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August 10, 2010
Governor Looks to Double Down on Atlantic City
Legislature to Convene Joint Gaming Summit
Governor Chris Christie has announced a sweeping State plan to address the economic challenges facing New Jersey’s gaming, professional sports and entertainment industries. The recommendations include plans for the State to create and assume oversight of a tourism district in Atlantic City, in an effort to create a Las Vegas-style destination on the East Coast.
Governor Christie held two press conferences on July 21, one at the New Meadowlands Stadium and the other on the Atlantic City Boardwalk, to proclaim his enthusiastic support for recommendations issued by the Governor’s Advisory Commission on New Jersey Gaming, Sports and Entertainment. The Commission’s report was made public at the news conferences.
In addition to its plan to spur economic growth in Atlantic City, the Commission recommends encouraging the completion of the stalled Xanadu retail and entertainment project in the Meadowlands with State support; transforming the New Jersey Sports and Exposition Authority from a venue operator to a landlord; and privatizing horse racing.
Joint Legislative Gaming Summit August 6
In response to the Governor's proposal, a special joint legislative committee will examine the future of legalized gambling, entertainment, professional sports and horse racing in New Jersey on Aug. 6 at the Atlantic City Convention Center. The session will be dedicated to reviewing the report issued by Gov. Chris Christie's special gaming commission on Wednesday. Jon Hanson, the commission's chairman, has been invited to attend.
Co-chairs Sen. James Whelan (D-Atlantic) and Assemblyman John Burzichelli (D-Gloucester) said the initial focus will be to fill in what they see as the report's gaps on gambling in Atlantic City, and to create a state wide plan to move forward. They said subsequent hearings will go into greater detail about specific proposals, and their impact on New Jersey's casino, horse-racing and tourism industries.
Betting on Atlantic City
Casino gaming represents one of New Jersey’s largest industries, with estimated revenues of more than $3 billion spread across more than 2,000 businesses. But since 2007, Atlantic City has lost 25 percent of its gross revenues and 12,000 jobs, the Commission noted.
This decline, according to the Commission, is due to factors that include:
- The perception that Atlantic City is unclean and unsafe, and the failure of the city’s government to effectively address such concerns
- Atlantic City’s fiscal mismanagement of its existing significant tax base
- Wasteful staffing in the city’s government
- The absence of police and law enforcement presence in the Boardwalk/Casino District
- The absence of a Master Plan that addresses how to improve these conditions
- Competition from neighboring states
- Inadequate investment in nongaming amenities and attractions
AC Recommendations
The Commission recommends the State create a framework to encourage private investment and growth in the Atlantic City marketplace. The goals set forth by the Commission are:
- Create a “clean and safe” tourism district with State oversight by July 1, 2011.
- Create a Master Plan for the new tourism district to entice new entrants into gaming and nongaming attractions. The Master Plan should be delivered to the Governor by July of 2011.
- Improve the financial stability of Atlantic City by attracting other world-class casino operators.
- Increase meeting and convention business by 30 percent in the next five years.
- Bring New Jersey regulatory structure into the 21st Century by reducing costs without sacrificing the integrity of the gaming industry. The resulting cost savings (between $15 million and $25 million) should be used by the private sector to pay for enhanced marketing and reinvestment.
- Increase visitation and spending through joint marketing efforts comparable with other national destination resorts.
- Improve transportation to Atlantic City, including increasing air, rail and ferry options.
Governor’s Proposal
The Governor is proposing a number of initiatives to implement the goals established by the Commission.
The creation of the Atlantic City Tourism District would establish something akin to a special improvement district, with representatives from the State, Atlantic City, Atlantic County and industry. The District, which still must be defined by legislation, would be responsible for overseeing the “clean and safe” initiatives and security within the Tourism District.
The District would assume control of various activities currently conducted under the offices of the City of Atlantic City, the Atlantic City Convention and Visitors Authority and the Casino Reinvestment Development Authority (“CRDA”). CRDA’s resources would be focused on Atlantic City and to a lesser degree on other parts of the State, a win for Atlantic City and a loss to other New Jersey cities such as New Brunswick and Newark, in which CRDA has made investments in the recent past.
The District also would assume responsibility for all government aid for development within the District, including eminent domain, financing issues, zoning, traffic flow and related services.
The Atlantic City Convention and Visitors Authority, which currently operates the Boardwalk Hall and the Atlantic City Convention Center, no longer would operate these facilities, and responsibility for these operations would fall to the District.
AC Master Plan
The Commission’s report also proposes a public-private partnership that would work with the District to develop a Master Plan. The Atlantic City Partnership, an existing consortium of businesses, is the suggested “private” component of this partnership. The Commission recommends this Partnership expand the Boardwalk area with new family friendly businesses, upgrade the use of Marina facilities, develop the South Boardwalk, and provide other amenities such as Boardwalk amusement rides, theaters and possibly a NASCAR facility.
Marketing is a prominent subject of the report. The Commission encourages marketing the “Atlantic City” brand for convention and business, as well as assisting in transforming Atlantic City into a destination resort. The private sector will be asked to contribute money to this marketing initiative, and to help promote more robust convention business and activities such as food and wine festivals, music festivals and special events.
The regulatory reforms, which the Commission estimates should save casino operators between $15 million and $25 million annually, should be used by the private sector for marketing and reinvestment in Atlantic City.
Legislation will be needed to implement these recommendations. The Governor has indicated he is firmly behind these recommendations and expects to receive bipartisan support.
Expansion of gaming in locations outside Atlantic City will not be considered until some future time when: (a) Atlantic City becomes a destination resort; (b) Atlantic City gaming operators support additional gaming locations; or (c) the proposed reinvention of Atlantic City fails.
New Jersey Sports and Exposition Authority
The Commission’s report recognizes that the NJSEA is losing approximately $30 million a year, and recommends the Authority be restructured so it is able to create and maintain a break-even budget. To accomplish this, the Commission recommends the NJSEA divest itself of all responsibilities related to venue operations, including the Meadowlands Racetrack, the Izod Arena and Monmouth Park Racetrack.
The Commission rejects any proposals to install video lottery terminals or other forms of gaming at the Meadowlands Racetrack at the present time. In short, the Governor has determined to double down the State’s investment in the Atlantic City casino gaming monopoly, notwithstanding encroaching competition from New York and the Poconos.
Xanadu
The report recommends that the State should help to refinance this project, while requiring the development group to invest additional capital to enable the project to be completed. The Governor supports tax-exempt financing to assist in completion, but only as gap financing in which the State would yield upside economic benefits.
Thoroughbreds Win, Standardbreds on Their Own
Recognizing the end of casino-sponsored purse supplements, the Commission’s report supports a shorter but higher-quality thoroughbred meeting at Monmouth Park for thoroughbreds. Standardbred (trotters) are left on their own to fight for their future.
Legislation has been passed and signed into law that eliminates the thoroughbred meet at the Meadowlands and creates a 50-day summer meet with a $1 million-a-day purse at Monmouth Park. The moves were made to attract higher-quality horses, major stables and higher attendance. This effort has been a reported success this season.
In a surprising move given the importance of Monmouth County to his electoral base, the Governor proposes to allow the standardbred owners to take over the Meadowlands Track and all operating costs by lease or sale, or to build a new facility in Monmouth County with a mile-long track, leaving the future of Freehold Park uncertain. It appears these efforts will require nearly complete private sector investment, a dicey proposition in these economic times and given the niche nature of this sector.
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Hill Wallack LLP’s Gaming & Hospitality Group
Hill Wallack LLP's Gaming & Hospitality Group has a long history of successfully representing major casinos, as well as companies involved in the lottery, horse racing, Indian gaming, and Internet wagering sectors, on a broad range of legal matters. We also counsel those doing business with gaming companies, including executives, investors, institutional financial sources, banks and vendors.
The firm served as counsel to the Casino Redevelopment Authority in 2002 and 2003, assisting in the development of Atlantic City’s The Walk outlets and other high-profile projects.
Our attorneys have extensive experience in matters involving licensing and enforcement issues, internal and special investigations, real estate development, land use and environmental projects, and corporate financing, as well as litigation of commercial, employment, collections, personal injury and workers’ compensation claims. Clients turn to us for advice and representation on regulatory, strategy and corporate governance issues.
We have advised CEOs, general counsel, boards, and board compliance and audit committees on sensitive matters that include new market development efforts, government and business ethics, and acquisition strategies.
For more information, contact one of the attorneys who work in this area: Paul P. Josephson, Esq., Richard F. DeLucry, Esq., Noah Bronkesh, Esq., Robert W. Bacso, Esq., Patrick D. Kennedy, Esq. or Ryan P. Kennedy, Esq.
This article provides information of general interest and is not intended, and should not be used, as a substitute for consultation with legal counsel. Any questions regarding the specific issues raised in this article should be directed to the authors or to your contacts at Hill Wallack LLP.