Details of North Jersey Casino Referendum Emerge

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Wednesday, March 9th, 2016 | Written by Stephen Smith

New Jersey has long been caught up in a battle over whether to break Atlantic City’s gambling monopoly, and allow casinos to operate in the northern part of the state. Atlantic City’s eight land-based casinos have lobbied hard to maintain their control over the industry, stating that increased competition could drive them out of business.

Still, some lawmakers believe that legislation could be introduced with language to help protect the existing casinos in the Garden State. Ultimately, however, the matter will be decided by voters who will be allowed to go to the polls on November 8th during the general election.

Legislation Attached to Referendum

Here are some of the details that have been released about legislation attached to the referendum.

1. Protections Are in Place for Atlantic City. The law will require all new casinos to be at least 70 miles away from the existing gaming area in Atlantic City in order to reduce competition.

2. Casino Investment Will Be Considerable. The new law will not allow for standalone card rooms or slot parlors to operate in northern New Jersey. Under the law, investors will need to create integrated resorts that include a casino, stores, restaurants, night clubs and accommodations. It’s estimated that it would cost roughly $1 billion to build the types of properties required.

3. No Definitive Locations Yet. At this time, there is no official word on where the new casinos would be built, but industry experts are making guesses. Jersey City is a likely location due to the size of the city and its proximity to Manhattan. Another good possibility is East Rutherford, which is home to the Meadowlands conference area and sports stadiums. This area is already a destination for tourists, so it seems natural to place resorts there.

4. Tax Estimates Have Been Released. Jeff Gural, who holds a lease on the Meadowlands, believes that a Meadowlands casino would provide the state with $400 to $500 million in tax revenue. He has publicly pledged to pay a tax rate of 55 percent if allowed to build a casino there. That’s quite a figure when you consider that other casinos operating in the state only pay an 8 percent tax on revenues.

Is A 40-60% Tax Rate Too Much?

Picking up on the last point, while actual tax rates that might be applied to North Jersey have yet to be disclosed, State Assemblyman Ralph Caputo recently said at a special public hearing that the rate is likely to fall between 40 and 60 percent. Needless to say, that figure is significantly higher than the 9.25% tax rate currently enjoyed by those casinos based in Atlantic City, or the 6.75% rate for those in Nevada.

That said, a quick glance at the gambling taxes being levied in nearby states shows that the exuberant rates are not so far fetched. In Connecticut, for instance, casinos must pay a 18% tax rate, while Pennsylvania charges 55%, and New York a whopping 60 to 69% tax on earnings. Nonetheless, Atlantic City Assemblyman Chris Brown has expressed his view that the tax rate is excessively high, whilst also questioning the premise that more casinos in the state would aid his constituents. As Assemblyman Brown stated:

“Is it going to pave the roads so that people who are unemployed can get out of town?”

The Effect on Atlantic City

Carl Icahn said recently that he would not make a $100 million investment in his Trump Taj Mahal casino in the eventuality that North Jersey casinos are given the green light. Soon after, he received a response from backers of the state constitutional amendment, with State Assemblyman Ralph Caputo stating:

“This is a game-changing proposal. We would modernize our gaming industry and provide significant relief for senior citizens and disabled residents.”

Assemblyman Gary Schaerals also added his voice to the debate, saying:

“For a state sorely in need of new revenues for vital needs such as programs and property tax relief for senior citizens and disabled residents, this is a win-win. This proposal would help bring a brighter economic future for our state.”

Although there are protections to help minimize competition for Atlantic City casinos, there is sure to be an impact on the casinos. Revenues at the Jersey Shore resort area have plummeted by $5.4 billion over the last decade and are now down to an average of $2.5 billion. Governor Chris Christie has recently had to put into play a plan to help bankrupt Atlantic City continue to operate due to the dire financial situation in the city. Furthermore, it is believed that the operators of the casinos in Atlantic City will be given priority for securing at least one of the two licenses that will be made available if the referendum passes. We’ll have to wait until November, though, to find out whether any operator will have a shot at opening a casino north of Atlantic City.