Still No Answers to Key Questions on Casino Expansion

Given New Jersey’s track record with gambling – one of big promises, a lack of delivery on those promises and little long-term economic benefit – one would think there’d be more caution and skepticism about expanding casinos to North Jersey.

Published on Feb 8, 2016

These are prepared remarks to be delivered to the Assembly Judiciary Committee this morning.

Chairman McKeon and members of the committee, thank you for the opportunity to examine a crucial constitutional amendment proposed for a public vote this November.

Given the public support of the governor and legislative leaders, ACR-1 feels like one of those bills destined for swift, uncritical and incomplete review. I hope not. There are numerous issues posed by expanding casino gambling that deserve careful attention by this committee, your legislative colleagues and the public. Given New Jersey’s track record with gambling – one of big promises, a lack of delivery on those promises and little long-term economic benefit – one would think there’d be more caution and skepticism about expanding casinos to North Jersey.

There’s time. The legislature has 198 days before final action to place ACR-1 on the November ballot. That is plenty of time to more closely inspect of the implications and consequences of the issues raised by expanding casino gambling to North Jersey. Before voting to proceed so quickly with approval of ACR-1, I would hope the committee would address three glaringly obvious questions:

Won’t North Jersey casinos only accelerate Atlantic City’s economic decline?

At the beginning of 2014, Atlantic City had 12 casinos. Today, it has eight. And Wall Street analysts expect at least two more to close in the next two years, long before any of the proposed North Jersey casinos would be operating. These new casinos would be competing in a saturated Northeast market that is becoming even more saturated, with eight new casinos slated to open in the next three years. Common sense dictates – and financial analysts agree – that expanding casino gambling in New Jersey would only accelerate the closure of weakened casinos in Atlantic City. What is worse is that the saturated Northeastern market is not growing, even without the approved new casinos.

Given these known facts, it is fair to ask proponents of casino expansion if their stated goal of saving and rebuilding Atlantic City is realistic – and how exactly they think that will work.

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 have drawn the strongest developer interest, complete with schematic plans. Routes 3 and 17, the Turnpike extension and Jersey City’s surface streets are already congested and in sub-par conditions. The opening of new 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. The Transportation Trust Fund currently has no funding to pay for new projects and the governor made that situation worse by promising that there’d be no increase in the gas tax.

Presently, two large-scale developers have shown strong interest in building casinos in the Meadowlands, one attached to the Meadowlands racetrack, the other to the American Dream mall. American Dream is scheduled to open next year. With the TTF near bankruptcy and Routes 3 and 17 and the Turnpike already jammed, just one casino at the Meadowlands could convert Route 3 into an 18-hour a day parking lot. New Jersey’s transportation capital plan for 2016-21 makes no provision for any improvements to the Meadowlands area, and the 2014 Super Bowl is a reminder of how poorly mass transit deals with increased patronage.

How does the Committee know how new casinos will aid Atlantic City and the state’s perilous financial condition without proposed tax rates?

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 by foregoing a tax rate on Atlantic City’s casinos that reflected that monopoly. Yet no tax rate is defined in this casino expansion plan.

Some developers are telling the press that they’d be happy to tax rates as high as 55 percent for their new casinos. That’s welcomed news, and generous of said developers, particularly given another developer’s expectation that the current rates will prevail. While the tax rate should not be carved into the Constitution, it’s in everyone’s best interest to secure agreement on a proposed tax rate now, to avoid getting steamrolled by developers down the road and, once again, seeing extravagant promises broken.

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. Taking swift action on ACR-1 suggests that those lessons have not been learned by the legislature.

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