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The budget shutdown has ended, but Atlantic City's casinos are very concerned over the lasting impact. Even worse, they're concerned over what would happen if there was another shutdown next year.
ATLANTIC CITY -- The slots stopped spinning a week ago. The dice and cards went into storage. Huge casino floors turned into colorful ghost towns. Buses stayed away. Restaurants closed down. And more than 36,000 employees got an unwanted three days off during the busiest month of the year. All this courtesy of a state-ordered closure that made the the gaming industry a pawn in a stalemate between Gov. Jon Corzine and the Legislature over balancing the budget.
A week later, gamblers again feed the slot machines, roll the dice and play poker and blackjack. Buses pull into bays loaded with eager visitors. A full complement of restaurants serve the hungry. The battle over a 1 percent sales tax increase is in the rear view mirror.
Or is it?
The forced hiatus left a bad taste from the Boardwalk to Wall Street to Las Vegas. It's unlikely the casinos or their employees will make up for lost time, said John W. R. Payne, Atlantic City regional vice president of Harrah's Entertainment, which operates Harrah's, Caesars, Showboat and Bally's.
The state lost nearly $4 million in taxes for the Casino Revenue Fund because its gambling inspectors were not permitted on the job as required.
"It's hard to make up three days," said Payne, even with boxer Arturo Gatti and Madonna coming to town this month.
Worse, there's the gnawing prospect of a repeat performance next July -- and every July, for that matter.
If the state budget process remains unchanged, another impasse on June 30 means the governor can order the casino inspectors out of the casinos -- even though the gaming industry pays their salaries, not the state.
"I'm concerned with the impact of the reputation of this jurisdiction as one of the most stable in the world," said Nicholas Casiello, Jr., a lawyer in the Atlantic City office of Fox Rothschild LLP. "Atlantic City has a stellar reputation for being a predictable jurisdiction with reasonable regulations and regulators. This episode has had a detrimental impact on the system. I've had phone calls from clients around the country asking, "How could this happen?' "
The governor could have kept the casinos running like he did for the first five days. "He could have also said the inspectors were essential employees," Casiello said.
As it is, the shutdown could mark Atlantic City in the eyes of the investment community: banks who lend money for projects, financial analysts who recommend stocks and bonds and underwriters who price offerings of debt securities.
"There's a little uncertainty in the process," Casiello said.
A rise in interest rates and a drop in stock prices can impact expansion plans of existing properties or prevent new entrants.
"If it happens again, it really impacts the way Wall Street and the investment community looks at New Jersey," said Mark Juliano, chief operating officer of Trump Entertainment Resorts, which has three casinos here.
"People will start thinking this is not a stable political environment and we should look elsewhere to invest."
Said Casiello: "Absent legislation, this could happen every year. . . . These things could scare away investors or make them think twice."
The law has to change, Payne said. If nothing else, casino inspectors should be declared essential employees, he said.
"We're excited to get back to business. But we're also working to change the law so this never happens again," Payne said. "We'll work with the governor and Assembly. We can't let all those people be out of work and hurt a growing $5 billion industry in New Jersey."
Attempts at similar legislation in the past died when the crisis ended. But analyst Joe Weinert thinks the climate is different this time.
"We believe the powers that be in Trenton are now keenly aware of the personal and economic harm their inaction caused Atlantic City. No doubt the industry, badly burned through no fault of its own, will be lobbying heavily to insure that this episode cannot be repeated," said Weinert, vice president of Spectrum Gaming Group and managing editor of its flagship publication, Michael Pollock's Gaming Industry Observer.
Still, not everyone sees doom and gloom emerging from the closure. The shutdown will be little more than a blip on the growth for the year, said Cory H. Morowitz of Morowitz Gaming Advisors in Galloway Township.
"I think Corzine's leadership sends a positive note to investors that he's committed to the gaming industry. There were no new taxes," he said.
The Legislature took a public relations whipping, he said, and will think long and hard before not having a budget on the governor's desk in time.
And if not? The Atlantic City market is incredibly strong. New customers will emerge out of Pennsylvania, Morowitz said.
"And there are enough potential developers lined up, so I don't think it will have an impact," he said.
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