Casinos in Jersey ?>

Casinos in Jersey

Doubling down is a bad idea for the state

Bugsy Siegel was a genius.  After the war, he saw that water and power from the Hoover Dam could be used to build a fantasy playground in the cheap Nevada desert.  The result was Las Vegas, where every gaudy dream could come true.  Thirty years later, New Jersey almost duplicated that success.  It even had a beautiful beach town ready to relive its success of the 1920s.  Atlantic City could become the second gambling mecca in the United States.  It stood to capture half of the gaming business in the United States.

In 1978, the Resorts International casino opened.  It was profitable.  Unfortunately, none of the tax revenue was recycled.  When you stepped outside an Atlantic City casino, you stepped into a sty.  Well paid casino workers built in nearby towns.  Maids and food service workers continued to live in squalor.  In the 1980s the pattern continued at a ferocious pace.  More casinos, but not much else to say for AC.

At the same time, every other state and Indian tribe looked at the gaming market and said, “I want a piece of that.”  Riverboats on the Mississippi.  Miami cruises to nowhere.  Resorts in the forests of Connecticut.  Finally, casinos inside the city limits of Philadelphia and New York City.  Eventually no one would need to make the trip to Atlantic City.  A roulette wheel or a slot machine in a windowless room is the same anywhere.  AC’s ocean view was still nice, but don’t look inland.

In 1991 we got the first taste of the future of Atlantic City.  The Taj Mahal went through the first of its bankruptcies.  Depending on your outlook, it was either Trump’s first big loss or his success in pulling money out of the beleaguered city.  It would not be the last of the casinos to close.

Casinos are a straightforward real estate play.  They aren’t unlike shopping centers.  The newest one is always full and makes money.  The older ones molder if there isn’t enough business.  Casino construction continued in the 90s, albeit at a slower pace.  Finally, however, competition took its toll.  The Revel, a $2.4 billion project, never made it around the first turn.  It opened in 2012 and closed in 2014.  In 2015, the property sold for $83 million.  It joins four other shuttered facilities in Atlantic City.

The local government faces bankruptcy too.  The state is bailing it out with loans, but it won’t be long before the state is debtor in possession.  To get out of the casino mess, the state is considering doubling down.  The following measure will come before voters in November:

Do you approve amending the Constitution to permit casino gambling in two additional counties in this State?  At present, casino gambling is allowed only in Atlantic City in Atlantic County.  Only one casino in each of the two counties would be permitted.  Each casino is to be located in a town that is at least 72 miles from Atlantic City.  The amendment would allow certain persons to apply first for a casino license.

In short, the proposal is to allow yet another casino to be built in the Meadowlands or in Jersey City.  The theory is that being so close to New York City, the one built will be immensely successful.  The problem is that there are already casinos at Aqueduct in Queens and another at the Raceway in Yonkers.

Despite Donald Trump’s assertions that he made a lot of money in Atlantic City, the situation today is that AC has five shuttered casinos, the highest mortgage foreclosure rate in that nation, and a bankrupt city government.  It’s worse off than it was in 1976.

November’s ballot measure isn’t about the morality of gambling.  It’s a business choice.  Do the citizens of New Jersey think that forty years from now casinos in North Jersey will be making money, or will we have more white elephants?

The proposal to put a casino in the Meadowlands is the last in a series of dreams for the area dating to the 1960s.  For reasons I don’t understand, the place is a money pit.  Perhaps it is because the owner is the New Jersey Sports and Exposition Authority, a state-run agency.  Every dreamer wants his project there: auto racing, indoor ski hill, world’s largest mall.  The list of stillborn projects is endless:  the Izod Center, Xanadu, and the American Dream.  When there’s a storefront in your town that’s had ten restaurants in twenty years, you gotta wonder whether it’s the location.

A Jersey City casino hotel might be a better plan, if the money at risk were all private.  Jersey City wouldn’t be hurt by a nice hotel.  Casino floor space can be converted to other uses.  An investor may see potential returns.  I don’t.

New Jersey needs to stake its future on the next big thing, not yesterday’s industry.

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