Casino says tax increase derails plan for new hotel

METROPOLIS, Ill. -- An increase in riverboat casino taxes has prompted Harrah's to cancel plans to build a $40 million hotel in this town in Southern Illinois.

Harrah's says the project has been tabled until the state repeals its tax increase or allows more slot machines and gaming tables at casinos.

"It's unfortunate that a $40 million-plus project has to be put aside because we can't make the economics work anymore," said Tim Wilmott, eastern division president for Las Vegas-based Harrah's Entertainment Inc.

The state budget that took effect July 1 increased riverboat casino taxes about $130 million a year. Harrah's Metropolis Casino, one of the most profitable casinos in the state, saw its tax rate jump 10 percentage points, Wilmott said.

"You take 10 full percentage points right off the top, and that's what makes the hotel economics unworkable," he said.

The hotel would have brought 175 jobs to the area.

Harrah's had intended to seek a permit to build the hotel in a park across from the casino and relocate the park, city officials said.

"I sort of have mixed feelings," said Mayor Beth Clanahan. "You hate to move the park, but at the same time, it's a good opportunity for the city."

The city's share of casino tax revenue is nearly $700,000 a month, an increase of more than $200,000 since Harrah's upgraded the casino a year ago.

Confidential memo

Harrah's and other casinos are not taking the tax increase sitting down.

The Chicago Tribune reported earlier this month that it had obtained a copy of a confidential July 26 memo that outlined a 15-point plan to convince lawmakers to rescind the increase by next summer and do away with a limit on how many slot machines and gaming tables a casino can operate.

According to the memo, Gov. George Ryan met with Argosy Gaming Co. executives and "expressed a willingness to revisit the tax issue" during a lame-duck session of the Legislature later this year.

The memo was sent to Tom Swoik, executive director of the Illinois Casino Gaming Association, and it detailed a strategy agreed to by executives of Harrah's, Argosy, Hollywood Casino Corp. and Boyd Gaming Corp.

A spokesman for the governor has said he is willing to take a look at a tax rollback, but that's contingent on opening the state's 10th casino license. Illinois gambling officials approved a deal Aug. 8 that puts the license up for sale.

Meanwhile, the 950-worker Metropolis casino continues to add jobs. A job fair was held this week to fill about 50 administrative and customer-service positions, the casino said.