ATLANTIC CITY — Now that the casino market has stabilized after a brutal 10-year stretch, which saw gaming revenues cut in half and five properties close, some experts and officials believe now may be the time to review existing regulations to prevent another calamity.
The state’s transition report on Atlantic City, co-authored by Jim Johnson, recommended policymakers examine whether regulatory reform is necessary to ensure the gaming market’s stability and allow it to respond to competition.
The report suggests exploring the idea of capping the number of casinos or the total capacity of gaming parlors in the city.
“Atlantic City’s fortunes remain closely tied to the health of the casino industry,” the transition report states. “The shuttered casinos now haunting the (B)oardwalk are powerful reminders that while there can be significant benefit from learning lessons from failure, there can also be devastating costs to forging ahead without heeding those lessons.”
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Presently, two state entities regulate the industry: the Casino Control Commission, which is responsible for issuing licenses, and the Division of Gaming Enforcement, an arm of the Attorney General’s Office charged with maintaining the industry’s integrity.
James T. Plousis, chairman of the Casino Control Commission, said in an email the agency “has reviewed the (transition) report’s recommendations and is committed to working with the (state Department of Community Affairs) and other relevant agencies to assess the best path forward for Atlantic City.”
A spokesperson for the attorney general declined to comment on behalf of the DGE.
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The notion of strictly regulating the Atlantic City casino market is not new. As far back as 2014, state lawmakers representing Atlantic County have introduced legislation that would limit the number of casino licenses issued to any one person or entity. State Sen. Chris Brown, R-Atlantic, sponsored the bill for this legislative session, which was referred to the tourism committee in 2018 and has not moved since.
The Casino Control Act used to limit the number of licenses any one person or entity could hold, but the language was lifted during the industry’s heyday in the mid-1990s.
“Capping the number of casinos allowed within a defined geographic region is what Pennsylvania and Ohio do, and New Jersey should consider a similar process,” said Anthony Marino, a local analyst who has followed the industry for several decades.
Marino suggested relying on gross operating profit before issuing any new casino licenses.
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“That way it’s an automatic decision, not an ad hoc one determined by the regulators,” he said.
Bob Ambrose, an industry consultant and adjunct professor of casino management at Fairleigh Dickinson University, said he supports a free-market system and does not believe in a cap.
“However, and I have been saying the following since I was an executive in Atlantic City and elsewhere and note it every time I speak: One company should own only one casino in the Atlantic City market. That includes any brands under the same corporate structure,” he said.
The Casino Control Act requires the commission to consider whether issuing a new license or permitting the sale of a property to an existing license holder creates an “undue economic concentration,” but has never denied an application on that basis.
The industry’s ability to sustain another casino property may soon be tested.
Bart Blatstein, owner of the Showboat Atlantic City Hotel, has proposed circumventing a deed restriction on the Boardwalk property that prohibits gaming and stated his intention to build a new casino facility on an adjacent lot to his property. If successful, Blatstein’s project would result in 10 casino properties in Atlantic City.
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After Trump Taj Mahal Casino Resort closed in October 2016, the Atlantic City casino market was left with seven operational properties. That same year, the industry reported its first increase in total gaming revenue in nearly a decade.
The Atlantic City casino market had its third consecutive year of total gaming revenue growth in 2018, the first such period since 2004-2006, when the industry reached its peak of $5.2 billion.
In 2018, total gaming revenue was $2.9 billion and increased 9.2% over the previous year, the largest year-over-year jump since 1995. That growth has continued through the first quarter of 2019.
Most experts attribute a significant portion of the recent growth to two major events in June: the legalization of sports betting in New Jersey and the dual openings of Hard Rock Hotel & Casino Atlantic City and Ocean Casino Resort. In July, gaming analysts expect revenue numbers to begin more accurately reflecting the state of the industry.
Marino noted the industry’s numbers are somewhat artificial because of the increase in supply of table games and slot machines. He cautioned against judging the market’s health without allowing an apples-to-apples comparison later this year.
“Putting a hold on granting new licenses until the Atlantic City market shows evidence that demand is keeping up with supply seems a fair way of dealing with the issue,” he said.