Building casinos outside of Atlantic City may not be sure bet some New Jersey legislators think, according to gaming analysts interviewed by NJ.com, the website of the Newark Star Ledger.
Experts told the website that the Northeast casino market is already saturated and it is uncertain that casinos in Jersey City and East Rutherford — two of the proposed locations — would attract many gamblers who would otherwise head to casinos in New York, Connecticut and Pennsylvania.
“If you build it, it doesn’t mean the customers will come,” said Deb Figart, a professor of economics at Stockton University.
The state legislature is expected to place a referendum on the November ballot to allow casinos outside of Atlantic City, which requires a change to the state constitution. Current plans are to allow two casinos, but sites have not been chosen.
According to the report, Democratic lawmakers are largely in favor of the ballot initiative, and it became a top priority in the waning days of the last state Assembly session. Sheila Reynertson, a senior policy analyst for left-leaning think tank New Jersey Policy Perspective, said that’s because state legislators “without a doubt” spoke only to pro-casino voices, not dissenting opinions, as they rushed to get the initiative on November’s ballot.
“The big winners are not going to be your everyday people who need work,” Reynertson said. “It’s going to be the developers, gaming manufacturers, casino owners … and that’s it. Long-term, I think it’s irresponsible for the legislators to push this as an economic driver for everyday New Jerseyans.”
Four Atlantic City casinos closed in 2014 and Wall Street analysts believe more will shut down this year. New Jersey legislators have been pushing for new casinos to be built in Northern New Jersey, as a defensive move.
Southern New Jersey legislators, however, oppose the bill, which they say would devastate Atlantic City.
But Deutsche Bank Securities, in a report this month, said Atlantic City’s casino industry is collapsing anyway in the face of its competition.
“Over the years, the Jersey casino monopoly has been carefully guarded by southern politicians, even as other markets, such as Philadelphia and New York, have eaten away at Atlantic City’s historic lock on that broader market. Massive revenue deterioration took its toll on the market,” said gaming analyst Andrew Zarnett.
He said the current wave of new development in other states will continue to take its toll on the market and lead to even more resorts closing in Atlantic City.
“We would expect Taj Mahal and a second Boardwalk casino to join the list of shuttered properties in the outer years,” he said “By 2017, we foresee Atlantic City to have two center boardwalk casinos, the Tropicana, and three casino hotels located in the Marina district.”
New Jersey has seen a number of proposals for new casinos, including two separate proposals in the Meadowlands and at Liberty State Park in Jersey City.
Paul Fireman, a Massachusetts venture capitalist and former Rebook CEO, wants to build a $4 billion hotel and casino complex at the exclusive Liberty National Golf Club adjacent to Liberty State Park that he calls Liberty Rising.
Less than 12 miles away in the Meadowlands, in the shadow of MetLife Stadium, Hard Rock International wants to build a casino at the Meadowlands Racetrack.
Atlantic City Finances
Meanwhile, little happened with a proposed rescue package to help Atlantic City pay off some $270 million in debt it currently faces.
However, the Borgata Hotel Casino asked a court to force the city to pay a $62 million bill for back taxes the casino won when it challenged its tax assessment for 2009 and 2010. The payment is part of about $160 million the city owes the casino on top of its $270 million debt. The court would not force the city to pay but instead extended time for the two parties to negotiate. The judge did say Borgata could stop paying taxes until the dispute was resolved, a move that Mayor Don Guardian says would force the city into bankruptcy. Guardian says say the city simply doesn’t have the money and is already facing an about $40 million budget deficit while the state tries to hammer out a rescue plan for the city.
“Although there is no doubt that we owe Borgata money back from prior rulings, the question has always been how do we pay them back fair and reasonably given our current fiscal constraints?” he told the Associated Press. “Having Borgata exercise the option not to pay their first quarter taxes would be devastating to Atlantic City.”
State Senate President Steve Sweeney—a principal architect of the state’s rescue plan—said he wants an Atlantic County bond to pay the debt. The county’s bond rating is excellent while the city’s bond ratings have been reduced to the lowest junk bond levels.
Sweeney said the county could bond for the debt with the city making the actual payments.
However, Atlantic County Executive Dennis Levenson was skeptical of the proposal.
“What guarantee would the county have that the city would pay its debt?” asked Levinson about the bonding idea. “And what guarantee do we have that the state would come through on a guarantee?”
As for the proposed rescue plan, which would allocate more casino monies to the city, it is expected to be introduced in the state Senate this week, Sweeney said.
