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Industry official commends decision after court invalidates Pekin video gaming ordinance

An updated Pekin city ordinance related to fees on video gaming terminals has been deemed in violation of the state law.
WCBU file photo
An updated Pekin city ordinance related to fees on video gaming terminals has been deemed in violation of the state law.

A Pekin ordinance aimed at drawing more funds from video gambling machines is off the books after being deemed unlawful.

In October, Pekin officials approved an update to the city code, assessing a fee of 2.5% of net revenue from each gaming terminal in the city. Two gaming operator businesses - J&J Ventures and Accel Entertainment - sued Pekin, claiming that the percentage-based fee actually constituted a tax and was therefore barred by Illinois’ Video Gaming Act.

“The open question that we had was: Is it appropriate for any city to charge a percentage on revenues and deem that to be a fee? And once we lay that out to them in those terms, to their credit, they conceded,” said Ivan Fernandez, executive director of the Illinois Gaming Machine Operators Association.

An order issued May 24 by Tazewell County Circuit Court Judge Paul Bauer barred Pekin from enforcing the updated ordinance. City attorney Kate Swise told WCBU the ruling was entered in an agreement between the parties to resolve the pending litigation.

Swise said the invalidation automatically restored the previous version of the city code that placed a flat $1,000 annual fee on all video gaming terminals within the city.

Fernandez applauded Pekin officials for acknowledging the ordinance was unlawful

“We're very, very happy to be involved in business in the city of Pekin,” said Fernandez. “We think that this industry is probably one of the best examples of a public-private partnership that's ever existed in the state of Illinois and local governments are a big part of that.”

The vacated ordinance called for distributing the city’s additional video gaming revenue between the police and fire pension funds. Swise said the restored previous ordinance still does just that, with 60% for the fire pension and 40% for the police pension.

Swise said Pekin is reviewing the accounting of video gaming terminals to determine whether any machine paid more than $1,000 in fees under the invalid ordinance during this fiscal year.

Asked if any money was collected in error and would need to be reimbursed, Fernandez said no. He said another issue with the unlawful ordinance was that it did not establish a mechanism for the “fee” to be collected.

“There's no way for us to pay such a fee or to plan for it, because you don't know how well a business is going to do. Obviously you have an idea, but you can't run your business that way,” said Fernandez.

“When it comes to fees, when it comes to the government-structured items like that, it should be something that you can plan for and get ahead of. And in this case, we wouldn't not have been able to do that, given the structure that they devised.”

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Contact Joe at jdeacon@ilstu.edu.