As Atlantic City Casinos Rise Again, Trying to Ensure Community Also Benefits

John Reitmeyer | June 7, 2019 | More Issues
Senate hearing learns of a resurgent casino industry. Now the focus is on ensuring the locality — hard-hit by the Great Recession — also reaps rewards

atlantic city
The casino industry is making a comeback in Atlantic City, but this time around state lawmakers want to ensure past mistakes are not repeated and that if casinos prosper, so does the city. Legislators took up that cause yesterday during a wide-ranging hearing in Trenton that looked at everything from the tax rates the state levies on casino revenue to how easy it is for gamblers and other visitors to get in and out of the seaside resort.

Among those testifying before the Senate State Government, Wagering and Tourism Committee was the state’s top casino regulator along with the man who’s leading the ongoing state takeover of the city’s finances for Gov. Phil Murphy’s administration. They and others agreed that with the opening of two new casinos in recent years and the return of thousands of jobs, the casino industry is on the rise and remains a dominant force in the local economy. But new efforts are underway to ensure the casinos are more integrated into the community so that, as they rise, so does the city itself.

“The real issue here is the casinos today understand that they are intimately related to the success of Atlantic City as a municipality for their success,” said David Rebuck, director of the state Division of Gaming Enforcement, during the hearing.

David Rebuck, director of the state Division of Gaming Enforcement
While the Great Recession officially ended in 2009, its effects in Atlantic City lingered for years, including as competition from other casinos that opened in nearby states took away the resort’s longtime regional gambling monopoly. Five different casinos eventually closed in Atlantic City between 2013 and 2017, taking away thousands of jobs and depriving the resort itself of a major source of tax revenue.

In the wake of the downturn, the city government faced an estimated $500 million in unpaid debts and a projected $100 million budget deficit as its ratable base was drastically reduced. Atlantic City narrowly avoided defaulting on a debt payment in 2016. Eventually lawmakers enacted state takeover legislation that now gives the Murphy administration broad powers to oversee the city’s finances.

Making sure residents are included

As part of that effort, the administration released a report last year that called for a more holistic approach to revitalizing the city’s economy, including by making sure neighborhoods and their residents could take full advantage of any turnaround along with the casino industry. The same report also suggested that a review of the state’s casino regulations be conducted to see what, if any, role they played in the retraction in the industry between 2013 and 2017.

Among the recommendations made in that report — which now is guiding the ongoing economic recovery in Atlantic City — was a call to review the state’s oversight of the casino industry to see what lessons could be learned from the closure of five casinos within a few years of the Great Recession.

The author of the report, former U.S. Treasury official Jim Johnson, said during yesterday’s hearing that as two new casinos have opened in recent years and thousands of jobs have returned, it’s a good time to begin the lookback, much as federal officials after the recession reviewed what role existing financial regulations played in the downturn.

Jim Johnson
“Five thousand jobs have come back, but those jobs are more than just numbers on a page in a report,” Johnson said. “What those jobs represent are families and workers.”

Issues now being looked at include whether there should be a cap placed on the number of casinos allowed to operate in Atlantic City. Right now, there is no limit, although officials said yesterday that the resort has never been able to support more than 12. Another issue that bears examination, said Johnson, is whether changes should be made to the licensing process to ensure any new casinos are required to play an integral role in helping the city’s residents.

“If there are going to be new entrants into the market, what positive impact could they have on the community?” Johnson asked.

Big new tax revenues

From a financial perspective, Rebuck said the casino industry is now providing the city with $132 million in annual revenue through payment-in-lieu-of-taxes, or PILOT agreements, that were enacted through the takeover that began when former Gov. Chris Christie was in office. Meanwhile, the state is continuing to tax gross gambling revenue at a rate of 8.5 percent, with another 1.25 percent levy that is generating revenues to help the city pay down its debt. New taxes are also now being levied on sports betting after it was legalized last year, and on online gambling, which became legal in New Jersey in 2013.

“Both of those are huge successes,” Rebuck said.

Jim Plousis, chairman of the Casino Control Commission, said overall gambling revenue was up 7.5 percent last year, and sales tax revenue in the region was up about 30 percent. Room occupation at the casinos was also up by 18 percent in 2018 and salaries for workers are on the rise, he said.

“We’re trending in the right direction,” Plousis said. “There is a new energy down there.”

But yesterday’s discussion also went beyond the casinos themselves as the focus shifted to infrastructure and the ways that people get in and out of Atlantic City, including by rail and nearby Atlantic City International Airport, which is on the mainland. Lawmakers zeroed in on the lack of a direct rail connection to north Jersey and New York, and what at times can be an inconvenient link with Philadelphia via New Jersey Transit.

Rebuck also said a key for the city and the casinos is a continued focus on diversifying the revenue stream to emphasize entertainment as much as gambling.

“Certainly, people have a different interest in going to a casino than just doing your traditional gambling,” Rebuck said. “The more they diversify in nongaming and the more offerings they have is going to help them.”