Vol. 4, No. 4, April 2007
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Money for Nothing?
Recently, there have been several newspaper articles and editorials, most notably in the New York Times, critical of the way the Casino Reinvestment Development Authority (CRDA) has been spending its money. They all missed the point.
Actually, it’s not “CRDA” money, it’s “casino” money. The money dedicated by the casinos to the CRDA (or “Creeda,” as we locals like to call it) is technically money that is “re-invested” in worthy developments in Atlantic City and around the state. Again, “technically,” that money should be returned to the casinos when the loan period is up. Everyone understands that probably won’t happen, but the fact remains, it is supposed to be an “investment,” not a tax.
When it was formed in 1984, the CRDA was designed to take 1.25 percent of casino revenue (on top of the 8 percent gross gaming revenue tax) and use it to redevelop Atlantic City. The formation of the CRDA was the brainchild of recently retired Senator William Gormley. It became the tool that wound up redeveloping the city as it was designed to do. When you look at the housing in the Inlet area of the city, and many of the improvements to public buildings and the Boardwalk, you should realize CRDA funding was responsible for all that.
To get the bill through, Gormley dedicated funding to other projects in the state in the “out-years” of the agency’s 20-year life. That period has been extended several times down through the years when various re-funding programs were installed, and it now is designed to go out of business 50 years from its formation in ’84. But anyone who believes that a government agency will ever shut down should be a great candidate for a three-card monte game on the Boardwalk.
The critics have said that the recent CRDA funding of hotel and entertainment amenity expansion is contrary to the original purpose of the CRDA, which was to rebuild Atlantic City. They contend that building additions to the casinos that will create more business for the casinos is not an appropriate use of the funds.
There are a few things wrong with that argument.
First, the funds being used by the casinos for this new development—hotel rooms, retail, restaurants, spas, theaters and other non-gaming amenities—are coming from a dedicated source that is separate from the 1.25 percent rake from the GGR. That dedicated pool of money goes untouched by the casinos and continues to be devoted to the original goal of the CRDA—redeveloping Atlantic City and other parts of New Jersey.
The Casino Capital Construction Fund and Atlantic City Expansion Fund were approved by the state legislature in 2003 and 2004 (again at Gormley’s request) and taken from a parking fee (now $3) imposed on Atlantic City casino garages and parking lots. Projects that have been partially funded by this money include the House of Blues, the Borgata expansion, the Pier at Caesars, the new Trump Taj Mahal hotel tower and others. So, there has been no impact on the dedication of funding to fulfill the original mission of the CRDA.
That said, I believe the money dedicated to the casino developments does fulfill that mission. For good or bad, the future of Atlantic City is tied to the casino industry. Without the partial funding from the CRDA, most of these projects would not have gone forward. Remember, when the money was first allocated, Atlantic City wasn’t “hot,” like it is today. The opening of the Borgata in 2003 was the first sign that AC would become so desirable as a gaming destination, but when financing was being lined up by the casino companies prior to the Borgata’s opening, only the addition of the small amount of the CRDA credits put them over the top. It was an essential ingredient to jump-start development in Atlantic City, thereby ensuring the future viability of the CRDA and its other revenue recipients. It is, contrary to the opinion of the always-nearsighted New York Times, an entirely appropriate use of CRDA funds.
