Atlantic City Casino Industry Workers Hope for Better Times in 2015
Atlantic City’s casino executives and workers are hoping 2015 proves to be a turnaround year for them. In looking ahead to the next year, the gaming industry’s professionals see a number of reasons for optimism.
It takes a courage and a wellspring of positivity to see that good future. The fiscal year Atlantic City weathered in 2014 was nothing short of awful. The city collects 70% of its tax revenues from gaming-related sources. The gaming industry had lost revenues each year since 2006, when it had a peak year of $5.4 billion. In 2013, the city’s revenues were only $2.86 billion–almost half where it had been in the peak years.
2014: The Worst of Times
2014 was far worse, though. Atlantic City had 12 operating land-based casinos coming into the year. As the year closes, four of those casinos have closed: Revel Casino, Atlantic Club, Trump Plaza, and The Showboat. Also, Trump Taj Mahal is going through a difficult bankruptcy and only stayed open because major investor Carl Icahn provided an additional $20 million in funds. When the revenue figures become known for 2014, expect to see them dip towards the $2 billion mark.
The loss of the four closed casinos cost the city 8,000 job. Trump Taj Mahal would cost an additional 3,000. With fewer direct taxes and all the lost revenues from taxes on the casino workers, Atlantic City is facing a shortfall of $70 million in its own budget.
Reasons for Optimism
Tony Rodio, president of the Tropicana Casino and Resort, said, “It’s got to be better than the year we just had given that we had four closings. In that regard, the worst is behind us. But there’s certainly a lot of uncertainty with the tax situation and the state legislation, and about market conditions. I’d forecast a better year, but still cloudy.”
If that sounds like blind optimism by Tony Rodio, there are several issues which bode better for the coming year. The state legislature is likely to provide more clarity on Atlantic City casino taxes, while the electorate is likely to allowed a voice on whether a North Jersey casino will be licensed. Also, Revel Casino could become a gaming destination once again, while the world’s largest online poker brand might start contributing tax revenues in 2015.
State Taxes on Casinos
The State Senate and State Assembly recently discussed a new tax plan for Atlantic City casinos over the next 15 years. This would provide clarity and stability instead of a sliding scale of taxation, while also offering tax relief.
The plan would tax Atlantic City casinos a fixed rate of $150 million a year for the first 2 years of the plan, then charge them $120 million a year for the remaining 13 years of the law. Such clarity would allow executives to project future earnings, while it would allow creditors to gauge risk and other calculations when dealing with those casinos.
That plan was shelved at the eleventh hour, because Carl Icahn could not come to an agreement with Revel Casino’s workers. When the New Jersey opens its 2015 session, expect to see that law passed through to Governor Christie.
PokerStars licensing is a little more complicated. PokerStars is seen by many lawmakers and bureaucrats as a “bad actor”, because it continued to make money by accepting U.S. players after the 2006 UIGEA law made it troublesome (if not downright illegal) to operate an online poker room in the United States. PokerStars paid the U.S. government over $700 million to settle up, while the offending executives left the company after Amaya Gaming bought PokerStars in August 2014.
With those hurdles cleared, it was thought PokerStars would be licensed quickly by New Jersey–perhaps as soon as early-October. That didn’t happen, putting the issue in some doublt. Expect to see someone at the Department of Gaming Enforcement realize that PokerStars could be a major asset to the state, because of its proven ability to draw in card players. PokerStars should help increase revenues from poker playing.
Revel Casino’s Next Phase
On January 5, the fate of Revel Casino will be determined. That’s when a bankruptcy judge will decide whether Glenn Straub’s Polo North $95 million bid is going to win the bankruptcy auction. Previously, Polo North lost a bidding war with Brookfield Management out of Toronto, which had a $110 million bid. When Brookfield Management could not renegotiate an energy contract with the coop which supplied energy to the casino, it pulled out the auction process (and forfeited an $11 million deposit).
If Glenn Straub’s bid wins, the days of Revel Casino as a gaming venue might be over. Straub has suggested local gaming vendors might set up shop in the skyscraper, but he had indicated the Revel building’s main use would be as a rail link. He earlier had planned to build a separate 35-story building on the site that would serve as a college for “geniuses”. Brookfield Management had planned to reopen a casino on the site. Whether Revel Casino is a gaming or non-gaming business, it will be better for the city to have the lights on, since Revel Casino is the biggest and most impressive-looking building in town.
North Jersey Casino Referendum
2015 appears to be the year when the people of New Jersey will decide whether to put a land casino in North Jersey, likely in the Meadowlands in East Rutherford. This has been a dream of business leaders and politicians in northern New Jersey for years. They claim Atlantic City is too far away from the population centers of New York City and Philadelphia to remain competitive with the casinos of New York state and Pennsylvania.
If a North Jersey casino is approved, many industry insiders in Atlantic City fear that would be the death knell of the Boardwalk. Proponents of a North Jersey casino say that death knell has already been sounded, and dealing with the new reality is the only pragmatic approach. State Senate President Steve Sweeney hopes to split the difference, using the tax revenues from the Meadowlands casino to funnel $1 billion in funds to Atlantic City, to help with its transition to a non-gaming economy.
In other words, it appears that the market is adjusting itself. While Atlantic City might need help from the state government in adjusting to the new reality it faces, the city may have faced the worst of that adjustment period.
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