Those in Frankfort who seem to think legalizing casinos is the right tonic for Kentucky's financial woes may want to take a look at what has been unfolding in Atlantic City in recent weeks.
Two weeks ago an Associated Press report began with this: "Atlantic City's crumbling casino market disintegrated even further (July 12) as the owners of the Trump Plaza casino said they expect to shut down in mid-September."
The story went on to say that if the Trump facility closes as expected, Atlantic City will have lost a third of its casinos and a quarter of its casino workforce in less than nine months, including 1,000 plus workers at Trump Plaza alone.
Last week the Wall Street Journal reported the impact of the collapsing casino business on Atlantic City's bond rating. Moody's Investor Service dropped the city's debt rating to Ba1 - better known as "junk" status. It was the second downgrade of the city's debt by Moody's in the past nine months, and the firm retains a "negative" outlook on the city's finances, meaning further downgrades are possible.
The WSJ story took note of the fact that Atlantic City's gambling revenues decreased to $2.86 billion last year, down from $5 billion in 2006. It said the city's $15 billion tax base is 68 percent reliant on gambling, and that increased gambling competition from casinos opening in other states is likely to increase pressure on the city's tax base in the future.
The Associated Press noted that until a few years ago, Atlantic City was second only to Nevada as the nation's largest gambling market. It has now yielded that position to Pennsylvania. Atlantic City had 12 casinos at the start of this year. It stands to have eight by year end. The Atlantic Club closed, costing 1,600 jobs. The Showboat will close by the end of next month, costing 2,100 jobs. Revel is in bankruptcy, and 3,100 workers there will be unemployed if a buyer isn't found. And now Trump Plaza looks likely to join the list, with 1,009 workers on its payroll.
Atlantic City's woes are just the most visible from a broader trend of oversaturation of casino gambling in the nation, particularly in the northeast. In fact it is interesting that Kentucky's casino proposals in recent years have generally been tied in with horse racing facilities - the sales pitch being that revenues from racetrack casinos are needed to bolster the state's horse racing industry.
A June 19 Wall Street Journal article on the growing casino glut nationally highlights the problems with Delaware's racetrack casinos, which once generated $240 million a year in tax revenues for the state but are now reeling under competition from the casino building boom in the northeast. Now Delaware finds itself looking at bailing out its racetrack casinos with a $20 million a year tax break.
The WSJ article notes "States that adopted gambling earlier than their neighbors, such as Delaware, New Jersey and West Virginia, are watching dollars drain away, and new projects have some wondering how many facilities the area can support."
Our point in reciting these events is one we have made in the past, which is, we're far from convinced given the saturation of the casino market nationally and regionally, that legalized casinos in Kentucky would fare particularly well financially. And the plight of New Jersey's bonds and Delaware's racetracks underscore how unreliable casino revenues can be as a source of financial support for public undertakings.
Even if one puts moral and ethical objections aside, a pretty good case is emerging that the financial benefits of casinos to the state being touted by legalized gambling proponents aren't all they're cracked up to be. Casino gambling is simply not a good or reliable answer to Kentucky's budget woes.
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