Setbacks for casinos shake Atlantic City
Atlantic City, N.J. — The recent slide in the construction of casino-hotels here -- and in patronage of those already in business -- has left supporters of legalized gambling surprised and unhappy.
In January, for the second consecutive month since casino gambling began here in May 1978, gross revenues have declined sharply. While part of this decrease is traceable to the cold weather (business is expected to pick up when warm weather returns), this downturn is coupled with the virtual halt of casino construction.
In fact, there is almost unanimous agreement here that once three new casino-hotels now in the final building stages are completed (they are scheduled to open this summer), there will be no new construction in the foreseeable future.
"We've got problems -- big problems," said William Eames, managing director of the Greater Atlantic City Chamber of Commerce. "We're killing the goose that laid the golden eggs."
Three years ago, Mr. Eames and many other businessmen here envisioned a phalanx of casinos lining the famed Atlantic City Boardwalk. But as one firm after another has announced it is shelving plans to build new casino-hotels, or that existing casinos were not going to be expanded, Eames's expectations have given way to incredulity and even anger -- at what he and others consider New Jersey's overregulation of the casino industry.
Originally, 47 companies announced their intentions to build casino complexes in Atlantic City. Of these, 19 formally applied to the state Casino Control Commission (CCC) for operating licenses by putting down a nonrefundable deposit of $100,000. To date, only six casinos are operating, and one of those is said to be near bankruptcy.
Compounding the drop in gambling revenues and construction is the fact that convention attendance also has fallen dramatically in the past year.
Ironically, the decline of about 20 percent in the number of conventioneers coming to this so-called "Las Vegas East" came despite a gain in the number of first-class hotel rooms by the city. Many of these new rooms, it seems, were taken by gamblers.
"Without conventions, the city cannot survive," Eames said in an interview. "The city cannot compete with other cities on casinos alone. We've said that from the very beginning."
A plan to expand 50-year-old Convention Hall, site of the Miss America beauty pageants, collapsed last year following disagreement over who should pick up the multimillion-dollar tab for the project. The city wants the casino industry to invest more than it has so far been willing to in the expansion plans.
According to Stephen F. Hyde, executive vice-president and chief operating officer of Caesar's Boardwalk Regency Hotel-Casino, the unexpected downturn in revenues for December and January was not caused by overregulation of the casino industry alone.
Basically what has caused the crunch, Mr. Hyde said in an interview, is that the increase in the number of gamblers has failed to keep pace with expansion to six operating casinos.
"However, our costs stayed roughly the same," he said, "and as a result of that . . . we fell on hard times."
The only exception to the decline in casino business apparently was the Golden Nugget facility, which reported before- taxes profits of $2 million in January. But Golden Nugget's chairman, Stephen Wynn, indicated the firm would not build a second casino in Atlantic City. Instead it is planning to build one in Las Vegas.
Meanwhile, with three new casinos soon to enter the competition in Atlantic City, Hyde and other casino executives are redoubling their efforts to blunt existing state regulations and what he calls "regressive" tax proposals.
Specifically, the industry is lobbying to speed up the licensing process, for permission to advertise its casinos more aggressively, to win a freer hand in the choice of hotel interior designs, and to derail passage of a bill that would raise the state tax on casino revenues from 8 percent to 10 percent.
But this is a gubernatorial election year in New Jersey, and some lawmakers with notions of succeeding outgoing Gov. Brendan Byrne (D), who is not eligible for reelection, seem in no mood to relax controls on casinos so that the "public's welfare" is protected.
One of the casino industry's sternest critics, State Assemblyman Charles Hardwicke, contends "it is too early for the state to endorse all kinds of changes just to make the casino industry happy. They [the casinos] want to relax the regulations so they can squeeze more money out of the public."
For its part, the CCC is taking steps to relax some regulations and red tape -- but not nearly fast enough to suit the casino industry, which fears the arrival of legalized casino gambling in neighboring New York State and elsewhere. Some observers think, considering the way momentum is building, that New York may well have casino gambling by 1982.
Says Eames: "The state is doing everything it conceivably can to discourage investment in Atlantic City -- and it's being very successful."
But New Jersey has a major stake in the success or failure of casino gambling. Since its advent here, the state has realized approximately $100 million in taxes from casino revenues.
At the same time, the state's costs associated with casino gambling are mushrooming. For example, the Division of Gaming Enforcement has requested a $ 20.1 million budget for the next fiscal year -- up 44 percent from the current year. The division says that much of the increase is for new state employees to monitor the activit ies of the three casinos now under construction.