New Jersey bet on the wrong casino with Revel

When the swanky $2.4 billion Revel casino opened in Atlantic City last year, New Jersey Governor Chris Christie hailed it as a "game-changer" for the struggling Jersey Shore resort. That's why the state provided it with $300 million worth of aid. He couldn't have been more wrong about the most expensive casino in the city's history.

The resort, which brags about its ocean-view rooms with flat-screen TVs and marble-tiled bathrooms, tried to bring Las Vegas glitz to the blue-collar Jersey town and failed to attract customers. According to state officials, Revel generated a paltry $8 million in total casino revenue in January, ranking dead last among the city's 11 casinos. That's why the news earlier this week that Revel plans to file Chapter 11 bankruptcy is hardly a shock.

"Revel had amended its revolving line of credit at least three times since the summer, spending money at a fierce clip while bringing in less than half the $30 million a month that Wall Street analysts said it needed to sustain its massive 6.3 million-square-foot operation," according to the Philadelphia Inquirer.

As part of its aid package, New Jersey gave Revel a Redevelopment and Growth tax incentive award of $261 million, which allowed it to receive a rebate of tax revenues over 20 years. No taxpayer funds were provided up front.

The resort has had a rocky history for years. Morgan Stanley (MS) first began developing the project in 2006 but backed out before construction was complete and wrote down its entire $1.25 billion investment. Chief Executive Kevin Desanctis was brought in 2011, but his status with Revel after the bankruptcy remains unclear, according to The Wall Street Journal.

Many critics of the aid, including state Democrats, have argued that the state's oversight of Revel was lax. Bob McDevitt, head of Atlantic City's largest casino union, which has tried to organize Revel's workers, is quoted in the Press of Atlantic City saying, "We warned them this would be a catastrophe, but no one listened. Now, it's a catastrophe."

Revel has a tough road ahead. Increased competition from neighboring states such as Pennsylvania have eroded Atlantic City's business, causing revenue to fall in each of the last six years. Revel clearly didn't help that trend.

--Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.