Royal Flush – The Atlantic City Gambling Disaster

Atlantic City Casino closing

Amidst the closing down of Atlantic City’s giant casinos, one by one, a bill to give the smaller casinos a chance to set up shop inspires hope.

Chelsea Hotel‘s owner, Curtis Bashaw, admits that he would like to open a small casino now that the bill is passed. He envisions having his hotel host one of two new so-called ’boutique casinos’. Bashaw says that he had always been keen on “adding gaming amenity to the Chelsea’ calling it an “intimate experience” as “the casino would be a desirable place to go and learn to play and hang out with your friends.”

Bashaw is against the ‘one-size-fits-all gaming floor’ model that Atlantic City is so infamous for. He doesn’t want to be in competition with huge gaming operators. His wish may come true as Atlantic City is taking advantage of its involuntary down-sizing of its number of casinos to initiate smaller casinos to fill the gap.

Fall of the giants

Indeed, Atlantic City has to find feasible solutions to get some money into the city. The city, as pronounced in its gambling news, is in throes of panic as hotel giants such as the Revel goes bankrupt. The grandiose 2 year-old Revel Casino, fell with a mighty crash, its $2.4 billion turning to dust on Atlantic City’s iconic boardwalk. Unemployment is almost at 11% per cent with over 8,000 casino workers now jobless.

The list of multi-million dollar casinos that straddled the main street of Atlantic City going bankrupt is appalling. The ill-fated Revel, which debuted in April 2012, closed this year. So too has Showboat, owned by the indebted Caesar Entertainment. It closed in August and its remaining three partners are struggling to stay open. Then, there is the Taj Mahal Casino, which opened up in 1990, and which may close, come December 20, if a deal with the workers’ union falls through with the Casino’s New York-based billionaire debt-holder, Carl Icahn.

• 4 of Atlantic City’s 12 casinos have jumped ship
• Bill passed to favor boutique casinos
• Bill passed to encourage construction of new owner-occupied homes

Before, casinos were only allowed in, if they met the three main criteria: They had to offer jobs with decent wages. They had to increase tax revenues. Finally, casinos had to prove that they would be able to contribute to economic growth. Now, faced with the onslaught of casinos going bankrupt and hundreds of jobs being lost, New Jersey’s lawmakers are trying to erase the Royal Flush from Atlantic City.

Two bills in a row

Two bills have now passed, one of which is aimed at enticing small new casinos and the other to attract new home owners. The first bill, sponsored by Sen. Joseph Kyrillos, a Monmouth County Republican, state Senate President Steve Sweeney and Sen. James Whelan, a former Atlantic City mayor, was approved by the state Senate committee Thursday. It overrides the requirements of a 2011 US gambling law which stated that of two casino hotels being built, one would have to be expanded into 500 rooms.

Now, the bill authorizes two casino hotels with as few as 200 hotel rooms to be built and would also allow a casino to be located in an existing building, as opposed to all new construction. For although Governor Chris Christie had signed the original legislation in January 2011 no smaller casinos have been built in Atlantic city, since then.

Sweeney explained that ‘the original requirements for casino licensing were set in a very different time and place’. So, even though Florida’s Seminole Indians asked through their Hard Rock International franchise to build one, the deal fell through. Besides approving this bill, this is just one of one of several measures state lawmakers are considering to help Atlantic City and its struggling land-based and mobile casino industry.

State Senators, Whelan, Robert Singer and Assemblyman Mazzeo also proposed the second new legislation. The bill is designed to ensure a more even distribution of the ‘property tax burden’. Under the Atlantic City Growth Tax Credit Program this would offer developers an opportunity to construct new, owner-occupied residential projects.

They would also take advantage of a tax credit for construction costs, demolition costs, capital improvements, and land acquisition. Potential homeowners acquiring the units would be considered for low-interest mortgages through the New Jersey Housing and Mortgage Finance Agency.

“A city with three-quarters of its residents as renters is unsustainable,” said Whelan. “We need to incentivize both developers to build residential projects in Atlantic City and consumers to purchase
these units. Only then can we grow both Atlantic City’s economy and its population” he went on to say. The hope is that the bill rectifies Atlantic City’s financial crisis, induced in part by successful tax appeals from the casinos. It would also encourage construction of new owner-occupied homes in Atlantic City, where three-quarters of the residents are renters.

Boutique casinos, the way to go

Bashaw will propose his small casino as a ‘new product that would attract new customers’. Perhaps his hotel guests would play at 25 or 30 tables placed all around his hotel’s fifth floor. He envisions even instructional sessions to teach new excited gamblers how to play. And, as the hotel would only be able to hold only several hundred people because of fire codes, then due to the limited gambling space, priority would be given to hotel guests to use his casino.

Mayor Don Guardian blames the casino culture plaguing Atlantic City as being responsible for ‘two generations making a living at jobs that required almost no post-secondary education’. He proclaims that “Atlantic City has always been happy having just one road come into town, whether it was gaming or … before that, when it was just a big hotel for tourists”.

If the ‘boutique casino’ bill works it is certain to attract ‘developers into the market at a much lower price than the $1.5 billion to $2 billion the city’s higher-end casinos cost to build’. Perhaps Atlantic City, with more conventions, condominiums, home owners and just the right amount of small casinos, will see a lowering of taxes and a spur of new jobs.

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