Illinois Business Journal - Jan. 1 'no smoking' law to hurt casinos, cost state millions in revenues

The head of Illinois' casino gaming association says statistics borne by other gambling arenas prove that once this state's new smoking ban takes effect Jan. 1, casinos here could suffer a 20 percent loss in their revenues during the first year alone.

SB 500, known as the Illinois Public Smoking Ban or the Smoke Free Illinois Act, takes effect at midnight on Jan. 1. Sponsored by 18 upstate Illinois senators, the legislation provides a broad definition of what is a "public place," including restrictions such as no smoking within 15 feet of the exterior of such a facility.

The law, as it stands, contains four exemptions in terms of places where smoking will be allowed, according to Tom Berry Jr., partner with Sandberg, Phoenix & von Gontard PC. They are: a private residence (unless it's being used for day care, as a healthcare facility or as a home-based business open to the public); retail tobacco stores that are already in business; private and semi-private rooms at nursing homes or long-term care facilities that are occupied by one or more residents who have requested in writing to be in a smoking room; and hotel/motel sleeping rooms that are rented to guests as smoking rooms.

Currently the state of Illinois collects slightly more than $700 million annually in casino revenues, according to Tom Swoik, executive director of the Illinois Casino Gaming Association. He said that if the state of Illinois follows through with its gaming expansion strategy, the snowballing effect of lost revenues would make this anticipated 20 percent revenue loss - a projected $144 million - a drop in the bucket.

"We're still lobbying hard to get an exemption to the smoking ban," Swoik said at press time. "It could cost the state up to 20 percent of the tax dollars. What makes that worse is that they're talking about doubling gaming. If you figure that, there could be another $144 million that they would never realize. So you could actually be talking about another $280 million or $300 million in lost revenues," he added.

In addition to the state's collection of revenues from casinos, municipalities take in a substantial amount of revenue - a portion that is also expected to decrease when smokers opt to frequent non-Illinois casinos come Jan. 1, Swoik said.

"Local communities get a total of about $100 million a year from the casinos," he said, noting that the local share is in addition to the $700 million revenue figure referred to above. "In 2006, the city of Alton received $7.554 million in local tax dollars from Argosy Casino. If you take 20 percent of that, think how much local communities stand to lose because of this new legislation."

Delaware knows well the effects of a statewide ban on smoking in public places. Its state budget also knows well the void it felt from loss of casino revenues as a result of the ban, which went into effect in December 2002 and remains in effect today. Michael R. Pakko of the St. Louis Federal Reserve Bank performed a study that found Delaware's three casinos lost a total of $94 million, beginning in year one, as a result of the no-smoking law. Since the state of Delaware's take of casino revenues is 35 percent, it meant a loss of $33 million to the state budget.

Illinois will be one of 21 states with a statewide smoking ban. Minnesota and Ohio are the closest states with statewide smoking bans.

State Sen. Bill Haine of Alton, a Democrat who voted against SB 500, said to approve broad-sweeping legislation such as this - a law that he says will clearly be damaging to business and the economy - is too big of a gamble to take when the scientific evidence isn't solid enough that second-hand smoke is injurious to one's health.

"Well-meaning individuals and associations shared information with us (Illinois legislators) about the dangers of second-hand smoke," said Haine. "But for the legislature to make an overreaching decision like this when the statistics are not completely analyzed�I remain skeptical unless we can have a complete analysis of the epidemiological facts. I've read that these reports are exaggerated. It's tough for me to vote on the basis of incomplete information when I know that what I would be voting for would hurt the livelihood of businesses."

After several surveys of its 3,000-member coalition, the Illinois Restaurant Association's official position on this new law is one of neutrality. Andrew Ariens, director of communications, said for years the IRA fought against government-mandated smoking bans but that its current membership's diverse opinions on the issue balances out to the middle of the road at this point in time.

"Our industry is made up of diverse owners and patrons," Ariens said. "It's our wish that all of our customers and business owners can be accommodated with regard to smoking. However, with recent legislation allowing all municipalities to enact their own smoking restrictions, a patchwork of smoking bans throughout the state has created an unlevel playing field. Our marketplace has requested - and restaurants have responded to - more non-smoking areas or completely smoke-free dining," he added. "But as such, we still remain opposed to government intervention into our business."

And that's where Haine underscores his point about the danger of government interfering with businesses' and individuals' right to their own judgment, decision-making and plain old free choice. "If we're going to have this type of social engineering statute - one in which we have arguably less statistical evidence of the long-term effects of second-hand smoke than we do on the damage caused by trans fats, are we next going to pass legislation to ban trans fats?" he asked. "New York City did. Once we start down that road, it's a slippery slope."

Rather than the Jan. 1 law banning smoking altogether in public places, Haine would have liked to see a move toward voluntary restriction.

"As we know, prohibition didn't work with alcohol. We shall see how it works with smoking," he said.

Enforcement of the law will likely strain already-burdened patrol divisions of local police departments, according to Alton Police Chief Chris Sullivan - officers who are now concentrating their efforts on offenses much more serious than persons smoking cigarettes where they shouldn't be.

Alton typically has seven patrol officers on duty at any given time, answering calls ranging from domestic disputes to peace issues, traffic enforcement, break-ins and more. What this new smoking ban law will do, said Sullivan, is pull one of those patrol officers away from one of these calls to deal with a smoking misdemeanor.

"We've already been asked to deal with a lot of nuisance offenses," Sullivan said, "whenever there's no one else to deal with it. We already handle 40,000 calls for service a year. What the state has mandated with this new 'no smoking' law is huge. Anytime you pass sweeping legislation like this, it's going to take time and money away from other enforcement areas. I'm not taking a stand on the law one way or the other, but this is basically an unfunded mandate that is going to force our police department - one that already has limited resources - to make some tough choices."

Madison County State's Attorney Bill Mudge said he expects there will be a phase-in period for enforcement of the new law. His office stands ready in case there is a deluge of added work to already heavy dockets, but he hopes cases won't reach his office unless they call for elevated fines due to repeat offenders.

"The 15-foot stipulation in that law is pretty tough," Mudge said. "A lot of public places are small, and I guess they're going to have to mark off from doorways and windows so occupants know where the designation even is. We will just have to evaluate each case on a case-by-case basis. We sure don't want 12-foot-from-the-door smoking violations brought to our docket."

The local health departments will also be involved in enforcement of the new law, he said.