“The state Economic Development Authority’s … $261 million Economic Redevelopment and Growth Grant for the Revel project is … a no-lose proposition for New Jersey. First, the term ‘grant’ is misleading … the state pays nothing upfront. Rather, it provides Revel with a portion of the sales and other taxes it generates over a 20-year period. It is money the state would never see if the Revel is not completed and operational.”
– Joseph D. Kelly, president, Greater Atlantic City Chamber of Commerce

Mr. Kelly’s published letter praising “public-private partnerships” like this reminds me of the Highlights for Children magazine in the doctor’s office when I was a kid – “How many things are wrong with this picture?”

First, this $261 million grant is an upfront taxpayer guarantee of a $305 million subprime construction loan. Revel is paying $1.15 billion to union contractors for a project that will be worth only $850 million when finished. Since private lenders don’t loan more than a finished project is worth, Revel needed a second “mezzanine” loan of $305 million with no security – on top of the $850 million loan secured by the property. Only politicians would pledge 20 years of future tax collections from Revel to repay $261 million of the unsecured $305 million mezzanine loan. Only construction union bosses would use their members’ pension funds for the rest of it.

If Revel does worse than expected, the state taxes it pays won’t be enough to make the quarterly payments on that $305 million unsecured loan. Since voters never approved of this loan, as required by our state constitution, this should not be our problem. Only investors who buy the bonds should get stuck. But in the past, state government always covered the bad bets of authorities like the EDA. Right now, New Jersey taxpayers pay roughly $3 billion a year – more than 10 percent of the state budget – for the unfunded debts of state authorities like the EDA and “independent” state pension funds.

And suppose we want to cut state taxes in the future? The 15 percent hotel tax in Atlantic City, 7 percent sales tax, luxury tax, parking tax, and other high business taxes are killing the economy. If future politicians cut those state taxes, business might boom – but the state would collect less tax money from Revel to repay the loan.

I agree that roughly 2,100 highly paid construction workers will be busy on the project for a year. But when the work is done, won’t most of them go on unemployment at $550 per week for three years?  Won’t this hit every employer in the state with more surcharges – and kill even more jobs?

Revel claims it will create 5,500 permanent jobs when it opens, and that this will create 10,000 other permanent jobs in the area. Doesn’t this assume that every customer of the new Revel will be a brand new visitor to Atlantic City? But if the Revel takes its customers from other casinos, won’t each new job at the Revel kill one existing job at another casino?

Last year state Sen. Jim Whelan admitted that two or three casinos would probably close when the Revel opens. If he is right, then the state would gain one tax-exempt casino, but lose two or three full-taxpaying casinos.  What tax hikes will the state then need to make up the difference?

I think the opposite will happen and Revel will fail. Investors are now buying used Atlantic City casinos for about $40 million and renovating them for roughly $200 million. You can buy and fix up five used casinos for the price of one new Revel.

Imagine that Revel is a restaurant paying $1,200 per month rent, trying to compete with similar restaurants that are each paying only $240 a month rent. If the state keeps jacking up electric bills to pay for new solar panels and ocean windmills to keep union workers busy, how will Revel and the other casinos, pay their summer electric bills?

Giving a sweetheart deal to one company while making everyone else pay a fortune for taxes, permits and construction perpetuates New Jersey’s rotten pay-to-play business culture. In this state, pleasing politicians is far more important than pleasing customers.

As in Highlights for Children, there are many more things wrong with this Revel picture. But as you can see, this is all the space they give me.

Somers Point attorney Seth Grossman appears on 1400AM talk radio 3-4 p.m. Mondays and Wednesdays and on 92.1FM 8-9 a.m. Saturdays. For information see www.libertyandprosperity.org, email This e-mail address is being protected from spambots. You need JavaScript enabled to view it or call (609) 927-7333. Breakfast discussions are held 9:30-10:30 a.m. every Saturday at the Shore Diner on Fire and Tilton roads in Egg Harbor Township.