Amendment to Allow Casinos Outside Atlantic City Odds-On to Lose

Chase Brush | November 3, 2016 | Elections 2016, Politics
Supporters of a measure that would allow gaming in north Jersey are resigned to defeat in next week’s ballot but are confident they’ll eventually succeed

roulette gambling
When they go to the polls next week, New Jersey residents will decide whether casino gambling should be expanded beyond a beleaguered Atlantic City. Public Question #1, as it will appear on the ballot, asks voters if they want to amend the Constitution to allow gaming outside of the city, to which it’s been limited by the state for the past 30 years.

It’s a decidedly historic question, given the fact that not since 1976, when legalized gambling first came to New Jersey via an approved constitutional amendment, have residents voted on the issue of gaming in the state. Proponents of the measure argue allowing casinos in places like north Jersey would spur economic development, attracting $7 billion in new investment and as many as 12,000 new jobs. They also say that — by funneling some of that revenue into Atlantic City’s depleted coffers — it would provide a lifeline to the city, which is still facing a state takeover after Gov. Chris Christie’s administration rejected its recovery plan this week.

On the other hand, opponents of the constitutional amendment counter that any benefits reaped by an expanded gaming market would be offset by the costs, especially those Atlantic City is expected to incur, given its precarious economic footing. The seaside gaming mecca, which has had a monopoly on casino gambling in the state since it was first legalized, has seen five of its 12 casinos shutter their doors over the last several years as casinos have cropped up in neighboring states and siphoned off its customer base. More competition from outside the city’s bounds, they argue, would only exacerbate that situation.

“I think people look at that and think, what are we getting?’ said state Senator Jim Whelan, who served three terms as mayor of Atlantic City in the 1970s. “It’s not the cure-all that some people would have you believe. We really don’t need it right now.”

That conflict — between opponents and supporters of north Jersey gaming, or any gaming outside of Atlantic City — has been the defining feature of the measure’s journey to the ballot. Lawmakers in Trenton began mulling the idea as early as 2014, arguing the state was losing out on an opportunity to recapture valuable gaming revenues that were making their way to places like New York and Pennsylvania; those revenues had been cut in half from a high of $400 million by increased out-of-state competition. In May they gave their final approval to the referendum, asking voters to allow two casinos to be built in two different counties at least 72 miles from Atlantic City.

As crafted, the amendment would also require some of the new revenue generated — up to $200 million per year over the first 17 years after the new casino openings — to be redirected to help revitalize Atlantic City. Additionally, it would offer companies that already hold casino licenses in the city a six-month window during which they would be given priority in drafting proposals, with an investment of at least $1 billion, for the new casinos.

But the divisive nature of the debate has made the question one of the most expensive the state has ever seen. Special-interest groups on both sides of the issue have poured millions of dollars into campaigns aimed at swaying voter opinion on the issue, breaking the state’s previous record for the most money ever spent on a ballot question. Most of that money — over $20 million and counting — came from Our Turn NJ and Trenton’s Bad Bet, two organizations leading the charge for and against the measure. All told, supporters of the question have raised $9,498,545 and opponents $13,697,000.

While it’s unclear how much of an effect that spending has had on voter sentiment — New Jersey residents have long responded with skepticism to casino expansion in the state, with polls even before the measure had been proposed in Trenton finding a majority of voters against the idea — those involved in the referendum say the odds of its passing aren’t looking good.

Seventy percent of voters said they were opposed to constructing casinos in north Jersey, according to the latest Fairleigh Dickinson University Public Mind poll, with just under a quarter in favor. That’s up from the 58 percent who said they were opposed in June — a statistic that led Our Turn NJ to fold its hand last month and end the expensive media campaign it had mounted in favor of the measure.

“I think it’s fairly obvious that we expect to lose, which is why we stopped campaigning,” Jeff Gural, one of two main underwriters of Our Turn NJ, told NJ Spotlight. “It’s unfortunate, but [the opposition] basically tuned in to the mood of the country that you can’t trust the politicians, and that’s been their campaign.”

Gural, who owns the Meadowlands Racetrack in East Rutherford, has been lobbying for years to build a gambling hall there, citing its proximity to a densely populated Manhattan in its favor. He pointed to the amount of spending from the opposing group as the main reason for the measure’s likely failure. He said opponents of the measure relied on an anti-Trenton message to sway voter opinion, painting it as a botched plan that lacks specifics and that lawmakers are destined to mishandle. That message, he said, drowned out that of Our Turn NJ, which focused more on the economic benefits that north Jersey gaming would bring to the state. He also jabbed at lawmakers who helped to get the question on the ballot in the first place, saying they didn’t do enough to defend it in the face of the opposition’s criticisms.

Both Gural and Paul Fireman, chairman of Fireman Capital Partners and developer of Jersey City’s Liberty National Golf Course, where he’s proposed building a casino, put $5 million into Our Turn NJ.

“[Lawmakers] didn’t come out to defend the attacks on Trenton. So basically the opposition was saying you can’t trust Trenton, and there was never a response to say, well, you can trust us, this money would go where it needed to go,” Gural said. “It was hard to watch, where they’re attacking people, and there’s nobody responding to the attacks.”

Other longtime supporters of the measure also predicted a likely defeat, saying a combination of factors — including a lack of specifics in the amendment itself — helped doom it. Assemblyman Ralph Caputo (D-Essex), chairman of the Assembly’s Tourism, Gaming and the Arts Committee and sponsor of previous legislation to expand other forms of gaming in the state, said the plan failed to name a tax rate for the new casinos. He said it also mistakenly restricted the offering of new casino licenses to Atlantic City entities, which deterred outside companies that might otherwise benefit from the referendum from coming in to support it.

That created a lopsided playing field, Caputo and Gural said, leaving Atlantic City casinos — only one of which, Resorts owner DGMB Casino LLC, spent money against the measure — to fight against better funded, out-of-state interests such as the Genting Group, the Malaysia-based global casino operator that was the main financer of Trenton’s Bad Bet.

The Genting Group controls the Resorts World casino at Aqueduct Racetrack in Queens and is building another gambling hall near Monticello, N.Y. which is expected, Gural said, to steer yet more New Jersey customers away from Atlantic City. Two more out-of-state groups — Hotel Restaurant and Club Employees and Bartenders Union Local 6 UNITE HERE and New York Hotel and Motel Trades Council, AFL-CIO — also spent a collective $1 million against the question.

“You’re talking about the well-heeled corporate labor interest outside New Jersey, and the reason for it is they want to keep billions of dollars in gaming revenue flowing into their pockets,” Caputo said. “They want to keep things as they are.”

But opponents of the ballot question, which include South Jersey lawmakers and Atlantic City stakeholders who argue north Jersey gaming would be economically disastrous for the southern part of the state, welcome the prospect of the question’s defeat. They’ve been calling on voters to unanimously reject the measure, saying a heavy drubbing would help discourage supporters from returning in two years, which by law is the period they’d have to wait before they tried again. That’s what happened in 1974, when New Jersey voters first rejected a gaming legalization initiative due to a lack of specifics about where casinos would be located, only to approve a revised version two years later.

In contrast to this year’s spending on both sides, the 1976 referendum cost just $1.4 million; adjusted for inflation, the same campaign would cost $5.6 million today.

“Nobody knows what the taxes are going to be, nobody knows where it’s going to be, nobody knows what’s going to be built,” Whelan said. “It’s not going to be close, and hopefully this will give pause to the notion that this will come back in two years.”

The referendum comes amid continued uncertainty surrounding the future of Atlantic City, which spent the last 150 days crafting a five-year recovery plan to plug a $100 million budget hole and make good on its $500 million in debts. But that plan was roundly rejected by the Department of Community Affairs on Tuesday, putting the state in a position to come in and take control of the city’s municipal government, rip up union contracts and spin off local assets.

Atlantic City officials, led by Mayor Don Guardian, railed against that decision at a press conference yesterday, saying it was based on “pure politics” and urging the state to reconsider. They said they would address the administration’s concerns in a revised report and “hand deliver” it to them today, noting Thursday marks the official deadline imposed by lawmakers for the city to submit its recovery plan.

Caputo said he feels for Atlantic City officials, but maintained that the referendum’s passage would be good news for a state marred by many economic problems in recent years. He said he’s hopeful a similar amendment will succeed in the future, and in the meantime is researching ways to bring other forms of gaming, such as video lottery terminals at the Meadowlands, to the state.

“This was a very difficult challenge,” he said. “But I think after it’s over we can go back to the drawing board and figure out what worked, and what didn’t.”

Gural added that it’s just a matter of time before north Jersey gets its own casino, given the direction the surrounding market is headed. “New York is going to continue building casinos,” he said. “At that point, Atlantic City will be wiped out.”