Aug 4 Casino towns Las Vegas and Atlantic City were both hit hard by the real estate bust and weakening gaming industry, but Las Vegas has seen a stronger economic recovery, reflected in the city's better credit rating, Moody's Investment Service reported on Monday.
Casinos dominate the economies of both cities, but Las Vegas enjoyed a stronger rebound from the Great Recession thanks to regional demographics, economic diversity, and competitive pressures. New Jersey's Atlantic City, in contrast, remains eight notches below the Nevada city, Moody's outlined.
Las Vegas relies less on gaming revenue from casinos and has generated funding from other areas such as conventions and healthcare.
Meanwhile, Atlantic City has suffered from a high poverty rate, stagnating population growth, and one of the largest local unemployment rates in the country at 14.9 percent.
"The greater Las Vegas metropolitan area is supporting long-term growth in construction, commercial activity and has elements of a nascent tech economy. It also is a popular retirement destination and has a growing healthcare sector," Moody's reported. "Atlantic City, in contrast, is almost entirely dependent on casinos and gambling tourism."
Moody's rates Las Vegas at Aa2 with a stable outlook, while Atlantic City is Ba1 with a negative outlook. In 2010, Las Vegas' rating was only three rating notches higher than Atlantic City's A1 rating.
While neither city receives direct tax revenues from gaming, casino win revenue is an indicator of property tax values and overall economic health.
In Atlantic City, the tax base is substantially concentrated in casinos, with a dozen casinos making up 68 percent of the assessed value. All 12 casinos filed tax appeals in recent years. As a result, Atlantic City paid significant property tax refunds, financed by most of its $300 million of municipal debt issued since 2008.
"These appeals have not only challenged the city's reserves in recent years but could also increase the city's debt burden," reported Moody's. "Las Vegas does not face the same taxpayer concentration as seen in Atlantic City, and is not financially exposed to the same risk of taxpayer appeals."
From 2008 to 2013, property values in both cities fell by roughly 50 percent. But while Las Vegas has seen an improving real estate market, Atlantic City continues to suffer declines.
The impact of the housing market has been felt differently in each city as property taxes account for only 16 percent of Las Vegas's total city revenues, while Atlantic City's totals 78.2 percent.
As Las Vegas diversifies its economy into healthcare and technology, Atlantic City has felt encroaching competition from new casinos in Pennsylvania, Delaware, Maryland, and soon, New York, which has plans to expand gaming. (Reporting By Robin Respaut; Editing by David Gregorio)