ATLANTIC CITY — As word came down three weeks ago that the city’s plan to stave off a state takeover had failed, business at the city’s seven casinos continued.
The blackjack cards were dealt and the roulette wheels continued to spin.
For the most part, the casino industry, which generates more than $2 billion a year in revenue, operates outside the jurisdiction of the city.
“The most important function that the city provides is the police, since the fear of crime is a major problem for the gaming industry,” said Steve Norton, a former Atlantic City casino executive who now runs a consulting company, Norton Management LLC. “We also rely on the Fire Department, city utilities and other services.”
The gaming aspect of their operations is governed by the state Department of Gaming Enforcement and Casino Control Commission. While redevelopment and expansion of gaming facilities falls under the control of Casino Reinvestment Development Authority’s Special Improvement District.
Two weeks ago, the state Local Finance Board approved granting Tim Cunningham, the director of Local Government Services, powers over the city. Cunningham appointed former state Attorney General and former U.S. Sen. Jeffrey Chiesa to lead the state’s efforts to reshape the city’s dire financial picture. Among the powers Chiesa has is the ability to open and renegotiate union contracts, as well as sell city assets.
Casino officials remain mum on what impact the state taking over the city will have on the industry. Officials for properties in Atlantic City either declined to comment on the issue or did not return calls.
The Casino Association of New Jersey did not return emails seeking comment. In April, the association implored the state to act on a package that would save the city from the pending financial abyss and prevent “negative consequences” to the city.
The appointment of a state designee to run the city shouldn’t impact the casino industry in the short term, but the longer the issues linger, it could give an air of instability to people looking to invest in the city, said Bob Ambrose, instructor of hospitality and gaming at Drexel University.
“The casinos do not fall under the city management, so having the state come in to run the city should not impact their operation short term,” Amrbose said. ”A concern may be long term. Their presence may offer an ongoing perception of instability. This is not good for investors’ long term.”
Norton said the state’s involvement in the city’s day-to-day operation could lead to casinos having their tax burdens reduced.
“But the new state oversight will make it easier to change contracts and policies that have created such an increase in the city’s budget, since 1978. And, of course, that impacts the casino industry, because we have paid the majority of the city’s real estate taxes since gaming began,” Norton said.
Jim Allen, president and CEO of Hard Rock Entertainment and former executive at the President-elect Donald J. Trump’s former Atlantic City properties, said the state coming in could be a positive for the city.
“I think the issues between the city, (Atlantic) county and the state need to be rectified,” Allen said. “Atlantic City has a long-term future, but if Atlantic City is making national stories about it going bankrupt and there are all of these challenges in business, I think that it’s hard to grow an economy with that going on.”