Atlantic City's revenue from luxury tax on the rebound - pressofAtlanticCity.com: Breaking News

Atlantic City's revenue from luxury tax on the rebound - pressofAtlanticCity.com: Breaking News

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Atlantic City's revenue from luxury tax on the rebound

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Posted: Monday, July 22, 2013 2:00 am

Atlantic City luxury-tax revenue, a key indicator of consumer spending on nongambling attractions, has risen to its highest level since Hurricane Sandy lashed the Jersey Shore, newly released figures show.

Officials say the increase is a sign that the local economy continues to recover from the Oct. 29 storm, aided by stronger demand for hotel rooms, entertainment and other nongambling amenities.

“I’m looking at it as a huge positive for the city,” said Matthew Levinson, chairman of the New Jersey Casino Control Commission. “It shows that we are looking like the resort destination that everyone wants us to be. Although gaming revenue keeps the lights on in these buildings, this shows that people are still coming to town and spending money — spending money on things other than the slot machines.”

Revenue from the luxury tax climbed 13 percent in 2012 to $35.5 million, an all-time high. It was also up in three of the first four months of this year, according to figures released last week by the New Jersey Treasury Department.

There was a nearly 13 percent increase in luxury-tax revenue in April, the most recent month for which figures are available. April’s proceeds were $2.9 million. Israel Posner, a casino analyst at the Richard Stockton College of New Jersey, noted that April reflected the biggest monthly increase since Sandy.

“The trend toward more spending on entertainment and restaurants is clearly continuing,” said Posner, executive director of Stockton’s Lloyd D. Levenson Institute of Gaming, Hospitality and Tourism.

Posner and Levinson say they believe revenue from the luxury tax will continue to increase because of the recent addition of bars, restaurants and nightclubs at the Atlantic City casinos. The $35 million Margaritaville-themed restaurant, bar and casino expansion at Resorts Casino Hotel was the centerpiece attraction during a series of grand openings over the Memorial Day weekend.

Golden Nugget Atlantic City debuted a nightclub over the holiday weekend, while Revel Casino-Hotel opened a poolside day club. Tropicana Casino and Resort followed this month with a restaurant expansion headlined by a Chickie’s & Pete’s sports bar overlooking the Boardwalk.

“I would expect that with Margaritaville and with Chickie’s & Pete’s at the Trop, the trend will continue,” Posner predicted about the increase in revenue from the luxury tax.

The luxury tax is collected on hotel rooms, alcoholic beverages sold by the glass and show tickets. It is also charged for the rental of beach chairs, cabanas and the iconic Boardwalk rolling chairs. The tax rate is 3 percent for alcoholic beverages and 9 percent for all other purchases.

Atlantic City’s luxury tax, though obscure to the public, has become an increasingly important indicator of the health of the local economy. Analysts say the recent increases in receipts from the luxury tax show that nongambling attractions are helping to boost the economy, even though revenue from casino slot machines and table games continues its seven-year slump.

“It really helps to add new attractions,” Levinson said. “This will bring in more people and spending.”

Proceeds from the luxury tax are used primarily to pay off the construction bonds on the Atlantic City Convention Center and Boardwalk Hall. The revenue also helps to offset the operating losses on both of those buildings.

In recent years, revenue from the luxury tax has fluctuated, reflecting the volatility of Atlantic City’s tourism-dependent economy. After soaring 23 percent in 2005, it increased only modestly the next two years. It declined slightly in 2008 and fell again in 2009, just as the national recession was coming to a close. It rebounded in 2010 and 2011 to set records, at $28.5 million and $31.5 million, respectively. The 2012 figure pushed the tax revenue to yet another record high.

Figures available for 2013 show that revenue was up in January, February and April. March had a fractional decline.

Levinson noted that another spending metric tied to nongambling attractions further suggests Atlantic City is starting to rebound from the lingering effects of Sandy. In 2012, sales at third-party businesses — the independently owned restaurants and other establishments in the casinos — climbed 39 percent to end at $246 million.

Much of the increase was attributed to last year’s grand opening of Revel, where nearly all of the restaurants and businesses operating inside the $2.4 billion megaresort are independently owned and operated.

“We have casinos, including Revel and Tropicana, that have new venues not owned by the casinos. They are bringing in lots of revenue,” Levinson said.

Levinson also pointed to nongambling attractions outside the casinos that will serve as tourist magnets, including the Boardwalk’s Steel Pier amusement park and a Bass Pro Shops store scheduled to open next year at the foot of the Atlantic City Expressway.

Contact Donald Wittkowski:

609-272-7258

DWittkowski@pressofac.com

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