The reduction to Ba1 from Baa2 on the city’s $245 million of general-obligation debt reflects a weakened tax base resulting from anticipated casino closings, the New York-based ratings company said today in a statement. The outlook remains negative.
“The downgrade to Ba1 reflects the city’s significantly weakened tax base, revenue-raising ability and broader economic outlook,” analysts Vito Galluccio and Julie Beglin said in the statement. “These result from ongoing casino revenue declines, expected near-term casino closures, and the impact of sizable casino tax appeals, all of which has stemmed from increased competition from casinos in neighboring states.”
Atlantic City lost its regional monopoly as states including Pennsylvania, Maryland and New York legalized casinos or expanded betting to increase tax revenue. Casino revenue in the city has dropped for seven straight years, falling to $2.86 billion last year from a high of $5.07 billion in 2006, according to Bloomberg Industries.
The city’s 11 gambling houses account for almost half its jobs: 5,883 positions in a workforce of 13,500. The Atlantic Club closed in January, putting 1,600 people out of work. The closing of Caesars Entertainment Corp.’s Showboat on Aug. 31 will wipe out 2,133 jobs. Trump Plaza Hotel & Casino said it plans to close Sept. 16, taking away another 1,009. Revel, the $2.4 billion complex that employs 3,106 people, is seeking a buyer in bankruptcy.
“Their reasoning for the new rating is exactly what we’ve said over and over again –- regional competition for casino gaming is directly weakening Atlantic City’s casino revenues,” Mayor Don Guardian said in a statement.
The Republican said his city “is taking the lead in transitioning from strictly gaming centric tourism destination to a non-gaming tourism destination with gaming as a supplement.”
Governor Chris Christie, a 51-year-old Republican in his second term, in 2010 gave Atlantic City a five-year deadline to reverse the decline.
“This administration is committed to our partnership with Mayor Guardian and the people of Atlantic City,” Kevin Roberts, a spokesman for Christie, said by e-mail. “We will continue to work closely with the city to address its financial challenges as well as those of the gaming industry and to help secure their future.”
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