The Equity Factor

Time for Atlantic City to Close Its Casinos

Today Atlantic City will elect its next mayor. Voters need to decide if they want to keep putting all their cards down on a sputtering economic engine.

Atlantic City’s boardwalk at sunset. Credit: Chris Goldberg on Flickr

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Atlantic City is in big trouble. Casinos, meant to boost the city’s economy when gambling came to its shores in 1976, are instead gutting America’s Favorite Playground. And those shiny toys filled with blackjack and roulette will weigh on voters’ minds as they head to the polls to vote for mayor today. But rather than rehabilitate the local gaming economy, as New Jersey Gov. Chris Christie has tried doing with $261 million in tax credits and looser regulations, it’s time for Atlantic City to cut bait.

The grand economic development experiment is over. Get casinos out of Atlantic City.

Last month, a state tax court judge ruled that the city owes the Borgata Hotel Casino & Spa, one of 13 casinos within its borders, a $48.8 million tax refund — plus interest — on property taxes from 2009 and 2010. This amounts to 20 percent of the city’s annual revenue. The city, under the leadership of the next mayor, will most likely appeal the ruling, but that’s not even a fraction of the debt it could owe casinos for tax refunds because the casinos haven’t met anticipated revenue projections. This is the sleeper issue of today’s election.

Yup, Atlantic City has paid for $200 million in tax appeals from casinos since 2007. Its property tax base has shrunk by 34 percent in the same time, according to the county Board of Taxation. It’s not unreasonable to think that a consistent stream of casino tax appeals could eventually sink the city. As more municipalities wade into bankruptcy court, Chapter 9 has become a more viable option. But the problem with casino taxes, many argue, is that the state doesn’t assess casino properties fairly. Their values are calculated based on both income and taxes.

Experts and policymakers have called for more equitable assessments of casinos from the state legislature. Republican mayoral candidate Don Guardian has made the issue part of his platform. There are “too many variables there that can be used against the city to lower the actual rate, and therefore lower the tax,” he told me. His opponent, incumbent Lorenzo Langford, did not respond for comment and has yet to take a strong stance on the issue, though he has said the state needs to reconsider its assessment process.

But the tax appeals have held up in court, which only means that casinos will continue to appeal their taxes in the future — and that the city will take a direct hit with every drop in profitability they experience.

“I don’t have any sympathy for the casinos,” said Earl L. Grinols, a professor of economics at Baylor University and a former senior economist for Ronald Reagan’s Council of Economic Advisers. “They’re asking the people of Atlantic City to chip in to support their misfortune. Or, you could say, to support their failure to do their business right.”

This is all to say that casinos have failed Atlantic City. Their grand visions of economic development and prosperity have fallen flat, and it’s time to start anew. Grinols, author of the 2009 book Gambling In America: Costs and Benefits, said that with the spread of gaming to other states, Atlantic City could benefit from some progressive gambling policy.

“My advice would be, get rid of gambling,” he said. “You’ve tried gambling. You’ve now seen gambling long enough to know that it’s not doing what you wanted it to do. So why not move onto something different? Why don’t you consider becoming the first city to diminish the footprint of gambling and move onto other kinds of attractions?”

It can start with the geographical attraction that has brought people to Atlantic City for years: the shore. Guardian acknowledged the city’s desperate need to diversify its economy with a nod to the ocean. “Casinos need to be just one part of the total picture with entertainment, dining and the ocean,” he said. Why not focus on tourism and turn those gleaming towers into destinations for events or conventions, rather than dens of addiction dressed up as economic engines?

Something else to consider: If the city manages to eradicate casinos, it will most likely see a dip in crime. Grinols said that, during his years of research, he found that the presence of gambling elevates crime rates.

But what Atlantic City needs is a mayor ready to battle with the casinos and legislature. “The first point is really to sit down and talk about how we’re moving forward,” Guardian said without going into further detail.

My phone call with Guardian was cut short before I had a chance to ask him if he’d consider shuttering gaming in Atlantic City.

Next door, New Yorkers are voting on an amendment that would permit up to seven casinos in New York State. New York City and Long Island would have to wait seven years until they could cash in, but that isn’t too long. And if Proposition One passes today, developers will surely be at the ready when the moratorium is lifted. They already have their sights set on the Catskills and Tioga County.

That means less gaming tourism for Atlantic City. The next mayor should just cut to the chase: Get rid of gambling and look elsewhere for economic development.

The Equity Factor is made possible with the support of the Surdna Foundation.

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Bill Bradley is a writer and reporter living in Brooklyn. His work has appeared in Deadspin, GQ, and Vanity Fair, among others.

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Tags: new york cityeconomic developmentequity factornew jerseycasinosatlantic city

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