Chris Christie’s Boondoggle

 photo Revel_Atlantic_City_from_boardwalk_zps01e4de4b.jpg

Promoted by Rosi.

Cross-posted from FireDogLake

When New Jersey Governor Chris Christie received the endorsement of the Laborers International Union of North America (LIUNA) many in the media and national political circles just took it as further evidence of Christie’s bi-partisan appeal. A politician so popular even unions would endorse him. But they were missing the story. LIUNA’s endorsement was actually due to one of New Jersey’s biggest boondoogles, the now named Revel Casino-Hotel in Atlantic City which has cost the taxpayers millions.

While the Christie campaign spun the endorsement as a validation of Christie’s record on helping the private sector, LIUNA leadership had no trouble noting the publicly funded quid pro quo.

[LIUNA Leader Ray] Pocino cited the GOP governor’s accomplishments, including his signing the Higher Education Bond act, which he said will lead to more than $1 billion in construction, including new classrooms and labs; authorization of the Transportation Trust Fund for roads and bridges improvement totaling an estimated $5 billion, and his support for the Revel Casino project and the Bayonne Bridge.

It also probably didn’t hurt that Christie appointed Pocino to a seat on the board of the Port Authority of New York and New Jersey.

Revel has been, to put it lightly, a disaster. Originally imagined as more of a resort than a casino, Revel cost $2.4 billion to open. Even before Revel opened it was considered a high risk investment in a city already on the decline due to gambling competition from Delaware and Pennsylvania. Progressives opposed state investments in the project which came during the same time Governor Christie was cutting education and healthcare services for women. Christie invested $261 million of New Jersey tax money via credits as Morgan Stanley backed out of Revel fearing it was a loser.

Not soon after Revel opened it became clear the resort idea was as dumb as many thought it was and “Revel Atlantic City” went into bankruptcy. The bankruptcy put the State of New Jersey on the hook as Revel announced that the casino’s value had dropped from $2.4 billion to $450 million. Ouch.

Now the “Revel Casino-Hotel” is trying not to go bust again by doubling down on gambling.

Revel, hailed by Gov. Chris Christie as a “turning point” for the city when it opened in April 2012, lost $111 million its first year. And last year, Pennsylvania displaced Atlantic City as the gambling capital of the East, according to the American Gaming Association…

Revel, now owned by several hedge funds, has told state regulators that it anticipates cutting its operating loss by more than half, to less than $43 million this year. The fortunes are not just the casino’s, but New Jersey’s. The state relies on casino gambling for $300 million in tax revenue and is counting on online gambling at casinos to provide an additional $180 million.

Did you catch that? Revel hopes to lose $43 million this year. That’s the good scenario. Winning is losing $43 million. How do you like those odds?

But hey, lets not be too tough on Governor Christie. He had to do something to stimulate New Jersey’s economy. What’s public money for if not to make job creating investments, even if they are in failed enterprises. It’s not like there were any alternatives.

This month Revel will reimburse slot losses to get people in the casino. You lose, you get your money back. How do the taxpayers get in on that game?

Photo of Revel Casino-Hotel by Dough4872 released to Public Domain.

Comments (12)

  1. William Weber (WjcW)

    The state has invested nothing.

    All Revel received was tax abatements. The state receives 20% of any and all profits.

    Bankruptcy actually helps the state. The state effectively owns 20% of an asset that now has less debt as a result of bankruptcy.

    What this analysis assumes is that Revel would have opened anyway without the state incentives. That is not at all clear.

    The only way the state becomes a big loser is if the casino operates at a loss for the next 20 years. I doubt that’s in anyone’s business plan.

    I’m haven’t read the agreement but I’d bet the abatements ‘worth as much’ as 261 million were calculated on a certain estimate of revenue. As you pointed out, Revel hasn’t lived up to expectations, which means that the tax expenditure is likely less than originally forecasted as well.

     

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  2. William Weber (WjcW)

    But if you read it…

    No decision has been made on whether to end the Economic Redevelopment and Growth Incentive Grant Agreement with Revel. But state officials said there is no risk to taxpayers because Revel has not yet satisfied all of the requirements in its grant agreement. That means that even though the casino has been operating for nearly a year, no tax reimbursements have been paid to the casino.

    Not sure if they got anything yet or not…  

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  3. Nick Lento

    ….you can make a perverse case that cashflow is being generated and that some folks are being hired to do some jobs for a while.    

    But if the underlying project was never economically feasible or profitable or needed in the first place….if it was all about pay to play and influence peddling then it’s going to be negative for the taxpayers and for the economy as a whole.

    Boondoggles are wrong when Democrats do it and when Republicans do it…..it’s basically welfare for the private sector that allows them (the folsk at the top of the food chain) to make money win or lose……at the cost of screwing taxpayers and all the shlubs who get screwed by the bankruptcies…..not to mention the actual VIABLE projects that don’t get done because the resources got diverted to politically connected pay to play meisters.

    Again, BOTH parties pull this crap and it’s always WRONG!

    Reply
  4. Rosi Efthim

    The fact that the state invested nothing up front for Revel is really beside the point. There’s a failure of big-picture thinking here, and that failure isn’t all your guy’s fault. The pool of gamblers is finite; Atlantic City used to have an East Coast monopoly, and doesn’t anymore. And the truth is some other places are nicer to visit than AC – a tawdry, sequined band blocking a failing city from its own seashore, a windfall for big-money investors to leach all the value out of the area in minimal exchange for jobs (the story of high-paying jobs going to residents outside AC, while locals typically get only low-paying ones, is standard fare). That’s not your guy’s fault, either. That’s a long series of economic decisions of both parties and attempted rescues by both parties.

    But the reality is the that minimal risk to taxpayers if Revel (continues to go) belly-up, is only part of the picture. There are real questions hardly anyone is asking – as they try to keep all the plates spinning in the air – whether we should be helping Atlantic City rethink their mission as a destination.

    Meanwhile, yes, Revel is a boondoggle, with its tax assessment cut in half, and its bankruptcy leaving its creditors holding the bag for millions. The questions aren’t only being asked here – Philadelphia Inquirer calls Christie’s rescue of Revel a “massive bailout”. And in my opinion though Christie obviously should be accountable for some of this, there are tough questions to be asked of both parties. My 2 cents.  

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