Tangos and Waltzes for the Big Apple and Windy City By Ken Adams, CDC Gaming Reports March 14, 2021 at 8:00 pm New York and Chicago appear to be getting closer to a hometown resort. Chicago is currently taking a step down that road. The city is expected to release an RFP soon. Mayor Lori Lightfoot says the city would like premium casino companies to bid for a Windy City resort. The mayor went so far as to hope the companies applying would have a Las Vegas return address on their proposal. A casino in Chicago has been a dream of the city’s mayors since Illinois legalized casino gambling in 1990. Former Mayor Richard Daly advocated for a land-based casino in the city. In Daly’s plan, the city would own the casino and lease the operations to a casino operator, much like a REIT. Unfortunately for the mayor, he could never convince the Illinois Legislature to endorse his plan. Could New York City soon be home to a resort casino? State lawmakers may be asked that question in 2021/Shutterstock Photo The legislature did finally endorse Chicago. In June 2019, lawmakers passed a major gaming-expansion bill authorizing six more casinos in the state. It allowed each of the existing casinos to add 800 positions, permitted the nearly 7,000 VLT locations to add an additional VLT, and authorized legal wagering on sporting events. The bill was a whopper and it had something in it for nearly everyone. But of course, the intent was to raise money for state offers. Each new position, VLT, and new casino would pay a fee and gaming taxes. Casinos pay a graduated state gaming tax, from 15 percent for the first $25 million in gross gaming revenue up to 50 percent for AGR over $200 million; table games pay a lesser percentage. However, neither the legislators nor the mayor of Chicago thought that was enough. An additional 33 percent tax was addended for the Chicago casino. All parties were very pleased with themselves. However, the casino industry was somewhat less enthusiastic. In the wake of the bill, casinos have been slow to add the additional positions. The profusion of VLTs in Illinois has reduced casino revenue dramatically and left most casinos with an excess capacity. Bids for new casinos were also somewhat limited. And no company was interested in Chicago at that price. The mayor went to the legislature and begged for a change to the tax rate; in time, she got it. Then she reached out to the industry. She asked what they might be willing to build in Chicago, where would they want to locate, and what concessions they might expect from the city. Lightfoot got nearly a dozen responses. Now she is ready to start the process. However, she faces competition for the attention of the casino industry’s biggest companies from New York City. New York City is also coming out of a quiet period and nearing the time when three licensees will be chosen for the New York City region. Neither the state nor New York City has made any official announcement, but the local press says an announcement is pending. Informed observers say that two of those licenses will go to existing operators MGM and Genting Resorts World; each has a racino and would like to add tables and become a full-fledged casino-resort. Resorts World New York City is in Jamaica and MGM owns Empire City in Yonkers; MGM paid $850 million to buy Empire City in 2019. Both companies have invested considerable sums in hopes of receiving a casino license eventually. That leaves one license for New York City, which will be attractive to top-tier gaming companies. Casinos in New York and Chicago will be expensive to build, likely between $2 billion and $4 billion, if not more. They will also be expensive to operate; wages, utilities, and real-estate taxes are high in both places. Gaming taxes are also higher than in other metropolitan areas in the country. New York gaming taxes at about 37 percent of gross gaming revenue are less than in Illinois and New York City is more attractive than Chicago by virtue of its size. The New York City metro area has nearly 20 million people, while Chicago has 9.5 million. Also, New York has less in-state competition. There are just four commercial casinos in the state and before the pandemic 18,000 VLTs; Illinois will have 16 casinos when all are open and it has 38,000 VLTs. The price of a resort in Chicago and New York City limits the number of gaming companies qualified to bid. Only big cash flows and easy access to financing need apply. And both cities are likely to be swayed by the name and reputation of the companies. A short list would include Caesars, Wynn and Sands. MGM could be on the list; it might be interested in Chicago, but not New York. Then there are Golden Nugget, Penn, Boyd and Bally’s, all of which are aggressively exploring expansion and are undoubtedly interested in at least one of the cities. But their names lack the luster of the first three and financing might be more challenging. Wynn has already expressed interest in Chicago, saying it is “our kind of town,” and the Sands has said the same about New York. The New York Post published an article stating that Wynn, Sands and Bally’s have expressed interest in NYC. Caesars in the wake of the recent acquisition by Eldorado and its push into sports and igaming may think it has enough on its plate. But it can be expected to at least test the waters. Outside of those two cities, not many prize metropolitan locations in the country without a casino are left: Atlanta, Dallas, Houston, Los Angeles and Miami. Actually, Los Angeles, Miami, New York and Chicago already do have Indian casinos and riverboats close to each of them. That leaves Atlanta, Dallas, and Houston. This year, there are legislative discussions in Georgia and Texas to legalize casinos in or near those cities. But up first are Chicago and New York. The next few months should be interesting, as Mayors Lightfoot and de Blasio begin their courtships of the likes of Wynn, Sands and Caesars. There is bound to be some jealously over the mayors’ choices in dance partners. Now, however, Mayor Lightfoot is just hoping anyone from Las Vegas will lead her onto the dance floor to do the Windy City tango. The Big Apple waltz with come later.