THE ILLINOIS VIDEO GAMING ACT
As published by the Illinois Municipal League
The Video Gaming Act, enacted on July 13, 2009, legalizes the use of video gaming terminals in specific land locations in Illinois. The new Video Gaming Act is codified at 230 ILCS 40. Other states that allow video gaming outside a casino or racetrack include Louisiana, Montana, Nevada, Oregon and South Dakota.
Many of the provisions of this new Act will impact local governments and local businesses. This document is intended to answer the most frequent questions that municipal officials may raise. It is important that municipal officials consult with their attorney for specific actions that may arise from the implementation of the Video Gaming Act.
The law allows for the placement of “video gaming terminals”. What is a video gaming terminal?
A video gaming terminal is any electronic game machine that, upon insertion of cash, is available to play or simulate the play of a video game, such as video poker, line up and blackjack, using a video display and microprocessors in which the player may receive free games or credits that can be redeemed for cash. The term does not include a machine that directly dispenses coins, cash, or tokens or that is only for amusement purposes.
Who regulates the machines and the operators of those machines?
The Illinois Gaming Board has jurisdiction over and shall supervise all gaming operations under this Act. Municipalities are not responsible for administering or enforcing the provisions of this Act. The Illinois Municipal League will be monitoring all rule makings proposed by the Illinois Gaming Board pertaining to the implementation of this Act to be sure that no local mandates are adopted under the rule making procedure.
Where may these video gaming machines be located?
The statute specifically defines four types of establishments where video gaming machines are allowed:
* Licensed establishment – a licensed retail establishment where alcoholic liquor is served for consumption on the premises such as a bar or restaurant;
* Licensed fraternal establishment – a qualified fraternal organization that derives its charter from a national fraternal organization;
* Licensed veterans establishment – a qualified veterans organization that derives its charter from a national veterans organization; and
* Licensed truck stop establishment – a facility that is at least 3 acres with a convenience store and with separate diesel islands for fueling and parking commercial motor vehicles.
What are the restrictions on the operation of these video gaming machines?
The statute sets forth a number of requirements for the operation of these games, the more prominent restrictions are:
* Location restrictions—Video gaming terminals may not be operated on any premises that is (i) located within 1,000 feet of a horse racing or riverboat gambling facility or (ii) located within a 100 feet of a school or a place of worship.
* Number of machines—There may not be more than five machines on any premises.
* Location of machines—Video gaming terminals must be located in an area that is restricted to persons over 21 years of age. The entrance to that area must be within the view of at least one employee.
* Age restrictions—No licensee may cause or permit any person under the age of 21 years to use or play a video gaming terminal.
* Liquor license required—Each premises establishment must possess a valid liquor license issued by the Illinois Liquor Control Commission.
* Hours of operation—Those premises that are licensed establishments, licensed fraternal establishments, and licensed veterans establishments may operate video gaming terminals only during the hours of operation for the consumption of alcohol at that premises. There appears to be no limit on the hours of operation for licensed truck stop establishments.
* Additional regulations—The Illinois Gaming Board may adopt rules that add additional restrictions or conditions on the placement or operation of the video gaming machines.
Can municipalities prohibit video gaming in their community?
The statute identifies two ways by which video gaming may be prohibited in a municipality:
* The corporate authorities may pass an ordinance prohibiting video gaming within the corporate limits. Also, a county may pass an ordinance prohibiting video gaming in the unincorporated areas of the county.
* A petition containing not less than 25% of the legal voters of that municipality may be filed with the clerk at least 90 days prior to the election. If this occurs, then a proposition will be placed on the ballot asking whether video gaming shall be prohibited. If a majority of the voters voting in the election vote “Yes,” then video gaming is prohibited in that community. A similar referendum may be held in a county, but it is unclear from the language whether the prohibition would apply countywide or just in the unincorporated areas of the county.
* Please note that the Governor amendatorily vetoed Senate Bill 1595 in an attempt to lower the petition requirement from 25% of the legal voters to 11% of the total ballots cast by the registered voters in the last election. The amendatory veto also attempts to allow a similar referendum to be held in a township. It is likely that the General Assembly will take action on this provision in the October Veto Session.
If my community bans video gaming, will it still be eligible to receive funds through the State’s Capitol Program?
The State’s Capitol Program is supported through a combination of (i) the increase and expansion of taxes on alcohol, soft drinks and candy; (ii) increased vehicle registration fees; and (iii) video gaming. It is estimated that video gaming will raise approximately 25% of the projected funds to the State’s Capitol Program.
The Capitol Projects Fund is created under Section 6z-77 of the State Finance Act. The statute is silent regarding whether capitol projects may be held back because a county or municipality passed a ban to prohibit video gaming.
Can a municipality impose other restrictions on video gaming?
The statute is silent as to whether the municipality may impose stricter standards for the operation of video gaming than what is set forth in the Act. It should be noted that the Act does not preempt any home rule powers.
Can a ‘dry’ community have video gaming under this Act?
No. A precondition for licensure is that the premises posses a valid liquor license. Additionally, video gaming may only be conducted during the legal operations allowed for the consumption of alcohol at licensed establishments, licensed fraternal establishments, and licensed veterans establishments.
What about existing amusement games that are currently in operation?
The new law makes it a felony to own, operate, or possess any device that “awards credits and contains a circuit, meter, or switch capable of removing and recording the removal of credits when the award of credits is dependent upon chance.” A video gaming terminal that is operated only for amusement and that bears an amusement tax sticker is not subject to the prohibition until the earlier of (i) the expiration of the tax sticker or (ii) the Gaming Board’s establishment of a central communications system. This prohibition could lead to the loss of some tax revenue for coin-operated amusement devices under Section 11-55-1 of the Illinois Municipal Code.
Is there a tax on these machines and do municipalities receive any of the revenue?
A tax of 30% is imposed on the net income from each video gaming terminal. The State collects the tax. Of the tax collected, one-sixth goes to the unit of local government where the machine is located. According to a report titled “The Estimated Revenues from a New Video Gaming Tax in Illinois” by the firm of Arduin, Laffer & Moore Econometrics, a reasonable median projection for the net income per machine is $45,000 per year. Using this projected income, the total tax per machine would be $13,500 per year, and the municipal share of that tax would be $2,250 per year. Therefore, for each establishment with the maximum number of five machines, a municipality will generate an estimated $11,250 in tax revenue per year.
The unit of local government may use the proceeds of that tax for any general corporate purpose authorized for that municipality or county.
Can the municipality impose a fee on the video gaming terminals?
Yes. A non-home municipality may not impose a fee in excess of $25 per terminal per year. There is no limitation in the statute on these fees imposed by Home Rule Municipalities. Adoption of this fee by the corporate authorities is necessary.
What are the penalties for violating the provisions of this Act?
Depending on the violation, the penalties range from a petty offense with a fine not to exceed $100 to a Class 4 felony. Also, for certain offenses, the establishment may lose its licenses to operate video gaming and to serve or sell alcohol.
When is it likely for us to start seeing these machines in Illinois?
This legislation has an immediate effective date. However, the Illinois Gaming Board has 60 days to adopt an emergency rule making to implement this program. In a recent article in the Chicago Sun-Times, Aaron Jaffe, Chairman of the Illinois Gaming Board, indicated that the 60-day deadline is a big problem. He also stated that there is no appropriation for the implementation of this program. According to the article, it is likely to take anywhere from 12 – 18 months if not longer.