Shares in riverboat-gambling operators dropped more than the broader stock market after Illinois legislators approved a bill to grant Chicago its first casino.
The decline reflected the threat that new gaming facilities may drain customers from some of the existing riverboats located in Chicago’s suburbs, said Chad Beynon, an analyst at Macquarie Capital USA Inc.
“Overall that market is fairly saturated,” Beynon said. “The worst-case scenario, it’s just robbing Peter to pay Paul. If you see a shift to a different area of the city you could see a 5 to 10 percent decline at some properties.”
Democratic Governor Pat Quinn called the bill “excessive” the day after the Illinois Senate passed the legislation May 31, though he stopped short of threatening a veto.
Penn National Gaming Inc., based in Wyomissing, Pennsylvania, has fallen 3.2 percent since the Senate vote. Las Vegas-based Ameristar Casinos Inc. is down 3 percent, and Boyd Gaming Corp. of Las Vegas dropped 3.5 percent. The Standard & Poor’s Index fell 2.4 percent in the same period.
Illinois has nine riverboat casinos in suburban Chicago and elsewhere across the state.
Mayor Rahm Emanuel lobbied for the expansion to help address Chicago’s fiscal problems. The third-largest U.S. city, which has a projected 2012 budget deficit of $587 million, and other Illinois communities could benefit financially from a casino, Beynon said.
“There are some pockets where I think gaming could bring incremental tax revenues to the state,” including Chicago, because downtown casinos usually attract different customers and in many cases “haven’t cannibalized suburban markets.”
Emanuel accomplished on his 16th day in office what eluded his predecessor for almost two decades -- state legislative approval of a downtown casino and slot machines for the city’s two airports.
His muscle-flexing didn’t go unnoticed by Quinn. Asked whether he was concerned about angering Emanuel if he were to veto the Chicago casino, Quinn reminded reporters, “I’m the governor of Illinois.”
“The people of Illinois are the only ones I’m beholden to,” he said yesterday.
Emanuel Gets Credit
Lawmakers credited Emanuel with helping get the measure to Quinn’s desk, saying it signaled that they and the governor will be hearing more from the former White House chief of staff than they ever did from Mayor Richard M. Daley.
Emanuel, who as a congressman from Chicago was a top deputy of former House Speaker Nancy Pelosi, worked Springfield as he once worked Washington, said Senator Terry Link, a Democrat from Chicago’s north suburbs who sponsored the gambling bill.
“He made a huge difference,” Link said. “He understands how to pass a bill, and he worked the General Assembly.”
Emanuel also lobbied on education reform and changes in the state’s worker compensation system. Both of those bills passed, too.
Daley, who governed the city for 22 years before deciding not to run for a seventh term, repeatedly voiced support for a Chicago-based casino. Yet Link, a longtime advocate for casino gambling, said he never got the impression that Daley truly wanted a gaming house in his hometown.
“I think Daley had mixed emotions,” Link said. “He didn’t want to be perceived as the guy who put gambling in Chicago.”
Economic circumstances may have boosted the political prospects for expanded gambling, Link and others said, as cities struggle with the effects of declining taxes and the loss of state and federal financial aid. A casino would create 7,000 to 10,000 jobs while helping “energize our city’s economy,” the mayor said May 31.
Emanuel has ruled out a property-tax increase to close the city’s budget shortfall, effectively adding to the financial importance of new developments, such as a casino.
Quinn, who met with Emanuel shortly after he took office May 16 to talk about gambling and other issues, said he would support a Chicago casino “if it’s properly done.”
The governor has amendatory veto power, meaning he can eliminate certain items in a bill while keeping others.