(Reuters) - New Jersey's legalization of online gambling is expected to help stabilize Atlantic City's property tax base, but it could also further dampen tourist visits to casinos as gamblers place bets from home instead, Moody's Investors Service said on Friday.
Atlantic City, once a prominent destination for gamblers, lost its ranking as the second-biggest U.S. gaming market, behind Las Vegas, to the neighboring state of Pennsylvania.
The credit rating agency also took a jab at Caesars Entertainment Corp on Friday, cutting its corporate family rating to Caa2 from Caa1.
Moody's also downgraded additional Caesars' debt on Friday. The action affected a total of $15.6 billion of debt, and the outlook is negative.
So far this year the company has continued to see negative gaming revenue trends across most of its major markets, as higher taxes are slicing into customers' discretionary income and derailing a rebound in gaming demand, Moody's said.
Moody's rates Atlantic City's general obligation debt Baa1 with a negative outlook. A spate of bad news has continued to put downward pressure on its credit rating, but for now the outlook and rating are unchanged, Moody's said on Friday.
One potential bright spot has been the state's legalization in February of online gaming for a 10-year trial period.
Under the legislation, computer servers used to host the gaming websites would be housed within Atlantic City's casinos so those casinos could accrue the revenues.
That potential revenue boost would help to stabilize the city's taxable property values, because financial performance is an element of each casino's market and assessment value, Moody's said.
Casinos with improved taxable values would also likely be less able to reduce their tax bills through appeals.
Trump Taj Mahal, for example, has appealed its Atlantic City property taxes every year since 2008, Moody's said.
But the ability to place a bet from home could cause further erosion of Atlantic City gambling tourism, which has been dropping since 2005.
The decline is due to several factors, Moody's said, including new gambling venues in neighboring states, a weak regional economic recovery, high gas prices and a "stubbornly high" state unemployment rate, which was 9.3 percent in February.
Visitors pay hotel taxes and parking fees, which back bonds sold by the Casino Reinvestment Development Authority.
(Reporting by Hilary Russ; editing by Sofina Mirza-Reid and Phil Berlowitz)