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player ready...Some five years ago, Chicago entered into a so-called Host Community Agreement (HCA) with the gaming company Bally’s, the city’s choice as the operator of the first Chicago casino. In that 214-page agreement, brokered by the Lori Lightfoot administration for better or worse, Bally’s made a whole variety of commitments, including how many Chicagoans it would hire and their union status, the level and scope of the amenities in the casino and a bevy of other conditions arguably unprecedented for a private business in the city. The city also demanded payments: $40 million on the signing of the agreement and then an additional $4 million a year in “direct” and “indirect” impact fees.
In return, the city gave Bally’s a monopoly on slot machines, or, if you prefer, video gaming terminals, within city limits. Indeed, the agreement explicitly specifies that if the city were later to allow VGTs, as they are called, and Bally’s showed a negative impact on its operations, then the direct and indirect impact frees (that $4 million) “shall be subject to good-faith renegotiation.”
We had a visit Tuesday from Bally’s executives who, in advance of this issue coming up Wednesday for discussion in the City Council, made it pretty clear that their interpretation of “good faith negotiation” would mean their not paying those annual fees, period. So any positive upside to the city tax base from those VGTs would start out at minus $4 million, at least if Bally’s got their way.
Actually, Bally’s senior vice president, Christopher Jewett, went further than that: He told us in no uncertain terms that Bally’s would consider its entire contract with the city to be essentially null and void, meaning that it could and would do a lot more than not paying out that annual $4 million, and might, for example, consider itself no longer obligated to hire the number of workers specified in the HCA or to fulfill some of the other provisions.
In addition to that, Bally’s also would likely pursue litigation against the city, including damages.
In a letter sent to aldermen and leaked (presumably by Bally’s) to Politico, Jewitt said that the company would go after “all available legal remedies.” In our meeting, he did not leave the impression he was making idle threats.
We were convinced by Bally’s argument that it would be hurt by widely available VGTs; it has the data to make that case (Bally’s argues it is somewhere in the order of a 30% hit on slots) and it also stands to reason that if you can play a slot machine at your local supermarket one block away, you are less likely to be heading to the casino. That’s assuming, of course, that you are a low-end customer; high-rolling blackjack players will be going anyway. Still, those low rollers are a big piece of Bally’s business. Whales are much thinner on the ground.
So the question before the council, then, is whether or not legalizing these machines, or terminals, is worth blowing up the contract with Bally’s and defending the litigation that surely would follow.
We do not believe so.
First off, the amount of likely city revenue (the city projects $6.8 million in 2026) from these machines is not worth the negative social impact or the potential hit to city pension funds. That’s because the revenue from the casino is taxed by the city at a much higher rate (23.2% than the VGTs (5.15%). So that means the city would need roughly four times the revenue from the non-Bally’s slots to break even, never mind the loss of the discretionary payments.
Second off, if VGTs start to spread like kudzu, Chicago will look too much like Pottersville, the dystopian alternative for George Bailey’s Bedford Falls in “It’s a Wonderful Life.” Who wants that?
Third off, polls consistently have shown that Chicagoans don’t want VGTs expanded.
We’ve long argued that gambling (or gaming, as the industry likes to call it) should not be in every convenience story or gas station. It is more tolerable when it comes attached to other amenities and when it is aimed at people with discretionary income. We’re not in the business of carrying water for a casino operator that has yet to prove itself in Chicago, but given the choice between a backroom machine in a corner bar or a gas station and a fancy place with restaurants, lounges and a hotel, we’re on the side of the latter.
Chicago Ald. Anthony Beale, 9th, is on the other side of this debate. He has argued that if enough taverns and restaurants get the VGTs it would dwarf the Bally’s losses and that with the city’s budget problem, it represents an opportunity that cannot be overlooked. Several suburbs, he has rightly noted, have the machines already and in some cases Chicagoans merely have to walk across the street to partake. Then, of course, there is the whole enforcement argument; the VGTs operating without authorization in Chicago appear to be doing so with impunity already, so what’s the point of deeming them illegal if that law is not going to be enforced?
All good points to our mind. But the argument that people exceed the speed limit on DuSable Lake Shore Drive does not constitute a good case for increasing what is permitted; it merely suggests there is an enforcement problem. Solvable by better enforcement.
In the end, though, our position is based on the incontrovertible truth that the city of Chicago made a commitment to Bally’s to not have to deal with the vampire-like coming of VGTs.
The less-than-speedy course of our new casino has not run smooth and it remains to be seen how well it will do (as a side note on the competition, Aurora opens its own, vastly improved new casino Wednesday).
Still, a deal is a deal in this instance. Chicago should at least let Bally’s get the casino open and see if that existing bet will pay off.
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