CHICAGO -- As restaurateurs here weighed the significance of tentative support by Mayor Richard Daley and Illinois Gov. Rod Blagojevich for a proposed Chicago casino, state legislators were mulling a measure that would allow Illinois restaurants to deal video poker.

In the final weeks of the Legislature's session in Springfield this month, lawmakers were wrestling with Illinois' $5 billion budget deficit, and gaming committee members were considering a new plan to allow a casino in Chicago and permit 47,000 video poker machines in bars and restaurants statewide.

Meanwhile, Mayor Daley surprised legislators by saying he was looking into the possibility of applying for a city-owned, land-based casino, which would require the state to lift its current ban on gaming in the nation's No. 3 city.

Mindful that Las Vegas had upped the ante on its tourism industry by fostering a dramatic restaurant renaissance there over the past decade, some hospitality veterans in Chicago welcomed the prospect of casino gaming in their city.

"If it's well run, it could only benefit us," said Patrick Norton, general manager of the Smith & Wollensky steakhouse branch overlooking the Chicago River on North State Street. "The big thing is for convention people; it would give them something more to do. People like to hang in casinos and have a couple of drinks."

Hugo Ralli, a partner in the Gibsons Steakhouse in Chicago, predicted that the arrival of casino gambling "might fill up certain empty seats." However, he added, "I've always wondered if gamblers eat."

Another Gibsons restaurant is in suburban Rosemont, Ill., which also has been a contender for a gaming license. However, Ralli said that the restaurant had sales of $12 million last year without the presumed benefit of a local casino.

Nine Illinois cities currently have licenses for riverboat casinos, and a 10th license became available after one riverboat went out of business.

As chairman of the House gaming committee, state Rep. Louis Lang, D-Skokie, proposed legislation May 7 that would grant Chicago a riverboat casino license. Lang said the bill would have to be amended to permit land-based gaming. As currently written, the bill also would increase gaming at existing casinos in the state, add slot machines to horseracing tracks and legalize the installations of the video poker units.

"The restaurant people would be very happy to have this happen," Lang told Nation's Restaurant News.

Earlier, he was quoted by the Associated Press as saying, "We have our greatest opportunity to make any of this happen that we've ever had and probably will have in the next 10 years."

Daley, after meeting with Gov. Blagojevich and legislators May 7, was quoted by the AP as saying, "I think everyone is looking for revenue, and revenue is very, very important to the state."

Blagojevich, despite having campaigned against an expansion of gaming before his election as governor last fall, was quoted by the AP as saying, "I think it would be irresponsible to just arbitrarily dismiss the possibility of exploring other ways for revenue" raising besides tax increases.

The Chicago Tribune quoted the governor as hailing the city as a "very compelling place" for a casino but also as stating that Daley's apparent openness to hosting a gambling palace had "sort of caught us a little bit by surprise."

Meanwhile, restaurateurs in the Chicago suburb of Elgin, Ill., say things are looking up in their city's formerly blighted downtown, thanks to revenues from its riverboat casino.

Just a few years ago, the downtown of the aging city of 95,000 on the banks of the Fox River was a sorry collection of abandoned storefronts and disrepair, following several decades of disinvestment. Manufacturing left first, spurred by the closing of Elgin National Watch Co. in 1964, and followed by the decampments of major department stores and other retailers from the city, which is 30 miles west of Chicago.

Most residents also shifted their dining dollars from downtown to suburban malls and other more prosperous towns.

Then, in 1995, Elgin became one of 10 depressed river towns in Illinois to be licensed to have a riverboat casino. The city's Grand Victoria Casino, the most profitable in the state, last year contributed $23.3 million to Elgin's municipal coffers, according to Jon Ridler, executive director of the Elgin Area Convention and Visitors Bureau.

Illinois' riverboat casinos generated total tax revenues of $666 million last year for the state and the local governments where the boats operate.

By comparison, Illinois lawmakers estimated that the Chicago casino and other proposals, including slot machines and video poker, would generate more than $2.6 billion a year in tax revenue.

Elgin, with help from its gaming revenues, has been funding business upgrades through such efforts as the city's Downtown Facade Improvement Program. It has enabled building owners to rehabilitate older structures through grants of up to $150,000. The city has been soliciting restaurant chains, entrepreneurs and residential developers to locate downtown.

"We believe there is room for between 600 and 800 units of housing," Elgin City manager David Dorgan said. "And we would like to see more restaurants."

Five new restaurants have opened within the past year and a half, spurred by such visible signs of downtown redevelopment as a new multimillion-dollar recreation center, a nearly completed library and a new river walk. All the new restaurants are located in rehabilitated vintage buildings built in the late 1800s.

"Riverboat [gaming] proceeds have helped building owners make facade improvements; they're making huge strides in making downtown appealing to everyone," said Lynn Diamond, who owns Latte Dah Cafe, an espresso bar and sandwich and pastry shop, and is a member of the Elgin Heritage Commission.

The city's facade improvement program provided 35 percent of the $400,000 that semiretired attorney and lifelong Elgin resident Frederick Steffen spent on exterior renovation of a building that houses his Cafe Magdalena. "Without that program it would not have been possible," he said.

"Elgin has benefited tremendously," Steffen said, adding that the biggest remaining problem was persuading people to come back downtown to dine. "We have to try to change people's habits," he said.

His Italian trattoria, open for 18 months, has been attracting what he said was decent business that was expected to become more consistent after completion of planned downtown condominiums.

"We're right on the edge," he said. "We just have to hang in there andget over this lousy economy."

Steffen said he also hopes more entrepreneurs will open restaurants downtown to make it more of a dining destination, similar to what has happened in some other Chicago suburbs, including Arlington Heights.

Early business has been slow for Latte Dah, said Diamond, who opened the cafe after losing her job in a corporate downsizing. Her biggest supporters have been other downtown businesspeople, but they are too few in number, she said.

"The potential is huge," she said. "The revitalization has really brought Elgin leaps and bounds from where it was in the last 10 years."

However, Diamond, who opened Latte Dah with the help of a Small Business Administration loan, still has worries. "Our unemployment benefits have run out, and we are struggling to make it," she said.

The possibility of a competing casino in Chicago now poses new worries for Diamond's neighboring business owners.

"I think the effects would be pretty detrimental to Elgin and the other towns with riverboat casinos," said Ridler of the Elgin Area Convention and Visitors Bureau. "Chicago would have a very strong draw away from the casinos in the suburbs. The economic drain would be pretty widespread and far reaching."

Ridler also said that allowing Chicago to have a casino would go against the original regulations that legalized riverboat gambling in order to bring an economic boost to areas like Elgin and such Illinois towns as Aurora, Rock Island, Joliet, East Peoria, Alton, East St. Louis and Metropolis.

"A lot of casino money is put into capital improvements and organizations like ours that are trying to bring in more opportunities for businesses," he said. "There is a possibility that that funding would not be available if there is a drain on our casino."

Ridler's bureau offers area restaurants and other small businesses marketing and advertising resources that they otherwise could not afford, he said.

Joe Follrath and Suzanne Pfaff who lost their previous jobs after their employer merged with another firm, recently opened a Quizno's Classic Subs store in Elgin with the help of a local bank's loan.

"Business has been pretty good at lunch, but we die after 2:30, and we're open till 6," Folirath said. "Our business needs another 40 customers a day."