In light of the negative fiscal impact that the COVID-19 pandemic has had on Atlantic City casinos, the New Jersey Legislature voted in favor of providing temporary relief to the industry.
In a vote on Thursday, the General Assembly moved the bill (S2400/A4032) to Gov. Phil Murphy’s desk for his signature. The state Senate passed the bill back in June.
The ultimate goal of the legislation is to help casinos get back on their feet as well as resume hiring.
The bill allows for a reduction in taxes paid on gross gaming revenue. It also includes a monthly deduction against gross gaming revenue equal to the bonus and promo credits used by the casino’s customers.
According to the legislation, the pandemic “has clearly not just reversed the consistent track of economic improvement that the Atlantic City casino industry had worked very hard to achieve over the last several years, but also has set back the economy of an entire region that is greatly dependent on the jobs, tourism spending and purchases that the Atlantic City casinos generate.”
How bad is it at Atlantic City casinos?
2020 has been a frustrating year for many in the entertainment and hospitality industries, especially in Atlantic City.
When the coronavirus pandemic was at its height in New Jersey, Murphy shut down the casinos. Until the scaled-back reopening in July, Atlantic City’s casinos had to rely on just online gambling to bring in any sort of revenue.
Last month was the first full month that all nine Atlantic City casinos were open since mid-March.
All the casinos reopened at reduced capacity with a reduced number of games and machines for customers to play on as well as a ban on indoor dining.
Indoor dining returned with similar restrictions in September.
All of these various factors played a role in a considerable drop in revenue compared to August 2019.
A drop in casino win across the board
According to a press release from the Division of Gaming Enforcement (DGE), the total gaming revenue posted in August was $326.3 million. Last year, $352.8 million was earned, a 7.5% decrease.
On its own, that decrease isn’t much. And the reason for that lies in the strength of NJ online gambling sites.
In August, $87.8 million in NJ online casino revenue was brought in compared to $41.1 million last year, an increase of 113.6%.
There was also a year-to-year increase in NJ sports betting revenue at $39.5 million for the month, up from last year’s amount of $25,210,342. The majority of that revenue was also online.
Land-based casinos, however, are another story. Eight casinos saw year-over-year decreases between 14% and 55% in August.
The only outlier was Ocean Casino Resort, which grew by only 1.4% year-over-year.
|Casino||Table & Other||Slot Machines||Aug 2020 Total||Aug 2019 Total||% Change|
|Bally's||$ 3,915,944 ||$ 11,540,973||$ 15,456,917||$18,756,628||-17.60%|
|Borgata||$ 11,671,996||$ 28,821,017||$ 40,493,013||$71,925,945||-43.70%|
|Caesars||$ 6,444,970||$ 14,766,485||$ 21,211,455||$30,920,635||-31.40%|
|Golden Nugget||$ 1,515,939||$ 7,747,523||$ 9,263,462||$20,684,016||-55.20%|
|Hard Rock||$ 12,586,066||$ 20,287,550||$ 32,873,616||$38,456,242||-14.50%|
|Harrah's||$ 5,278,263||$ 16,234,162||$ 21,512,425||$31,125,574||-30.90%|
|Ocean Casino||$ 6,340,123||$ 18,034,934||$ 24,375,057||$24,050,296||1.40%|
|Resorts||$ 3,182,446||$ 10,718,845||$ 13,901,291||$18,889,794||-26.40%|
|Tropicana||$ 4,004,543||$ 15,961,030||$ 19,965,573||$31,671,211||-37%|
|Total||$ 54,940,290||$ 144,112,519||$ 199,052,809||$ 286,480,341||-30.50%|
Note: Atlantic City poker rooms were open in August 2019, but remain closed as of September 2020. The total gaming revenue in August 2019 includes poker.
AC casinos struggle to maintain growth
The industry’s total gaming revenue last month was only $1.618 billion, compared to last year’s $2.278 billion, a 29% decrease.
These numbers continue the downward revenue trend that Atlantic City’s casinos are on this year. The first-quarter numbers were down 65% compared to the previous year. That included the first two weeks of the casino shutdown.
The second-quarter numbers were much worse, as there was a $112 million, or 85%, decrease compared to last year. This was the quarter that was completed affected by the shutdown.
The back-to-back quarterly losses come on the heels of a period when Atlantic City casinos saw a 21-month streak of growth come to an end.
Casinos and hiring during a pandemic
While AC’s casinos are up and running at a limited capacity now, the impact of the months-long shutdown will be felt into 2021. That’s something that is not lost on Assemblymen John Armato (D-Atlantic City) and Vince Mazzeo (D-Atlantic City).
“We all know that the casino industry is vital to the success of the local finances and to the over 30,000 individuals it employs,” Mazzeo said in a Press of Atlantic City article.
“Atlantic City will be feeling the downturn in the economy like the rest of the state and country. Ensuring that we do not intentionally worsen that or place any extra burden on the taxpayers is our top priority,” Armato added.
That being said, the new bill does require something of casinos in return for tax relief. Casinos in Atlantic City must make a “good faith effort” to hire as many former and new employees as possible.
In the last few months, casino management had to get creative in order to make the most of the restricted opening in July. Hard Rock Atlantic City, for example, moved its VIP high-roller lounge from indoors to an outdoor ocean view tent.
“We’ve been able to bring back about 60% of our employee base, so not everyone,” said Joe Lupo, president of Hard Rock AC.
“We can’t fill our hotels because we can’t put as many people in our hotel elevators, nor do we have enough seating outside to supplement all those guests if we did fill our hotel rooms.”
The local effect of an Atlantic City casino downturn
The fiscal impact that the city itself will experience due to the casino shutdown is already being felt by the city and its businesses. But it will also be felt in next year’s municipal budget.
According to the PILOT bill, which was enacted in 2016, Atlantic City’s nine casinos pay a portion of their annual earnings to the city instead of taxes for 10 years.
The casinos paid the city $150 million last year, a number that will not be achieved this year due to the pandemic, according to the state’s Department of Community Affairs (DCA).
“DCA projects that 2020 gross gaming revenues will be lower, which will result in lower PILOT payments to the City of Atlantic City in 2021,” Lisa Ryan, a DCA spokesperson, told the Press of Atlantic City.
Despite the expected lower PILOT payment for 2020, the DCA still feels that there will not be any real impacts on Atlantic City’s budget for next year.
However, Michael Busler, a public policy analyst and finance professor at Stockton University, has a less than optimistic view.
“I think (the casinos) are going to have a tough time even meeting the amount that they have to pay (for 2021),” Busler said.