New Jersey Running Out of Luck When It Comes to Casino Expansion

Subscribe to Bloomberg | Quint
The Daily Newsletter
News & Stock Alerts

(Bloomberg) -- New Jersey’s latest effort to rescue its collapsing casino industry appears headed to defeat.

A constitutional amendment on the Nov. 8 ballot, which would allow for the opening of two casinos in northern New Jersey, is lagging in the polls after anti-expansion groups backed by New York and Atlantic City casino operators spent heavily to defeat it. The measure proposed steering up to $200 million in tax revenues to Atlantic City in return for breaking its New Jersey monopoly, which opponents say would further damage a gambling hub that’s already at the brink of financial collapse.

"With casinos in north Jersey, it’s almost a guarantee that several more casinos in this town would close," said Cory Morowitz, a casino analyst at Morowitz Gaming Advisors. "If you put large casinos in northern New Jersey, you’re cutting off Atlantic City’s lifeblood."

Atlantic City has been heading toward insolvency since a third of the town’s casinos closed in 2014 amid increased competition from nearby states, while those remaining won a series of tax appeals, further eroding its revenue. The Trump Taj Mahal closed last month, and Atlantic City is moving closer to a state takeover after a New Jersey agency this week dashed its turnaround plan.

With Atlantic City losing visitors, state lawmakers proposed allowing casinos elsewhere, a bid to keep drawing gamblers and the tax revenue they bring. The resolution proposes permitting two in northern New Jersey, at least 72 miles (116 kilometers) from Atlantic City. The bidders must be an owner of an existing Atlantic City casino and willing to commit $1 billion to the projects.

The measure would use some of the new tax revenue to aid senior citizens and the state’s horse racing industry. But the lion’s share would go to Atlantic City: up to $200 million per year for the first 17 fiscal years. However, key details such as the tax rate have yet to be passed in enabling legislation, leaving some dubious of such projections.

"I think we were also hurt by their failure to pass enabling legislation," said Jeffrey Gural, Meadowlands Racetrack chairman and one of the backers of pro-expansion campaign Our Turn NJ. "A lot of criticism was that they didn’t know the facts."

New Jersey Assemblyman Ralph Caputo, a Democrat who was one of the bill’s sponsors, agrees.

"It should have been done simultaneously -- you should have had the enabling legislation to accompany it," said Caputo. "Hopefully when they see more deterioration of the Atlantic City business, I think they’ll be more interested in solving the problem, because how far are we going to let this go?"

Poll numbers suggest the gambling expansion’s chances are slim. In a Fairleigh Dickinson University poll released Oct. 24, 70 percent of voters disapproved of the measure, with 46 percent of respondents answering they heard "just a little" or "nothing at all" about it.

What they did hear, though, was likely negative. According to the New Jersey Election Law Enforcement Commission, opposition group Trenton’s Bad Bet spent $14.4 million on negative ads through Nov. 2. Trenton’s Bad Bet received more than $6 million from Genting New York, owner of Resorts World Casino. Other donors included Empire Resorts, which owns the Monticello Raceway in New York; and JEMB Resorts, an Atlantic City casino owner.

Outspent and facing daunting odds, Our Turn NJ suspended its advertising campaign in September, saying polling showed the referendum was likely to fail. Gural said that the mistrust of the New Jersey legislature, fueled by the ongoing trial of Governor Chris Christie aides Bill Baroni and Bridget Anne Kelly, and a well-executed opposition campaign doomed the referendum.

"It became obvious that this was very similar to Donald Trump or Bernie Sanders -- this anti-government feeling in people’s mind," said Gural. "Their campaign was very effective. Ours was really focused on the facts, which was how much money would go to the state, the seniors, and Atlantic City."

Two casinos in the densely-populated northern New Jersey region could generate $1 billion in annual revenue, theoretically creating $500 million for the state in taxes, Gural said. If they’re unsuccessful Tuesday, lawmakers may retool it in another attempt to resurrect New Jersey’s gambling industry.

"‘No’ does not solve the problems we’re talking about," said Caputo, the lawmaker. "We need to reinvigorate the casino business."

Bloomberg
Stay Updated With OnWeb News On BloombergQuint
Subscribe to Bloomberg | Quint
The Daily Newsletter
News & Stock Alerts