Companies might balk at price tag for 10th Illinois casino license

Font Size:

By Mike Riopell | Saturday, May 17, 2008 12:36 AM CDT | () comments

SPRINGFIELD — The process of selling Illinois’ unused 10th casino license continues, and lawmakers are counting on the millions of dollars the sale is expected to pump into the state’s budget.

But as the economy suffers, smokers are kept off the riverboats and casino revenues drop, a top gaming expert says the state might not get as much as expected from the transaction.

Bill Eadington, director of the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada-Reno, said casino companies might not be as aggressive in paying for Illinois’ 10th license as they were in 2004 when the license was last awarded for about $520 million.

“I think they would just be more cautious,” Eadington said.

He said companies base their bids on several years of projected revenues. Because of the state’s indoor smoking ban and general economic woes in the industry, those projections could likely be lower.

Illinois gambling revenues have dropped statewide in the first four months of the year by about 18 percent.

Eadington said casino companies have seen a “pretty significant crunch” in their profits, and the economic optimism that the last round of 10th license bids might not be around anymore.

“That optimism has been eroding certainly for the last 18 months,” he said.

The 10th Illinois casino license is available because a plan to locate a riverboat in the Chicago-area city of Rosemont fell through. And the license has been tied up in court proceedings for several years.

Gov. Rod Blagojevich’s proposed budget estimated the state getting $575 million from the license sale.

Blagojevich budget spokeswoman Kelley Quinn said Friday that $575 million is still the goal and she doesn’t think economic factors or the smoking ban would damage the bids.

“No, we do not feel that way at this time,” Quinn said.

State Rep. Gary Hannig, a Litchfield Democrat and budget point-man, said negotiations so far have assumed the $575 million estimate and have focused on Blagojevich’s plan to use that money to help schools.

The Illinois Gaming Board controls how the casino license will be sold. Spokesman Gene O’Shea said the board is in the process of finding an investment banker that would help arrange how companies can bid for the license.

After that, bidding can begin. Lawmakers and Blagojevich are banking on the license being sold sometime in the next year.

“We’re following the rules of the procurement process,” O’Shea said.

Even though bids might come in low, Eadington says, there’s little doubt companies will show interest in opening another Illinois casino.

“It’s certainly going to get some attention,” he said.

Lawmakers likely will begin budget negotiations in earnest next week, aiming to finish a spending plan by the end of May.

Mike Riopell can be contacted at (217) 789-0865 or mike.riopell@lee.net.