Will Chicago’s Tax and Casino Investment Cost Scare Bidders?
The high tax rate and $1 billion investment requirement for a Chicago casino seem to be scaring off potential investors.
The city of Chicago is preparing for a casino, with city officials calling for a high tax rate the property and a $1 billion minimum investment. The city is aiming high for the new facility, and it might just cost it potential bids. Already, major gaming companies are bowing out of the process, and it could be that no one shows interest due to the requirements surrounding the project.
On the Hunt for Bidders
Chicago wants to see a big name build and operate its very first casino property. However, it seems the stipulations that the city has put in place is causing many potential bidders to think twice about trying to be involved.
Officials want the new casino to offer a 500 guest room, five star hotel, a meeting space that features as much as 60,000 square feet, and an outdoor public space. The property should also be home to a casino of course, as well as restaurants and shops.
Lori Lightfoot, the mayor of Chicago, stated that the city expects to offer a unique entertainment destination and gaming option for visitors, something that won’t be found anywhere else. The city opened up a request for proposals regarding the casino some time ago and the time frame for submission ended on August 23.
Early on, MGM Resorts International, Rush Street Gaming, Hard Rock International, and Wynn Resorts showed interest in pursuing the license for a Chicago casino. However, MGM and Wynn are now no longer interested.
Wynn said via a spokeswoman that the company is no longer interested in participating and said nothing else. Months ago, Bill Hornbuckle, the CEO of MGM, stated that the tax rate for the project does not fall in line with the development of a full-scale casino resort. Hornbuckle even went so far as to call the city of Chicago complicated when it comes to a casino project.
Are Fees and Stipulations Getting in the Way?
The operator of a casino in Chicago will have to pay fees to get started including $30,000 for every gaming position. This is a huge cost and would come to $120 million, if the operator decides to add the full 4,000 games allowed.
Within the first three years of operation, the facility will need to make a payment based on annual gross revenues. It has been estimated that this could reach over $400 million. The payments would be made over six years.
In 2019, then the lawmakers of Illinois decided to allow a Chicago casino, they set the tax rate at over 70%. Eventually, the cost was cut down to 40%, but it is still high when compared to other gaming markets.
Even though it was lowered, the 40% tax combined with the huge fees due upon starting the project are just too much. Most casino companies see Chicago as a good investment spot, but they also do not want to spend a ton of cash just to get started in the city. The benefits may not outweigh the initial cost, which is most likely while the big operators like MGM and Wynn backed out.
It will be interesting to see how the process proceeds from here. Will any bids be submitted, and will they meet the criteria set by the city? Certain concessions may need to be made in order to even see the city receive bids for the available casino license. If the city wants to get anywhere, major changes may need to be placed on the fees or tax rate to even garner interest.