Tax hike prompts Argosy to shelve casino

Don Babwin

Wednesday, June 19, 2002 | 11:30 a.m.

CHICAGO -- A gambling company official said Tuesday the company was shelving indefinitely plans to build a $75 million casino in Joliet because of the state's proposed tax increase on casinos.

"Suddenly the expansion we planned for over a year could no longer be justified in any economic sense," Paul Keller, a vice president of Argosy Gaming Company, told the Illinois Gaming Board.

The decision by Argosy, which planned to open the 75,000-square-foot casino late next year to replace two riverboat casinos in Joliet, follows another casino company's decision to drop plans because of the tax increase. Las Vegas casino giant MGM MIRAGE cited the tax increase as the reason it was withdrawing its $615 million offer to buy a casino license from Emerald Casino Inc.

The board's meeting on Tuesday was the first since lawmakers approved the 2003 budget that includes raising taxes as high as 50 percent on gross revenues for the most profitable casinos and smaller increases for less profitable casinos. Gov. George Ryan is expected to sign the budget that includes those increases.

Other casino operators have said the tax increases could have a devastating effect on the gambling industry in Illinois, where the tax rate for casinos is already higher than any other state.

"I don't know of any industry that can last in a state that taxes 50 percent on gross revenues," Gary Thompson, spokesman for Harrah's Entertainment Inc., said.

And Tom Swoik, executive director of the Illinois Casino Gaming Association, said the tax increase will "have a significant impact statewide."

He said, for example, the community of Elgin could see its share of the Grand Victoria casino profits reduced by $10 million.

Dennis Culloton, spokesman for the governor, said the governor is concerned about the possibility that gaming companies would put off investing in Illinois. "But by the same token, we had a $2 billion budget hole in this state and the general assembly made it very clear that the only new taxes they were interested in were in the areas of tobacco and gaming."

Culloton also said the casino industry has been "enormously profitable in Illinois" and a number of companies remain eager to come to Illinois.

The tax increase also triggered a flurry of activity from both casino operators and the state's attorney general's office.

Executives with casinos operating in Illinois gathered last week in Chicago to discuss the tax increase. Attorney General Jim Ryan's office subsequently subpoenaed casino executives to find out if they broke the law.

"Our concern is that any action or plan that these casino operators may take or discuss that has a direct economic impact on the state could be a violation of state and federal antitrust laws," Lori Bolas, a spokeswoman for Ryan's office, said of the subpoenas issued last Friday.

Casino executives say they met to discuss the tax increase but have denied plotting any kind of strategy.

"It was an informational meeting and it's a meeting very similar to those conducted by any other industry considering legislative action," Thompson said.