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Atlantic City Casinos Threatened With Shutdown

There is a serious threat to casinos in one of the gambling meccas in the country, Atlantic City in NJ. The casinos in this part of the nation are threatened by a temporary closure as part of an overall state shutdown of nonessential government services.

If the shutdown pushes through, Boyd Gaming will be particularly badly hit, following the grand $200 million expansion of the Borgata, one of the landmarks of Atlantic City, which has just introduced the city's largest poker room. Boyd and MGM Mirage operate the Borgata as a joint venture. Harrah's and Trump are also some of the bigger players in the city.

New Jersey Gov. Jon Corzine along with state assembly leaders remained on an impasse on a new budget. Until a decision is approved, nonessential government services such as the casinos will be shut down beginning Wednesday at 8 in the morning. Gaming activities will also cease.

On Monday evening, a plea by the casinos to stay open during the shutdown was rejected by a New Jersey court appellate. Now the Casino Control Commission has told Atlantic City's 12 casinos to prepare to lock their doors up starting Wednesday.

Assistant Attorney General Patrick DeAlmeida, argued the case on behalf of the commission. He said that if the casinos are granted judicial approval to stay open, it will follow that other private parties would also seek such relief.

"Casinos are not alone here in feeling economic harm, " DeAlmeida said.

Casino association lawyer John Kearney said that the casinos were trying to figure out their next step.

In light of recent events, spokesman for the Casino Control Commission Dan Heneghan expects that the casinos would be taking the matter to the N.J. Supreme Court.

In 2005, July was A.C.'s highest grossing month on record, taking in an average of $16.3 million per day.

Lawrence Klatzkin, a Jefferies analyst says that Harrah's and Trump might be the most affected by any closures. Aside from the possible short-term hit to companies' earnings, the longer-term effect of any temporary shutdown is the matter of whether the budget issues will deflect investment from the city.

"Every year the casinos get threatened with this, even though they pay for their own regulators, " Klatzkin says. "Do you want to be in a state that has this regular threat?"

Three years ago, a similar threat was made to casino operators and during that time, they went to court to seek the right to stay open. Luckily, a budget was decided on at the last minute that prevented a closure. If the closure pushes through this time, it will be the first government shutdown in New Jersey history.