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(CNBNewsnet)September 19, 2016--The upcoming referendum in New Jersey which could see the entry of Las Vegas-style gambling may prompt the closure of up to five Atlantic City casinos. If the legislation is passed, it will likely encourage the opening of new casinos further upstate. The loss of this essential business will harm Atlantic City establishment, according to the CEO of one of the major AC casinos.
Resorts Casino Hotel recently commissioned a study to assess the damage
Revenue has already gone down in the casino industry in Atlantic City. What was once a flourishing betting hub has already seen a number of high-profile closures ever since the financial crisis. Although part of the reason for this may be a lower level of disposable income in patrons, it could also be linked to the rise in online gambling. There is now a big interest in mobile casinos, ever since New Jersey legalised online gambling back in 2013. Although online gambling is limited to servers held in Atlantic City, the taxes are far higher than are paid on average land based casino profits. Less foot traffic also means lower usage of secondary products such as alcohol and food on premises.
The New Jersey Casino Expansion amendment would permit additional casinos to be built and operated in two other counties. However, only one casino would be allowed in each county. As the 1976 law which gives the monopoly of casino profits to Atlantic City still stands, holders of Atlantic Casino licences will be invited to submit the first proposals for the new casinos. They will be given six months to do so. A proposal will also require a commitment to invest at least $1 billion dollars in the new venture. If the six-month period passes and no proposals are submitted which meet the above guidelines, then licence holders outside of Atlantic City will be permitted to apply. They will be subject to the same investment conditions.
The recent findings by the Resorts review have proven worrying for investors in the area. After the closure of the Trump Taj Mahal next month, seven casinos will be left standing. However, if the new North Jersey casinos prompt a further drop in revenue then this number is likely to take a huge dip. Although, proponents of the legislation have claimed that the move could redirect as much as $200 million tax revenue per year to the city. Those against say that this will not be enough to cover the cost of increasing competition.
Atlantic City faces a difficult time ahead. The ballot will be held on the 8th of November 2016. The city is now holding its breath to see whether massive job cuts lie ahead.