The pros and cons of expanding gambling in New Jersey

Casino gaming in Hudson County could have a positive economic impact on areas outside of New York City, but at what cost?

Atlantic City promotional Image, courtesy

ATLANTIC CITY, New Jersey, April 12, 2016 – Atlantic City,  once dubbed the “Little Las Vegas,” has been a gambling mecca for decades. In 1976 New Jersey became the only state outside of Nevada to legalize gambling. Currently, however, New Jersey’s surrounding states — Delaware, Pennsylvania and New York — boast casinos and Atlantic City gaming revenues have suffered as a result of these states adopting the cash cow that is legalized gaming.

Though not easily accomplished legislatively, protecting a state’s gaming infrastructure is crucial. In the case of Atlantic City, legislation is clearly needed to help reconstruct the mass appeal that lead to casino openings and the influx of gaming revenues that originally resulted from the opening of gaming venues in the city many years ago.

Failures in Atlantic city have a number of negative outcomes both for the jurisdiction and the state. Decreased state revenues for instance. More pronounced: economic reductions in available entertainment and overall commercial activity positioned in the lower southern half of New Jersey.

New Jersey Assembly Speaker Vincent Prieto (D) supports plans to open casino facilities in his home county of Hudson and a bill sponsored by Assemblyman Ralph Caputo (D) is currently before the legislature. The outcome may not be as dire as some opponents fear.

There is tremendous potential in Atlantic city based solely on the capital infrastructure set in place over  previous decades when the casino industry operated profitably, expanding from a single casino in 1978, to today, where gambling takes place in eight different establishments.

Presently operating casinos are Bally’s Atlantic City, The Borgata, Caesars, Golden Nugget, Harrah’s, Resorts Casino Hotel, Tropicana and the Trump Taj Mahal (the original Trump Plaza Hotel and Casino closed in September 2014 as did the Revel and Showboat casinos).

Passing the bill ACR1 allowing gambling in Hudson County could mean more development in New Jersey. If approved, the state could see $1 billion in new commercial investment. The draw of legalized casino gaming is attractive as it helps preserve and enhance the commodity value of local real estate and provides a buffer against economic erosion.

The argument against a Northern New Jersey casino complex is that it will cut into the once-lucrative pie in Atlantic City. Placing casinos closer to New York City would mean an alternate and closer destination for patrons who now must drive upwards of three hours, barring traffic issues, to reach Atlantic City from Manhattan.

The Casino Control Act, signed June 2, 1977, sought to provide private control of casinos which, it was argued, would allow more effective management. The emphasis of the referendum was to employ casino gaming as a redevelopment tool for a greatly impoverished Atlantic City.

That legislation worked. It could work again for Northern Jersey, bringing commercial development, stable jobs and creating destinations for aging, impoverished areas.

But there have been failures to consider as well, including losses in casino industry revenues as the result of legislative negligence, primarily the smoking ban and, more specifically, the onerous property tax assessment imposed by local government authorities.

If speculators are willing to risk time and capital on creating infrastructure, whether in Atlantic City or Hudson County, they must have made an educated estimate of the ROI (Return on Investment) on such a venture. How can they be enticed?

With the right legislative and economic environment the state can thrive off a smoothly functioning and profitable gaming industry. The legislative failures of the past, however stem from this peculiar notion: Democrats believe that the casino industry was intended to pay for everything in the state. It is not.

Atlantic city should be self sufficient based on residential property tax revenues, with the casino industry serving to anchor property values at or above market rate. This should stymie the spread of economic erosion due to poor economic conditions.

Consider how Atlantic City might have ridden out the recent economic downturn that caused three properties to shutter their doors. If the city had adequately planned for the future instead of treading on private sector gains to fuel public sector “investments,” its current problems might very well have been averted.

The original New Jersey gambling legislation was put together with some level of foresight. The proceeds from the casino industry were dedicated to senior/disabled aid programs, which cover, statistically speaking, a generally economic demographic. It was not intended to be the “fix-all” for every public sector problem, real or imagined, that elected official needed to boast about to boost their re-election chances.

Every time government officials want a fancy building or to add a bonus to public employee pension plans, they ran to the casinos for the money. Once, you could easily sell your house at market rate in Atlantic City because the economy was buoyed by a stable income stream that protected the value of real property within the municipality. But, gradually burdened by increasing state based taxation, the opposite situation–declining property values due to casino insolvency—eventually became true, causing the municipality to become insolvent.

There are two versions of casino legislation currently before the legislature in Trenton, one advanced by the Democrats in Assembly, the other by Democrats in the Senate. The two bills differ by a $15 million dollar margin in terms of the amount of new casino tax revenue that will be allocated to the government of Atlantic City. The Senate proposes a 50% slice, while the Assembly only requires a 35% allocation.

But it all seems a rather moot point, considering that the original legislation was designed to help all seniors/disabled statewide, whereas current plans seems to arbitrarily single out Atlantic City for economic assistance.

This new money simply won’t help out Atlantic City, a municipality clearly mismanaged by its officials. I say that because countless municipalities within the state are able to balance their budgets with significantly less revenues. The rationale behind the current legislation giving Atlantic City’s failed local government even more money to misspend clearly needs to be re-examined.

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