Making the News

Casino Journal

Originally Published:Monday, October 10, 2005

In a 2003 report for the Casino Association of New Jersey, Spectrum Gaming Group wrote: "Atlantic City has grown to become one of the major gaming destinations in the world. This has been the result of governmental policies, private-sector confidence in the potential of Atlantic City and public acceptance of casino gaming. Atlantic City represents a tremendous success story for state policy by any measure."

The Spectrum report makes the case that, when the state invests in Atlantic City, it stands to reap dividends in various forms, not the least of which is increased tax revenue.


Setting a positive precedent
Want an idea of how to best address gaming in your state? Look no further than the New Jersey model

By Lloyd D. Levenson
Casino Journal

Lloyd D. Levenson is senior partner and chairman of the casino law department of the Atlantic City-based law firm Cooper Levenson (http://www.cooperlevenson.com/). He can be reached at (609) 344-3161 or by e-mail at ldlevenson@cooperlevenson.com.

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No other private industry is as dependent on state government as the casino industry. The limitations are clear. Wal-Mart can target locations based on demographics, traffic patterns and land costs. Gaming companies are limited by factors that Wal-Mart never needs to contemplate, such as the number of states that authorize casinos, as well as by other restrictions such as the number of licenses, locations and other requirements, not the least of which is the tax rate.

Among the states that have legalized casinos, New Jersey has long been a leader. The Garden State was a pioneer, becoming the first state outside Nevada to establish a gaming industry. It developed effective regulations that have quietly benefited the industry in numerous ways. New Jersey demonstrated that casinos could be run properly by companies that exhibit honesty and integrity. This has fostered public confidence, as well as investor confidence. We need to remind ourselves periodically that, prior to New Jersey's pioneering efforts, Wall Street was not comfortable investing in gaming.

New Jersey regulators have earned plaudits by maintaining a focus on integrity issues while streamlining regulations in other areas. Such efforts have been emulated in other states.

Now, New Jersey is a leader among the states for some additional reasons as well. Gov. Jim McGreevey, along with the leadership of the state Legislature, have taken special steps to ensure that Atlantic City-the East Coast capital of gaming-offers an environment that is friendly to both visitors and investors.

Vested interest in reinvestment

Naturally, every state and every political leader wants to sound the right notes about creating jobs and helping the tourism industry. In New Jersey, the leadership has gone further, developing and expanding some very real policies that will accomplish those goals, as well as help Atlantic City weather the competition that is coming from Pennsylvania, New York and other states.

State officials are learning that casino executives make investment decisions based on straightforward
economic models that quantify the potential returns on invested capital based on market data, not political considerations. One of the most important factors that could impact such decisions are tax rates.

Since everyone-including the state treasury-benefits when capital investment is made, the state is recognizing that the right kind of investment will create jobs, increase visitation and ultimately increase tax revenue.

In a 2003 report for the Casino Association of New Jersey, Spectrum Gaming Group wrote: "Atlantic City has grown to become one of the major gaming destinations in the world. This has been the result of governmental policies, private-sector confidence in the potential of Atlantic City and public acceptance of casino gaming. Atlantic City represents a tremendous success story for state policy by any measure."

The Spectrum report makes the case that, when the state invests in Atlantic City, it stands to reap dividends in various forms, not the least of which is increased tax revenue.

Legislative aid

That indeed represents an effective state policy that the McGreevey administration is implementing to the benefit of all parties. In the latest statutory changes, the state of New Jersey expanded the Atlantic City entertainment-retail sales-tax incentive program to $800 million over 20 years. It also extended Casino Reinvestment Development Authority obligations to 50 years from 35, established a $62 million state fund to build casino hotel rooms, and phased out the $26 million annual tax on casino complimentaries.

That measure advances state public policy on several fronts. By rolling back some recent tax increases, the state improves the investment climate in Atlantic City. By adding incentives for investment, the state will encourage more hotel rooms and other nongaming attractions, which will make sure Atlantic City remains competitive as the gaming landscape shifts throughout the Northeast.

More rooms, restaurants and retailing will ensure that Atlantic City attracts a broad range of visitors, and such attractions will keep those visitors in town longer. The result will benefit both the industry and government.

Looking forward, it will become increasingly important to ensure that the interests of both the state and the gaming industry remain on parallel tracks.

The issue of installing VLTs at racetracks in New Jersey is dormant for now, due to an agreement in which the casino industry will subsidize track operations over the next four years. But such issues are likely to arise again.

When they do, the state will need to remind itself of what it has already accomplished: Maintaining a positive investment climate in Atlantic City is not only good for the casino industry, it is excellent public policy as well. CJ

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