New Jersey Voters Refuse to Build Casinos Outside Atlantic City

With Atlantic City in financial crisis because of casino closures, the state's voters aren't willing to take any more gambles.
by | November 8, 2016
The Trump Taj Mahal is expected to close next month. (FlickrCC/Bill Larkin)

Read all of our coverage on 2016 ballot measures at governing.com/ballotmeasures.

Atlantic City will keep its monopoly on New Jersey's gambling industry. Voters overwhelmingly rejected a ballot measure that would have added two new casino sites in the northern part of the state.

The results are a rare win for the struggling seaside resort town, which has met repeated disappointment in recent years as casinos have closed and pushed the city into a fiscal crisis.

In the weeks leading up to the vote, polling showed the measure headed for defeat. With about half of precincts reporting on Tuesday night, results showed the referendum failing 78 percent to 22 percent.

Although the measure said about one-third of any new casino revenue would have gone to Atlantic City for 15 years for economic revitalization, opponents said they doubted the revenue-sharing proposal would generate enough money to make a difference. Opponents included casino worker unions and Atlantic City-area stakeholders.

Morris Bailey, owner of the Resorts Hotel Casino called the vote "an important step for Atlantic City's return to becoming a world class resort."

Proponents of the referendum included developers and businesses in northern New Jersey, Republican Gov. Chris Christie, and the assembly speaker and senate president, who are both Democrats. They argued that the referendum was the city's best hope for revitalizing its downtown and diversifying its economy beyond gaming.

Reebok CEO Paul Fireman and developer Jeff Gural, who proposed building casinos in Jersey City and the Meadowlands Racetrack, said in a statement Tuesday night that they were "disappointed but not surprised" by the result.

Atlantic City, once the East Coast’s gaming capital, has struggled in the face of increased competition in neighboring states. In the past 15 years, more than a dozen casinos have opened in Maryland, New York and Pennsylvania. In 2014, four of the city's 12 casinos closed, and the Trump Taj Mahal closed last month. Atlantic City's unemployment rate is already 50 percent higher than the national average. The closures have taken a huge swipe at the city’s property tax revenue, as the total assessed valuation has plummeted from $14.4 billion to $7.3 billion in just two years. On top of that, casinos successfully appealed their property valuations by arguing the city had been overtaxing them. As a result, Atlantic City owed casinos large refunds on taxes paid up to 10 years ago.

The measure's supporters argued it would bring back some casino spending and revenue to the state, particularly in the northern part where New York City’s Resorts World Casino has been a regional attraction.

But observers cast doubt upon that argument.

Lucy Dadayan, a senior policy analyst with the Nelson A. Rockefeller Institute of Government, authored a report earlier this year, that found a new casino typically provides a short-term revenue boost but long-term disappointment as gambling activities slow or even decline.

“At the end of the day, all states are competing for the same pool of gamblers,” she told Governing. “Opening a casino doesn’t mean there will be many more gamblers, particularly with baby boomers aging and millennials not spending as much money on casinos.”

She also disputed claims in the state that the new casinos could collectively generate $400 million in revenue each year. State leaders said winnings at the new casinos would likely be taxed at a much higher rate than Atlantic City’s 8 percent, but to generate $400 million a year, Dadayan estimated the new tax rate would have to be at least 55 percent.

"Even that is highly hypothetical,” she said.

Still, advocates of the proposal said, Atlantic City's downfall is another reason why adding new casinos to the state makes economic sense.

“People no longer have to travel great distances to gamble,” said Assemblyman Ralph Caputo, who chairs the Tourism, Gaming and the Arts Committee. “If we are going to address the reality of ‘convenience gambling’ and reverse the trend of taxable gaming revenue leaving New Jersey, we must adapt.”

Read all of our coverage on 2016 ballot measures at governing.com/ballotmeasures.