Vol. 4, No. 3, March 2007
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Meadowlands Mistake?
Slot casinos at racetracks are not in New Jersey’s constitutional gaming mix—for good reason.
The New Jersey Casino Control Act is more than just a piece of legislation that created casinos in Atlantic City. That law, which will be 30 years old this summer, is a firm agreement between those who dreamed of rebuilding Atlantic City and those who had the financial means to make those dreams a reality.
This legendary legislation led the transformation of Atlantic City from the decaying urban center it was in the 1960s and 1970s to the tourist destination that exists today—and the even greater destination that will be here tomorrow.
How did the Act accomplish the rebirth of Atlantic City that many thought was impossible? As with any successful agreement, it created a win-win situation by making—and keeping—certain promises.
The state of New Jersey—and the voters who wisely approved that constitutional referendum in 1976 by a margin of 2-1—promised that Atlantic City would be the only location in the state to allow casino gaming. In fact, the 1974 constitutional referendum that proposed statewide gaming failed.
The 1976 referendum sealed that promise into the language of the state constitution. The state promised a fair and stable tax rate and an operating environment that limited gaming solely to Atlantic City. This promise would encourage capital investment.
The casino industry made certain promises as well. The casinos, their owners, executives, employees and suppliers promised to meet the state’s high standards for demonstrating good character, honesty and integrity. The gaming industry, based on its reliance on the state’s promises, would invest billions of dollars into that once-dying seaside resort and transform Atlantic City into a major destination resort.
In the process, the casinos would create thousands of good-paying jobs with benefits, help rebuild neighborhoods, and improve the lives of individuals and families throughout the state. Additionally, for good measure, the casino industry would generate literally billions of dollars in various taxes for the state.
With hindsight, both parties can now claim: What a great success!
Consider that about $10 billion has been invested by casinos in Atlantic City since gaming was approved. Over the years, these casinos have generated more than $17 billion in overall tax revenue. In addition, thousands of good jobs have been created. The industry directly employs approximately 45,000 individuals, with thousands more being employed by casino contractors, suppliers and vendors, which collectively sell the casinos approximately $2 billion in goods and services each year.
You have to ask yourself, with such a track record of proven success, why would anyone seek to change a win-win deal into a potential lose-lose?
Maybe Atlantic City is a victim of its own success. Some subscribe to the view that, since our industry is doing so well, it can sustain certain drastic changes to the economic model that created its success, and under which Atlantic City is poised for greater success.
Consider the idea of establishing a slot machine casino at the Meadowlands. Proponents of this approach would do so for two reasons:
• To compete with the casinos in Pennsylvania and New York and to thereby generate additional revenue for our fiscally troubled state.
• To subsidize New Jersey’s failing horseracing industry.
Both of these rationales are seriously flawed and shortsighted. Why should New Jersey’s thriving gaming industry be burdened with subsidizing a struggling industry that has done very little over the years to help itself? The racing industry is facing problems not just in New Jersey but in states across the nation—including states that have no casinos.
Subsidies paid by the casinos in the amount of $80 million have done nothing to create racing fans, and the casino industry’s future should not be sacrificed to address a problem it did not create and cannot solve.
New Jersey, of course, has an interest in competing effectively against new casinos in Pennsylvania and New York. Atlantic City is the greatest weapon in New Jersey’s arsenal, and it should be strengthened, not weakened.
Pennsylvania and New York, like most other states, have adopted gaming models that rely on high tax rates and scattered casinos. No other state in the East is planning to build another Atlantic City. The Atlantic City model is built on the principles of strong integrity, fair taxes, a stable investment climate, significant capital investment and a large, thriving entertainment industry with multiple attractions in one location.
If New Jersey decides to change that model in reaction to these emerging jurisdictions, Atlantic City’s growth will be greatly jeopardized, which would, in turn, damage Atlantic City’s ability to compete.
Capital investment has been attracted to the Atlantic City market in part because of the stable economic and political environment. Wall Street (which lends the money) and the casino resort business community (which decides where and how much to invest) can accurately and confidently anticipate the returns on the sizable investments necessary to compete in New Jersey. Any change in this predictability will reverse that momentum, and surely contribute to a decline in growth in Atlantic City.
The New Jersey Legislature struck a wise balance nearly 30 years ago. The Casino Control Act was precisely the right deal for the state and its citizens. Why risk what has worked so well at a time when Atlantic City’s growth is poised to explode?
