Court upholds legality of Waukegan tax on gaming machines; city due $11M
Throughout the history of the lawsuit, the city kept asking the Lake County Court to dismiss the eight-count complaint filed by the Illinois Gaming Machine Operators Association (IMOGA) and its members in Waukegan.
Quickly dismissing some of the counts claimed by IMOGA and its Waukegan-based members, the court let them rewrite other portions of the complaint as the case remained in the court system for more than four years.
Eventually, the court either dismissed parts of the complaint completely or entered a summary judgment in favor of the city of Waukegan on the rest, ruling if everything the plaintiffs said in their complaint was true, they would lose. Not done, IMOGA appealed.
The Illinois Appellate Court for the Second District ruled in favor of the city on March 4 in Elgin entitling the city to receive tax money gaming operators withheld because they argued a tax the city properly imposed was illegal.
Stweart Weiss, an attorney with Waukegan corporation counsel Elrod Fridman, said in an email Monday the city's 'penny push tax' approved by the City Council in August of 2020 was legal. It provided the city with a penny for every play on a video game, according to court documents.
'The City's taxing authority was clearly granted by the Illinois legislature, and it has been validated by every court that has reviewed it,' Weiss said in the email. ' All that remains now is for terminal operators to collect the tax from players and remit it to the citizens of Waukegan.'
Waukegan Mayor Ann Taylor said in an email Tuesday the city's finance department estimates more than $11.3 million is due from the penny punch tax for the past three years ending on Dec 31, 2024. It comes from 336 terminals in 58 spots. Approximately $2.5 million is anticipated in future years.
Though it took more than four years of litigation to finally be in a position to collect the penny push tax, Taylor said it 'will go a long way' to help with the operating costs necessary to meet residents' needs.
'The revenue to be raised by the collection of the Push-Tax will go a long way in addressing the increasing operating costs of providing services to the citizens of Waukegan,' Taylor said in the email. 'The Push-Tax will be a welcomed source of relief for our community.'
The City Council approved an ordinance requiring a penny push tax on April 9, 2020. It requires any person playing on a video gaming device to pay a tax of one cent per play, according to the court's opinion.
Less than two weeks after Waukegan approved the tax, IMOGA and seven of its members sued the city alleging the law not only violated the Illinois Constitution, but changing the gaming terminals to calculate the tax was 'complicated and cost prohibitive,' according to the opinion.
Passing the law, Waukegan intended to both collect revenue to provide for residents' needs and, 'provide adequate funds to offset the adverse effects of gambling that occur within the municipality,' according to the opinion.
'The city's position is not that it seeks to eliminate gambling; rather its position acknowledges a negative effect of the activity and the action it took to combat it,' Judge Ann B. Jorgenson said in the opinion.
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