Five Southland towns OK video gambling tax
Boards, councils approve measure in special Sunday meetings to beat legislative deadline
Village boards and city councils across the Southland held special meetings over the weekend to enact penny-per-play taxes on video gambling machines in advance of a Monday deadline set by the Illinois General Assembly.
Calumet City, Dolton, Markham, South Chicago Heights and University Park village boards and city councils approved such a push tax Sunday, while Homer Glen trustees soundly rejected similar action.
Although South Chicago Heights did approve a push tax, it is holding off on enacting it, Mayor Terry Matthews said Monday.
The tax, first enacted by Oak Lawn, still faces a legal challenge by operators of video gambling terminals.
Legislation approved by the Illinois House and Senate last week allowed home-rule municipalities to enact such a tax before Monday. The measure awaits the governor’s signature.
Oak Lawn was the first Illinois community to enact the tax, which took effect Jan. 1, 2020, and it was immediately challenged in court.
The Illinois Gaming Machine Operators Association, an industry trade group that represents the interests of terminal operators, has argued that Oak Lawn’s push tax is unconstitutional, violates the state’s Video Gaming Act and would be costly and technologically complicated to implement.
This past June, Tinley Park approved a similar push tax that will take effect April 30, 2022.
At a Dolton meeting Sunday night, Trustee Jason House said the village had considered some months ago approving the tax but delayed action due to the pending litigation.
During a Homer Glen meeting Sunday, however, it wasn’t the pending litigation that was of concern but how the tax might affect village businesses.
Steve Wood, owner of Mugshots Sports Bar & Grill, said that he and other businesses have been adversely affected by the COVID19 pandemic and that his business would have to lay workers off or reduce operating hours should the tax be imposed.
Trustees voted 6-0 against imposing the tax, and Mayor George Yukich, although not able to vote on the matter, said he was not in favor of it.
“It hurts the businesses,” Yukich said.
Mike Pappas, an executive with Accel Entertainment, told Homer Glen officials that even at a pennyper-push, the tax might drive gamblers to other communities that have video gambling but haven’t approved the tax.
His company is a plaintiff in the terminal operator association’s lawsuit challenging the push tax.
“We fully expect to win it,” Pappas told Homer Glen’s Village Board.
The Burr Ridge-based company, as of the end of June, operated nearly 13,200 video gambling terminals at more than 2,500 locations in Illinois, according to its financial information. The publicly traded company, for the second quarter ended June 30, reported revenues of $202 million and net income of $12.4 million.
The tax “is a bad idea now and will be a bad idea in the future,” Pappas told board members.
The terminal operators’ trade group, Accel and eight other terminal operators filed a legal challenge in March 2020 seeking an injunction barring Oak Lawn from applying and enforcing the tax and prohibiting it from collecting push tax revenues.
It was not immediately clear how the new legislation, should it be signed into law, would affect that lawsuit.
Tom Phelan, Oak Lawn’s village manager, said it was too soon to measure the legislation’s impact, but said he hoped plaintiffs would recognize the village is on solid legal ground.
Oak Lawn had estimated it could bring in about $1 million a year, and that for this calendar year is figuring about $1.5 million in revenue from it, Phelan said.
The tax falls on gamblers, but the owners of the machines, which are companies such as Accel, are put in the position of tax collectors.
They are responsible for tallying how many pushes, or individual games, are played and filing documents with
the municipality along with submitting tax payments.
Oak Lawn, a few months after the community’s tax took effect, fined 14 video gaming terminal operators for allegedly failing to submit the required forms.
Homer Glen rejects tax
At the Homer Glen meeting, Pappas initially told trustees that it would be virtually impossible to keep tabs on how to collect the one-cent tax.
“There is no software in the gaming world that deducts a penny when a player hits push,” he said.
However, under questioning from Trustee Rose Reynders, Pappas backtracked on the difficulty of calculating the number of individual plays.
“It would be very painstaking to get that but we would
be able to do it,” Pappas said.
Matthews said the South Chicago Heights Village Board unanimously approved the tax, but want to get more clarity about who ultimately is responsible for collecting it.
“We didn’t want to not pass this and lose out,” he said, noting the General Assembly’s deadline.
The mayor said officials are looking at additional expenses, such as a big hike in the cost of providing ambulance services to residents, and is “seriously considering initiating” the push tax.
In Manhattan, the Village Board voted Oct. 5 to allow video gambling terminals in businesses that serve liquor starting Jan. 1, said Mayor Mike Adrieansen.
A motion was made at that meeting to also consider adopting a push tax in conjunction with allowing video gambling, but the motion failed to gain
support and died for a lack of a second, the mayor said.
Tax split change
In any municipality where video gambling is allowed — just a handful of south and southwest suburbs bar the games — terminal operators make arrangements to place the machines in businesses or places such as the American Legion or Veterans of Foreign Wars post.
From gamblers’ losses, which the state defines as net terminal income, the money is shared by terminal operators, business where the machines are located, the state and the municipality.
The 2019 gambling expansion legislation, which granted a license for a landbased casino in the south suburbs, changed the revenue allocation giving the state a bigger share of the money, to 29% from 25%. Municipalities’ share remained at 5%, and that decision prompted Oak Lawn officials to explore the penny-per-push tax, according to Oak Lawn Trustee Paul Mallo.
“That didn’t set well with us,” Mallo said Saturday.
He said he was not sure how the General Assembly’s move to allow Oak Lawn and other home-rule communities to levy the tax would affect the pending lawsuit.
“I think we have a solid ordinance here,” Mallo said.
State gaming board figures show how much is wagered at each establishment, which differs from the actual amount of money players put into a machine.
For example, if someone puts $5 or $10 into a machine and in the course of playing wins additional credits and plays them before cashing out, that counts toward the total amount played. That amount is much bigger than the actual cash fed into a terminal.
The amount wagered by an individual gambler is where the penny-per-play tax comes into play, where each push of the button to launch a new game racks up the one-cent tax.
The tax is likely not noticed by the customer, but with millions being poured into the machines, a penny here or a penny there can turn into serious cash.
Tinley Park had studied the tax since March of last year, before the COVID-19 pandemic brought on orders for nonessential businesses in Illinois, including video gambling, to suspend operations.
Initially, video gambling was halted from March 16, 2020, through the end of June, then again from Nov. 20 through mid-January of this year, according to the state gaming board.
Use of revenue
It’s not clear how much the new 1-cent tax would generate for Tinley Park, and, under the ordinance, revenue generated would be used to “promote the general health, safety and welfare” of the village and “provide adequate funds to offset the adverse effects of gambling within the village.”
That boilerplate language is found in other municipal ordinances approving the tax, including Dolton.
From January through September of this year, the amount played, or wagered, at the 221 terminals in Tinley Park totaled $132 million, according to the gaming board.
Actual money put into the machines was $42.3 million, with net terminal income, or losses to patrons, of $11.1 million.
Of that amount, $7.3 million was shared among the business owners and terminal operators, with the state getting $3.2 million and Tinley Park receiving a bit more than $557,000, according to the gaming board.
During the January-September period in Oak Lawn, customers at 250 video gambling terminals in played $183.2 million, with money put into the machines coming in at $59.8 million, according to the gaming board.
Net terminal income was $14.7 million, with the village realizing tax revenue of just under $737,000.