For the all the glitz and the glamour of a casino, the heart of any tall tale about them always starts with one question: Did you win money?
In the case of Revel Casino Hotel, which will go dark on the Atlantic City boardwalk this week as the casino moves to officially cease all operations, the answer is easy: No.
The gamble didn't pay off. The long shot didn't come in. The casino crapped out.
The big loser, however, may not be who you think.
Two big figures immediately jump out to anyone who's followed the building's saga. There's the $2.4 billion price tag it cost to build and the $261.3 million Economic Redevelopment and Growth tax credit awarded to the project by the state Economic Development Authority in 2011.
For many around the state, Revel's failure has led to one perception that continues to linger, even as the casino has rested on its deathbed: New Jersey took a sucker bet on Revel and lost big.
Except, it didn't.
“To be clear, Revel has not received one penny of its ERG award,” said Tim Lizura, EDA president and chief operating officer. “These incentives have built-in safeguards to ensure taxpayer money is used responsibly. Before receiving any of their approved award, projects must first generate new tax revenue, complete capital investments and/or hire or retain employees.”
According to EDA spokeswoman Virginia Pellerin, the approved $261.3 million figure represented 75 percent of the estimated annual incremental state tax revenue that the project was expected to generate over a 20-year period.
But under the law, funding is not given up front and only provided after a project is completed and new taxes have been generated and confirmed.
That was never the case for Revel, which also never turned a profit in its two-plus years of existence.
Pellerin is also quick to note that no taxpayer funds from EDA-administered programs were ever given to Revel up front.
Israel Posner, executive director of Stockton College's Lloyd D. Levenson Institute of Gaming, Hospitality and Tourism, said the perception that the state was financing the struggling casino is a “misunderstanding” that has been used as “interesting fodder for people who are looking to raise controversy or stir the pot.”
But the promulgation of that perception isn't to blame for Revel's failures, Posner said.
“Whether or not that affected the business plan or the marketing of that facility to its market, I doubt it,” Posner said.
And the biggest loser in the casino's closure isn't the state or even Revel itself, Posner said. It's everyone else who invested in its future.
“If there was a raw deal, it was basically the thousands of people who made their careers there and the many, many suppliers and vendors whose businesses depended on that,” Posner said. “That's really where the frustrations lie.”
The state might not be financially on the hook for Revel's woes, but that doesn't mean it's a testament to the EDA's process for awarding tax credits, said Jon Whiten, deputy director for liberal think tank New Jersey Policy Perspective.
“New Jersey's incentives supporters are quick to point out that Revel didn't ever get any of its estimated tax break,” Whiten said. “That's true, and that's an important safeguard in the state's subsidy programs.
“However, that doesn't mean Revel's turmoil shouldn't serve as an important warning on the reliability of the state's economic projections for subsidy projects.”
Whiten said the EDA's projections for Revel “missed the mark by miles and miles” and that now, with the Economic Opportunity Act in place and incentives being awarded at a rapid pace, it's more important than ever before to fine-tune the process.
For Whiten, that includes upping the threshold for net benefit tests on projects from 100 percent to 110 percent and moving away from the 35-year economic impact projections used for many projects and bringing that number down to around 15 years.
With projections susceptible to being as off as they were in Revel's case, banking on small net benefits over long periods of time is not good policy, Whiten said.
“These thin margins could easily turn into revenue losses if just one part of the EDA's formula turns out to be slightly incorrect — even at the same time that the company is meeting its jobs requirements,” Whiten said.
“Regardless of how one feels about the efficacy of business tax subsidies, I think everyone can agree that the state should not be putting tax dollars at risk with these awards.”
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