Atlantic City’s faltering casino industry has resulted in a sharp drop in property tax revenues, which has forced the city to borrow hundreds of millions of dollars and is threatening its ability to pay its bills.
A big problem is that the drop in gambling revenue prompted a number of casinos to appeal their property tax assessments, resulting in lower tax bills. In order to pay property-tax refunds, Atlantic City has borrowed $270 million since 2007.
“In a few years, we will be broke under the way the city is doing business, and the [casino tax] appeals is just one part of it,” Mayor Don Guardian told The Inquirer in an interview before he was sworn in. “Detroit continued to bond until [it] couldn’t bond anymore. It increased taxes and lost population. Some of those same things are happening in Atlantic City, and we have to take steps to avert bankruptcy.”
In Detroit, a continued drop in casino revenues is hampering the city’s ability to restructure its debt. Meanwhile, there does not appear to be any end in sight to Atlantic City’s financial woes.
The Atlantic Club Casino (formerly Steve Wynn’s Golden Nugget) is closing its doors later this month, reducing the number of casinos in Atlantic City to 11.The Borgata will be in court this spring fighting to maintain a $48.8 million refund awarded by a state tax court in October. The city appealed the ruling. If the Borgata wins, many expect Atlantic City will have to raise taxes on residents and businesses.
Moody’s downgraded Atlantic City’s credit rating last month to Baa2, citing the shrinking tax base. In New Jersey, casino property valuations are based on the income generated. Casino revenues in Atlantic City have dropped from a high of $5.2 billion in 2006 to just over $3 billion in 2012. The final figures for 2013 are expected to be below $3 billion, which would be the lowest in 22 years. That is without adjusting for inflation.
Atlantic City’s financial woes offer a cautionary tale for other cities and states that try to use casinos to fund budget operations. Research by the Rockefeller Institute shows that gambling revenue is often unsustainable and unreliable.
The nearly two dozen states that get revenue from casinos struggled financially in recent years, according to an analysis by the Lexington Herald-Leader. “All of the states cut spending; half raised taxes. Some fired thousands of their public workers, including educators and police, and gutted their basic classroom funding,” the paper reported.
Tags: Atlantic City, Atlantic Club, bankrupt, Borgata, casinos, Detroit, Moody's, property tax appeals, Rockefeller Institute, Steve Wynn, unsustainable
One of the most effective gimmicks casinos use to lure in frequent gamblers is offering so-called “free play,” or gambling credits.
These are essentially gambling vouchers to get people in the door. It is the equivalent of a fisherman putting chum in the water to lure sharks. The gamblers like it because they feel special and get to play with house money. But once they burn through the voucher, most gamblers dig into their own pockets. That’s exactly what the casinos want.
This story in the Atlantic City Press details how one casino has used “free play” to dramatically boost profits. The Atlantic Club increased the amount of free play it uses to lure in gamblers to $3 million a month from $1 million. The result was a 33 percent increase in profits.
That may be good for the casino. But the end result is luring gamblers in more often and stripping more wealth from them. One Atlantic Club member said the casino gives her upt to $25 in “free play” every time she shows up. As a result, she goes to the Atlantic Club three times a week and usually on the weekends. That comes to about 200 trips to the casino a year. Talk about feeling lucky.
Tags: Atlantic City, Atlantic Club, casino, free play, gamblers
Anyone who has visited Atlantic City knows how scuzzy the town is, but this is a new low. The former Golden Nugget casino is so desperate for gamblers it is offering $1 bets on roulette and blackjack and $3 bets on dice games, like craps. The casino – now known as the Atlantic Club – also has increased the pay out on its penny slot machines.
The moves are all designed to go after the low rollers or minnows as opposed to high rollers or whales. Call it the Wal-Mart casino.
State regulators just approved the moves to allow cheaper bets, which are now the lowest in Atlantic City. The cut-rate strategy is likely to attract poorer gamblers, including many elderly and minorities living on fixed incomes. Their gambling losses will serve as a regressive tax on those who can least afford it.
Atlantic City has been hurt by increased competition mainly from casinos in Pennsylvania. Several casinos have been forced to file for bankruptcy. The Atlantic Club is on its third name in a year. Now the casino is going after low end customers and trying to make a profit on volume.
It’s a race to the bottom to attract struggling gamblers in a sluggish economy. It shows how casinos will do whatever it takes to suck every last nickel out of gamblers.
Tags: Atlantic City, Atlantic Club, Golden Nugget, low roller, minnows, penny slot machines