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US – Improving Atlantic City still needs revitalisation legislation

By Phil - 25 November 2015

With four less casinos than last year, Atlantic City’s remaining casinos reported a 61 per cent increase in their gross operating profits for the third quarter of this year.

With The Showboat, Revel, and Trump Plaza all shutting in the third quarter of 2014, to join the previously shuttered Atlantic Club, which closed in January, the increase was felt at all eight of the remaining casinos.

The New Jersey state Division of Gaming Enforcement confirmed that the city’s eight casinos generated a profit of $237.4m in July, August and September, compared to $147.5m last year.

Matt Levinson, Chairman of the New Jersey Casino Control Commission, said: “These results show that casino operations are stabilizing after several difficult years. Each of the eight casino hotels reported significant increases in the third quarter. The higher profits came from increased gaming, hotel, food and beverage revenues, and reduced expenses at the properties.”

Even the lowest increase of 41 per cent, recorded at the Tropicana, was impressive although it was dwarfed by the improvement at the Taj Mahal, which saw a revenue jump of 182 per cent.
The Borgata led the way once more in terms of profit, accounting for a over a third of the market’s total with $82.1m.

The picture for the year so far as a whole is even more rosy with the eight casinos posting profits for the nine months of $450.9m, representing an increase of 67.5 percent over the same period last year.
So far this year, the biggest turnaround has been at the Golden Nugget where profits have surged by 354 per cent in the nine-month period. The Tropicana is the only venue that has recorded a decrease in profits for the year so far compared to the first nine months of 2014.

Whilst gross operating profit was up spectacularly, net revenue for the quarter was $783m, representing just a five per cent from a year earlier.

Casino operators in the city are hoping that five new bills will be approved to stabilise the sector further.

One of these is a plan to let casino operators make fixed annual payments in taxation instead of highly variable property-tax payments.

The Casino Property Taxation Stabilization Act, known colloquially as PILOT, would allow casinos to make $150m in payments in lieu of taxes annually for two years, then $120m for each of the next 13 years.

The bill passed the Legislature on June 25 and is waiting for Governor Christie to sign it off.
It would end tax appeals by casinos. Borgata is currently owed $148m in property-tax refunds for 2009 to 2013 after a state-court judge agreed to slash its assessed value by more than $1.3bn.
The Casino Association of New Jersey, a lobby for Atlantic City casinos, is has said that without PILOT more casinos will close.

“As the clock continues to tick while we wait for Gov. Christie to sign the Atlantic City revitalization legislation, the price of inaction continues to grow and the fate of Atlantic City and the region hangs in the balance,” it said. “If this legislation is not signed this year, Atlantic City will lose approximately $50m this year. That means the city would need to replace that revenue by other sources – presumably the property-tax payers of Atlantic City.”

The sector is also waiting to hear whether the Atlantic City Alliance, the non-profit marketing arm, will be disbanded and if funding for the Casino Reinvestment Development Authority, which takes casino-paid taxes to fund large local events and development projects, will be slashed.

The Casino Association of New Jersey (CANJ) was however disappointed that Governor Christie’s opted to veto the Atlantic City Economic Revitalization legislation.

“We are disappointed that the Governor conditionally vetoed the package of bills designed to help revitalise Atlantic City. As we have repeatedly said, these bills are vital to establishing a viable path forward out of the city’s financial crisis. That crisis has threatened the continued sustainability of the casino industry and the economic benefits it generates, including thousands of jobs held by our employees. Every day that passes jeopardizes the financial stability this legislation would achieve and also threatens not only our employees, but also non-casino Atlantic City businesses as well as residents and taxpayers across the county. We implore the necessary parties to quickly convene and resolve all open issues as soon as possible so that the legislature can address the Governor’s action.”