Finding Common Ground
by Lloyd Levenson
April 1, 2009
When casinos succeed, the states they're in succeed.
The gaming
industry understands full well that healthy competition is the natural order
when it comes to private enterprise, and – since casinos are largely a private
enterprise – they know that competition is essential, and is a key to survival.
Casinos compete in different ways, sometimes on how much they give customers,
and sometimes on what type and quality of amenity they can
offer.
While
it is clear that casinos compete against casinos, it is equally clear that
states compete against states. If you want to legalize casinos in your state,
the best way to do it appears to be by lamenting that your citizens are
crossing state lines to gamble elsewhere.
States,
of course, compete against each other in a variety of ways, and it often
depends on what their goals are. Quite often, they compete on tax rates. That
doesn’t necessarily mean that they offer lower tax rates to attract investment,
but rather they offer higher tax rates in a quest – often ill-fated – to
generate the most revenue. Maryland
recently approved legislation that would tax casino revenue at a 67 percent
rate, which drew a tepid response from potential investors. By contrast, that Maryland proposal is making elsewhere in the region –
from West Virginia and Delaware,
to Pennsylvania and New Jersey – look pretty good by
contrast.
In the
interest of understanding competition, I have to ask a related question: Do
regulators compete against regulators?
The
answer, of course, is no. For example, Michael Cruz, director of gaming
laboratory operations, Pennsylvania Gaming Control Board, told attendees at the
Pennsylvania Gaming Congress that his then-fledgling laboratory received
critical advice and support from its counterpart at the New Jersey Division of
Gaming Enforcement to help it become
successful.
While
regulators do not – and should not – view their counterparts in other states as
competitors, they can – and should – take justifiable pride in the success of
their respective gaming industries. Veteran regulators have learned that, when
they focus on being responsive and in maintaining the integrity of gaming, they
play critical roles in building successful industries. And, when economic times
turn tough, regulators can play critical leadership
roles as well.
For
example, New Jersey Casino Control Commission Chair Linda Kassekert is often
relied on by the media, legislators and others to provide informed, thoughtful
views on what Atlantic City
needs, where it is going, and how it will get there. Kassekert, like her
colleagues and predecessors, can take justifiable pride in knowing that Atlantic City’s many
economic success stories owe a great deal to a variety of regulatory
initiatives and reforms. And Atlantic
City’s future, while challenged, would be downright
dismal if there were not responsible regulators at the helm.
Likewise,
Pennsylvania Gaming Control Board Chair Mary DiGiacomo Colins takes justifiable
pride in the recent and ongoing success story in the Keystone
State.
Colins,
speaking at the Pennsylvania Gaming Congress, noted that “Since the opening of
the first slots casino in November 2006, legalized slots gaming has generated
$2.2 billion in revenues directly returned to the state. These funds are being
used to provide general property tax relief to all Pennsylvania homeowners, more than double those
eligible rebates under the property tax and rent rebate program for seniors,
reinvigorate the state’s horse racing industry, and provide thousands of new
living wage jobs.” According to Colins, casinos have created about 6,200 new
jobs as of the end of last year.
Colins
crystallized the mission of regulators: “While we will be tough when toughness
is necessary, the gaming industry can expect the PGCB to provide reasonable,
consistent and predictable enforcement as the gaming industry in Pennsylvania matures. As
regulators we must ask ourselves what we can be doing to help the licensee be
compliant with our regulations and still allow the casino to operate at its
highest capability.”
That could be a guiding
principle for regulators anywhere. The ideal system is one based on
cooperation, not competition. Speaking at the same event, Penn National
President and Chief Operating Officer Tim Wilmott noted that gaming offers a
unique opportunity to merge the interests of the public and private sectors.
When casinos succeed, then the state succeeds. As Wilmott noted, those parallel
interests should be cultivated. It is perfectly acceptable, and ultimately
beneficial, when casinos compete against each other for market share by
building better properties and offering better service. It is far less
acceptable, and anything but beneficial, when states do not recognize that they
should pursue policies that help their own casino industries to grow and
thrive.
Lloyd Levenson
ldlevenson@cooperlevenson.com
Lloyd Levenson is CEO and chairman of the Casino Law Department of the Atlantic City/Las Vegas law firm Cooper Levenson (www.cooperlevenson.com). He can be reached at (609) 344-3161.
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