Former Mayor James Whelan, who is now a state senator, will introduce legislation to permit four new casinos of at least 200 rooms. The current minimum is 500, and the newest casinos have 1,000 or more.
Supporters see the move as a potential cure to the malaise gripping the nation's second-largest gambling market, which is struggling with competition from neighboring states.
"The world has changed, and Atlantic City has changed," Whelan said. "In 1978, Atlantic City desperately needed hotel rooms and nightclubs and the amenities that go along with a first-class hotel. Five hundred rooms made all the sense in the world.
"But where we are today, you can go to Philadelphia or Delaware or other jurisdictions where the entry fee to build is much lower," Whelan said. "You can get in for tens of millions of dollars. In Atlantic City, 500 rooms costs you $800 million, minimum, and nobody's writing checks for $800 million or $1 billion nowadays."
One likely participant would be the Chelsea, a 330-room "boutique hotel" opened two years ago on the Boardwalk just as the national economy tanked. The hotel is owned by Curtis Bashaw, former head of New Jersey's Casino Reinvestment Development Authority, who was forced to scrap his plan for his own sprawling casino nearby due to the recession.
"We think the Chelsea would be an excellent candidate for a small, upscale Monte Carlo-type venue that would elevate the market and attract a more upscale patron," Bashaw said. "This is about jobs, innovating new gaming products and allowing the capital markets to enter the market at the level they're comfortable with now."
George Lynn, former CEO of the AtlantiCare hospital system, said bringing new, smaller casinos to Atlantic City will help the entire business community, including those not involved with gambling.
"The more people that come to Atlantic City, the more that small businesses prosper; we've seen that again and again," he said. "These boutique casinos will help Atlantic City differentiate ourselves from our competition, which is something we absolutely have to do."
But before the bill is even introduced, many existing Atlantic City casinos are lining up against it.
"I think it's a terrible idea," said Mark Juliano, CEO of Trump Entertainment Resorts, which owns three casinos here, including the flagship Trump Taj Mahal Casino Resort with 1,250 rooms. "We all played by these rules for a long time. To change the rules now when we're really hurting is not fair and it's not right."
Likewise, Bob McDevitt, president of Unite-HERE Local 54, the union that represents 15,000 casino hotel room cleaners, food and beverage servers and other service employees, blasted the proposal as lowering a standard and image that Atlantic City has worked hard to build and maintain.
"You're cheapening the billions and billions of dollars already invested in Atlantic City, and changing the definition of what gaming in New Jersey is," he said. "If you want to enter the nation's second-largest gaming market, you better be able to pony up the money to do a first-class facility. Otherwise, you have no business being here."
Atlantic City's top casino, the Borgata Hotel Casino & Spa, has nearly 4,000 rooms including its non-gambling Water Club luxury hotel. Robert Boughner, the Borgata's president, said New Jersey legislators should be focused not on adding supply to Atlantic City but increasing demand here.
The new casinos would have to pay a tax rate of more than 14 percent to compensate for the lesser amount they would have to spend, compared to existing, larger casinos, which pay just over 9 percent.
The bill has incentives to entice casino owners to add hotel rooms. Those who build 200-room hotels would be permitted 20,000 square-feet of casino space. If they expand to 500 rooms within five years, they would get 30,000 square feet of gambling, and would get back the extra 5 percent in taxes they paid to enter the market.
Conversely, if the owners of a 200-room hotel kept it that size after five years, the money they paid would be used for other casinos' expansion or infrastructure projects in Atlantic City.
Owners could opt for slot machines alone - which account for two-thirds of Atlantic City's casino revenue - or offer table games as well, which cost more to staff.
McDevitt and several casino executives said the Seminole Indian nation of Florida has expressed interest in building a new small-scale Hard Rock casino-hotel on land near a bus depot on Route 40, one of three major entranceways to Atlantic City. The Seminoles could announce a proposal as soon as next week, the executives said.
James Allen, CEO of Seminole Gaming, did not return a message left after hours Friday.