An upcoming November ballot referendum that would allow New Jersey voters to decide if casino gaming expands beyond Atlantic City into the northern part of the state could have the unintended consequence of up to four casino closures. That comes from a recent report from Fitch Ratings.
While increased competition from nearby states such as New York, Pennsylvania and Connecticut has been cited as a major factor in Atlantic City’s decline over the last decade, further lost revenue for the embattled city could come from within New Jersey itself.
Increased competition from within NJ
Atlantic City is currently down to eight casinos, after losing four in recent years. Should the referendum pass, proposed locations for up to two new casinos would be the Meadowlands Racetrack and the American Dream complex, both in East Rutherford, and in Jersey City as well.
Right now, polls show voters are split on whether to allow the North Jersey casinos.
Jeff Gural, who runs the Meadowlands and has partnered with Hard Rock International Inc. for the casino proposal, said 14.6 million people live within 50 miles of his track.
“I think we’d do great,” he said. “We have the best location for a casino in all of America.”
The Jersey City proposal comes from developer Paul Fireman, who has not publicly disclosed information on his estimated $4 to $5 billion project.
AC casinos at risk
Fitch adds an estimated 25% decline in Atlantic City’s gross gaming revenue would negate any operating profit before factoring in the management fees of Golden Nugget, the most profitable among those three.
Fitch speculates Bally’s would be the most likely fourth closure. Caesars Entertainment closed down the Showboat Casino in 2014 although it was marginally profitable. Bally’s is currently the lowest-performing property among Caesars’ three remaining Atlantic City casinos.
Proposal attempts to minimize harmful impact to Atlantic City
Despite the expected negative effects more casino closures would have on Atlantic City, primarily in the form of further job losses, some concessions have been made in what would seem to be an attempt to recognize and minimize further harm to Atlantic City’s economy.
The current proposal gives Atlantic City operators priority in the application process and also includes a revenue share provision with Atlantic City.
There is speculation among financial analysts that the surviving properties could benefit from the closures and see performance improve, echoing what occurred after the four Atlantic City casino closures during 2014. Figures for 2015 showed an average revenue increase of just over 5%, which also factors in NJ online gambling revenue.
Peter Trombetta, an analyst with Moody’s Investors Service, believes the North Jersey casinos would do well, but not without consequences to others in the region. While potential harm to Atlantic City is the most pressing concern within the state, the new casinos could potentially also lure customers away from casinos in Pennsylvania, New York, Connecticut and possibly even as far south as Maryland.