New Jersey's proposed casino expansion into the northern part of the state is a potential credit negative for Atlantic City, according to Moody's Investors Service.
Gov. Chris Christie and legislative leaders announced on Jan. 11 plans to introduce a bill that would allow voters to decide whether to amend New Jersey's constitution to permit two new casinos outside Atlantic City. The proposed bill, which must be approved by three-fifths each house of the Legislature to reach the Nov. 8 ballot, would allow two casinos that must be located at least 72 miles from Atlantic City.
"We view any gaming supply expansion in New Jersey as particularly bad news for the already struggling Atlantic City gaming market, which has seen gaming revenue decline about 7% for the year through [November 30, 2015] over the same year-ago period," said Moody's analysts in a Jan. 13 report. "In our view, the additional competition will likely cause more casinos to close, which would be credit negative for Atlantic City."
Moody's noted that revenue in three Atlantic City casinos -- Bally's Park Place, Caesars and Trump Taj Mahal -- has cumulatively declined 9% the last two years. Four of Atlantic City's 12 casinos were shuttered in 2014 and the city has been under emergency manager supervision for the past year. Moody's rates Atlantic City bonds at Caa1.
Under the legislation pitched by lawmakers, those interested in bidding for the Northern New Jersey gaming facilities must hold an initial 51% majority interest in an Atlantic City casino. If the state does not receive qualifying bids within six months, other license holders from outside Atlantic City will be allowed to join the bidding process.
If the constitutional ballot is successfully approved this November, Moody's expects a new casino in northern New Jersey could be up and running by the end of 2019. Details such as tax rates for the new casinos and revenue sharing agreements for Atlantic City are still to be determined.