The New Jersey state legislature last week was set to consider several bill that would have a major impact on Atlantic City and its future.
In the final legislative session of the year, the state Assembly approved a package of bills designed to rescue the disastrous financial situation in Atlantic City government. Tax appeals by the casinos have been routinely won by the casinos, forcing the city to repay over-assessed taxes and hitting small businesses and residents hardest. New Jersey Governor Chris Christie had vetoed a bill that included a PILOT (payment in lieu of taxes) program that would have each of the city’s eight casinos make specified payments for 15 years instead of property taxes. But Christie wanted more accountability from the city.
The $30 million that had funded the Atlantic City Alliance, the marketing agency for the city, would instead be steered to the city for operating expenses. Christie is demanding that the state hold it for two years until the city develop a fiscal plan acceptable to the state.
The state Senate has yet to schedule a vote, which would presumably push it into the new year. The next voting session will be held on January 11. But Atlantic City Senator James Whelan believes it can still get done.
“The dialogue will continue and I am hopeful that we can get them done and before the lame duck session is concluded,” he told the Philadelphia Inquirer.
Atlantic City Mayor Donald Guardian was upbeat about half a win.
“For Atlantic City, for South Jersey, this is very good,” Guardian told the Atlantic City Press. “Yes, we’re going to have to live to battle another day with North Jersey casinos, but this is very important for us short term.”
And that next battle may come soon since, on the front burner in Trenton is legislation that would lead to a statewide referendum to change the constitution allowing casinos to be located outside Atlantic City. Each house of the legislature has a different plan.
Atlantic City would see less revenue from casinos built in northern New Jersey under a plan announced by state Assembly Democrats, which control the lower house.
Democrats in the state Senate initially proposed a plan to build two casinos in northern New Jersey. The plan called for 49 percent of tax revenue from the new casinos to be used to redevelop Atlantic City, the only municipality in the state currently allowed to host casinos.
The Assembly plan would cut that figure to 33 percent with the difference going to programs for seniors and disabled residents.
The Assembly plan also differs from the Senate plan since it allows casino companies that are not currently licensed by the state and do not already own an Atlantic City casino to seek one of the two proposed projects. This is seen as helping proposals already made for the Meadowlands and Jersey City. Hard Rock has reached an agreement with owner Jeff Gural to locate a $1 billion casino next to the Meadowlands racetrack. In Jersey City, officials have been negotiating with former Reebok Chairman Paul Fireman about locating a $4 billion-plus casino on the banks of the Hudson River, a short train ride away from New York City.
The Senate plan would require the potential companies to already be licensed by the state and operating in Atlantic City or the owner of a holding company that has a New Jersey casino license and operates a casino in another jurisdiction with similar licensing standards.
Senate President Steve Sweeney, the main sponsor of the state Senate plan, is not backing down from that demand.
“I am not going to betray southern New Jersey and let Atlantic City fall into the ocean,” said Sweeney, a Democrat from a nearby South Jersey county. “That’s not happening. I’m pretty strong where I’m at.”
Sweeney says a connection between the two North Jersey casinos and Atlantic City is important.
“If you gamble in the Meadowlands, you earn comps that you can use in Atlantic City,” Sweeney said. “It creates that linkage.”
The plans are actually proposals for a referendum to go before voters. New Jersey’s constitution currently limits casinos to Atlantic City, which has been struggling in the face of competition from new casinos in nearby states such as Pennsylvania, New York and Maryland. Voters would have to approve construction of casinos outside of the resort.
With two competing proposals, both were approved by committees and advanced. The Assembly Judiciary Committee and the Senate Budget and Appropriations Committee both advanced the bills and made some slight changes to the respective plans.
A sticking point, however, remains over the issue of who can seek to build the new casinos, as well as the division of gaming taxes to Atlantic City. No tax rate is mentioned in the bill, but will be established following passage of the legislation.
The Plans
The Assembly plan would dedicate 63 percent of state tax revenue from the new casinos over the first 15 years to two places according to NJ.com:
• Half for programs for seniors and disabled persons—something Atlantic City casino tax revenue currently goes toward. The Assembly committee later added another 2 percent to this aspect of the plan.
• Half toward state aid to each county and municipality in New Jersey for programs and property tax relief for senior citizens and disabled residents.
Another 35 percent of all tax revenue over the first 15 years would help aid redevelopment in Atlantic City, with a small percentage going to the state’s horse-racing industry.
The Assembly plan also allows companies that don’t currently own an Atlantic City casino to vie for one of the proposed casinos—though no locations for those casinos have been named yet.
Under the Senate plan, only one-third of all tax revenue generated from the casinos for 15 years would go to Atlantic City to help reposition the city away from an overreliance on casinos through the development of non-gaming attractions. Half of the first $150 million would go toward rebuilding Atlantic City. The aid would decline by 10 percent for every subsequent $150 million produced by the tax. Two percent would go to the cities that host the new casinos. Half would go to the seniors and disabled. The Atlantic City aid wouldn’t kick in until year two. In the first year, all tax revenues would go to the Casino Revenue Fund, which currently receives only casino gaming tax revenues.
The Senate plan also requires both new casinos be operated by companies that already are licensed by the state and own casinos in Atlantic City.
Assemblyman Ralph Caputo (D-Essex), a former casino executive and chairman of the house’s gaming committee, said members of his chamber “see things a little differently” than the Senate.
“We’ve got to present something that the public is going to accept,” he told NJ.com. “We know Atlantic City has to be assisted. But I think 49 percent was quite high.”
Both plans for northern casinos envision a much higher tax rate for the new casinos than Atlantic City casinos pay. Atlantic City casinos pay a rate of 8 percent. Hard Rock, for example, has offered to pay a 55 percent tax.
Since only one plan can go before voters, it suggests that Democratic leaders in the two houses will have to work quickly to agree on a deal if the measure is to be voted on in the current legislative session, which ends January 11. The legislature can either decide on a unified plan or pick one of the two competing plans.
There are two ways a referendum can be approved. It can either win a simple majority in both legislative houses for two years, or win a two-thirds majority in the houses in one year.
Proponents of the plan have said they want to get a plan voted on this year and then again next year rather than try for a two-thirds majority.
No locations for the new casinos have been named in the plans but the two sites most often discussed are at the Meadowlands sports complex and in Jersey City.
The Meadowlands is home to a harness racetrack as well as the football stadium that houses both the New York Giants and Jets.
Assemblyman Ralph Caputo, an Essex County Democrat, told the AP that Assembly members thought the Senate bill was too restrictive.
“This wasn’t done just for Hard Rock,” he said. “We’re open for business in New Jersey. To say that both operators have to come from existing operators doesn’t bode well for the state. This is the fairest way to do it.”
South Jersey Reaction
Either proposal is likely to see strong opposition in the southern part of the state, where many see new casino construction as simply adding more competition for Atlantic City. Several southern New Jersey pols spoke against the plans at their respective committee hearings.
“I’m very worried. Most in the region are very worried,” Whelan, a former Atlantic City mayor, told NJ.com. “My thinking all along is: There is an inevitability to this being on the ballot. The question is: Can we defeat it at the ballot box?”
Whelan said the “good news” is that there’s “a wide gap between Senate and Assembly bill.
“Hopefully we won’t have a question at all,” he said.
Whelan also got into a war of words over the move with southern New Jersey Assemblyman Chris Brown, who has been a vocal critic of the plan. According to the Press of Atlantic City, Brown wrote a letter to Whelan, calling on him to not post the Senate resolution as chairman of the Senate State Government, Wagering, Tourism and Historic Preservation,
The resolution, however, was sent to the Senate Budget and Appropriations Committee, which is chaired by Senator Paul Sarlo, a prime sponsor of the North Jersey casino legislation.
Whelan responded by saying that anyone thinking the plan can be derailed through procedural moves is kidding themselves.
Atlantic City Mayor Guardian also painted a bleak picture for the city—which saw four casinos close in 2014 and lost 8,000 jobs—if the plans are eventually approved.
“Whole families lost their only source of income after being ‘Day One’ employees at the casinos that they had invested their whole lives in,” Guardian told the Associated Press. “Auxiliary services that depended on the thriving casinos died a slow death as each casino went dark and no longer needed their services. Dentists, lawyers, teachers, bankers, real estate agents, restaurant owners, and just about everyone who made a living in Atlantic City and the surrounding areas felt the terrible effects of broken promises from expanded casino gambling and oversaturation of the market.”
