Deutsche Bank Report Says New Jersey Should Open Casinos Beyond Atlantic City
Posted on: May 20, 2015, 02:44h.
Last updated on: May 20, 2015, 02:45h.
New Jersey has toyed with the idea of opening a casino in the northern part of the state, a move that would mark the first time casinos in the state had spread beyond Atlantic City.
That effort may get more support following a report by Deutsche Bank that says such a casino could be just what New Jersey needs.
Deutsche Bank analyst Andrew Zarnett filed a report last week that took an overall look at the New Jersey gaming industry, and found that it would be in the state’s best interest to build at least one casino in northern New Jersey, perhaps at the Meadowlands.
“We believe that one or two casinos in north Jersey could generate well over $500 million, putting ~$275 million into the state’s coffers and thus is a smart move for the state,” Zarnett wrote. “It’s good from a budgetary position and also for Atlantic City, as long as some of those tax revenues go back to that market.”
Talk of New Casino Intensifies
The topic of putting a casino at the Meadowlands or elsewhere in northern New Jersey heated up last year, as some lawmakers looked forward to potentially broaching the issue at the end of 2015 or in 2016.
In February 2011, Governor Chris Christie put an unofficial five-year hold on such talks as a way to give the city’s gaming industry time to improve without the pressure of another local casino potentially cannibalizing the market.
In particular, Senate President Stephen Sweeney (D-Gloucester) said last year that it might be possible to hold a statewide referendum on building new casinos elsewhere in the state in November 2015. Zarnett spoke to this possibility in his report.
“It is our belief that a ballot question to allow gaming outside of Atlantic City could come this November 15,” he wrote.
Voter Turnout Concerns
However, supporters of such a move may not be looking to hold the vote so soon. According to Sweeney, the expected lower voter turnout in an off year for elections could harm the measure, as voters from Atlantic City and nearby areas may be more motivated to come out and vote against it than voters from the northern part of the state are to support it.
That could mean holding the vote off until November 2016, when a presidential election will guarantee a high percentage of New Jersey adults head to the polls. But others who are in favor of the casino expansion still want to see a vote this year.
“We have to do it now, so we don’t fall even further and further behind other states,” said State Senator Ray Lesniak (D-Union County). “Atlantic City will continue to decline, and racing will continue to decline. This may very well be our last chance.”
Deutsche Bank Expects More Closures
The Deutsche Bank report also painted a grim outlook for Atlantic City’s casinos, projecting that gaming revenues in the city would fall to about $1.8 billion in 2017 due to increased gaming options in surrounding states. That could mean further casino closures in the years to come.
“We would expect Taj Mahal as well as a second Boardwalk casino to join the list of shuttered properties in the outer years,” Zarnett wrote.
The report’s conclusion is straightforward, and one that supporters of a north Jersey casino will be happy to quote.
“In summation, it’s time for New Jersey to push forward with plans for a North Jersey casino or casinos,” Zarnett wrote. “And as such, we believe that the next step is a constitutional referendum this November providing approval for gaming outside of Atlantic City.”
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Last Comment ( 1 )
The controversial issue of casino gaming in North Jersey, is one that needs to be addressed in a timely fashion. NJ dodged a bullet when New York chose to protect the Catskills, rather than pick casino locations in Orange County, that would have provided substantially more tax revenue, jobs and development. An Orange casino could have been more convenient for North Jersey citizens than either the Poconos, Bethlehem, Parx or Yonkers. And the enormous potential from Manhattan residents and visitors, will probably be lost in a decade, as NY inevitably adds one or more destination casinos to one of the Worlds most celebrated Cities. And the discussion centering on the best locations for a major casino, need to consider the time it takes to build a true destination property, and the level of a win tax, that would justify a multi $billion project, while still providing $100 million or more for Atlantic City. Logic should tell NJ, that the Meadowlands, offering a 55% tax on slot win, along with the ability to get gaming in operation quickly, deserves the first North Jersey casino. Because a destination casino by LV Sands, MGM, or Paul Fireman's $4.6 billion Jersey City proposal, would take 3 to 4 years to complete, and could not afford the kind of casino tax suggested by Jeff Gural at the Meadowlands. For discussion, let's say that a casino at the Meadowlands could win $700 million at their slot machines (Aqueduct in 2014 was just under $800 million). Probably $100 million would come from growth, due to convenience, from North Jersey, Manhattan and Staten Island, and two/thirds of the rest from Eastern Pennsylvania casinos, Yonkers and Aqueduct. That would leave Atlantic City loosing another $200 million of win and maybe $60 to $70 million in EBITDA. But New Jersey would receive $385 million in slot taxes, which could be shared statutorily with Atlantic City. If AC's share was 45%, the casino resort would get around $175 million and the State $210 million, making up the State's shortfall from AC's 2006 payments. The Eastern market (Eastern PA, NY City and MD), that was once Atlantic City's monopoly, has grown from $5.2 billion in 2006 by some 30% to a likely $6.8 to $7.0 billion this year. The casinos and racinos that currently serve North-central New Jersey and NY City won $2.6 billion last year, so a $400 million hit from a North Jersey casinos would represent only a 15% drop, where AC is already down over 50% since 2006. Anything over $100 million for AC, would be a bonus, and would, among other things, allow South Jersey to subsidize air service from the Southeast into AC International. There are over 30 million residents there that have no gaming, other than a Tribal casino in the mountains of North Carolina. Atlanta alone has over 5 million citizens and has the World’s busiest airport, Hartsfield, with 40 flights a day to Las Vegas. Not only does air availability add new markets, but it provides the required transportation that conventions and trade shows attendees want. And this type business would fill rooms and restaurants mid-week in the fall, winter and spring; where AC now comps or offers large discounts to create occupancy. Las Vegas today, profits from the rooms, restaurants, convention and retail departments, where AC relies primarily on its casino revenues. Our win is never going to return to 2006 levels, without horrendous inflation, but resort hotels, like those in Vegas, can be profitable, if the rooms and food are being sold at market rates. Shared tax revenues from North Jersey gaming, could provide Atlantic City with the funds to subsidize the start up of air service, that brings tourists and conventioneers to AC, not the Spirit kind we have now, that takes our South Jersey residents on cheap fares to Florida. NJ needs to hire Spectrum Gaming to study the revenue potential of a North Jersey casino and project the potential harm to AC. But at the same time weighing the benefits of judiciously using a share of new casino taxes to expand AC's resort hotel demand from new markets and the convention trades.