Atlantic City has been on a bad run the last several years, but it’s seldom faced as much bad news all at once as it has in the last week.
In successive order, a plan to expand casino gaming in New Jersey—bitterly opposed in the city—re-emerged after it appeared stalled, the state Legislature moved to completely takeover the running of the resort and a plan to stabilize casino taxes in the city was substantially changed after it had already been approved by the legislature.
And finally, state figures show casino revenue for 20115 was down 6.5 percent.
The bad news started when New Jersey Governor Chris Christie announced a compromise had been reached on plans for expanding casinos into northern New Jersey.
Christie was joined in announcing the compromise by state Senate President Stephen Sweeny and Assembly Speaker Vincent Prieto, who had sponsored competing plans for the expansion that deadlocked in Trenton.
Any plan ultimately must be approved by the state’s voters, as it requires a change to the state constitution to expand gambling outside of Atlantic City.
The legislature will now consider Sweeney’s bill with an important amendment that any new developer has to invest at least $1 billion in the project, as recommended by Prieto.
“We want real investment in the state of New Jersey,” Sweeney said. “We don’t want slots in a box.”
The new plan also reconciles some major sticking points between the two competing plans. The major disagreement was over what casino companies could bid on the projects, with Sweeney’s original plan calling for only existing operators in the state—meaning they operate in Atlantic City—eligible and Prieto’s plan allowing one new developer to apply. Prieto’s plan was seen as protecting already announced proposals for casino in the Meadowlands and Jersey City, and others who he said had expressed interest, including Wynn Resorts and Las Vegas Sands.
The new bill would have given existing Atlantic City casino operators six months to propose projects in northern New Jersey, but an amended bill reduced that window to 60 days. If no proposals are made, both new licenses would be available to any interested company.
“I don’t care who builds them as long as they get built in the right fashion,” Prieto said.
“I have talked to many individuals that have expressed interest in coming into New Jersey,” Prieto told NJ.com. “Mr. Wynn is one of those individuals that has shown interest in different sites in the area.”
Capital investor Paul Fireman has also proposed building a $4 billion hotel and casino in Jersey City. Meadowlands Racetrack owner Jeff Gural has also proposed partnering with Hard Rock International for a major casino project at the track.
According to the Press of Atlantic City, existing Atlantic City casino operators could partner with outside companies which could own up to 49 percent of a new casino.
The final plan allocated about 50 percent of the gaming taxes to go Atlantic City. Prieto’s plan had called for about 35 percent. That money will go to a non-profit investment fund, but there were no details on who would administer the funds or receive the funds.
The agreement will also include language forcing operators to propose projects within a certain timeline “that will address the ability to make this move quickly,” Christie said, eliminating any winning Atlantic City bidders from dragging their feet.
Since the legislature was unable to agree on a plan for new casinos in its previous legislative session, which ended January 11, this new plan will have to pass by a three-fifths majority in both houses for a referendum to go before voters in November.
The new bill was passed by the state Senate 33 to 6, but has not been voted on in the state Assembly, where a three-fifths majority will be harder to achieve. The expansion is opposed by many southern New Jersey politicians who see it as a threat to Atlantic City’s casinos.
“It is foolish to think that gaming in North Jersey would do anything but cannibalize an already-saturated market in the same way that casinos in Pennsylvania, Delaware, and Maryland have cannibalized ours,” said state Senator James Whelan, in a press statement. Whelan represents Atlantic City.
Sweeney, who also represents southern New Jersey, but closer the Philadelphia than the shore, acknowledged that the expansion would likely cause Atlantic City’s casinos to lose jobs, but said the plan will provide funding to help “create a city that’s an entertainment destination” and bring year-round businesses to the resort, according to the Press.
The plan doesn’t name specific locations for new casinos, saying only that they must be in separate counties and at least 72 miles away from Atlantic City.
The plan also doesn’t name a specific tax rate for the new casinos. Some proposals have been as high as 55 percent, even though Atlantic City casinos only pay 8 percent.
Takeover bid
Sweeney is also a principal sponsor of a bill to have the state takeover running Atlantic City for the next 15 years. The city’s budget is already monitored by the state and Christie also appointed an emergency manager to oversee the city’s operations last year.
But the bill would expand the state’s control to municipal authorities and assets and keep the city under state supervision. The state Local Finance Board would be given control of “any of the functions, powers, privileges, immunities, and duties of the governing body.”
Sweeney said the city should declare bankruptcy if the legislature doesn’t quickly approve it.
“This is a very clear statement to Atlantic City,” Sweeney told the Associated Press. “Get your act together. Knock off the B.S. and start addressing what you need to address. The state is not going to come in and bail you out anymore. You need to fix this.”
The bill caught most Atlantic City officials off guard.
“It took us 30 years to get into this mess,” Atlantic City Mayor Donald Guardian told the Wall Street Journal. “You gotta give us a few years to dig ourselves out.”
However, Guardian and City Council quickly came together—locking arms symbolically at a press conference—and vowed to fight the effort, which Guardian called a “hostile takeover” and Atlantic City’s “Pearl Harbor.”
City Council President Marty Small also said the state has a poor record of taking over municipalities.
“The state hasn’t done well of anything they have taken over,” Small told the Press of Atlantic City. “They took over the tourism district and four casinos closed.”
Other officials pointed out that the state also already oversees the state Casino Reinvestment Development Authority—which oversees the city’s tourist district and the city’s convention and visitor’s bureau—and the Atlantic City International Airport.
Atlantic City’s local government “wouldn’t exist” under the proposed bill, Whelan said.
“A state takeover threatens to disenfranchise the residents of Atlantic City, removing their democratically-elected government,” Whelan said in a press statement adding that the move would be a “disaster.”
Since the state already controls hiring, firing and spending, city officials charge that the move is being made to seize control of city assets such as its Municipal Utilities Authority and the largely undeveloped Bader Field area, the city’s former municipal airport.
The MUA is seen as a major asset, which Sweeney has said could net the city $100 million.
“When I introduced the takeover bill, it’s for one reason,” Sweeney told the Press. “When you watch the bickering that’s going on in Atlantic City between the council and the mayor and the water company, well when Bayonne was in trouble financially, they sold their water company. It was worth a hundred and something million dollars.”
Sweeney later told the AP “It’s like you have a house in foreclosure and you’re sitting on a pile of cash with assets you don’t want to sell. Either they’re going to take it seriously or else we’re going to find a solution for them.”
Guardian, however, said the council, his administration and the emergency manager appointed by Christie have all concluded that the city would be better off not selling the authority. Authority officials also warned that selling the utility would likely mean water rates would rise in the city, hurting its poorest residents.
The MUA has been a sought-after asset in Atlantic City. Philip Norcross, brother of South Jersey power broker George E. Norcross III, is a lobbyist for New Jersey American Water and was part of a meeting in July that discussed a state takeover of assets in Atlantic City, according to Philly.com.
“The only thing that some people in Trenton wanted was the MUA, to sell it,” Guardian told the website and who wants the city itself to take over the independent utility. “But the emergency manager, as well as city council and myself, have agreed that made no sense.”
As for Bader Field, the city has tried repeatedly to solicit development proposals for the former municipal airport, but with casino construction at a halt in the city, has not found many takers. Council recently temporarily leased the property to a company for use as athletic fields.
PILOT Bill
The legislature also passed some last minute revisions to a group of bills dubbed the Atlantic City rescue plan. The main bill sets a payment in lieu of taxes plan for city casinos—or PILOT—to help stabilize the resort’s taxes and stop costly casino tax appeals.
The revisions included some made by Kevin Lavin, the state appointed emergency manager of the city’s finances and a vocal opponent of the bill, state Assemblyman Chris Brown, who represents the city.
According to the AP, the amended bill requires the casinos to make $50 million in additional payments over seven years, and would share 13.5 percent of the money collected from the casinos with Atlantic County’s government and the city’s schools to help prevent tax increases for those entities.
The bill also considers revenue streams other than gambling when calculating how much the casinos owe, and sets a collective minimum payment of $120 million per year for the eight casinos. Under the previous version, the collective payment was tied to casino revenue and could have fallen well below $120 million over the 15 years of the plan.
It also sets a goal of securing $10 million for economic development projects for the Casino Reinvestment Development Authority, and $8 million to continue marketing and tourism advertising for the resort after the abolition of the casino-funded marketing arm the Atlantic City Alliance, which had a $30 million yearly budget.
The bills also take effect in 2016, rather than retroactive to 2015.
“This makes it more fair for everyone, all the taxpayers, instead of just a handful of casinos,” Brown told the news service, although it penalizes businesses and residents in Atlantic City.
The amendments were approved despite the fact that the package had already been approved and is awaiting Christie’s signature. He has until January 19 to sign the bills.
Whelan, however, charged that the bill allocates too much money to Atlantic County, while leaving less for an already cash-strapped city.
“How is this fair?” he asked. “If Atlantic City takes a haircut, everyone should take a haircut.”
The bill also requires casinos to pay regular tax rates on any new construction or expansions during the next 15 years, a provision Whelan charged would help the city’s bigger casinos and discourage smaller casinos from expanding.
The changes in the PILOT program and the state’s move to take more control of the city appears to have had an effect on the city’s bonds, with Bloomberg News reporting that some of the city’s tax-exempt bonds have increased their value in regular trading since the announcements were made.
Casino Revenues
And finally, figures released by the state Division of Gaming Enforcement show that the city’s eight casinos took in $2.56 billion in 2015, a 6.5 percent decline from 2014.
According to the AP, the year-end casino figures for 2015 show five of the eight casinos won more that year than the year before. The largest percentage increase was at the Golden Nugget, which was up 24.6 percent for the year to $231.2 million. The biggest decline was at the struggling Trump Taj Mahal, which was down 16.5 percent to $180.2 million.
Internet gambling showed a 21.2 percent increase in New Jersey in 2015, rising in its second full year to nearly $149 million.
The monthly figures for December show the casinos’ collective revenue up less than 1 percent compared to December 2014.
