New Jersey budget standoff shuts casinos
All 12 of Atlantic City's casinos shut down today because of a state budget dispute between Gov. Jon Corzine and his fellow Democrats, who control the state Legislature. Corzine is attempting to increase the state sales tax to 7 percent from 6 percent to help overcome New Jersey's $4.5 billion budget deficit. Without a budget, the state can't pay its employees – including the inspectors whose presence is required at the casinos. Atlantic City casinos say the closure will cost them more than $16 million a day in gambling revenue, 8 percent of which goes to the state. July and August are historically the busiest months of the year in the nation's second-largest gaming market.
On Tuesday evening, James Zazzali, an associate justice of the New Jersey Supreme Court, upheld a state appeals court decision denying the casinos' request to block an order from the Casino Control Commission. One Wall Street gaming analyst points out that there have been budget impasses before, but they've never resulted in the casinos' going quiet.
"This is unprecedented," the analyst says. "But I also think this will be a short-term thing. I doubt we will be talking about this on Friday."
Still, the shutdown is likely to nick sales and earnings at some gaming companies. The analyst notes that Trump Entertainment gets all of its gaming profits from Atlantic City, while Harrah's gets a third. Total Atlantic City gaming revenue was up 4 percent in April, the most recent figure available, to $440 million, with $324 million coming from slot machines and $116 million coming from table games.
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