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Op-Ed: Critical Information is Missing in Push to Expand Casinos in New Jersey

Who gets tax revenues? What about competition? Who will upgrade roads and transit? And exactly how will this help Atlantic City?

gordon macinnes
Credit: NJTV
Gordon MacInnes

Here we go again: another hasty proposal to convince legislators and the public that more gambling will painlessly create jobs, grow the economy and enrich the state’s coffers. This year’s stampede by the governor and legislative leaders is to expand casino gambling to North Jersey, now that the Atlantic City monopoly has been broken and the Northeast casino market is saturated in all neighboring states.

The advocates for two new casinos assert that two powerful reasons prevail for the action:

• Two new casinos will help ignite the state’s economy, creating thousands of new jobs and producing substantial new tax revenues.

• Some of those new revenues will help stabilize Atlantic City and put it back on the road to becoming a viable non-casino tourist destination.

These are worthy goals, but their attainment by expanding casinos to the north is highly unlikely. Before casting a vote, both legislators and citizens should have answers to at least these crucial questions:

Instead of saving Atlantic City, won’t two North Jersey casinos only accelerate its decline?

Four of Atlantic City’s 12 casinos closed in 2014, and Wall Street analysts project that North Jersey casinos would quickly close two or three of the eight that are left.

In the meantime, the Atlantic City government is near bankruptcy and state initiatives to restore the city have been laggard and ineffective. Plus, nothing being proposed about a state takeover of the Atlantic City government even hints at a realistic effort to make Atlantic City a non-casino destination.

Will New York stand quietly by, while New Jersey steals its resident and tourist gamblers?

New Jersey surrendered its 25-year monopoly on the East Coast to casinos and “racinos” opening in Pennsylvania, Delaware, Connecticut and Maryland without so much as a peep. Despite the saturation in a casino market that is showing little or no growth, neighboring states persist in carving the market into smaller pieces – eight new casinos are scheduled to open in the Northeast in the next three years. There are no guarantees that Gov. Cuomo will not move quickly to open Manhattan to casinos if the North Jersey expansion is approved, thereby killing a short-lived monopoly in Metro New York.

How can such generous revenue promises be made without specifying tax rates?

As the question of what tax rate new casinos will pay has surfaced, proponents of expanding gambling have done their best to shove these concerns aside. The Senate president, for example, says he’d prefer to address the tax rate after the amendment clears the Legislature.

This delay has been coupled with a downward slide of what we might expect the tax rate to end up being. Last year, rates as high as 55 percent were in play. As of this month, the Senate president says he is looking at something in the 20 to 30 percent range.

“No way would I consider 50 percent,” he said.

The lower the tax rate, the less New Jersey will benefit from the modest economic boost new casinos may bring. In fact, casino operators may be negotiating the tax rates downward since they know they won’t be developing cash cows in a crowded gambling market that seems to be on the decline. It’s hard to imagine that the revenue estimates being touted by proponents can become a reality with tax rates like those the Senate president suggests are likely.

Moreover, the cap of one-third of such revenues on assistance to Atlantic City suggests that the true purpose of the amendment is not to aid in the restoration of Atlantic City. Even with an optimistic projection of $450 million a year in new casino tax revenues, the cap of $150 million for Atlantic City – which cannot meet its current obligations and property tax refunds – means there is little to no chance that even a well-considered plan could be implemented. And no such plan exists nor is it clear that one is being developed.

How will necessary transportation improvements be made, and who will pay for them?

None of the casino expansion proponents have mentioned that traffic congestion and public transit delays in Hudson and Bergen counties are already a daily problem. Even before the area’s largest mall, American Dream, opens (it’s scheduled to open next year), Routes 3 and 17 are already among the most heavily traveled roads in New Jersey. No mention in the transportation capital plan through 2021 is made of major improvements to southern Bergen County. The condition of roads and their congestion in Hudson County is even worse.

There is no money in the Transportation Trust Fund to take on any new projects. Will the Legislature proceed with the pushing of new casinos even if that issue is not solved? Will the capital plan be modified to give such large projects highest priority? And if so, will it be at the expense of repairing some of New Jersey’s 2,000-plus failing bridges, or upgrading our public transit system? Lastly, will new casino developers be required to chip in for these essential investments – and if so, how much?

It must be that New Jersey’s political leaders fear that an open discussion of these questions will hinder their lickety-split drive to slide the referendum past the Legislature and the citizens of New Jersey.

Gordon MacInnes is president of New Jersey Policy Perspective. He served as the assistant commissioner of the New Jersey Department of Education and was a member of the New Jersey State Senate and General Assembly. He also directed the New Jersey Network and was the first director of the Fund for New Jersey. He's also a current member of the Rutgers Board of Governors, though his opinions expressed here represent his views and NJPP's views only."

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