The three-month closure of casinos in Atlantic City did more than cripple the bottom line for gaming companies. It also hurt the state and local programs that depend on healthy casino revenues.
The Casino Revenue Fund, financed by a tax on gaming revenues, pays for a variety of programs for senior citizens and disabled residents, including pharmaceutical assistance, the community care program, food distribution, medical and public transportation and emergency housing needs.
The total estimated loss to that fund due to the shutdown is $94 million—$63.8 million from casino taxes, and the balance from the loss of hotel room fees and promotional gaming credits.
“The state is going to need help from the federal government to plug a lot of budget holes if we are going to fund these programs like we did in past budgets,” Assemblyman Vince Mazzeo, who was just reappointed to the fund’s advisory board, told GGB News.
Atlantic City’s nine casinos took in almost $86 million in May, nearly all from online operations. While that figure jumped 124 percent from the same month last year, the overall revenue numbers fell 65 percent compared to May 2019. Sports betting generated less than $10 million for the casinos and two racetracks.
On June 15, the state Senate approved a series of tax breaks for the casino industry, according to the Press of Atlantic City—among those breaks, a reduction in the amount of money dedicated to the Casino Revenue Fund.
While some lawmakers expressed reservations about both the optics of pumping money into casino corporations and the impact on the fund, other senators said otherwise.
“My concern has been and remains with the families who overnight found themselves unemployed and left to deal with a broken unemployment system for the last three months,” said Senator Chris Brown, a Republican who serves the New Jersey’s 2nd Legislative District, which includes Atlantic City. “Working in a bipartisan manner, we took a step toward saving 27,000 casino jobs while also assisting our small businesses so we can put our Atlantic County families back to work.”
Senate bill S2400 cuts gaming revenue taxes for one year, beginning from the date the nine casinos reopen. It also eliminates hotel fees through 2020, defers certain licensing fees and permanently allows for a 100 percent deduction of provisional gaming credits and coupons against gross revenues. The bill also allocates $100 million of Covid-19-related federal grant money to the state Economic Development Authority for small business assistance.
The bill includes an amendment that decreases the time casinos can receive a reduction in gaming revenue taxes, and could reduce the amount of casino-related taxes and fees paid to the state and the Casino Reinvestment Development Authority (CRDA).
That agency gets funding from a host of tourism-related services, all of them shredded by the closures of casinos, hotels and restaurants and bars. Here’s a breakdown:
- $2 per night room fee funds the Convention Center Division budget, minus the Urban Revitalization Program funds
- $3 per night room fee funds repayment of hotel room bonds and to a minimum extend, the CRDA operating budget
- $3 of parking fee allocates 50 cents for the Casino Revenue Fund while $2.50 pays down CRDA debt service
- 25 percent of gross revenues go towards non-gaming expansions/improvements, as well as CRDA project funding, but now redirected to Atlantic City to help pay down its debt
- Luxury tax collected from casinos and non-casino entities, which includes a 9 percent hotel tax, a 3 percent tax per alcoholic drink and 9 percent entertainment per ticket tax. These taxes pay for bonds as well as operations maintenance and promotion of the Convention Center and Boardwalk Hall, and funding for Meet AC, the former convention and visitors authority
The bill could reduce the amount of casino taxes and fees paid to the state and CRDA by more than $225 million over a two-year period, according to the Press. The agencies that still get their money are the ones that regulate the industry: the Casino Control Commission (CCC) and the Division of Gaming Enforcement (DGE).
“We anticipate the closings will have minimal impact, as the casino industry continues to fund the regulatory expenses of the DGE and CCC,” DGE spokesman Leland Moore told GGB.
