North Jersey Casino Boondoggle

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This week, state legislators proposed a constitutional amendment that, if passed by the state legislature, and then by voters in a state-wide referendum, would allow the construction of three new casinos in Bergen, Essex, and Hudson counties.

North Jersey lawmakers vary in which proposal they support – Assemblyman Ralph Caputo (D-Essex) backs all three, as does Valerie Vainieri Huttle (D-Bergen) and Raj Mukherji (D-Hudson). State senators Paul Sarlo, (D-Bergen) and Ray Lesniak, (D-Essex) are backing a plan to build a “destination resort” Hard Rock Casino to the Meadowlands and another “destination resort” casino and motorway in Jersey City. State Sen. Loretta Weinberg, (D-Bergen) has endorsed only the Meadowlands plan.

These legislators are intoxicated by the promise of jobs and tax revenue. They swoon at the thought of bringing economic development to their legislative districts.

As well they should.

But, let me tell you, dear state senators and assemblymembers: if you’re interested in a casino, I know of a couple of ’em for sale – all of ’em in the state, and only one in swampland (well, we it marshland…) And I can get them for ya real cheap…

Undoubtedly, the picture that is in the mind of legislators is the picture that the gaming industry paints when it sells state and local politicians on the idea of a casino: Tourism! Revenue! High-rollers from out of state! Champagne! Caviar! Tips! Jobs!

And once upon a time, that was the reality that the casino gaming industry would bring. Look at Las Vegas in the 1950s and 1960s. Look at Atlantic City in the early 1980s.

What they are not selling you is the 2015 reality: poor people who can’t afford to gamble! Declining revenue (and sometimes loss)! Stale beer! Staler buffet lines! Trying to support a family on 20 hours a week!

The legislators – who apparently couldn’t come to an agreement as to where to place an additional casino in northern Jersey — decided it would be a good idea to further eviscerate the market by calling for one in Jersey City, one at the Meadowlands, and one in Newark. They initially seemed able to secure the support of state President Steve Sweeney, who now appears to be waffling in his support. Many assumed Sweeney would remain protective of the Atlantic City casinos that constitute the largest industry in Sweeney’s neighboring district. But then Sweeney, apparently putting his 2017 gubernatorial ambitions ahead of the economic interests of South Jersey, seemed on board with the north Jersey casino plan, but has now said that perhaps a vote on the proposal should be delayed until November 2016 to ensure high turnout. Gov. Chris Christie, was initially opposed to expanding the industry, also now seems more amenable.

Complicating the matter is that PolitickerNJ reported that central New Jersey legislators state Senators Bob Smith (D-Middlesex), Kip Bateman (R-Somerset), and Linda Greenstein (D-Middlesex) are adding their “me toos” to the mix arguing that if south and north Jersey have casinos, so should central Jersey. Sweeney’s reaction to the central Jersey legislators was that they had a valid argument.

Despite all of the fawning by legislators seeking to kowtow to the building trades and appear supportive of economic development, there are three simple reasons why allowing additional casinos in New Jersey is a horrible idea.

Number one: the gaming industry is saturated, and cannibalizing it more only hurts the state.

The Atlantic City casinos were the first legal gaming halls outside of Nevada. In 1978, when Resorts International first opened its doors, in what had been Chalfonte-Haddon Hall in Atlantic City, toney crowds lined up around the block to get into the gaming hall. Back then, there was a dress code – gentlemen had to wear suit coats. Each year, gaming profits grew. By 2006, the gaming industry in Atlantic City was netting a $5 billion profit.

Throughout the country, states that had viewed gambling as sinful and morally abhorrent suddenly realized that they were losing out on revenue. Pennsylvania legalized gambling. In Connecticut, the Mashantucket Pequot Indian Reservation opened Foxwoods. Then Mohegan Sun opened. New York opened “racinos.”

Twenty years ago, only New Jersey and Nevada had legalized gambling. Today, 48 states have some form of legalized gambling (only Hawaii and Utah do not), 39 states have casinos, and the vast majority of Americans are within a day’s drive to a casino. The era of casinos as a destination is over, and in a post-recession economy, gaming revenue today in Atlantic City is about $340 million, up from recession lows, but still not $5 billion.

Other casinos also struggle: In the meantime, Foxwoods has $2 billion in debt; Mohegan Sun, smaller in scale, has debt in the hundreds of millions. Even the Hard Rock Casino in Las Vegas – not owned by the Hard Rock International – but nonetheless boasting the name that will allegedly attracts throngs to the Meadowlands – has incurred losses  of incurring losses of $103 million, $105.5 million and $116 million for 2014, 2013 and 2015, respectively.

The reality is that in the Northeast – indeed in most of the United States – supply of casino gaming venues far exceeds demand.

The Atlantic Club casino – which started out as the Golden Nugget and was also the Hilton, closed in January last year, as did the Showboat casino and Trump Plaza. The Revel, constructed with generous tax incentives, state subsidized worker training, and infrastructure support to be a magnet of the young, hip high-roller crowd filed chapter 11 bankruptcy twice in its two-year history, and then finally shuttered its doors in 2014.

The growth of one or two or three more casinos in northern New Jersey will not create attract a new class of visitors. In will not render the Meadowlands an “international destination.”

As reported by Associated Press reporter Wayne Parry, analysts and casino executives speaking at a major gambling conference last week agreed that the casino market in the Northeast is saturated. “You’re just moving money around” without growing the overall market, remarked Ed Sutor, president of Dover Downs casino in Delaware.

The second reason more casinos are an awful idea: it’s time to get over “if you build it, they will come.” Sometimes, if you build it, they’ll build one just like it. Only better.

The idea held by legislators and municipal elected officials that visitors from New York City will venture into Jersey City, the Meadowlands, or Newark represents not just a naiveté about the nature of gaming, but also about the nature of politics.

Let’s just imagine that these shiny new casinos are able to attract New York’s City’s millions of visitors, who, unsatisfied with the Isle of Capri casino in Boonville, Missouri come to New York City and figure that, because there’s so little to do in the Big Apple, their time would best be spent coming to New Jersey to gamble, and watching a motorsports in Jersey City, or gambling at the new destination resort Hard Rock in the Meadowlands – a destination resort without a hotel. Let’s just say that a lot of them do – millions even.

What would you do if you were New York?

I’d a build a casino.  A glitzy, glamorous, shiny, new casino on the other side of the Hudson River. I’d build it with a hotel, and a nearby convention center. Say, at the Javits Center. Or on Pier 76, with a walkway to the convention space. Or on Governor’s Island. Or on Coney Island.

Granted, while each of these casinos has been proposed, none are in the works. Yet. But New York has approved four new casino licenses, the first of which is slated to open in 2016, and is it realistic to believe that, if the north Jersey casinos were successful, if they attracted visitors from New York, that New York wouldn’t eviscerate that market?

Is it realistic to believe that the beyond the construction jobs, that these are good, sustaining jobs that will facilitate a middle class lifestyle?

At a press conference discussing the proposed casinos Assemblyman Mukherji noted his reasoning for supporting the proposal: “Jobs, jobs, jobs. Jobs-job-job-job-jobs, jobs, jobs.” He estimated that three north Jersey casinos would create 20,000 casino jobs and 30,000 indirectly-related jobs. Is he aware that Atlantic City’s unemployment rate is at 18.3 percent? Eighteen point three. Triple the nation’s. Is there any independent non-gaming industry sponsored research to back up those estimates? Is he aware that the opening of a new casino brings the hopeful employees from everywhere – dealers from New Orleans, waitresses from Florida, slot mechanics from cruise ships, who then place additional burdens on municipalities, counties, and the state when casinos fail (which they do).

If the solution was so simple – build a casino and it will generate 50,000 jobs — nearly every state would have tried it.

Oh, wait. They have.

Thirdly, there are significant opportunity costs to focusing on casino development.

Focusing on this form of development takes resources, and using those resources to grow the casino gaming industry is not a solid, long-term economic development strategy. Yes, constructing these casinos means there will be some jobs, and yes, some awful jobs are better than no jobs. But south Jersey outpaces all other areas of the state in economic indicators that indicate a failing economy: unemployment rates, foreclosure rates, lower housing prices, the rate of children living in poverty, and so on.

Choosing to invest in the casino industry, while glitzy and glamorous on the surface, will do little to foster long-term economic growth and stability of the region and the state. The resources that can be put into attracting casinos can be put into attracting corporations and business that will grow and prosper – and into good jobs in which employees will prosper.

That is where these legislators should be focusing their attention, rather than doubling-down and throwing good money after bad.

Brigid Callahan Harrison, Ph.D. is Professor of Political Science and Law at Montclair State University, where she teaches courses in American government and state and local politics. A frequent commentator in print and electronic media, she is the author of five books on American politics. Like her on Facebook and follow her on Twitter @BriCalHar.

North Jersey Casino Boondoggle