It finally happened—”finally” being a weird word to describe the bankruptcy of a casino that’s less than a year old, perhaps, but not when that bankruptcy has been so clearly pre-ordained since the beginning: Revel is bankrupt, filing late Monday for Chapter 11 protection that will let it reduce its debt to a mere $272 million, down from the eye-popping $1.5 billion (!!!!) it now owes. But there are several questions that need to be answered, nonetheless:
• Is this the death of Atlantic City as we know it? An alarmist question, perhaps, but gambling has been on the decline in Atlantic City for a few years, and that slump is expected to continue awhile. Gambling arrived in AC in the 1970s to stave off the city’s decline during that decade, and it worked for awhile—with the industry greatly restricted elsewhere, the city basically shared the gambling market in the United States with Las Vegas. Then other states thought they’d try to gamble their way to economic development. These days, Philadelphians who used to take the train down to the shore stay home—and have made Pennsylvania the second biggest “gaming” market after Vegas. The Revel was supposed to blockbuster AC’s way out of the slump: With 1,800 rooms, 14 restaurants, 2,400 slot machines, and so much more, it was intended to be a game-changer. It didn’t. So what becomes of Atlantic City now?
• How will this harm Chris Christie’s career? Will he be more damaged with New Jersey voters as he seeks re-election, or Republican presidential primary voters who have lately discovered the evils of government-run “crony capitalism?” Christie, after all, helped ensure the Revel eventually opened with a complicated state investment scheme: Essentially, New Jersey would return all taxes generated by the casino in exchange for a 20 percent cut of the profits. As Bloomberg’s Josh Barro noted earlier this year: “If Revel goes bankrupt, there won’t be any profits to Revel’s owners and therefore no kickback to the state. But the tax forgiveness will remain, costing the state tax revenues for years to come.” Christie can argue that the Revel wouldn’t have generated any tax revenue if the Revel hadn’t opened, but this still doesn’t look like a wise use of the state’s resources.
• What does this mean for the Jersey Shore’s recovery from Hurricane Sandy? Recovery is a self-fulfilling process. You recover enough that visitors start to return; they in turn generate enough money and word-of-mouth that businesses further invest in a full recovery to attract even more visitors. It may be that nobody cares about the Revel bankruptcy and that tourism will be fine this year; but it could also be that the bankruptcy could leave a sour taste about the region in the minds of prospective tourists. We’ll find out.