The recent closures of two Atlantic City casinos amount to a credit negative for the seaside city and New Jersey's Casino Reinvestment Development Authority (CRDA), Moody's Investors Service said on Nov. 24.
On Nov. 19, Brookfield Partners LP rescinded an offer to purchase the Revel Casino, which closed on Sept. 2. Five days earlier, the Trump Taj Mahal filed court papers to close in December, which would be the fifth Atlantic City closure this year and lead to 3,000 employees being laid off. The two casinos in 2013 accounted for 14% of Atlantic City's luxury tax revenue, 16% of hotel fee revenues and contributed 14.5% of all gaming revenues, according to Moody's.
Moody's analysts Josellyn Yousef and David Strungis said in their Nov. 24 report that casinos comprised roughly 70% of Atlantic City's tax base in 2013 with property taxes on the businesses a "main revenue source" making up nearly 80% of the city's current budget. Moody's projects assessed values will fall to around $9 billion for the fiscal year ending Dec. 31, 2015, from $18 billion in 2012.
"Although the city raised its property tax rate nearly 29% in fiscal 2014, that only increased by 1.4% the amount of money budgeted to be collected in property taxes," the Moody's analysts said. "This is because the continued loss of casinos has constricted the taxable business base and has shifted the city's tax burden to its residents, whose ability to pay is hampered by a very high 25% poverty rate and a median family income that is just 42% of the state's median."
In July, Moody's cut Atlantic City's rating to Ba1, a non-investment grade, from Baa2. The CRDA was
Moody's noted that there is a potential second buyer for the Revel, but that Atlantic City casinos face a "weakened brand" and increased regional competition from gaming facilities in nearby Pennsylvania, New York, Delaware and Massachusetts. The Atlantic City casino industry's struggle is also hurting the South Jersey Transportation Authority, which had its 2014A revenue bonds downgraded by Moody's on Nov. 21 to Baa2 from Baa1, citing decreased traffic revenue since 2008 with "low forecasted growth."
