Like a lightning quick dog tiring before a stretch drive, the legalized gambling boom around the country is slowing down. But, like the streaking canine, the pause shouldn't last long.
The revelations coming out of the ABSCAM scandal -- an FBI operation staged to uncover potential bribery of members of Congress -- along with the simultaneous increase in the cost of borrowing money, has slowed the development of Atlantic City and cut down on the growth of Las Vegas, industry watchers say. Those two cities have the only legalized casino gambling and are the keys to the gambling industry's future.
"It has curtailed some of the development that had been planned," said Lee Isgur, a leisure time analyst at Paine Webber Mitchell Hutchins Inc. "ABSCAM is the biggest news that has hit the industry in some time and the industry's momentum has cooled for the moment."
The ABSCAM revelations, which have in part revolved around the New Jersey gambling industry, delayed massive plans by Caesar's and other investors to continue the boom that has followed the legalization of casino gambling in Atlantic City.
Although the District referendum this week essentially revolves around the big money games of jai alai, dog racing and lotteries, gambling initiative advocates note the large profits recorded by firms in the business. But a look at the staggering growth of Resorts International Inc., a major beneficiary of the New Jersey action, indicates that any lull in the gambling boom is probably short-lived.
In 1979 alone, Resorts' profits rose from $51 million to about $91 million and the Resorts casino in Atlantic City has a gross win of about $600,000 a day. Resorts, which has cash reserves of $225 million, has plan to build a $200 million hotel-casino project there, with groundbreaking expected later this year.
The casinos in Atlantic City expect a gross win of $600 million a year, about 25 percent of the win in all the casinos in Nevada. Analysts estimate that over the next several years the total amount bet in Atlantic City will rise by 50 percent or more a year.
"Obviously there is a point of diminishing returns," said Phil Wechsler, Resorts' director of public relations. "But we're only attracting about 10 percent of our market and like the shopping mall principle where one store after another brings in more people, more and more people are filling Atlantic City."
The other two casino firms in Atlantic City are growing slowly and Steven Norton says that investors are taking a second look, for financial reasons, in addition to the political uncertainties surrounding gambling.
"The competition has started to show and the profit bubble has burst," Norton said. "The thing is that Resorts' first year earnings were unrealistic," in light of the monopoly the company had on the casino trade in Atlantic City.
By 1985, Isgur estimates that given a relatively stable rate of inflation, between $6 billion and $9 billion will be won by the nation's casino companies. In 1979, casino companies in Nevada revenues were about $1.75 billion, dramatically up from a figure of $200 million in 1960.
Therefore, it is not surprising that gambling is a ballooning business and that banks and other financial institutions are recognizing, although slowly, that fact. One survey indicates that 86 percent of the respondents to a survey of financiers said that casino gambling is here to stay.
Some lending institutions, despite a reluctance stemming from the traditional mores and crime concerns associated with gambling, are catching on. tThe Aetna Life Insurance Co. of Hartford, for example, has loaned the operators of Caesars Palace $60 million for their Atlantic City project.
Like New Jersey, other states foresee the gambling windfall. New Jersey has even raised the tax on casino profits from 8 percent to 12 percent, bringing in added revenues to a state that already has a horse racing industry with $18.5 million in pari-mutuel tax collections.
More states are expected to take a careful look at casino operations in light of tightening government budgets. Casino operations would only add to the substantial receipts state garner from pari-mutuel betting. California for instance raised $116.32 million in pari-mutuel collections during the 1979 fiscal year, about 10 percent more than New York. Maryland raised $20.5 million last year.
Those figures are encouraging states considering the requests of casino firms for gambling initiatives. "My guess is that within the next decade, most of the states in the United States will consider legalizing casino gambling," Robert Ferguson, chairman of the First National State Bank of New Jersey, the Garden State's largest commercial bank, said last fall.
"I think gambling is something that has always been built into the human body. It is perceived as a leisure time activity, as a recreational activity, people are going to do it illegally or legally," Ferguson said.