There Are Too Many Unanswered Questions on Casino Expansion

Gordon MacInnesThese are prepared remarks given at today’s Senate Budget Committee hearing on SCR-1, which would put North Jersey casino expansion on November’s ballot.

Thank you, Chairman Sarlo, and committee members for this opportunity to weigh in on expanding casino gambling to North Jersey.

I begin with a request: please do not act on SCR-1 until better information on essential questions is available for both legislative and public consideration. This is particularly germane because of the sad history of earlier advocates over-promising the public on the benefits of legalizing gambling – whether it was casinos in Atlantic City, internet betting, harness races in the Meadowlands or the privatization of state lottery operations.

The stated rationale for expanding casinos to North Jersey is that this will save Atlantic City, generate thousands of new jobs and create millions if not billions in new economic activity. Hefty promises, all. Yet casino expansion’s ability to even come close to delivering on any – to make no mention of all – of these promises hinges on a number of obvious and crucial questions – questions that have yet to be sufficiently answered. Here are just a few:

1. Given the saturation of the casino market in the Northeast, won’t two new North Jersey casinos only accelerate Atlantic City’s decline?

There are already eight new casinos expected to open in the Northeast within the next three years. Eight. Yet gambling experts agree that the industry has little room to actually grow. More casinos will just compete against each other for shrinking profits. North Jersey’s new casinos would be no different. The latest affirmation of this fact – which has been continually ignored in this expansion push – came yesterday from Moody’s: “The additional competition will likely cause more casinos to close,” the agency wrote.

2. Given that North Jersey is already among the most heavily traveled and congested regions in the nation, how will the public transit and highway infrastructure be improved to accommodate new casinos – and who will pay for such improvements?

The Meadowlands and the Jersey City waterfront are currently the most prominent sites with developer interest. Routes 3 and 17, the Turnpike extension and Jersey City’s surface streets are already congested and in sub-par conditions. The presence of billion dollar casinos only stands to make this worse – unless a new plan to improve traffic flow and upgrade public transit is drawn up, implemented and, crucially, financed. In the context of a Transportation Trust Fund that is almost unable to pay for new projects, it seems unfair that the state’s scarce dollars for capital projects should be siphoned off to benefit private developers of casinos.

3. What tax rate will be levied on these new casinos?

Promises of windfall tax revenues for New Jersey can’t come true without an aggressive tax rate on new casinos, if they can come true at all. The state has paid the price – literally, in hundreds of millions of dollars of lost revenue – for failing to take advantage of its East Coast monopoly in 1976 with an aggressive tax rate on Atlantic City’s casinos. Yet no tax rate is defined in this casino expansion plan.

Developers are telling the press that they’d be happy to pay very high tax rates for their new casinos. That’s welcomed news, and generous of said developers. It’s in the state’s best interest to stake its claim on a proposed tax rate early, to avoid getting steamrolled by developers down the road.

Any sensible investor or citizen would want answers to these—and other—questions before putting up cash or a vote. New Jersey should learn from its past. The swift action being taken on SCR-1 suggests that it has not.