Smoking Ban Is Causing Tax Revenue Drop, Illinois Casino Owners Say

Published March 1, 2009

Casino operators say a strict smoking ban is the main cause of a sharp drop in casino tax revenues in Illinois.

Illinois’ smoking ban took effect in 2008. The law forbids smoking in restaurants, bars, nightclubs, workplaces, and all public buildings.

Tom Swoik, executive director of the Illinois Casino Gaming Association, said figures for year-end 2008 would likely show casino revenue down at least 20 percent, about the amount he had predicted when testifying against the ban before it passed in 2007. The law took effect in January 2008.

Nearby Casinos Still Strong

While some of the drop-off can be pegged to the weakness in the overall economy, Swoik said, the smoking ban is a much larger culprit. He pointed to casino revenues in comparable communities in bordering states as evidence.

In northern Illinois, Swoik noted, casino revenues were down 21 percent, but in nearby northwest Indiana revenues were down only 4.8 percent. In East St. Louis, Illinois the casinos’ revenues dropped by 19.5 percent, but they fell by only 9.3 percent on the Missouri side of the Mississippi River. On the Illinois-Iowa border, casino revenues were down 13.2 percent on the Illinois side but were up 3.1 percent on the Iowa side.

“If it was just the economy, the figures would be the same because those areas have similar economies,” Swoik said. “The difference has to be attributed to the smoking ban.”

Happened Elsewhere, Too

Canada and Delaware had similar fall-offs in casino revenues when smoking bans were passed there, Swoik said. He had cited those instances in making his pre-ban prediction of revenue losses in Illinois.

New Jersey passed one bill banning smoking, then another one allowing it on about one-fifth of the gaming floor. Due to differences in the enactment of the bills, there was a two-week window when smoking was not allowed, and the Atlantic City casinos suffered double-digit declines in revenues in that time, Swoik said.

“It was almost like flipping a switch,” said Tom Monaghan, general manager of the Casino Queen Hotel and Casino in East St. Louis, of Illinois’ smoking ban. “On New Year’s Eve [2007], 15 minutes before midnight, we started taking the ash trays away from the casino floor. You could tell the reaction immediately.”

From Bad to Worse

The falloff started the next day and worsened after a casino opened across the Mississippi River in Missouri, where there are no smoking restrictions. His casino’s revenues fell even farther when Missouri later removed gambling loss limits, Monaghan said.

“Now all people have to do is cross one of three bridges and they can gamble, smoke, whatever,” Monaghan noted.

Casino Queen’s revenue plummeted 29 percent below the previous year, meaning job losses and lower revenues for the state and the local community.

“We provide 50 percent of East St. Louis’s operating budget,” Monaghan said.

Swoik said the smoking ban lowered bids for the state’s 10th casino license, awarded late in 2008, and has caused about 865 casino workers to lose their jobs.

Exemptions in Works

The state’s gambling industry is expected to push for a smoking ban exemption in the current session of the legislature. Casino operators say ending the ban would bring in more gamblers from neighboring states that don’t have smoking restrictions.

Swoik and casino operators already have tried to get an exemption from the smoking ban, or a partial exemption like the one in Atlantic City, by tacking the language onto other bills.

“A couple got out of committee, but they died when they got to the floor,” Swoik said. “They don’t want to reopen it because then they’ll have restaurants, bars, racetracks, and others seeking their own exemptions.”

However, falling state and local tax revenues could give an extra boost to the effort to lift the smoking ban for casinos, Swoik says. He said Illinois lost $150 million to $160 million in casino taxes because of the lower casino revenues.

“The legislators in the communities [with the casinos] are pretty agreeable to lifting the ban,” Swoik said.

Phil Britt ([email protected]) writes from South Holland, Illinois.