Making the News

Press of Atlantic City

Originally Published:Thursday, July 29, 2010

Casinos' contribution to new Atlantic City tourism district remains an open question

By Juliet Fletcher
Press of Atlantic City

\While the city's casinos have jumped on board with Gov. Chris Christie's proposed partnership between state and business interests in Atlantic City, gaming executives, strategists and legislators agree that private industries' role in the venture remains undefined.

Christie made clear last week that the new tourism district, overseeing Atlantic City's casino and entertainment assets, would not be paid for with taxpayer funds.

To foot the bill, advisers to the governor identified about $100 million in savings, through reducing state regulatory functions and rerouting casino profit that currently leaves Atlantic City as grants and subsidies.

But casinos and other businesses within the state-operated zone have not yet learned whether they will be asked to give financially to cover the running of the district.

That information will be critical to companies deciding whether to invest in Atlantic City.

"We know we'll be asking them to partner with the state," said Assemblyman John Amodeo, R-Atlantic, a supporter. "But the details need to be nailed down, especially in regard to affording extra services."

Under Christie's vision, state and private enterprise would collaborate to provide services to the area - among them trash-collection and the bolstering of a public-safety presence loosely dubbed by the governor's advisers as "security."

Changes may also signal the end to the current setup for the city's special improvement district, which derives most of its funding from casino real estate taxes.

Michael Diamond, vice president in charge of research at the Linwood-based Spectrum Gaming Group, said businesses wanted certainty on that unanswered question.

"I do believe the administration has to work quickly to lay this out, or else they risk losing the momentum that's building around this effort," Diamond said.

No taxpayer dollars

The governor faced immediate questions about how his goals would be funded. He was blunt that taxpayer dollars would not cover the cost.

"The state, frankly, cannot afford to do that," he said.

Asked whether casinos would pay a new rate of tax to the state under the arrangement, he said, "That's not the plan."

Companies now pay 8 percent of gross revenue to the state, an arrangement that is higher than the 6.75 percent maximum in Nevada but is dwarfed by the 34 percent rate in Pennsylvania. New Jersey casinos paid $295.3 million to the state in 2009.

But the governor left open the possibility that casinos would pay through additional means for the running of the district.

"We'd certainly be looking at them contributing in other ways," he said.

Before asking the casinos or potential investors to ante up more money, Diamond said, the proposed district has a potential operating fund of about $100 million - a pot of cash that comes from anticipated savings in casino deregulation and by radically reducing the disbursement of casino revenue that has been promised elsewhere.

All 11 casinos pay at least an additional 1.25 percent of their revenue to the Casino Reinvestment Development Authority. That money is redirected in grants to projects to reduce blight and rebuild or develop particular areas. A growing portion of that money has been sent every year to projects outside Atlantic City, with $38 million allocated outside the city last year. Christie wants to change the law to end that practice.

The governor also hopes to cancel an annual $30 million subsidy paid by casinos to horse racing groups in return for not pursuing slot machine-style gaming at tracks.

Lastly, Christie's advisers, led by Jon Hanson, reported that between $15 million and $25 million could be saved by reshaping the regulatory structure of the two state agencies that oversee casinos - the Casino Control Commission and the Division of Gaming Enforcement.

Those savings could be used to boost the marketing of the resort, the advisory commission said.

The $100 million estimate does not account for savings generated by possible changes to other agencies, such as the Atlantic City Convention & Visitors Authority, which handles marketing but is set to become part of the state-run district.

But Diamond said the question of whether the casinos will pay for those civic services upfront will be significant, and the outcome could signal the possible end of the current special improvement district, a nonprofit corporation in Atlantic City.

"The question is whether the casinos will turn a bill into the city for the services, saying, 'You're not doing this any more, we are, and this is what it costs,'" Diamond said. "Or do they keep it as it is, by paying an assessment to the special improvement district."

SID's future in doubt

Don Guardian, who earns more than $162,000 as executive director of the SID, stood on the Boardwalk while Christie held his news conference last week, eager to hear what the future of his organization would be. It was not clear then, and it is not clear now, he said.

"We haven't heard anything at all since then, beyond what we've read in the papers," Guardian said Thursday. "I think the governor has introduced a broad scope of strengthening the city and its businesses, but the details need to be filled in."

The SID currently operates with a $4.1 million assessment from businesses within its zone, with $3.6 million coming from Boardwalk casinos last year. District workers handle much of the clean-up on the Boardwalk, which by all accounts would fall into the governor's new tourism district. Guardian last week applauded the work of the SID employees, who numbered 75 in last fall's count, and said he hoped that whatever the new plan is for the district that he could work in tandem with the state.

Diamond, however, said two independent districts would not make sense.

"You can't have both the new tourism district and the SID, it would seem to me," he said.

Amodeo thinks that where the casinos agree to perform or provide any new services they should see their financial outlay recouped out of their property taxes.

"I'd like to see a portion of that withheld, because you can't ask them to pay the city for services if the city isn't the one providing them," he said.

Hammering out a plan

Christie administration officials are meeting this week to work on draft plans for state involvement. Mark Juliano, CEO of Trump Entertainment and president of the Casino Association of New Jersey, declined to comment Wednesday on what role the casinos would be asked to fill under the partnership until details are finalized.

But statewide, the decision to make casinos partially responsible for maintaining Atlantic City as a resort, with a new financial arrangement to meet the costs, won support even from legislators who have criticized other parts of Christie's plan. Many hail from central and northern districts.

"Offline, casino executives may tell you they have been too myopic in the past, concentrating on their little bubble of operations," state Sen. Jennifer Beck, R-Monmouth, Mercer, said by phone Tuesday. Beck's district includes Monmouth Park racetrack. "The state can provide leadership, but businesses in Atlantic City are going to maybe get used to contributing toward wider services in the area, reducing blight and so on.

"They can no longer be self-interested in their own piece of real estate," she added. "Still, it's a tough time to ask them to pay more money, because of their economic circumstance."

Casino revenue has fallen in the last three straight years.

These are not the only questions raised by Christie's plan.

In northern New Jersey, Christie's advisers propose shrinking the debt-ridden state Sports and Exposition Authority, which Christie said last week should "get out of the business of running things."

That agency, which operates the state-owned sports stadiums and racetracks but which has needed repeated injections of emergency state funds to remain afloat, will be shrunk to assume the role of a landlord over state holdings. The NJSEA recently d its debts of $38 million were so bad that it would need a state bailout. The debts must still be paid, but the state will now avoid paying emergency funds to patch the budget.

But Diamond said any savings from downsizing the sports authority would be unlikely to make their way south to bolster the operating budget of Atlantic City's tourism district.

"I can't see that happening," he said.

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