2020 Suspensions Of Video Gaming Shrink Local Budgets
Governments across Illinois are seeing large holes in their budgets due to COVID-19 restrictions. One area that’s seen a sharp drop is revenue from video gaming.
Video gaming terminals are a regular sight at bars, restaurants and roadside shops around the state. They’ve brought a pretty penny not only to their operators, but also to local governments. This is because municipalities get 5% of the net terminal income.
Eric Noggle is a senior revenue analyst with the State’s Commission on Government Forecasting and Accountability. He said revenue has steadily gone up year by year, until the governor restricted video gaming due to the pandemic.
“He [Pritzker] suspended operations between March 16th and June 30th of 2020. During that time, things abruptly changed, where we weren’t getting revenues in at all.”
When pandemic restrictions were eased, Noggle said there was an immediate resurgence in gaming.
“You thought a lot of people might have been staying home, but the revenues were doing, compared to the previous year, very similar.”
But video gaming was shut down again in mid-November -- and stayed that way for the rest of the year. Noggle said that hit hard.
“The State portion goes to the Capital Projects Fund, so that’s a significant amount of revenue that you’re not receiving in the Capital Projects Fund that you hadn’t expected.”
The State takes a larger chunk of video gaming terminal income. But local governments have seen a greater impact on their budgets, depending on how they use the gaming revenue. Todd Cagnoni is the city administrator for Rockford, which makes the largest amount of money from video gaming terminals in the entire state.
“We anticipated pre-pandemic in 2020 that we would receive approximately $1.8 million in annual VGT, which would be dedicated towards our total cost of about $3.8 million for capital vehicle purchases,” he said.
With pandemic restrictions, Rockford only made about $1.1 million in 2020.
“To put that in perspective, that’s pretty similar to what we were receiving in 2012,” Cagnoni said.
And that money has to cover a lot of maintenance and purchases.
“Ambulances, fire trucks, ladder trucks, police department response vehicles, vehicles associated with our public works department," he said.
Fortunately, Rockford had a separate vehicle fund that could make up for some of the lost gaming money. But Cagnoni said the City must carefully prioritize how it maintains its current fleet, and when vehicles are replaced.
Other cities had to put some projects on hold. Springfield is right behind Rockford when it comes to gaming revenue, and it normally uses the money for infrastructure projects. Mayor James Langfelder explained:
“It’s more of a maintenance side of things and we’ve been carrying it year to year ever since video gaming started.”
But pandemic restrictions saw Springfield’s 2020 revenue drop from a projected $1.8 million to $1.1 million. Furthermore, road crews were limited in their duties due to social distancing requirements.
“Crews were meeting at the site or driving individual trucks, things of that nature. But from the standpoint we continued working, we just couldn’t work ahead as you had hoped due to the lack of traffic out there that you typically would in a normal situation.”
Langfelder said the situation is improving this year, at least when it comes to gaming revenue.
“Now that we’re reopened to a certain degree, I think the video gaming without a doubt helped maintain the level of operation on the expense side of things with that added revenue of video gaming since the capacity numbers are restricted.”
But Springfield is still struggling to get back the revenue it earned from sales and other usage taxes.
“Hopefully, people will come visit the home of Abraham Lincoln and we’ll have that rebound on the hospitality side of things," Langfelder said.
And then there are cities like Loves Park. It’s among the top five in video gaming revenue. And because of its tax structure, it’s more dependent on that money. Mayor Greg Jury explained:
“The City of Loves Park does not have a municipal property tax to its residents and businesses. So we survive solely on sales tax, income tax and things like gaming.”
Before the pandemic, Loves Park made about $80,000 per month. But the gambling closures put a dent in that over parts of 2020. Jury says relief came from an unlikely source. A Costco had opened in town back in 2019 and stayed open as an “essential business.”
“So from a sales tax standpoint, it did offset all of the business that were shut down for x amount of months.”
Jury says he’s always run a tight ship, and at this point, the City is working to bring back revenue through more business outside of video gaming. This now includes medical cannabis.
“We have a dispensary being built right now in the city of Loves Park which is going to bring in additional revenue to help us pay for our services,” he said.
Jury says that facility is likely to open in August.
And finally, there’s DeKalb. While its video gaming revenues aren’t as high as bigger cities, City Manager Bill Nicklas said they still get a decent amount of money for the general fund.
“We had projected for 2020 that we would see at the city level, about $256,000 from that source of income.”
The 2020 closures cut that amount by about 30%. Nicklas says on the positive side, many local businesses have survived by innovating their services. He hopes the new year and vaccinations can further improve the situation.
“We’ve all struggled to get to where we are, and we hope the struggle gets a little bit lighter as we go forward.”
Overall, local governments lost a fair chunk of their video gaming revenue thanks to the pandemic closures. But history shows a big rebound when those services reopen. When video gaming first reopened in June 2020, demand was high.
Municipal governments hope in 2021, that same demand for video gaming can make up for the budget shortfalls they saw in 2020. How that will play out, and when businesses will fully reopen, remains to be seen.