CHICAGO (Reuters) - A high tax and fee structure mandated by an Illinois law for Chicago's first casino would make the project "generally not financially feasible" regardless of where it was located, according to an analysis released on Tuesday by the state's gaming board.
The finding led the city's mayor and others to call for the law to be revised. The third-largest city in the United States had been betting on a casino to generate revenue for its underfunded police and fire fighter retirement systems.
Legislation signed in June by Illinois Governor J.B. Pritzker authorized a casino for Chicago as part of a state-wide gambling expansion that included sports betting.
But the analysis, conducted by Las Vegas-based consultant Union Gaming Analytics, said the law contained the highest effective gaming tax and fee structure in the United States, making it difficult to finance a Chicago casino and operate it at a profit.
Total development costs, including licensing and other fees, would generate "at best a 1% or 2% return annually, which is not an acceptable rate of return for a casino developer on a greenfield project," according to the analysis, which looked at five proposed sites for the project.
Emily Bittner, a Pritzker spokeswoman, said the governor would seek "to refine" the state's approach to ensure maximum job and revenue opportunities.
Chicago Mayor Lori Lightfoot called for revisions to the law.
"While the study confirms our concerns about the tax structure that the legislature passed, we know that this can be addressed, and we look forward to working with the governor and legislative leaders to revise the legislation," she said in a statement.
With annual pension contributions expected to rise by nearly $1 billion by fiscal 2023, the city needs additional revenue. Pensions for Chicago police were only 23.8 percent funded in 2018, while those for firefighters were just 18.4 percent funded.
Lightfoot is scheduled to release her fiscal 2020 budget projections later this month. Prior to taking office in May, she warned the deficit would be bigger than the previous administration's estimate, which topped $700 million.