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Casino officials would call it the worst setback since Hurricane Katrina and the debate to eliminate tax breaks for casino reconstruction along the Gulf Coast. For an industry that has grown accustomed to rolling with the punches, it was also just another day in the trenches.
When New Jersey Gov. Jon Corzine shut down Atlantic City's 12 casinos for three days this past week, he didn't do it out of malice or misunderstanding. Corzine, faced with a budget deficit and thwarted in his plan to raise New Jersey sales taxes by one percentage point, played hardball.
Atlantic City casinos are required by law to operate with state inspectors on the premises. But with the budget expiring June 30 and no compromise on a new spending plan, Corzine furloughed state employees, forcing the casinos to close their doors.
"Only in the gaming industry," Jan Jones, Harrah's Entertainment's Senior Vice President of Communications and Government Relations, said. "Just when you think one disaster has blown over another one comes up."
New Jersey casinos lost a last-ditch effort to have casino inspectors declared essential employees along with state police. While the governor's decision was legally on point, others say he wouldn't have been challenged had he given special dispensation to the casinos that generate millions in yearly tax revenue.
Even so, gaming folks don't appear to harbor any ill will toward Corzine — a man who knows the value of a dollar. The industry was simply caught in the middle — a major case of being in the wrong place at the wrong time, they say.
"He's a pretty smart man," Jones said of Corzine, former chief executive of investment banking giant Goldman Sachs. " This was an unintended consequence."
But it's a consequence that could happen again if New Jersey isn't careful.
New Jersey residents, it appears, don't like taxes any more than Nevadans do. Casinos dodged a bullet in 1990 when New Jersey's governor was able to push through a sales tax hike to shore up the budget. Then-Gov. Jim Florio was promptly voted out of office and the Legislature swung from Democrat to Republican, the party that repealed the sales tax increase.
While the rest of the world sees casinos as just one of many pawns in a complex political game, the gaming industry dictates policy in Nevada.
Besides the fact that state law doesn't require inspectors to be stationed on casino premises, New Jersey's meltdown would be unworkable in Nevada, where gaming is not only the state's economic lifeblood but an inextricable part of its cultural fabric.
"In New Jersey they have a different attitude about things," said Nevada Senior Deputy Attorney General Toni Cowan, a former New Jersey regulator. "They never embraced gaming. They always wanted to err on the side of caution."
One major difference is in staffing. Regulating Atlantic City's 12 casinos are two distinct agencies including the state Casino Control Commission, with five full-time members and a staff of about 350 people, which includes the roughly 190 people who are posted to specific casinos as inspectors. The state's enforcement arm is the Division of Gaming Enforcement at the attorney general's office, which has its own staff of about 360 people.
The Casino Control Commission roughly compares to the Nevada Gaming Commission, a part-time regulatory body of five people. The Division of Gaming Enforcement can be compared with the Nevada Gaming Control Board, which has a staff of nearly 450 to oversee about 420 casinos and thousands more slot bars. The gaming division of the Nevada attorney general's office, with handful of attorneys, offers legal advice to the board and commission.
"There's a lot more scrutiny that goes on in New Jersey," Cowan said. "Whether it's needed is up for debate. But that's just the way it is."
Another interesting tidbit: Nevada's " Black Book" of people banned from casinos contains 36 names compared to New Jersey's list of more than 180 people.
Atlantic City is on the cusp of an unprecedented growth spurt defined by Las Vegas-style activities such as dining, shopping and nightlife. The Boyd Gaming Corp. and MGM Mirage owned Borgata, the first Las Vegas-style resort in Atlantic City, opened a $200 million casino expansion in time for the July 4 weekend and will open another $300 million hotel expansion next year.
Another billion in expansion is underway or in process in Atlantic City, which is evolving from a dumpy day-trip market into more of a resort getaway.
Joseph Corbo, the even-tempered president of the Casino Association of New Jersey, said the industry needs to do a better job of explaining how casinos have contributed to the New Jersey economy over the years, including the billion-plus dollars in taxes paid by Atlantic City casinos.
"In Nevada the population grew up around the industry and they grew together," Corbo said. "New Jersey 30 years ago was a heavily populated state and gaming was in a faraway part of the state."
Like the polite guest of a short-tempered host, the casino industry is reluctant to strongarm the state into changing its regulations so that it can prevent a shutdown from happening again.
More than 25,000 casino employees returned to work Saturday and the gaming engine, stalled during one of its hottest months, is up and running again.
Corbo is bullish on the future and hopes the incident will go down in history as an aberrant blip in the city's growth curve.
"Gov. Corzine certainly understands economic development and certainly understands the need for industries like ours to grow and prosper," he said. "He also understands the need for stability in our taxes."
"What we've been able to show (the governor and the Legislature) is that with a stable tax rate, the gross taxes we've paid have increased significantly since the existence of casinos in Atlantic City," Corbo said.
The casinos in Atlantic City have always operated in a "separate world" from the rest of New Jersey, Jones said.
"A lot of elected officials are from Trenton and honestly, they see it differently," she said.
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