New Jersey Governor Chris Christie's "pride and glory", the Revel Casino in Atlantic City, is filing for bankruptcy. Revel Casino, a private corporation, was heavily subsidized by taxpayers whose investment of hundreds of millions of dollars is now lost.
LITTLE FERRY, N.J. (CBSNewYork/AP) - Less than a year after opening, the Revel casino and hotel in Atlantic City has announced it is filing for chapter 11 bankruptcy next month.
Revel, the struggling city's newest casino and a $2.4 billion project, announced Tuesday that it would enter a voluntary Chapter 11 bankruptcy and remain open after a rough start during its first year in business.
Once hailed as a game-changing resort that could pull Atlantic City back from the brink, the casino has not been able to turn a profit and has been eclipsed by competitors in the city and in neighboring states.
Through the bankruptcy process, Revel plans to convert $1.5 billion in debt into $1 billion in equity for its creditors — effectively giving them ownership of the casino
instead of repaying the money.
This was Chris Christie's baby
The continuation of the abandoned investment was the brainchild, and pride and glory of one Chris Christie who then said "the $2.4 billion Revel is one of the most spectacular resorts he's ever seen and expects it will motivate other Atlantic City casinos to revitalize their properties. "I think that one of the things that Revel will be is a catalyst for additional modernization and investment by the other casinos to say, listen, if we grow more people here coming to the region and we're offering something that looks nice further down the boardwalk, maybe people will want to look there as well." As it now stands, the Revel will only be a catalyst for further bankruptcies as industry after industry finds out what a tapped out consumer with no access to $1.8 trillion in excess reserves truly means.
One of the most unflattering reports
on this story comes from Breitbart of all places:
Even after Morgan Stanley "abandoned the project before construction was complete and wrote down nearly its entire $1.25 billion investment" in 2011, Christie decided to invest taxpayer dollars into the casino, saying if the casino succeeded, it would be a sign that "Atlantic City is back."
According to an April 2012 report, Christie gambled on the casino, backing "the stalled construction of Revel with $261.4 million in state tax credits over the next 20 years," even as mayors saw some red flags. In addition, Christie also "approved $2.6 million in employee-training grants for the casino," which was "on top of additional millions previously pledged through local tax breaks and $20 million in infrastructure funding from the state’s Casino Reinvestment Development Authority."
Christie of course tried to put the best possible spin on this by saying:
“[The lenders are] showing their faith and confidence in the concept and in the future of Atlantic City by not walking away and closing the place down, but by, in fact, saying ‘We’re going to take the money that we’re owed and instead we’ll take stock in the company,” Christie said.
On the other hand, they had no other choice and would have been stuck with a giant white elephant.
The gambling industry and Atlantic City are not in good health. The Trump Plaza casino in Atlantic City recently sold for $20 MM - today it would cost $400 MM to build, so it has lost 95% of its value. The Sands and Atlantis casinos have disappeared. Yet Christie thought this project was a good investment of taxpayers' $260MM which is now essentially down the drain.
As early as last September an article by David Cay Johnston appeared in Reuters describing the troubles the Atlantic City gambling industry was facing
so it should come as no surprise that the casino is now declaring bankruptcy
Because betting is now legal in neighboring states, gambling here is way down. The casino hotels have slashed their workforces, cut real wages and, citing falling property values, received huge property tax refunds - with more refunds likely.
The city has sold $103 million of bonds to finance casino property tax refunds, bonds that with interest will cost the average homeowner more than $2,100 over the next two decades, Michael Stinson, the city finance director, said.
But Gov. Christie likes to brag
in his ads and speeches that he has lowered New Jerseyan's property taxes.
According to Johnston, Atlantic City has imposed a tax on its residents to subsidize the casinos - $100 mm over next 15 years. The casinos cannot operate without government subsidies and have become "welfare queens". This is an ironic reversal of what was supposed to produce jobs and income for residents, who now instead have to support the industry with their tax dollars.
According to Johnston, Chris Christie is a leading proponent of corporate socialism - taking from the many and giving to business owners. Massive gifts to corporations entice them to relocate to New Jersey. For example, these corporations get to collect state income tax from workers' paychecks, but do not have to actually pay it to the state. They pocket the state income tax.
The city is about to sell another $35 million in bonds, while the Press of Atlantic City reports that $40 million more may have to be borrowed next year. If all that happens the average homeowner eventually may be out more than $3,600 in added taxes.
That may well understate the added costs to local taxpayers in the next few years as the gambling business is likely to shrink even more, as Mayor Lorenzo Langford told me. Each time another casino opens in nearby states, "the Atlantic City market should expect to see some lost business," Mayor Langford said, and "one or more of the weaker casinos may close."
Of course what this brings to mind is the endless whining by Republicans about Solyndra. who liked to repeat that the government should not be in the business of picking winners and losers. Which is of course ridiculous on its face as the government has always been instrumental in shaping policy and the economy. And Solyndra will have cost taxpayers far less than Revel and is a far more ethical and beneficial use of monies as it could have reduced the effects of climate change, whereas gambling robs from the poor to give to the rich.
NEW YORK (CNNMoney)
To Democrats it represents government support for a private enterprise that was supposed to create something that made us all better off -- clean energy and jobs.
To Republicans it represents government overstepping its role.
With the issue not showing signs of fading away in the election, here are seven things you should know about Solyndra and the Department of Energy loan program that supported it.
It was started by Bush: The DOE loan program that funded Solyndra was actually started by President Bush in 2005. It was intended to provide government support for "innovative technologies."
Lawmakers set aside $10 billion to cover any losses from $26 billion in loans. Solyndra could potentially cost the government $529 million.
And Beacon, a power storage company that also went bankrupt, cost the government $12 million. So even if Solyndra ends up costing the full $529 million, there's still nearly $9.5 billion available should other loans go belly up.
Solyndra wanted more: The company applied for another $468 million in funding shortly after its first DOE loan closed. The government did not award the second request.
And of course the final reminder is Christie's cancellation of what was at the time the country's largest public works project, on the grounds that taxpayers couldn't afford it. But, according to him they can afford to subsidize a private project.
The Tunnel would have created jobs in the region, but Christie chose to throw good money after bad in Atlantic City. Furthermore his reasons for doing so have now been refuted in a subsequent GAO report.
Gov. Chris Christie of New Jersey exaggerated when he declared that unforeseen costs to the state were forcing him to cancel the new train tunnel planned to relieve congested routes across the Hudson River, according to a long-awaited report by independent Congressional investigators.
The report [...] found that while Mr. Christie said that state transportation officials had revised cost estimates for the tunnel to at least $11 billion and potentially more than $14 billion, the range of estimates had in fact remained unchanged in the two years before he announced in 2010 that he was shutting down the project. And state transportation officials, the report says, had said the cost would be no more than $10 billion.
Mr. Christie also misstated New Jersey’s share of the costs: he said the state would pay 70 percent of the project; the report found that New Jersey was paying 14.4 percent.
Canceling the tunnel, then the largest public works project in the nation, helped shape Mr. Christie’s profile as a rising Republican star, an enforcer of fiscal discipline in a country drunk on debt. But the report is likely to revive criticism that his decision, which he said was about “hard choices” in tough economic times, was more about avoiding the need to raise the state’s gasoline tax, which would have violated a campaign promise. The governor subsequently steered $4 billion earmarked for the tunnel to the state’s near-bankrupt transportation trust fund, traditionally financed by the gasoline tax.
If there's any doubt that Christie is a typical Republican let's hope this debacle puts it to rest. He is on the forefront of corporate socialism - giving from the many to give to the (well connected) few.