How Will Atlantic City React To The Economic Slowdown?
The resurrection of Atlantic City by the inception of casino gambling twenty years ago was a slow process, and with increasing competition, there is growing uncertainty as to whether the city’s future will be one of continued growth, stagnation, or a return to the decay and decline that made Atlantic City turn to gaming in the first place. Recent casino and urban development has pumped billions of dollars into New Jersey’s economy, generating in new tax revenue and creating more jobs than the city had residents. However, the casino industry has not restored Atlantic City to its former position as playground of the world or the major hospitality center of the United States as was anticipated in the Casino Control Act. Let’s go through some of the reasons and the facts that might help us understand this trend and whether it is a short-term glitch or a long-term phenomenon.
The more typical experience is that of Atlantic City which has not reaped great benefits from its casinos, despite their contributing nearly seventy percent of the tax levy. The Atlantic City casinos collectively employ more than forty thousand people, wages are relatively low; study found that a third of the hotel jobs in the city paid very less.
Atlantic City Hotels and Casinos have provided the needed resources for the redevelopment of the city. They have created thousands of moderate income jobs in a year round environment, catering to millions of tourists per year. Of course, the state of New Jersey has received substantial tax benefits as a result of casino revenues. The revenue from entertainment and gambling related taxes at Atlantic City is second only to Las Vegas in the United States. With such a seemingly positive cashflow, how can the economy not do well?
There are several reasons that we think could be causing this. Political errors and the overall economic slowdown are perhaps the biggest ones. Because of disputes between Atlantic City, Atlantic County, and the state of New Jersey, the failing infrastructure and the social degeneration of the community continued up until five years ago. Under the New Jersey Casino control act, two percent of the gross revenue from casino operations was to be provided to the state of New Jersey for redevelopment projects within Atlantic City. Under the act, these funds were earmarked for urban redevelopment. The state believed that it did not need to use these funds in Atlantic City, assuming that the total investment in Atlantic City by hotels and entertainment facilities would be sufficient to stimulate growth within the community. The infrastructure and the need for city housing would be accelerated by the development of the casino industry itself. This assumption, combined with the overall nation-wide economic slowdown may have been one of the primary reasons for the current slowdown at Atlantic City.
It is interesting that, in sharp contract, other states and local governments have not hesitated to spend millions in efforts to attract new jobs into their economies. The state of New York authorized sic new tribal casinos and slot machine gaming at eight race tracks. This was motivated in no small measure by the need to close the gap against large impending state deficits, relating both to the economic slowdown and to the anticipated economic consequences of the terrorist actions and the subsequent war on terrorism. This sort of further reinforces that casino development can still be a very favorable thing for the State and its economy if done well.
More than 500 casino employees have been laid off in the past three months alone in Atlantic City and other leading gaming jurisdictions. The peripheral businesses for the casinos – hotels, atlantic city shows, Etc. are slowing down the fastest and even gaming revenues are showing signs of decline. Will Atlantic City survive this scare and come out ahead in the long run or is this the beginning of a new troubling era for it? Time will tell.
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