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How Will Atlantic City Cope After the Trump Taj Mahal Closes?

Trump Taj Mahal Will Close on October 10, 2016: Why is Yet Another Atlantic City Casino Closing?

Taj Mahal. (Source: usatoday.com)

2014 was a devastating year for Atlantic City, which had to deal with the fallout of an unprecedented four casino hotels closing and a loss of more than 8,000 jobs. With another casino hotel that is on life support, the Trump Taj Mahal, less than a month away from  closing, too, and the possibility of more closures if the referendum to open competing casinos in North Jersey gets passed, how will Atlantic City cope? Barring a miracle, on October 10, the billion dollar property that Presidential candidate and former owner Donald J. Trump once proclaimed “the eighth wonder of the world” will be no more than another empty building.

Since July 1, 2016, the Trump Taj Mahal, the northernmost casino hotel on the Atlantic Boardwalk, except for the still shuttered Revel, has been on strike. The main issue, which more than two months later, is no closer to being resolved than it was when the strike started, is the union workers’ loss of health and pension benefits as a result of the 2014 bankruptcy proceedings. The union has been demanding the same benefits for workers and their families that their counterparts at the other Atlantic City casino hotels are receiving.

Taj Mahal Strike. (Source: nypost.com)

Carl Icahn, who ironically saved the resort from closure two years ago, when he took over ownership and promised to restore the property to its former greatness, has now changed his mind, saying that he can’t keep throwing away good money after bad. Furthermore, because he sees “no path to profitability,” he has no choice but to close the resort.

Accordingly, on August 5, not only the 1,000+ Local 54 members who have been picketing in front of the property since July 1st, but all of the casino hotel’s 2,800+ employees, were sent the mandatory notice of the casino’s upcoming closure. However, the failure all month long for management to file the required official petition to close with the New Jersey Division of Gaming Enforcement (DGE) led many people to speculate that Icahn was just bluffing. Players and employees alike believed (or wanted to believe) that he was using the threat to close to gain leverage with the union. On the other hand, diminished services, closed restaurants and, of course, very few players on the casino floor all did not bode well for the casino’s future. Meanwhile, as the longest strike in the 38-year history of Atlantic City casino gambling continues, nobody knew for sure.

Now It’s Official: The Trump Taj Mahal Will Close! 

These days there may still be a little bluffing going on at the three or fewer open tables in the Taj Mahal poker room, but for Icahn, show time has finally come, and he is not bluffing. On September 2, the Trump Taj Mahal management team filed a formal petition with the DGE, not only requesting permission to cease all operations as of 5:59 a.m. on Monday, October 10, but to start shutting down some table games as early as September 26.

All four of the casinos that closed in 2014 (Atlantic Club, Showboat, Revel, and Trump Plaza) likewise filed a petition for permission to close, which the DGE approved, so there is no reason not to expect the same outcome for the Taj Mahal. Of course, the Taj has the option to withdraw its petition, but at this stage of the game, it seems highly unlikely. In addition, on the casino hotel’s official website, http://www.trumptaj.com/ there is now a formal announcement that both the casino and hotel will indeed close on Monday, October 10, 5:59 a.m. and when exactly prior to then different services will be terminated. Any player with chips or comps to redeem or other concerns needs to read this information.

Taj Mahal Customer Information. (Source: Taj Mahal Vegas)

Impact on Other Atlantic City Businesses

According to articles in the Press of Atlantic City, the strike has already had a major impact on other businesses located close to the Trump Taj Mahal. For example, Haider Raza, owner of the Mehfil Restaurant, a casual Indian restaurant that used to be very popular with Taj Mahal patrons and located on Pacific Avenue a block away, reports that business is way down. He says that the situation is similar to what he had to face in 2014 when the Taj Mahal appeared likely to close and his restaurant’s business declined by 40%.

Other businesses in the vicinity of the Taj Mahal have also experienced a sharp fall off in activity since the strike. One business, in particular, that has really suffered is the Steel Pier, which is located on the Boardwalk directly across from the Taj Mahal and is in fact connected to the latter by a pedestrian bridge. The Steel Pier is the only amusement pier in Atlantic City, so under normal circumstances, attendance during the summer should have been great. But owner Anthony Catanoso has reported a 20% decline in business since the start of the strike. People don’t want to deal with the picketers and the continuous shouting and banging, so they avoid the area. Of course, the summer is the time of year that brings the most visitors to the Boardwalk so business lost during what should be the busiest season probably cannot be recovered.

It will be interesting to see how the Showboat, which reopened in July 2016 as a hotel without a casino, will fare without the Taj next door and with Resorts, the only remaining casino in walking distance. Current Showboat owner, Bart Blatstein says, however, that his long-term plans for the Showboat do not require that the Taj Mahal remains open.

Richard Perniciaro, Director of the Center for Regional and Business Research at Atlantic Cape Community College, is less optimistic. He is concerned that the combination of the closing of the Taj and the pending referendum to allow casinos in North Jersey (which will be decided by New Jersey voters in November) might discourage both residential and commercial investment in Atlantic City.

Although the timing of the Trump Taj Mahal coincides with that of significant investments being made towards upgrading the northern part of the Boardwalk, it may be a while before the new attractions and activities are in place. In the absence of casino gambling, visitors will need more incentives to come to the area or they will stay away.

What Will Happen to All the Newly Unemployed Workers?

Another huge concern, once the Taj Mahal closes, is the imminent dramatic increase in unemployment, which Atlantic City clearly cannot afford. The Atlantic City rate of unemployment, which has been in the neighborhood of 10% throughout the first half of 2016, is already double that of both New Jersey overall and the national average. Soon the outlook for the Atlantic City economy and for many residents who depend on their wages to support themselves and their families is going to become even more dire when nearly 3,000 more workers join the ranks of the unemployed.

The news of the Taj Mahal closing and the availability of a large qualified pool of available employees has resulted in multiple job fairs taking place at other casino hotels around town. However, these stepped up efforts to recruit currently unemployed and soon to be unemployed workers have been primarily for positions at affiliate casinos outside of Atlantic City. For example, the Borgata (which is now fully owned by MGM Resorts) has hosted job fairs for positions in other MGM casino hotels.

Similarly, Caesars in Atlantic City has hosted job fairs, in part for positions at Caesars, Bally’s, and Harrah’s Resort in Atlantic City, but also for positions in other Caesars Entertainment owned properties. While these efforts will provide alternative income for those who are hired, it will mean that the workers and their families will have to uproot themselves to relocate in another state (such as Pennsylvania or Maryland). It will also mean a further blow to the Atlantic City economy
According to a recent Stockton University study, approximately 13,000 workers have relocated out of the Atlantic City  area as local jobs disappeared. If the recent job fairs are any indication, the trend should continue. A job is a job, and many people will take what is available even if it means they have to uproot their families. More than 500  people showed up at the Borgata to apply for a job at the MGM National Harbor Casino in Maryland. Meanwhile, 300 Atlantic City applicants for jobs at Harrah’s Philadelphia and Horseshoe Casino Baltimore were hired. Of course, there are also many people for whom a move out of state is impractical or impossible, and a large number of them will remain unemployed in Atlantic City.

The Mayor is Still Optimistic

One saving feature for Atlantic City is the bill passed by the State providing for fixed payments for the casino industry in lieu of taxes as long as casino revenues remain stable. Assuming that the Taj’s share of the business gets picked up by the remaining seven casinos and those casinos also pick up the Taj Mahal’s share of payments to the Government, the total payment should not drop below the stipulated $120 million. Even in the worst case scenario of much of the Taj Mahal revenue being lost, the impact on the total amount the government receives shouldn’t be great, because compared to the other casinos, Trump Taj Mahal’s gross gaming revenue didn’t amount to much in the first place. In fact, in 2015, it was only $180 million, compared to the other seven casinos’ combined gross revenue of over $2.2 billion.

The ability of other Atlantic City casinos to capitalize on the Taj Mahal’s misfortunes can also be assumed based on how they fared in July 2016, the first month of the strike. While the Taj Mahal’s gross gambling revenue plummeted 8.2% to $17.5 million, compared to $19 million in July 2015, overall casino revenue was up 6.9%. The Borgata, as usual, led the way, posting a whopping $85 million win, for its best month ever.

Atlantic City Mayor Don Guardian recently stated that it is “unfortunate and disappointing” that no resolution has been found to keep the Taj Mahal open. However, he also pointed out that “Atlantic City has been resilient for over 160 years and we will continue to do so, as we rise to meet any challenge ahead of us.” Recent special events like a Jimmy Buffett concert on the beach, a two-day seafood festival at Bader Field, and the Miss America Pageant have brought big crowds to the resort and are proof that this town still has a lot to offer gamblers and non-gamblers alike. Introducing the newly crowned Miss America, Savvy Shields, Guardian proudly proclaimed “With a Shield and a Guardian, Atlantic City will be safe for another year.”