not, you know, trigger this 15% threshold, not get anywhere near the $10,000.
Thank you, Daniel.
We have over 300,000 streetlights, and a proposal came to us for streetlight advertisements.
It would allow commercial advertisements on city-owned streetlight posts to generate new revenue while supporting small business visibility.
The key considerations would be the city currently only permits banners promoting civic events,
overseen and governed by Chicago Department of Transportation,
with neighborhood-level Chamber of Commerce overseeing existing private business advertisements.
Implementation for this would require minimal structural change by leveraging CDOT's existing infrastructure
and processes used for civic banners.
However, updates to policy, fee structures, and internal logistics would be needed.
Let's see how much we can get off this.
The assumptions first.
Chicago maintains more than 300,000 streetlights citywide.
We assumed advertisements on 1% of the total streetlights, so 3,000 streetlights.
The monthly banner fee is $200.
So when you look at the grid, it says for the banner setup, a single banner is $3,000.
The hybrid banner is $4,500.
Hybrid, it's like one and a half.
And the double banner is $6,000.
So the monthly revenue would be, for the single banner, $600,000.
The annual revenue would be $7.2 million.
For the hybrid, the monthly revenue would be $900,000.
The annual revenue, $10.8 million.
For the double banner, it would be $1.2 million in monthly revenue.
And the annual revenue would be $14.4 million.
As a note, the hybrid setup includes 1,500 poles with single banners and 1,500 poles with double banners, totaling 4,500 banners.
Actual revenue may vary based on the fee structure, advertising demand, pole location, desirability, and implementation cost.
Next, these estimates do not account for utilization rate or overhead cost.
So keep that in mind with these $14.4 million annual revenue for the double.
Oh, and OBM did mention that, is this the overhead?
The utilization was 40%.
Going to the next one, the vacant property registration, we got this from an alderman.
A company called Hera Properties was the one that brought this to us.
And the proposal was to issue a contract to a third-party vendor to maintain a vacant and foreclosed property registration platform,
to track and connect with relevant parties to resolve challenges related to unoccupied properties.
Now, one of the key considerations that the city already has something like this,
the Department of Building currently maintains a similar platform,
but for vacant buildings called the vacant buildings registration platform for residential and non-res buildings.
But the city does not provide property management services like this proposal would.
For implementation, issue requests for proposal and competitive bidding process
and decommissioned city-run platform and adjust fee collection processes.
Revenue estimates, the assumptions.
There's approximately 13,000 vacant and foreclosed residential properties.
Are registered annually.
March 2023, we got a number of 1516 for vacant.
And from 2024, we got a foreclosure starts of 11,508.
The Hera Property Registration Annual Fee is between $300 and $500,
so we assumed in the middle a $400 fee for this estimate.
The annual fee and the vacancies are constant, and the total revenue is also constant,
but the allocation, that's where the difference is at.
So if the allocation is 25%, the net city revenue will be $1.3 million.
If the allocation is 50%, the net city revenue will be $2.6 million.
If the allocation for the city is 60%, it will be $3.12 million.
And 100% will be a pipe dream.
It would be $5.2 million.
That's everything.
The note is revenue sharing scheme is unknown for Hera Property Proposal.
City maintains vacant building platform, and we receive 100% of the revenue.
But keep in mind, that revenue that we're receiving now is $60 for the fee, for the annual fee, $30 every six months.
These next two, they're not revenue generation proposals, but they're cost savings,
and cost savings can be just as important as the revenue generation.
This workers' compensation light work proposal institutes a transitional return-to-work program
that allows City of Chicago employees on workers' compensation to resume work in a limited, modified capacity while recovering.
One of the features of the program would be to create a light-duty bank to align employee capabilities with departmental needs.
The purpose of this proposal is, of course, cost savings rather than revenue generation.
Key consideration, currently the city lacks a formal light-duty policy that requires employees to remain off-duty until fully cleared.
In other words, if someone, I don't know, had an accident and they were feeling pretty good and can actually do something,
they would still have to stay home until they're completely cleared.
Transitional work policies are widely used across different industries to help injured employees return to work sooner.
Studies show they reduce time off and support recovery, making them a standard practice across sectors.
To implement, develop internal protocols for identifying a suitable assignment, managing employee transitions,
and communicating across departments, and communicating across departments.
Cost savings estimate, data limitations hinder development of cost savings estimate.
The next one is also a cost savings.
And the next one is workers' compensation loss portfolio transfer.
The proposal, the Leverage Loss Portfolio Transfer, or LPT, is a financial strategy that transfer legacy workers' compensation liabilities
to a reinsurer to help manage city employees' compensation portfolio in exchange for a fixed annual premium.
The reinsurer would assume responsibility for future claims.
Currently, the city, well, as of 2023, the city managed a total of 3,164 workers' compensation claims.
To implement, negotiate terms with the reinsurer, update the city's relevant financial management ordinances.
Cost saving estimate.
Estimates presented in this proposal suggest transfer of liabilities for an annual premium ranging from,
$15 to $25 million, removing the $300 million legacy claim liability from the city's financial records.
However, figures are drawn directly from the submitted proposal.
COFA was unable to verify these projections through publicly available data.
All right.
And the very last thing is just a shameless plug for COFA's new website.
It's www.chicago.gov slash COFA.
We'll have the mid-year report at the end of next week.
And we also have the mid-year report at the end of next week.
So have all of these annual budget option reports with a lot of different revenue savings and revenue resources.
Thank you. Thank you so much.
Anyone have any questions before we transition to some more revenue proposed ideas, which will include, though I think it's redundant, the towing and storage?
I think we are going to run that back again.
No. The ride share zone expansion slash congestion surcharge, not a congestion tax.
Thanks. Chairman Irvin.
Thank you. Thank you, Mr. Chairman.
The centralized accident towing and storage, that essentially would be a whole new stream of revenue if we disallow private tours from doing accidents.
Is that correct?
Yes, that is correct.
Just more specifically, when you look at the towing, and I said the city is currently operating at a loss because we're taking money in from tows within the loop because that's done through streets and sanitation.
But it's everywhere outside of the loop that these private companies are facilitating where we're taking the loss.
Say that again.
So, yeah, we're taking a loss from these private companies, so we took it over, yes.
Okay.
But any increase in fee would offset that loss that we would potentially be looking at.
But these new tows would be, these would be 100% new tows that aren't in the system today, right?
The accident tows.
You say that again?
The accident tows, centralized accident towing and storage.
These are tows that don't exist today, right?
Your revenue one.
Correct.
Okay, and so this would just be a totally new stream of tows and revenue for the city.
Yeah, in the most basic terms, we are profitable in the loop because we do it ourselves.
We are losing money outside of the loop where it's privately done.
And overall, we're still losing because the private is more than what we're taking in in the loop.
Yeah, but this would be in addition to all of those tows.
So, these would be another 30,000 tows that we hit potentially, that we would potentially see revenue on either through some percentage base of that because we wouldn't tow these vehicles.
These would be private tows.
But I think one of the challenges, as people talked about this tone, is that these folks come in and they hold your car hostage or something like that.
So, I think that we should do this because it would, number one, regulate the fees.
And I think everybody would enjoy that, knowing some certainty around the issue and then it also being an additional revenue source.
And in fact, we may be able to charge a higher amount for that specific type of tow because generally there's some other things that come along with it.
And it's not wouldn't be your standard tow. I mean, you know, it may require different types of equipment.
I mean, if the car is totaled, I mean, it's a difficult, much more difficult tow than just picking up the car that's parked illegally.
So, we may want to look at a higher fee if we do walk down that path, a higher fee for that particular tow.
And most of those tows are probably being paid for by the insurance companies anyway.
So, thank you.
Thank you so much, Mr. Chair.
All right.
With that being said, our last presentation today will be on some additional revenue ideas for the city of Chicago.
Hopefully, we get closer to 3 o'clock time at this time.
Noor Shake will be coming to the box.
She's the deputy CFO for the city of Chicago.
Giovanni LaFeo, the deputy budget director from the office of OBM.
And then Brian Carlson, he's the deputy director for the tax division, the Department of Finance.
Thank you so much.
Jill Jaworski is coming back as well.
Hey, Jill.
All right.
Annette Guzman is coming back as well.
So, while they are fixing that, I wish we had some Jeopardy music.
Do, do, do, do.
So, Chairwoman Dallas still with us.
Are you with us still, Chairwoman?
I believe so.
All right, you all, again, all right, you all, with us again is Nora Shake, deputy CFO, Department of Office of Finance, Giovanni LaFeo.
I'm saying that correct, right?
That's right.
All right, deputy budget director, OBM, and then Brian Carlson, deputy director for the tax division of the Office of Finance.
And then in the box is Jill Jaworski, our CFO, and Annette Guzman, our deputy director.
So, take it away.
Thank you, Ellerman Hall.
Good afternoon, members of the committee.
So, we're going to walk through a handful of items that were raised by city council, of interest, or city council have been previously discussed by city council here today.
We are simply presenting information on a handful of items as Ellerman Hall just walked through, Chairman Hall walked through.
Towing and storage fees, we'll just touch on that briefly as that was just discussed.
Rideshare zone expansion, or sometimes referred to as congestion surcharge.
Online sports wagering tax.
Liquor tax.
Tax and garbage fee.
And, again, we're just going to present information analysis about, illustratively, if items were to be proposed and to different levels, what potentially could that raise in revenue.
So, for towing and storage fees, it's been discussed.
So, we'll just kind of – I'll focus on maybe some of the key points that were kind of raised or talked about.
One thing that we'll jump into here is just in terms of estimates for new revenue.
So, it was raised in the prior presentation about if Chicago were to go to an average level among mere peer cities, what could that potentially look like?
So, the revenue estimate here that we're talking about.
So, a peer analysis was done that was looked at San Francisco, Houston, Los Angeles, Cincinnati, New York City, Philadelphia, Milwaukee, Dallas, and Columbus.
And that was a subset of large cities across the country, including Midwest cities as well, to get an accurate impression of what a peer analysis would look like.
And so, that would generate fees of $183 for the towing fee above the $150 that is currently in place and a $30 daily storage fee.
That would generate an additional $2.8 million in new revenue as an estimate.
Obviously, the numbers can scale depending on what level of the fees were raised.
It was talked about that on the West Coast.
Cities generally are significantly more expensive.
So, talked about San Francisco at $293.
Los Angeles was $195 for towing.
But it gives a sense of an average.
So, this would be at a level where Chicago wouldn't be the highest city, wouldn't be the lowest city, would be a decent comparison point.
And with that, I will turn it over to Brian to talk about Rideshare Zone Expansion.
Thanks, Johnny.
So, Rideshare Zone Expansion is based on – we currently, since 2020, charge a fee in the downtown zone, which is bordered roughly by North Avenue on the north to Roosevelt on the south, the lake to the east, and as far as Ashland Avenue and places on the west.
The surcharge is $1.50 per single ride per trip and $0.60 for shared trips, and it is only in effect from 6 a.m. to 10 p.m., and it's in effect seven days a week.
The surcharge has been in effect in this area, which was identified since 2020.
And the idea is that this zone could expand to include other pockets of congestion in the city because, obviously, congestion and traffic is not limited to just the downtown.
area. So we had a study done which looked at areas of congestion and the most highly congested areas
of the city outside of the current downtown zone. The study also looked at besides congestion areas
that had the highest density in transit service and also areas of high income and wealth. And
basically there were about six or seven different areas that were identified that could be considered
congested areas where there is good access to transit and also high income levels as mentioned.
And the idea being that if the additional $1.50 surcharge were extended to these zones,
which you can see in the slide highlighted mainly in reddish and orangish colors, which include areas
like Lakeview, Uptown, Lincoln Park, Logan Square, West Town, near Southside, and Hyde Park,
the revenue estimates would be about an additional $20 to $21 million per year over the next three years.
Next, we'll go to Noor for sports wagering.
Chairman, if you go back to the last slide, we do not have the congestion pricing at Midway, Noor,
O'Hare, even though they're like bright reds on your graphic there. I know we've got some
other fees out there. What fees do we have out there? And would layering this additional $1.50,
what would that bring to us? And what would that bring the total fee for being at O'Hare or Midway
in total?
Yes, thank you. That's a great question. The reason those are not included is that we already
include an additional $5 surcharge when one goes to O'Hare or Midway or McCormick Place or Navy Pier
for a pickup or a drop-off there.
But is that surcharge to the city or is it, I thought that was like to like MPA or something?
For Uber and Ubers and Lyft, that is the city ground transportation tax. So the city is getting
that entire $5. Works a little differently for taxis and liveries, which is a $4 charge goes
to the MPA. But we're just talking about Uber and Lyft TNP trips here with us. So that, is there any
elasticity in that cost? I'm sorry, what was your question? Is there any elasticity in the $5 fee
that's charged at O'Hare and Midway? Well, the $5 is charged for the, any trip that touches it,
whether it's a pickup or a drop-off. So I think I get what you're asking,
like how much can we raise that amount? We haven't studied that question specifically,
but we can look into it. Okay. All right. Sure. The $5 fee has been in effect since 2015.
So it's been there in place for 10 years and we have not changed it. So if we wanted to look at
adjusting that, yeah, we definitely could. Thanks. Yeah. That's why I asked the elasticity of it,
because I thought it had, it has been a while since we've talked about that. So
I think it's ripe. And I don't know how many trips that is and what potential revenue that looks
like. So just a thought. And the other question is, who's paying it? Are these local folks? Are
these out of towners? Well, who's paying that fee too, I think would be helpful for us to know as
well. Thank you. Next up, we'll talk through an idea that's come up a couple of times today,
the online sports wagering tax. So currently the city of Chicago does have a sports wagering tax,
but it's limited to in-person betting. We collect about 2% at specific venues. And the only venue
that we have that's currently qualifies under this ordinance is at Brighley Field. 2024 was the first
year that we collected a full year of revenue from this venue. And we only collected about $20,500.
Most of sports betting is happening online. If you look at this table, this is a snapshot of what
wagering looked like in Illinois, and it's from the Illinois Gaming Board. You'll notice almost 98%
of that activity is happening online. And that's not something that the city is capturing revenue from.
So the state in its latest budget just passed a $0.25 per wager tax up to the first 20 million
wagers placed in the state. And then starting with 20 million and one, that tax bumps up to 50 cents per
wager. And a couple of companies, including DraftKings, FanDuel, the biggest names, are passing this on
directly to customers, or at least they've publicly said that they're going to do that starting September
1. And what we looked at is what if the city extends a similar 50 cent per wager for all the
wagers placed in Chicago. And we are estimating that this can raise anywhere from 40 to 41 million over
the next three years. Okay, next we have the Chicago liquor tax. The liquor tax, as we know it today
in Chicago, has been in effect since 1986. It is a per gallons or unit based tax that we apply at the
wholesale distributor level, with the top six distributors making up about 80% of our current
liquor tax revenues. Since the tax went into effect in 1986, the rates have been adjusted on three
different occasions in 1994, in 2005, and in 2008 to account for the factors of inflation and that tax
revenues stay stagnant because it's a unit based tax when you don't periodically make adjustments for
inflation. The problem here is that since 2008, the price of alcohol has gone up roughly 40% while our tax
collections for liquor tax in Chicago have basically remained stagnant at around $30 million. And if you
look at the bottom of the current tax structure, you see the makeup that we have in the different
categories of liquor that are taxed at different rates, and what amount of our annual $30 million
revenues that we received each category of beer, wine, and spirits make up. There's also a map to the
right in blue that represents what the tax rates of some surrounding municipalities near Chicago have.
Certain suburbs have a percentage based tax on liquor that they administer and have enacted. So you can see
places like Berwyn, Oak Park, and Lincolnwood have a 2% rate. Park Ridge has a 4% rate, and Evanston has a
6% rate. And this is all on top of whatever local sales tax each municipality has as well. So the idea
in play here is that if the city were to move to a percent-based tax structure, and important context is
that the city currently has a 3% tax on soft drinks that we have enacted, which is on top of the sales tax,
So if you look at the categories listed and the current rate for each that we have in effect as a percent-based
rate based on our Chicago liquor tax revenues, and what I would call an average price of a six-pack of beer, a bottle of wine, or a
bottle of spirits, and the effective rate of tax that we're getting for each, it basically demonstrates that we are
taxing liquor at a lower effective rate than we are currently taxing soft drinks in the city of Chicago.
So if we were to equalize the rate at 3% for liquor, which is what we do for soft drink taxes,
we would essentially bring in about an additional $30 million per year starting in 2026.
You would also not have the current problem that we have been experiencing since 2008, which
gets exacerbated each year as inflation continues to go up. You experience compounding losses each year
as your rates that are unit-based stay the same and prices go up. That problem would be fixed
by going to be fixed by going to a percentage-based approach as well for liquor tax.
So the next item we'll look at here is the garbage...
Chairwoman...
Chairwoman...
Would that be a point-of-sale tax?
Yes, it would become a point-of-sale tax.
Right. Thank you.
So looking at the garbage fee. So the idea behind the structuring of any fee...
would be that the revenue generated for that fee sufficiently covers the cost of providing
that service for the fee. So when you look at garbage fee and garbage collection across the
city, if the city were to charge a rate on a monthly basis, commensurate with the full costs,
and that's inclusive of all costs, things like fuel, even vehicle maintenance type of costs,
that monthly fee per unit would be $55. If you scale down that monthly cost to exclude those fuel and
vehicle costs and just focus on the DSS departmental operating costs themselves, the cost still on a
monthly basis per resident or per household would be $37. The current rate for seniors as they are
provided a 50% discount is $4.75 compared to the $37, for example, in DSS operating costs. And the
current monthly rate for all residents is $9.50. So that's the idea behind structuring a fee behind
on a cost basis nature. Again, a $37 fee, to put it a different way, is that the city is not losing
money on the garbage collection program. Additionally, we looked at how this, how the
current fee in Chicago compares to other peer cities, both nationally and within the state of
Illinois. So when you compare the garbage fee in Chicago to other large cities nationally, and even
in Illinois to select larger cities, it is one of the lowest, and in this example, the lowest among all
the peer cities. So you compare Los Angeles is close to $56 a month, Phoenix $36 a month, Philadelphia
$42 a month, San Antonio $31 a month, and San Diego $43 a month. San Diego, a particular note, is one that
just recently enacted a new fee of this kind. Los Angeles is one that had a significant increase in
its fee this past year. And you'll notice the national cost among the large cities is closer
to that $37 or $55 that it costs to run the program for the city of Chicago. Within Illinois,
some select comparisons of a similar story in that the $9.50 is significantly lower than some other
larger cities in Illinois. In terms of what this could potentially generate in terms of revenue,
so just three illustrative kind of examples. $23 a month would be on the lower end for the peer city
comparisons. Again, there's a built-in 50% discount available to seniors, so that would mean $11.50 for
seniors. One option with raising any types of fee is that you could provide some type of exemption or
special consideration for low-income residents to try and mitigate the impact of the fee increase on
those households. So for example, if we were to generate a low-income program that's similar to
the utility billing relief program currently and maintain a $9.50 rate and insulate that low-income
households from any type of increase, that $23 baseline with those special considerations for
senior and low-income households would generate additional $75 million in new revenue to help
mitigate the losses from operating the garbage fee program. The $37 monthly fee that was talked about
to recover the DSS operating costs, with an example $18.50 per month for seniors and $9.50 for low-income
individuals and households, would be $155 million in new revenue. And then scaling to $41,
which would be more of a peer city comparison when you looked nationally, still below the full cost
of the program to Chicago, so would still be subsidizing the program for residents. $20.50
for seniors, $9.50 for low-income household program, if that were to be an option, would generate an
additional $177 million in new revenue. Those are all the items that we wanted to review.
Yep. I wanted to acknowledge Chairman Irvin again.
Yes. For the record, I rebuke anybody that wants to raise the garbage fee. I hate this thing. I think
this is something that is probably one of the most disproportionately impacting fees that we charge as
a city. It treats. It's not a progressive source of revenue. It is regressive, as it does have
disparate an impact on communities. So, you know, I rebuke this. I just don't. This is, we never paid
this fee, but it was probably the only time I've ever voted against a budget in my years here was 2015
when this was implemented. But I understand your point. I just hope you understand mine. This is for
everybody. The atmosphere, whomever needs to hear this, not a great idea. I understand you all's
position, but I just can't. That's bad. The fee is bad. Bad fee.
Chairman Irvin...
To be clear, this isn't... Yeah.
You say we don't have a position. We provide data and analysis.
I understand that. I'm just telling you what my position is. I wouldn't be rebuking anybody.
Chairwoman?
To Chairman Irvin's point, I cannot go back to my ward and tell them I'm going to raise their garbage
fee. So we need to find out how we can cut, how we can consolidate to get us where we need to be,
and then we can talk about what the revenue streams are going to look like.
Thank you for that, Chairwoman. Well, there's no further business, no further questions. Can I get
a motion to adjourn? Thank you, Chairman Irvin. All in favor, say aye.
I don't know. The speed is over.