Casinos Start to Show Their Cards

The prospect of

In testimony before a state Senate committee, senior vice presidents Kevin Sullivan of the Borgata and Gary Simpson of Aztar said northern New Jersey pumps $1.1 billion a year into Atlantic City tills. That accounts for some 23% of the casinos' annual gaming revenue and makes North Jersey a more valuable market for Atlantic City than Philadelphia or New York. The latter produces some $900 million a year in Atlantic City revenue.

The executives were speaking out against a plan to put 5,000 VLTs at the racetrack that has the support of acting Governor Richard Codey but faces stiff opposition in the state Assembly.

At risk, say casino operators, is an industry that has generated 50,000 jobs and $700 million in state and local taxes a year. "The consequences to the industry and to Atlantic City will be dire," said Sullivan. "And for what? The construction of a warehouse with 5,000 slot machines?"

VLTs look like today's electronic slot machines. But while slots tend to be individually programmed, VLTs are connected to a central data base that randomly selects winners from among a number of players. The state thus considers them to be an extension of the New Jersey Lottery.

While the casinos don't expect to lose all their North Jersey slot players to VLTs, any drop in business would be damaging. A Price-WaterhouseCoopers study commissioned by the Casino Association of New Jersey concluded that 5,000 VLTs in the Meadowlands would cost Atlantic City $298 million in lost gaming revenue, or 6% of the casinos' annual win. Such a decline would come while the city is in the midst of a construction boom and could jeopardize plans for new casino-hotels or the expansion of existing properties.

Despite such concerns, the Senate Wagering, Tourism and Historic Preservation Committee voted 3-2 on June 9 to approve S-2421, which calls for 5,000 machines at the Meadowlands. The real test will come in the Assembly, where South Jersey lawmakers who include Majority Leader Joseph Roberts (D-Brooklawn), say the bill doesn't stand a chance.

Nonetheless, supporters ofVLTs say they would generate hundreds of millions of dollars of revenue that would otherwise be lost to other states. Some 10,000 gaming devices are slated for Aqueduct Race Track in Queens, New York, and Yonkers raceway; installation schedules are still being worked out. Meanwhile a tribal casino is planned for a Catskills site in upstate New York some 90 minutes from New York City. And racetracks in Philadelphia and eastern Pennsylvania are scheduled to get 20,000 slot machines.

"As more and more video lottery terminals and slot machines are being operated in the tristate area, New Jersey is increasingly losing revenue that could be retained in this state," says Senator Paul A. Sarlo, (D-Wood-Ridge), the sponsor of the VLT bill. Sarlo and the bill's supporters point out that the Meadowlands is just minutes from Manhattan.

They say video slots would raise needed revenue and boost the state's ailing horse racing industry, which could use a share of the take to increase purses that have shrunk since the casinos opened 20 years ago and attract top thoroughbreds and trotters. Sarlo says casinos have been given the option to share in the proceeds.

In a case of dueling reports, a statesponsored study by Merrill Lynch and Christiansen Capital Advisers estimated this year that installing an initial 2,092 VLTs in the Meadowlands in 2006 would cost Atlantic City just $40 million in lost casino revenue. But that doesn't count the full 5,000 slots that would eventually be installed.

According to the report, gaming facilities in Pennsylvania and New York would have a larger impact on Atlantic City than slots in North Jersey. It estimates that such sites would siphon $650 million a year from state casinos.

Gaming executives dispute that claim. "We do not believe that [gaming] in New York and Pennsylvania will pull from New York City or North Jersey because [the facilities] don't have amenities like hotels," says Simpson of the Tropicana.

On the other hand, he says, "Gamblers at the Meadowlands would primarily come from within New Jersey." That means that "the 5,000 slots at the Meadowlands would have more of a negative impact than all the slots currently proposed for Pennsylvania and New York,"

According to the casinos' study, seven out of 10 VLT patrons at the Meadowlands would be Northern New Jersey residents who live within a 40-minute drive of the racetrack.

"What this bill proposes is gaming and no obfuscations or lawyer words can make it anything else," says the Borgata's Sullivan.

The casinos have some heavy legal ammunition in their fight against VLTs that includes an amendment to the state constitution that prohibits slot machines outside of Atlantic City. Gaming executives also cite a deal struck last year in which they agreed to use $86 million of casino revenue to increase horserace purses in exchange for a state promise not to install VLTs at tracks through 2008.

The Codey administration says VLTs are different from slot machines because the former have jackpots that are based on total VLT revenue. By contrast, slot-machine payouts are determined solely by the individual machines.

"The playing field keeps on changing," says Joseph D. Kelly, president of the Atiantic City Regional Chamber of Commerce, in a reference to state policy. "It's like building a home-run fence and raising it and lowering it every week."