Video gambling was illegal in Springfield when Mayor Mike Houston took office in the spring of 2011 and vowed to fix the city’s crumbling streets, sidewalks and sewers without raising taxes.
Video gambling was still illegal when Houston repeated the promise eight months after the election, saying he would deliver a plan in the spring of 2012. No plan was forthcoming.
Now that video gambling has started, Houston is counting on revenue from gambling machines set up in bars, restaurants and truck stops to pay the infrastructure repair tab. Whether the city’s cut of the gambling pie will be enough to fix everything is far from certain.
“He’s been in office almost two years, now, all of a sudden, gambling’s going to cure all the woes,” says Ward 1 Ald. Frank Edwards. “There’s so much hype being put on this right now. I don’t think this (gambling) is going to be the end-all, be-all – I’ll be amazed if it is.”
With just a handful of video gambling licenses in place in the city and more than 100 applications pending, city officials say it is impossible to project how much revenue the city will collect.
In December, the Butternut Hut on North Second Street generated slightly less than $1,700 for the city, which gets 5 percent of the net profits (the state gets 25 percent and the bar and the company that provides machines split the remaining 70 percent). All told, a half-dozen operators generated $10,600 for the city in December, according to city budget director William McCarty, who professed himself astounded at the numbers – it adds up to more than $500,000 of wagers in a single month at the Butternut Hut alone, with more than 90 percent of the gross being returned to gamblers in the form of winnings.
“I’m amazed at the dollars going through these machines,” McCarty said.
Assuming that December’s take proves typical, the city would collect nearly $20,500 a year from the Butternut Hut, plus $1,500 in licensing fees. There are roughly 200 bars, restaurants, fraternal organizations and veterans’ groups in the city that serve alcohol by the drink and could, at least in theory, install gambling machines.
But it is not a matter of extrapolating results based on early numbers from a handful of operators and projecting an annual windfall of $4 million or so. A Road Ranger truck stop on Camp Butler Road where more than $1 million was wagered in December generated twice the revenue for the city as the Butternut Hut, McCarty said. On the other hand, revenue could dip as the novelty of legal video gambling wears off, and gambling receipts can fluctuate depending on whether the economy is booming or in recession, he added. There is also the variable known as the Illinois Gaming Board, which grants licenses and has demonstrated that there is no such thing as a sure thing.
The gaming board has rejected applications from the American Legion Post 32 on Sangamon Avenue and the Curve Inn in Southern View. The board does not make public letters sent to rejected applicants that state reasons for denial. No one from the Curve Inn could be reached for comment. Gerald Bellatti, the American Legion’s post commander, called the problem a “technicality” but declined to be more specific. He said the post has reapplied and is hoping for approval in February.
“We’re starving,” said Bellatti, who acknowledged that the post, like many other businesses, had video gambling machines before they became legal last fall. “I can’t get into how much money we made before. You could call just about any American Legion post that has a building and is active and had the machines before and they’re all starving statewide because of the loss of income.”
The gaming board last week announced that it would not grant licenses to nonprofit social clubs, which means no gambling at clubs along Lake Springfield that once profited from machines in the days before legalization. The problem, according to the commission, is that the law legalizing video gaming in bars, restaurants, truck stops, fraternal organizations and veterans’ establishments doesn’t specifically authorize licenses for social clubs.
Public works director Mark Mahoney said he hopes to spend more than $20 million a year for three years on infrastructure improvements. The city now spends less than $8 million, he said.
Houston says that the city should borrow money for infrastructure improvements. McCarty said the city likely won’t be able to put together a bond measure, with a repayment schedule of 15 to 20 years, until late next fall, when the gambling revenue stream becomes more predictable.
“The overriding point is, it’s just too early to know what we’re going to get,” McCarty said.
Contact Bruce Rushton at email@example.com.