The closure of casinos in Atlantic City has left the municipality in financial crisis. Now New Jersey wants to build more in other places.
A proposal to end Atlantic City’s casino monopoly in New Jersey would spell the end for the struggling seaside resort town. At least that's what opponents of the idea say.
Backers of the ballot measure, however, say it's the city's best hope for revitalizing its downtown and diversifying its economy beyond gaming.
This November, New Jersey voters will decide whether to allow two new casinos to be built in the state. About one-third of any new casino revenue would go to Atlantic City for 15 years for economic revitalization.
The vote comes as Atlantic City, once the East Coast’s gaming capital, has struggled in the face of increased competition in neighboring states. In the past 15 years, more than a dozen casinos have opened in Maryland, New York and Pennsylvania. In the past two years, a third of the city's casinos have closed; the unemployment rate has soared; gaming revenues have been cut in half; and lawmakers have worked to avoid filing for municipal bankrupty.
Is it worth it for the rest of New Jersey to join the market?
Lucy Dadayan, a senior policy analyst with the Nelson A. Rockefeller Institute of Government, thinks not. In a report earlier this year, she found that a new casino typically provides a short-term revenue boost but long-term disappointment as gambling activities slow or even decline.
“At the end of the day, all states are competing for the same pool of gamblers,” she told Governing. “Opening a casino doesn’t mean there will be many more gamblers, particularly with baby boomers aging and millennials not spending as much money on casinos.”
She also disputed claims in the state that the new casinos could collectively generate $400 million in revenue each year. State leaders said winnings at the new casinos would likely be taxed at a much higher rate than Atlantic City’s 8 percent, but to generate $400 million a year, Dadayan estimates the new tax rate would have to be at least 55 percent.
"Even that is highly hypothetical,” she said.
Even the most optimistic revenue assumptions wouldn't significantly help a state that's struggled in recent years with billion-dollar budget gaps, said Dadayan. In fact, she said, the expansion of casinos would "create further budgetary problems for the state -- if not in the short-term, then certainly in the long-term.”
Proponents of the referendum include developers and businesses in northern New Jersey, Republican Gov. Chris Christie, and the assembly speaker and senate president, who are both Democrats. They argue that the referendum would bring back some casino spending and revenue to Atlantic City and the state, particularly in the northern part where New York City’s Resorts World Casino has been a regional attraction.
Opponents, which include casino worker unions and Atlantic City-area stakeholders, say they doubt that the revenue-sharing proposal would generate enough money to make a difference. The city has been in financial decline for more than a decade but recently hit crisis mode. In 2014, four of the city's 12 casinos closed, and the Trump Taj Mahal is expected to close next month. Atlantic City's unemployment rate is already 50 percent higher than the national average. The closures have taken a huge swipe at the city’s property tax revenue, as the total assessed valuation has plummeted from $14.4 billion to $7.3 billion in just two years. On top of that, casinos successfully appealed their property valuations by arguing the city had been overtaxing them. As a result, Atlantic City owed casinos large refunds on taxes paid up to 10 years ago.
But, advocates of the proposed ballot measure say, Atlantic City's downfall is another reason why adding new casinos to the state makes economic sense.
“People no longer have to travel great distances to gamble,” said Assemblyman Ralph Caputo, who chairs the Tourism, Gaming and the Arts Committee. “If we are going to address the reality of ‘convenience gambling’ and reverse the trend of taxable gaming revenue leaving New Jersey, we must adapt.”
Popular support for the initiative has never been overwhelming, and in recent months it's declined even further -- particularly after Jersey City Mayor Steve Fulop said he's reconsidering his support after meeting with officials in Atlantic City. Jersey City was expected to get one of the new casinos.
A recent poll by Farleigh Dickinson University/PublicMind found just 35 percent of residents support casino expansion. That's down from a Rutgers-Eagleton poll in April, which found that 44 percent of residents supported the idea.