Sunday, October 26, 2008

Elgin's luck runs out

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City's luck runs out

Decline in riverboat revenues brings tough budgeting choices

October 26, 2008

ELGIN -- As officials prepare to embark on the formation of the city's financial plan for the next year, consideration will have to be given as to how to compensate for the continued revenue losses hitting the Grand Victoria Casino.

In April, The Courier News reported a near 20 percent drop in riverboat gross revenues for the first three months of the year compared to the same period in 2007. Several factors, including abnormally harsh winter weather and the implementation of a new statewide smoking ban were mentioned as possible causes.

Four months later, figures for the Grand Victoria have not improved. From the period beginning Jan. 1 and ending Sept. 30, revenues are down 20 percent from the same period last year, according to information obtained from the Illinois Gaming Board.

Surprisingly, the decline in money does not directly reflect a significant drop in admissions, with 1.7 million visitors during that period compared to 1.8 million in 2007.

By no means is the Grand Victoria alone. Each of the state's nine riverboat casinos have recorded losses ranging as small as 10 percent to as high as 24 percent.

What makes the plight of the Grand Victoria significant compared to other businesses struggling during these troubling economic times is the size of its impact on both state and local coffers.

Last year, the riverboat was the revenue leader out of the nine casinos in the state, grossing roughly $436 million, of which, $203 million in state taxes were collected.

Elgin's tax share from the riverboat was around $24.3 million. The city also receives $1 for every visitor to the casino, which accounted for approximately $2.5 million.

Money collected from the casino goes into the city's Riverboat Fund, which has been one of the largest sources of funding for many of its infrastructure projects for more than 10 years. The city's 2008 financial plan budgeted for around $24 million in riverboat revenue to fund more than 100 projects and programs.

From the beginning of the year until the end of September, Elgin collected $14 million in taxes, about $4 million less than the same period last year.

If trends remain, City Fiscal Services Group Director James Nowicki said the Riverboat Fund could see shortfalls of $4.5 to $5 million by year's end.

He said the decline did not in anyway put the city in jeopardy of not making its annual payment of around $1.7 million of its 2000 bond obligation used to fund the construction of The Centre of Elgin, but rather would most likely affect agencies and projects funded through riverboat revenues.

"Right now we're going through the actual projects and determining which projects can be postponed or delayed to one of the out years to compensate for what appears to be $4-and-a-half to $5 million drop in 2009 riverboat revenues," Nowicki said.

It has not been determined at this point which agencies or projects will see cuts in their funding, but anticipation had been mounting that some sort of belt tightening would be necessary.

Elgin City Council member David Kaptain, executive director for the community organization, Elgin Community Network, said in June, city officials sent letters to all 23 not-for-profit agencies that receive a portion of their funding from the riverboat warning of cuts as high as 17 percent totaling an estimated $250,000.

"Obviously it's going to impact some much worse than others," he said.

Riverboat funding also funds groups such as Public Action to Deliver Shelter, the United Way of Elgin, Boys and Girls Club and the Children's Theatre of Elgin.

Children's Theatre Office Manager Susan Heaton said cuts could mean having to perform shows with less, or reducing the number of days each show can be performed.

"In good times you're able to fly people like in 'Peter Pan' or 'Wizard of Oz,' those kind of things are very expensive," she said. "So those kinds of bells and whistles would definitely be the first to go."

Despite the budget challenges many agencies face, Kaptain said he did not feel the city would find itself in the same position as an increasing number of municipalities nationwide that are struggling to maintain basic public services.

"I think it's the smartest single city council decision that's been made as that they separated riverboat funds from the daily operating funds," he said. "Aurora I don't believe did that, and when your wages come out of that what do you do now?"

Losses this year at Elgin's riverboat currently rank fourth behind those of the Empress Casino in Joliet at 21 percent, Harrah's Casino in Metropolis at 24 percent, and the Alton Belle in Alton at 27 percent. Aurora's Hollywood Casino reported losses of around 18 percent.

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