The document discusses the economic impact video gambling
could have on the city of Lincoln, its existing businesses and
residents.
(Copy)
As we begin our
discussion on video gambling I wanted to share the following
information with you.
All of you recently
received a packet of information from the Illinois Coalition for
Employment and Business Growth out of Normal, IL. The Coalition is
in favor of municipalities allowing video gambling and provided the
attached letter which they professed to come from "The People of the
City of Lincoln."
Since the
Coalition's name suggests they are interested in "business growth"
we should all take a closer look at the economic numbers they use in
their documents and how those could truly impact the City of Lincoln
going forward.
The Coalition
states three times in the attached document that Lincoln will "lose
out on nearly $270,000," video gambling will allow Lincoln "to
capitalize on the projected $270,000," and opting out means Lincoln
would not "receive the estimated $270,000 annually the machines are
projected to earn" (emphasis included in the attached document).
Thus, it is clearly stated that the City of Lincoln should expect
$270,000 annually in additional revenue if it were to lift the
prohibition and allow video gambling.
Where would the
$270.000 come from?
Illinois' Video
Gaming Act states that the tax on video gambling shall be 30% of the
"Net Terminal Income." Net terminal income means the money put into
each machine minus the money paid out to players. In other words,
the net terminal income is the loss each player experiences; not
what they win, but what they lose.
The Act states that
25% of the tax goes to the State of Illinois and 5% goes to the
municipality or county where the machine is located. Thus, if a
player loses $100 on a video gambling machine in Lincoln, $25 would
go to the State of Illinois and $5 would go to the City of Lincoln.
For all of these $5
losses to add up to $270,000 in additional annual revenue for the
City of Lincoln, how much money would have to be lost by Lincoln
gamblers? You arrive at that number by dividing $270,000 by 5%. The
answer is, for the City of Lincoln to earn $270,000 (as the
promoters of video gambling say we will), $5.400.000 will be lost
each year in video gambling machines in Lincoln alone.
If $5.400.000 is
going to be lost by players; where will that money go?
The Video Gaming
Act spells out the 30% tax mentioned above and it also spells out
what happens to the "net terminal income" (or player losses) beyond
the tax. The Act says that half of the amount beyond the tax will go
to the licensed establishment (in other words, the owner of the
location of the machine) and the other half will go to the "terminal
operator" (the person or business who owns, services, and maintains
the video gambling machine; the operator is prohibited by Jaw from
also being the licensed establishment).
Thus, the
percentage break-out for the distribution of the player losses is as
follows:
35% to the licensed
Establishment where the machine is located
35% to the
owner/operator/servicer of the machine
25% to the State of
Illinois, and
5% to the City
For the $5,400,000
in annual losses that the supporters of video gambling in Lincoln
say will occur, that means that the following entities will receive
the following amounts:
$1,890,000 annually
to the Lincoln businesses who would have video gambling machines,
$1,890,000 annually to the companies who will own and service the
machines, $1,350,000 annually to the State of Illinois, and
$275,000 annually
to the City of Lincoln
Setting aside the
amounts to Lincoln businesses who would have video gambling machines
and the amounts to the City (and assuming that every penny of those
funds will actually be invested in our local economy), that means
that $3.240.000 will be leaving the Lincoln economy annually as a
result of video gambling ($1,890,000 to the machine operators
and $1,350,000 to the State of Illinois).
What does that mean
that $3,240,000 will be leaving the economy annually due to video
gambling?
The $1,890,000 that
will go to the machine operators will not be invested in Lincoln,
neither will the $1,350,000 that goes to the State of Illinois.
Remember, these are dollars generated on an annual basis. Does
anyone actually believe we're going to be getting any portion of
that $1,350,000 that will go to the State of 1I.linois back on an
annual basis? We're lucky if the State provides us with 100% of the
taxes they are already supposed to share with us under current law.
To get some
perspective on this $3,240,000 annual loss, consider this: we spent
months and a considerable amount of work to convince the voters to
approve electric aggregation and to get a contract in place with an
alternative supplier. For each of the next two years we are
anticipating that we will save the people of Lincoln and Logan
County approximately $2,000,000 each year.
That means that
$2,000,000 that previously left Lincoln and Logan County and went to
Ameren now will stay in Logan County and be used by families to
stimulate and support our local economy.
The $3.240.000 that
will be leaving Lincoln and Logan County because of video gambling
is 162% of the savings we are anticipating from electric
aggregation.
Put another way, in
the course of a few months the Council could go from generating
$2,000,000 to support our local economy to draining it of
$3,240,000, a net loss of $1,240,000 to our local economy.
And, remember, the
$3,240,000 loss from video gambling will be an on-going annual loss.
Add that up for the next 25 years, and you've got a cumulative loss
of $81,000,000, greater than the estimated impact of $73 million
that we would have lost if Governor Quinn had been successful in his
attempt to close Logan Correctional Center.
But what does video
gambling hurt? Isn't it just people spending their own money?
That is partially
correct; no one is going to force anyone to play video poker - each
player will put his or her money into each machine. The money that
will go into each machine will come from the disposable income of
each household. If, as the gambling proponents contend, $5,400,000
will be lost in the machines in Lincoln each year, that means that
the average amount lost in video gambling machines from each of our
5,883 households will be approximately $917.89. That's 2.3% of the
average household income in Lincoln for 2009. How could the
equivalent of a 2.3% loss in household income for every single
family in Lincoln not be felt by every single business in Lincoln?
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That $5,400,000
annual loss will not be matched with a corresponding increase in
disposable income - it will have to come from a redistribution from
existing businesses. Nearly every dollar lost in a video gambling
machine will mean that same dollar will not be spent at a grocery
store, a gas station, a furniture store, a thrift store, or another
local business. Thus, a vote for video gambling will result in a
redistribution of local spending and the $3,240,000 that will be
leaving Lincoln annually.
The Illinois
Coalition for Employment and Business Growth states that the average
licensed liquor establishment in Lincoln that chooses to put in
video gambling machines will receive $78.680 in gambling
revenue each year (The Coalition says the City will receive $11,240
per establishment. Take that number and divide it by 5% [the revenue
received by the City] and you find that each machine will generate
$224,800. Thirty five percent of that number equals $78,680 in
gambling revenue per establishment.). If someone came to you and
said you could have another $78,680 in your business' bottom line it
would be tough to turn down, wouldn't it? In fact, you can see why
many of those establishments are contacting you asking for your
support to allow video gambling.
As a City Council
member, though, you have to know that the $78,680 that will flow to
licensed liquor establishments have to come from somewhere. That
somewhere else will be other Lincoln businesses.
Make no mistake:
allowing video gambling in Lincoln will impact every single business
in Lincoln that relies on receiving a portion of the disposable
income of the residents of Lincoln.
Please consider the
long term economic impact on Lincoln of your decision carefully.
John Kindt,
professor of Business and Legal Policy at the University of Illinois
summarizes the economic impact question succinctly:
"Gambling
is an economic cancer on the body politic, it's a black hole
of economics, and the only way for the U.S. and the world to
get out of the current economic malaise is to grow the
economy. Gambling shrinks the economy. It shrinks the
consumer economy because people are dumping their money into
non-productive activities instead of purchasing cars,
refrigerators, computers and the essentials of life such as
food and clothing."
We've spent a lot
of time and effort trying to grow our Lincoln economy during this
economic downtown. Let's not shrink it now.
This is a copy of the letter in the packet that Snyder spoke of
early on in his document:
(Copy)
Dear City of
Lincoln President and Trustees:
We represent a
large portion of your constituency in the City of Lincoln. As
citizens, we find it imperative to make our voices heard. We felt it
necessary to answer questions that recently have come to light
involving the Video Gaming Act and its effect in the City of
Lincoln.
1. Are there any
immediate negative effects if you vote to "opt out"?
- Yes. First, the
City of Lincoln will lose out on nearly $270,000 in direct annual
tax revenue, not to mention sales tax. If the ban is passed, each of
the 24 liquor license holders not allowed to employ the use of these
video gaming devices would see drops in their property value, losses
in patronage, and losses in much needed income leading to the small
business's demise. In fact, many of the 24 liquor licenses in
unincorporated Lincoln are veterans' halls and fraternal
organizations that would not be able to compete with other
businesses and they would be forced to close their doors. Uniformity
between our City and its municipalities is imperative to protecting
small businesses. Moreover, the ban could open the door to potential
lawsuits against the City for the board creating these unfair
business advantages through legislation.
2. Is the majority
of the Illinois public in favor of "opting out"?
- No. Only 3 out of
102 counties and 24 municipalities (out of thousands) have opted
out. Further, the city of Chicago, Aurora, Joliet, Springfield,
Rockford, and Peoria (totaling approximately 3.6 million people),
have not opted out and this reflects a large portion of the
population of Illinois.
3. If you vote not
to opt out, will the City of Lincoln have the revenues available to
use as they wish?
- Yes. The Illinois
Gaming Board rules and regulations will show you that the Gaming
Board will enforce the proper use of the VGT machines, thereby
alleviating any pressure on local law enforcement while the City of
Lincoln will collect a projected $11,240 per establishment per year.
Gambling already exists in our county and it is here to stay. So,
why not keep its revenues local while promoting jobs and business
growth and extra enhancements directly to the county? This will not
invite more gaming to the city. Rather this will allow you to
capitalize on the projected $270,000 from the 5% tax levied on the
machines.
4. Is there a
deadline to opt out?
- No. If the City
of Lincoln votes to table this issue to a later date or votes
against the ban, they may choose to opt out at any time in the
future. However, if the City Council doesn't vote in the near future
to approve the resolution, none of the liquor pouring establishments
can apply for a gaming license. Over a thousand have applied
already. Time is of the essence. Vote to make this happen. Save the
small businesses and create good revenue for the City of Lincoln.
5. If we opt out,
will the City of Lincoln still be able to collect funding from the
Capital Bill?
- Yes, but that may
change soon. Presently, there is pending legislation that would bar
any governmental unit that opts out from receiving any funding from
the Capital Bill. Nevertheless, even if the City of Lincoln received
funding from the Capital Bill after opting out, the City of Lincoln
would still not receive the estimated $270,000 annually the machines
are projected to earn, in addition to job growth, and thousands of
dollars in earmarked appropriations designated for the City of
Lincoln (legislation HB0312 & 5B1221).
The People of the
City of Lincoln
[Text copied from file received
from Mayor Keith Snyder] |