Michael Pollock / Meadowlands slots would create major conflict for N.J. - pressofAtlanticCity.com: Commentary

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Michael Pollock / Meadowlands slots would create major conflict for N.J.

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Posted: Monday, July 23, 2012 12:01 am | Updated: 9:48 pm, Tue Jul 24, 2012.

Michael Pollock / Meadowlands slots would create major conflict for N.J.

Spectrum Gaming Group has studied the question of expanded gaming in the Meadowlands for the past decade and has developed numerous findings over the years.

Much has changed over the past decade, including an unprecedented recession and a stomach-churning roller-coaster ride for the state's casino industry and for Atlantic City. But, remarkably, when it comes to the issue of expanding gaming within New Jersey, the core of our findings remains the same, and is arguably immutable.

Before proceeding on any expansion of gaming in New Jersey, policymakers need to address the following: Transforming the Meadowlands into a competitor of Atlantic City would create a very real, irreconcilable conflict between two state policies.

Since 1976, when voters approved a referendum to legalize casinos in Atlantic City, New Jersey's gaming policy has been the redevelopment of Atlantic City. That is enshrined in the state constitution.

For more than three decades, it has worked as planned. The state benefits in various ways when Atlantic City benefits, from the 8 percent tax on gross gaming revenue to increased casino reinvestment dollars to increased employment, as well as growth in various other taxes.

The state's interests and Atlantic City's interests have operated on parallel tracks. Adding gaming to the Meadowlands would create divergent interests. The state's share of Meadowlands slot revenue would, under any scenario, be significantly higher than its direct share of Atlantic City casino revenue. This disparity means that the state Treasury would appear to have a clear, abiding interest in maximizing revenue at the Meadowlands, where the tax rate would inevitably be higher. The casino industry and Atlantic City, however, would have a clear interest in maximizing revenue at Atlantic City properties.

This conflict would pit region against region, state against city, and legislator against legislator.

I am not saying that a satisfactory answer cannot be found, but to date, no satisfactory answer has been put forward.

As I wrote in 2010, slots at the Meadowlands would force New Jersey to adopt incompatible public policies: promoting the redevelopment of Atlantic City vs. promoting slots at the Meadowlands.

Meadowlands slots would cannibalize significant revenue from New Jersey casinos' core markets in northern New Jersey and the New York metropolitan area. Because slot-machine revenue at the Meadowlands would be taxed at a significantly higher rate than revenue at New Jersey's casino resorts, New Jersey would have a vested interest in maximizing revenue at the Meadowlands - at the expense of the established casino industry it created.

That very real conflict remains unchanged and will likely continue until a satisfactory answer has been developed. But some other factors regarding this issue remain unchanged as well.

No state in the nation, and certainly no state in this region, is contemplating the Atlantic City model. That model is characterized by a combination of a single-digit tax rate, a significant tourism infrastructure and a concentration of gaming licenses and capital investment in one location.

That singularity remains an untapped asset in New Jersey. Atlantic City, to some degree, has been on the path of reinventing itself into a regional entertainment destination, similar to the Las Vegas model. The recession created a huge obstacle on the path toward that evolution. Consequently, today, most of the licensees in Atlantic City still operate under a business model based on the premise that Atlantic City is the most convenient gambling location in the East. That model is no longer valid, and never will be again.

Atlantic City has not reached the point where its business model is such that it can withstand in-state competition, particularly if such competition creates conflicting policies for the state of New Jersey.

Despite the continuing negative news from Atlantic City, we can identify a solution: Greater capital investment. After all, nongaming revenues, albeit a small slice of the overall pie, continue to do well. Small market segments that are underserved can be grown. Capital investment can be the key.

Achieving that goal of transforming Atlantic City is viable, but will be difficult. It requires continued cooperation and coordination with the rest of New Jersey.

If New Jersey creates in-state competition, it means that a dollar wagered in Atlantic City at a lower tax rate is less valuable than a dollar wagered at the Meadowlands, and that means that every dollar that travels from North Jersey to Atlantic City is a lost opportunity for New Jersey, as opposed to the present situation in which every dollar wagered in Atlantic City is a benefit to the state. How will the state address and reconcile those conflicting interests?

How that question is answered makes all the difference - to the Meadowlands, to Atlantic City and to the state of New Jersey.

This column was excerpted from testimony June 19 before the Assembly Regulatory Oversight and Gaming Committee by Michael Pollock, the managing director of Spectrum Gaming Group, a Linwood-based research and analysis firm.

Posted in on Monday, July 23, 2012 12:01 am. Updated: 9:48 pm.

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