The unanimous cry from among casino operators in New Jersey is that the business conditions do not favor their sustainability. If nothing is done to save the situation, as many as four casinos will be forced to close down operations. It is under this condition that the Governor of NJ signed a bill that will offer tax relief to the casinos operating in Atlantic City. The Democratic Governor has over his tenure as governor supported the gambling industry by way of signing favorable legislation.
This recent action by the governor means that casinos operating in AC will no longer be required to make tax equivalent remittances. Previous laws dictated an amount of the same value as property taxes to be paid to the county administration and school system. According to the new bill, there will be a scale back of the payments meaning that casinos will get to keep much of their profits.
When the outgoing Democratic president of the state Senate, Steve Sweeney, made a presentation of the situation, he must have touched the legislators’ hearts. His report highlighted the fact that the future of Atlantic City as a gambling hub was uncertain owing to possibility of closures. Even though he had no documents to support the claim and no casino had made such claims, the house still sided with him.
Commenting on the aftermath of signing the bill, the Casino Association of New Jersey termed the move as good for the industry. The measure is going to safeguard the many jobs that the industry provides for many New Jersey residents. Avoiding business closure at a time when the entire industry is going through uncertainty will ensure market stability. The bill is not going to affect online gambling in New Jersey but the casinos will have a few adjustments to their financials.
The aftermath of the Covid-19 pandemic are still being felt by many companies operating in the entertainment space. This bill by Governor Murphy is going to aid companies in their recovery efforts by reducing taxes expected of them. If the current state of affairs is allowed to continue unabated, it would lead to high losses which casinos would not be able to recover from.
Now that the new law has taken effect, casinos are still going to pay large tax amounts to the county and schools. The main difference for the upcoming year payments is that the increase amount will have been reduced. All together, the casinos of Atlantic City will pay an estimated $10 million to $15 million above what was paid in the previous cycle. Without the bill, the casinos would need to part with about 50% more.
According to the state’s gambling regulator, the performance of casinos since the pandemic has shown a remarkable improvement. Internal reports from the casinos however point to desperate situation. Casino operators are against the inclusion of in person gambling wins in revenue collected.
Apart from that, money earned from sportsbooks and online gambling is shared between various providers lowering net revenue. This is one of the main performances drivers and factors that distinguish between companies that have in-house development teams from the rest.
Since the inclusion of sportsbook and online gaming revenue would lead to great discrepancies in implementing the new law, the legislators chose to omit. Coincidentally, these two streams are the fastest growing revenue sources for casinos in AC and beyond. It is no wonder that the county government of AC was adamant in accepting the said bill as it meant less taxes from collected income. This is considering the generous bonuses and rewards offered to NJ players to keep them loyal.
The casino industry appears to be among the worst hit by the Covid-19 pandemic. That explains why to date it has been an uphill task trying to recover from the damages suffered. According to casino administrators, the progress they had made before the pandemic hit is yet to be reclaimed. For them, 2019 will remain as the benchmark against which they will gauge the performance of the industry.
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Performance of New Market Entries
Ocean Resort and Hard Rock are the newest casino operators based on how long they have been operating in the market. For these operators, the revenue currently sourced from in-person revenue has surpassed what was achieved in 2019. According to reports published by the Casino Association of New Jersey, the other seven major casinos in AC have collectively lost 22% in revenue from that time.
Even though the current bill is weighty and appears to have riffled the feathers of the county administration, it is not new. Five years ago, the governor who was still serving then, passed the first version of the bill. At the time, the gambling economy of Atlantic City was struggling to remain afloat after five casinos closed down. The remaining casinos all agreed that their businesses had started to lose value because the market was declining.
To calm their worries, the state assembly allowed the county administration to perform property tax assessment on an annual basis. This meant that the performance of a casino was the main determinant of tax payable. This definitely blew massive holes on the budget of the city and the law that had been established prevented any appeals from being made. This to a large extent offered the casino operators a clear glimpse of their future responsibility as time unfolded.
Conclusion
Now that the bill has been approved, it does not change the fact that casinos in Atlantic City must pay 15% tax on revenue from internet gambling. Tax paid on revenue from sports betting is 13% while in-person casino revenue is 9.25%. The Governor of New Jersey has been the biggest supporter of the gambling industry in his state. Even though most people might not understand how signing the bill helps casinos to make money, the focus should be on Murphy. He has always acted in favor of New Jersey and there is no reason to believe that this time is any different.
