Atlantic City, once the gambling capital of the country has suffered great economic distress over the past few years, with increased competition from convenient gambling and casinos outside of the state borders, the harbour front city has seen four of their twelve casinos close in the last few years. This year, 2016, was looking promising; with the remaining casinos stabilising their position in the market, Atlantic City saw a massive increase in profits and also managed to finally agree on a financial rescue plan, with the state of New Jersey, earlier this month; until a report listing the effects of a potential referendum to license a couple of Vegas- style casinos in North Jersey suggested that it could lead to the closure of another three to five casinos in Atlantic City as a result.
New Jersey citizens will have to vote on the referendum in the month of November this year; 2016; if is passed it would allow up to two new casinos to be opened in North Jersey. If the referendum does pass, it will also be the first time in the state’s history that casinos would be built within the state’s boundaries but outside of the iconic location of Atlantic City. While this sounds like bad news for the residents of the city, a stipulation, which is included in the referendum, states that USD 200 million of revenue from the new casinos will have to be sent to Atlantic City for non-casino improvements.
The Potential Negative Effects of the Referendum
However, despite the flow of funds into Atlantic City, the radical shift in the state’s gaming dynamics would present a huge problem for the iconic casinos that have long been the central attractions for the city. Last week, Mark Giannantonio, the CEO of Resorts Casino and Hotel, the first casino hotel to be built in Atlantic City, presented a myriad of issues that would affect the city if these new casinos do open around the corner, at The East Coast Gaming Congress.
According to Giannantonio, if the referendum receives a go ahead at the winter vote, Atlantic City could see closures of three to five of their eight remaining casinos, which would also affect employment in the area and as a result, unemployment will double and 23,000 direct and indirect local jobs will be lost. Unemployment will undoubtedly also affect the affordability of residents and therefore, foreclosures can be expected to double as well.
The points were extracted from a study that was commissioned by Resorts Casinos Hotel and the full report was also released shortly after.
Giannantonio told casino professionals “Our findings are quite clear. Three to five casinos will close fairly immediately. The fallout of those three to five casinos will be, potentially, 23,000 job losses. Foreclosures will double, unemployment will double. I can go on with many, many more metrics.”
He also added, “Somers Point, Galloway, Egg Harbour Township, Linwood…those communities will suffer immensely.”
On the other hand, many disagree with Giannantonio’s report and believe that opening two mega casinos resorts in the state could prove prosperous for the state in the long run. Supporters of North Jersey megaresorts, each of which will end up costing over USD 1 billion to build, have stated that the casinos could help New Jersey retain a larger section of their gambling revenues over the years; competition for the gambling dollar has seen money siphoned away from New Jersey to neighbouring states by casinos in such as Resorts World Casino in Queens and Empire City Casino in Yonkers, New York. Three more casino projects have been approved and are going to be built in upstate New York, which are expected to open their doors to customers in the next few years; many experts also believe that it is just a matter of time before Manhattan decides to open their very own casino resort.
Jeff Gural, the CEO of New Meadowlands Racetrack, who is a supporter of the North Jersey Casino project, clearly disagreed with Giannantonio’s arguments and called it “crazy” and “meaningless”.
Gural went on to point out that the revenue sharing aspect of the referendum will definitely bring some much needed improvements to Atlantic City, as advocates of the referendum have said that the North Jersey Casinos will generate USD 200 million a year, in subsidies to be used for development in Atlantic City, for the next 15 years.
Gural, who himself wants to build a casino on his Meadowlands Racetrack, said, “You guys are nuts. This is your best chance. If the referendum fails, it’s coming back two years from now with nothing for Atlantic City.”
He then turned the argument to a more personal note and said to Giannantonia, “You need it more than anybody. To get to your casino, you have to drive through a slum.”
New Jersey Senate Remains Optimistic.
Despite the grim forecast for Atlantic City, New Jersey Senate President, Stephen Sweeney remained optimistic. He said that though Atlantic City has suffered financially over the years, the city is ready for a rebound.
He added, “The best is still ahead.”
Sweeney also mentioned that the November referendum was designed with Atlantic City and its unique position and the state’s gambling capital in mind. The referendum will help, rather than harm, America’s Playground; the legislation, to expand gaming to other parts of the state, was always meant to forward some of its benefits to fund the development of Atlantic City.
He said, “When we came up with legislation to expanding gaming, it was to ensure Atlantic City would benefit and have the funding to diversify its economy.”
Word of Caution from the State Assembly
Despite all the positive pointers the referendum holds for Atlantic City, Giannantonio’s cautionary message rings loudly. The USD 200 million of benefits that is to be forwarded by the North Jersey Casinos to Atlantic City is not guaranteed by the law scheduling the referendum. Secondly, it should also be noted that no law has yet been written to establish the taxes these new casinos will have to pay to the state of New Jersey; these are expected to be detailed in subsequent legislations after the referendum has passed. Therefore, voters are being asked to make a decision without all the information and important financial figures. Assemblyman Chris Brown, who has led the charge against North Jersey casinos suggested that the promise of beaucoup subsidies for Atlantic City is a ruse.
He said, “Without a tax rate, you don’t know what the true profits are going to be.”
Brown added, “Anybody who says ‘Don’t listen to studies prepared by experts,' you should question. Why would they want us to not look at what experts say?”
Whether or not the referendum is passed during the November vote, it will produce corporate winners and losers on both sides of the legislation. Without a clearer picture of how this will affect the citizens of New Jersey and Atlantic City in the future, the difficult task of making the call ultimately rests with the residents of the state.