State Budget Gimmicks Can't Solve Crisis

Citing ethical concerns, as if Illinois had any, a Coveted Casino License went to lowest bidder who plans to build in the city of Des Plaines.

Illinois gambling regulators on Monday chose the lowest bidder among three finalists for the state's only unused casino license, saying the company that plans to build in Des Plaines didn't raise the ethical concerns posed by finalists for Waukegan and Rosemont.

Midwest Gaming and Entertainment LLC beat out its competitors on a 3-1 vote of the five-member Illinois Gaming Board. Panel member Eugene Winkler refused to vote because he said he was not convinced that any of the finalists deserved permission to operate slot machines and betting tables.

"We have become accustomed to the stench of gambling and its effects in Illinois," said Winkler, a Methodist minister. "That's the problem we have grown used to. Corruption in government, pay-to-play, headline grabbers and behind-the-scenes operators, but real moral and ethical issues are at stake."

The recent corruption arrest of Gov. Rod Blagojevich cast a new pall over a selection process that has been mired in controversy for more than a decade, when the license was last used. Questions about ties between the Waukegan bidder and Blagojevich fundraisers helped sink that plan, and investors in Rosemont could not overcome concerns about mob influence in the village that helped derail two previous attempts to open there.

Once viewed as a cash cow that could fetch more than half a billion dollars, the license will tentatively go to a company that offered a total of $125 million once the doors open and an additional $300 million to be paid over the course of 30 years.

While Trilliant Gaming partnered with Rosemont to offer a high bid of $435 million for the license, Jaffe and other board members said they could not ignore the village's past problems.

Jaffe and other board members also questioned the background of some investors in Waukegan Gaming LLC, who touted their proposal as a way to revitalize the struggling lakefront community. The company offered $225 million upfront for the license and received the backing of one board member.

Jaffe would not elaborate, but the board previously questioned the company's dealings with Springfield power broker William Cellini, who held an ownership stake in the company that later became Waukegan Gaming.

Although Cellini sold off his interest more than 18 months ago, he and others with Blagojevich ties have connections to the businessman he sold it to: Michael Pizzuto, a Hinsdale real estate developer who was once director of finance for Cellini's New Frontier Development.

Cellini was indicted this year on charges that he extorted campaign contributions to Blagojevich from a Hollywood producer whose investment firm was seeking state business.

Blagojevich appointed Pizzuto to the State Universities Retirement System in 2004, and a "clout list" released in the trial of convicted Blagojevich fundraiser Antoin "Tony" Rezko suggested that he was sponsored by fellow fundraiser Chris Kelly.

Des Plaines is excited to get a casino even though a casino did not save East Dubuque in Jo Daviess County where the Silver Eagle Casino on the Mississippi River went under.

Riverboat Empty Promises

Flashback October 15, 2000 The casino gamble: Jo Daviess leader says riverboat dealt empty promises

When the Silver Eagle riverboat casino landed in Jo Daviess County, Ill., in 1992, county officials thought it was the goose that laid the golden egg. With the promise of more tourists and 5 percent of casino revenues, officials agreed to spend more than $3 million on infrastructure to bring a gambling boat to their side of the Mississippi River.

But a few years later, the boat was gone - its owners searching for higher profits elsewhere. And local officials were left with higher bankruptcies and other social problems. "We had 400-some jobs. Now we have none," said Darrell Barkow, president of East Dubuque Savings Bank.

"I was pretty gung-ho" about the casino in the beginning, said Bill McFadden, the county board chairman. "We got $8.2 million over a 4- to 4 1/2-year period."

But now, McFadden's had second thoughts.

"How much is it worth to see X number of families go down the tubes?" he said. "The more available (gambling) is, the more compulsive gambling you're going to have. It is addicting. It is compulsive. Some can handle it. Some can't."

"They littered our landscape with addiction, bankruptcy, crime and corruption and then sailed away leaving a wake of broken promises," said the Rev. Tom Grey, a Methodist minister who fought the riverboat casino in Jo Daviess County. "So much for economic development and a painless revenue stream."

During the period the casino was open, the county saw "a rise in the number of bankruptcies and the number of cases our social workers treated as far as compulsive gambling," McFadden said. "They had reasonable food, which hurt some of our restaurants. They complained their business has gone down."

Gambling is just another form of entertainment. People who go to the casino will be spending less on movies and less on eating out elsewhere. There will not be a single net new Illinois job created as a result of this casino license being awarded, and most likely no benefit even to DesPlaines in isolation.

Cash-strapped states weigh selling roads, parks

Many states are economically in trouble. California is at the top of the list as noted in California Implodes In Multiple Ways and Massive Surge In Municipal Bankruptcies Coming.

Minnesota, New York, Massachusetts and Illinois are also in trouble. Inquiring minds are noting Cash-strapped states weigh selling roads, parks.

Minnesota is deep in the hole financially, but the state still owns a premier golf resort, a sprawling amateur sports complex, a big airport, a major zoo and land holdings the size of the Central American country of Belize.

Like families pawning the silver to get through a tight spot, states such as Minnesota, New York, Massachusetts and Illinois are thinking of selling or leasing toll roads, parks, lotteries and other assets to raise desperately needed cash.

Minnesota Gov. Tim Pawlenty has hinted that his January budget proposal will include proposals to privatize some of what the state owns or does. The Republican is looking for cash to help close a $5.27 billion deficit without raising taxes.

GOP lawmakers are pushing to privatize the Minneapolis-St. Paul International Airport and the state lottery. Both steps require a higher authority — federal legislation in the case of the airport, a voter-approved constitutional amendment for the lottery. But one lawmaker estimated an airport deal could bring in at least $2.5 billion, and the lottery $500 million.

Massachusetts lawmakers are considering putting the Massachusetts Turnpike in private hands. That could bring in upfront money to help with a $1.4 billion deficit, while also saving on highway operating costs.

In New York, Democratic Gov. David Paterson appointed a commission to look into leasing state assets, including the Tappan Zee Bridge north of New York City, the lottery, golf courses, toll roads, parks and beaches. Recommendations are expected next month.

Onetime Shots Can't Work

Many states are in trouble over pension promises, salaries, and out of control spending in general. Selling bridges and parks can only be done once for obvious reasons. Entire branches of government need to be eliminated. What's left needs to be privatized and where privatization is not possible, salaries need to be reduced.

Selling off assets is a onetime shot while lotteries and casinos tend to prey on the poor and net-net create no real economic benefit. The only long term viable solution to this mess is to dramatically cut public sector employment, benefits, and pensions. Until that happens, private sector workers are going to be squeezed by rising taxes, rising fees, falling wages, falling benefits, and shrinking pension plans, envious and resentful of public sector workers who make out like bandits.

A massive taxpayer revolt is up and coming over this issue. I would like to see California kick things off with "Proposition Mish" to eliminate many state funded programs, privatize the prison system, release prisoners in for minor drug violations, and slash salaries of every state legislator, the governor, and others.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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