Gaming Board on Tuesday is expected to delve into the money details
Once viewed as a cash cow that could fetch well over half a billion dollars and save the state budget, Illinois’ only available casino license is being pursued by three companies offering far less, and industry analysts say even those cut-rate numbers may not hold up in the sagging economy.
“It’s very bad timing for Illinois,” said Bill Eadington, director of a gambling institute at the University of Nevada-Reno. “We’re facing the biggest economic recession in 75 years. I wouldn’t be surprised if the companies that made bids a couple months ago could no longer justify them.”
The Illinois Gaming Board is expected to delve into the money details Tuesday when it hears from casino operators hoping to set up shop in Des Plaines, Rosemont or Waukegan using the state’s long-in-limbo 10th and final license.
Those three outfits are asking to be dealt in as the gambling industry finds itself mired in a depressed market. Once driven to expand into places like Chicago, casino companies now are suffering from plummeting stock prices and the high cost of debt required to build and open casinos.
Across the country, major players are walking away from the table.
Harrah’s Entertainment recently cited financial concerns in nixing plans for a Kansas casino. In Indiana, Nevada-based Eldorado Resorts just dropped a bid to buy Casino Aztar in Evansville because of a problem in securing financing.
If larger casino operators are having cash-flow problems, Eadington said, then that likely doesn’t bode well for smaller companies that may be hit harder by the worldwide credit crunch—the types of companies bidding for Illinois’ license.
The finalists are Trilliant Gaming, a Los Angeles-based venture that has teamed up with Rosemont and submitted the high bid of $435 million. The next highest offer is $225 million from Waukegan Gaming. A distant third at $100 million is Midwest Gaming & Entertainment, billionaire developer Neil Bluhm’s group, who wants to open in Des Plaines. Those figures don’t include the cost of building the casino, which could be in the hundreds of millions, making it tougher to turn a profit.
“I would say that the Rosemont bid is so high against the rest that you wonder how they are going to get there, but at the same time I know the Des Plaines bid is much lower than last time around,” said state Rep. Lou Lang (D-Skokie), referring to when the license was last up for bid in 2004.
The Gaming Board declined to release details about how the three bidders would raise the money to back up their offers. Representatives for the companies hoping to open in Waukegan and Rosemont declined to comment before Tuesday’s meeting, while Des Plaines representatives could not be reached for comment.
Gaming Board officials have said their decision will be based on more than the initial offer price, and companies will be able to alter their bids. Lang said he expects the state to take a hit on the license price, but hopes the board is looking long-term.
“I am much more interested in permanent revenue, a casino’s ability to sustain revenue moving forward,” said Lang, the House Gaming Committee chairman. “The fact that one company’s down payment may be larger doesn’t convince me.”
The winner will open its doors facing a 50 percent tax rate and casino revenues already down in Illinois because of the economy and a new indoor smoking ban.
“Consumer spending is having an impact on gaming. It’s more vulnerable to economic changes than most other industries,” said Keith Foley, senior vice president of Moody’s Investors Service.
“We’re seeing major declines, and people should be afraid to assume that it’ll all just rebound and come back to where it once was. Gaming simply hasn’t been around long enough in most places to hope that this is just a cycle and casinos will bounce back.”
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