As a new state-run Tourism District in Atlantic City gets off the ground, the mechanism for funding the agency that will run the district remains unclear and undeveloped.
Administration officials say they have not finalized how to count the amount that casinos will save through a new regulatory structure. They also haven't settled on how to make sure those savings reach the operating agency for the district, the Casino Reinvestment Development Authority.
That amount, expected to reach into millions of dollars, is important because it figures as a major funding stream for the district's new mandate: to create a safer and cleaner zone around the city's major visitor attractions.
Gov. Chris Christie has said repeatedly that he wants to see any money saved by what he calls "re-regulation" - including the loosening of casino staffing minimums and security processes in line with the Las Vegas model - to be used for infrastructure and marketing of the new Atlantic City Tourism District.
"We'll be watching that very carefully," Christie said Feb. 1 when he signed the district and deregulation bills into law. But how to count or audit those savings has not been decided.
"All those issues are currently being worked on as we speak," Michael Drewniak, a spokesman for the Governor's Office, said Friday.
Three different agencies will soon be receiving and auditing tax revenue and fees that casinos pay to the state, a change from when the Casino Control Commission handled it all.
While the state may not be counting dollars and cents that way yet, casinos have already started saving money, beginning immediately after Christie enacted the new system that moved regulatory powers from the CCC to the Division of Gaming Enforcement.
Within days of that enactment, the Casino Control Commission issued pink slips to 115 casino inspectors, who earn a starting salary of about $40,000 and whose last day will be March 25. Meanwhile, the DGE took over day-to-day regulatory matters, including handling complaints from patrons and appeals for relief from casinos - items that no longer appeared on the CCC's agenda this month.
Atlantic City casinos, which are billed for the costs of their own regulation on a monthly basis, could see the effects of those changes on their monthly statements as soon as the end of February. Billable hours for inspectors will go down, although DGE staff hours will likely increase.
Meanwhile, CRDA staff members have begun early discussions of how anticipated regulatory savings, a prime source of district operating revenue, would be used.
Setting up the mechanism means deciding quickly whether external auditors will count and pass along the savings made to CRDA, or whether casinos will be expected to pay less regulatory cost up front but pass the savings along themselves to the CRDA.
Sen. Jim Whelan, D-Atlantic, who cosponsored the legislation, expressed strong concern Friday that the state had not yet identified ways to establish those concrete savings for the casinos.
"If we just shift powers from one agency to another, without accomplishing those savings, we won't have accomplished anything," Whelan said. Stressing that the DGE has the ultimate power to ensure that regulation costs less than before, he said, "We need to have a change of mindset over at DGE. The era of endless payroll has to end."
He further said that the regulatory legislation specified only that the casinos' savings would go to the district, but did not spell out how.
"The mechanism isn't clear," Whelan said.
Without ensuring those savings, he said, "We will not have enacted a new vision for this industry and this region."
Signs of how much is projected to be saved may come on Feb. 22, when Christie presents his budget for fiscal year 2012.
DGE should be expected to work within a smaller budget than the CCC previously did, Whelan said.
Daniel Heneghan, a spokesman for the commission, described how the billing had always worked.
"In the past, the commission has charged casinos an hourly rate for staff time to recoup the cost of regulation," he said. "Those fees, plus licensing, slot machine fees and other revenues were deposited in the Casino Control Fund and used exclusively to fund the operations of the Casino Control Commission and the Division of Gaming Enforcement."
Under the new bill, auditing functions fall to three departments: The Division of Taxation will collect the gross revenue tax, the 8 percent of casino revenue paid to the state. The DGE collects the major licensing fees, including the open-ended costs of licensing a new casino, which can run to more than $1 million. The Casino Control Commission, which once handled all of those revenues, now will handle parking fees.
In fiscal year 2010, casinos paid a total of $60.4 million in regulatory fees, $46.6 million of which were billable hours for CCC and DGE staff.
Jon Bombardieri, a spokesman for the Casino Association of New Jersey, confirmed what the casinos knew so far. "We're billed monthly," he said, "and we expect we'll still be billed monthly."
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