Restrictions on how Atlantic City's former Showboat casino can be used would be eliminated under a bill moving through the New Jersey Legislature.
But its former owner calls the measure unconstitutional and warns "it will create a multitude of problems and lawsuits."
The state Senate passed the bill by a 32-3 vote on Monday. It would prohibit deed restrictions on any publicly owned building located within the city's Tourism District, including the casinos and beachfront.
The bill is a response to the morass created by conflicting legal restrictions on how the Showboat can be used by future owners. Caesars Entertainment shut the Showboat on Aug. 31, 2014, then sold it to Stockton University for $18 million in December 2014.
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But the university's plans to convert it into a satellite campus were thwarted by conflicting deed restrictions: Caesars prohibits it from being used as a casino again, while a 1988 covenant among Trump Taj Mahal, Resorts and Showboat requires that it be used only as a casino.
That contradiction has thus far sunk two deals to sell the property: Stockton's original purchase, and its subsequent attempt to sell it to Revel owner Glenn Straub. Stockton now has a deal to sell it to Philadelphia developer Bart Blatstein for $23 million by mid-January, but he remains subject to the restrictions, as well. Blatstein has not decided whether to operate it as a casino or a non-gambling property.
"We're looking at the public interest here," said the bill's sponsor, Sen. James Whelan, a former Atlantic City mayor. "Stockton made some bad decisions here, but they are a public institution, and the public shouldn't suffer just because someone there made a bad decision."
The university bought the property knowing the deed restrictions were in place, saying it was assured they would be resolved, but not revealing who made that assurance.
Caesars Entertainment closed the Showboat and the Atlantic Club casinos in the name of reducing competition in the struggling Atlantic City market; 2014 began with 12 casinos there, but only eight made it to New Year's Eve.
Caesars opposes the bill, saying it is unconstitutional because it takes property without compensation, interferes with private contract rights, and would create many unintended consequences, among them encouraging "bogus straw transactions" to change owners and relieve them from deed restrictions.
"It is not a solution to any problem," the company said in a statement Tuesday.
Although the bill was intended to apply only to the Showboat, the way it is currently written would remove a similar deed restriction from the Atlantic Club, which Caesars also closed in January 2014 after jointly buying it with Tropicana. The property was sold to Florida developer TJM Properties, which, thus far, has not re-opened it, and which is considering selling it to a third party.
Whelan said he favors amending the bill to make it apply only to publicly owned properties, preventing it from applying to the Atlantic Club.
The state Assembly has yet to act on the bill.