By Seth Grossman, Executive Director.
Seth Grossman is also a Somers Point attorney, and adjunct history professor at Atlantic Cape Community College. He was an Atlantic City Councilman (1986-1990) and Atlantic County Freeholder (1989-1991).
Atlantic City has a simple problem. Its local government and public schools spend far more than what its taxpayers can afford.
The solution is just as simple–immediate and drastic cuts in spending. Dozens of employees must go. Salaries must be cut. Most of its $400 million debt can never be repaid, and must be wiped out.
State laws and contracts do not allow this. Bankruptcy does.
It took 37 years to create this problem. When the first casino opened, Atlantic City’s budget of $37 million was already bloated. Now it is $262 million. Although population declined, and casinos do their own security and fire protection, Atlantic City’s local government spending alone increased by $225 million–roughly $6 million (16%) per year.
This was caused by “poison pills” in the casino law that brought casinos to Atlantic City in 1978. That Casino Control Act forced every casino to be in a 500 room hotel. That is why a handful of big corporations own almost every hotel, restaurant, shop and theater in town as well as every casino.
That 1978 casino law also banished those big corporations, their executives, and most casino employees from politics. They could not run for office, contribute to campaigns, or even speak openly on public issues. It made NJ’s biggest industry afraid of offending any petty politician in the state—and getting whacked like the Tropicana in 2007.
Finally, the casino law “skimmed” 1.25% from the gross win of each casino for a new Casino Reinvestment Development Authority (CRDA) run by state politicians. For years, it stuffed Atlantic City with tax-exempt, low income housing.
That gave Atlantic City taxation without representation, and representation without taxation. Casinos paid 80% of local taxes, but had no say on how that money was spent. Most voters either paid no local real estate taxes, or held local government jobs with big “cost of living” pay hikes every year.
That is why few complained when spending and taxes in Atlantic City more than doubled and tripled inflation rates for the next 30 years. Only a few big corporations paid 80% of the taxes, and they were not allowed to even complain about it.
A few casino executives like Donald Trump and Steve Wynn grumbled about it. But most put up with the high taxes while they made huge profits from their East Coast monopoly.
All that changed in 2007. Atlantic City casinos lost their monopoly. The economy crashed. Casino profits fell, as did the value (and tax assessments) of their properties. Every government official in New Jersey knew then that the party was over. They all knew casinos would soon be paying a fraction of the taxes they paid before.
Republican Governor Christie knew in 2010 that Atlantic City’s local government needed immediate spending cuts with mass layoffs and drastic cuts in salaries and benefits.
Christie instead reached out to Democratic Senate President and Ironworkers Union boss Steve Sweeney. Together, they tried to borrow Atlantic City into recovery. State government agencies somehow borrowed $400 million to bail out the failed Revel Casino project. Another $400 million was borrowed to cover seven years of deficits for Atlantic City’s local government and public schools.
This money can never be paid back without breaking the backs of every taxpayer in Atlantic City—and the rest of the county.
In my opinion, this broke several state laws. The Attorney General, local prosecutors, and grand juries should investigate and punish those responsible to stop this in the future.
But now, the only way to immediately cut government spending, debt, and taxes is bankruptcy.
Once businesses and residents can again afford their taxes, state government should simplify and reform the casino, zoning, and permit laws. This would let dozens of local nvestors and business owners get into the casino business to revive Atlantic City–not just a handful of big corporations.