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Appellate court upholds Preckwinkle's slot machine tax

Monday, August 24, 2015
Crain's Chicago Business
by Thomas A. Corfman

The Illinois Appellate Court has reinstated a Cook County tax on slot machines, handing a setback to Rivers Casino and a boost of roughly $1.1 million to Board President Toni Preckwinkle's budget.

A three-judge panel on Aug. 21 reversed a lower court decision striking down the tax, which was passed in 2012 but has not been collected while the case was pending. The Des Plaines casino is operated by Midwest Gaming & Entertainment, whose chairman is Chicago investor Neil Bluhm. Rivers is the only casino in Cook County, but the ruling opens the door for other counties to impose a similar tax on one of the nine other casinos in Illinois.

If the company appeals to the Illinois Supreme Court, the litigation could take several more months.

If the tax is upheld, it could help close a county budget deficit estimated to be about $179 million for the fiscal year that starts Dec. 1. In July, Preckwinkle helped push through a one penny increase in the county's share of the sales tax to pay for pensions and road projects as well as balance the budget.

The Preckwinkle administration estimates that the slot machine tax will bring in about $1.1 million, slightly less than the $1.2 million predicted when the tax was passed nearly three years ago. Any impact on the 2016 budget will be determined as part of the budget process, according to Frank Shuftan, Preckwinkle's press secretary. Preckwinkle is expected to unveil the budget in October.

The ruling, “confirms our long-held belief that our efforts were lawful and legitimate,” he said in an email.

TOP-GROSSING CASINO

The tax imposes an annual levy of $1,000 on slot machines as well as a $200 fee on video poker machines, which are frequently found in bars and restaurants. Rivers has more than 1,000 slot machines, making it eligible to pay more than $1 million a year in taxes.

Rivers, which opened in 2011, is the top-grossing casino in the state. In 2013, it paid $161.6 million in gambling taxes to the state and another $24.7 million as the local share of those taxes.

Midwest Gaming launched a legal barrage against the tax, arguing that it was forbidden by the Illinois Riverboat Gambling Act, which regulates gambling. The company also contended and that the tax violated the Illinois Constitution, in part by unreasonably taxing casino slot machines at a higher rate than video poker machines.

In a 52-page opinion, Justice Robert Gordon rejected those arguments, noting in part that the Illinois Supreme Court in 1973 upheld a tax imposed by Cicero on Sportsman's Park, despite the state's widespread regulation of horse racing.

'BROAD IMPLICATIONS'

In a brief statement, Paul Seeman, general counsel of Rush Street Gaming, the parent company of Bluhm's gambling interests, expressed disappointment at the ruling.

“The General Assembly has expressly preempted the taxes Cook County imposed on Rivers Casino," he said. "This case has serious and broad implications for all businesses in Illinois.”

Midwest Gaming intends to appeal to the state supreme court, a company spokesman said.

The slot machine tax was one of two new taxes passed in 2012 that drew lawsuits. A group of suburban gun dealers and firearm owners filed suit to challenge a $25 tax on weapon sales, but have been unsuccessful in trying to stop the county from collecting the levy.

The gun tax produced $950,000 in revenue in 2014 and it budgeted to yield $800,000 in 2015, Shuftan said. The tax is still pending.

Gordon has been an appellate court justice since 2006. A former insurance defense lawyer turned plaintiff's attorney, he was originally appointed to the Circuit Court of Cook County in 1996 and later elected.

 

 

 



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