ATTORNEY AT LARGE: New Jersey at a Crossroads
by Lloyd Levenson
September 1, 2010
In New Jersey, regulation is at a turning point
I recently testified before
two legislative committees in Ohio that were reviewing proposed legislation
that would govern the establishment of four casinos in that state. The members
of both the Senate and House committees were thoughtful and studious, and they
all made it clear that they wanted gaming done right.
While their individual views might have differed as to what
specific provisions constituted a good gaming statute, they certainly appeared
to be uniform in their opinions that integrity was a cornerstone of gaming and
that gaming works best when private businesses are allowed to operate as
businesses, with the ability to make decisions for themselves as to how to generate
a reasonable return on their investments.
Still, I noticed that when I mentioned the experience of
regulators in New Jersey the lawmakers paid special attention. Even when I
pointed out examples of how New Jersey started out strict and then peeled away
regulations as those regulations proved to be unworkable, it was clear to me
that the message was getting through.
I have traveled around the world on behalf of clients, and in
jurisdiction after jurisdiction lawmakers and regulators all seem to respect
and pay attention to the experience in New Jersey. Casino Association of New
Jersey President Joe Corbo recently called his state’s regulation “the gold
standard”. Considering the views I have heard around the world, I would agree.
A few decades ago, Atlantic City casino operators might not have
been so quick to praise the regulations that governed their activities, but
times change. Regulators and industries mature, and Atlantic City was able to
develop and burnish its reputation as a market that knows how to regulate
effectively.
All this leads to another issue with respect
to Atlantic City: its long decline in revenues, which has fueled a related
descent in the minds of the media as to the city’s continued viability as a
gaming destination. For 21 consecutive months Atlantic City has reported
year-over-year declines in revenue. Those who know the Atlantic City market
understand that it has been hit hard by an imperfect storm of bad luck: a
recession and new competition.
The national recession, the worst downturn
since the Great Depression, effectively ended funding for many Atlantic City
projects, most of which never even had the opportunity to break ground. This
expected capital investment, which totaled about $10 billion, would have turned
Atlantic City into more of a regional destination.
The clear answer for Atlantic City is that it
needs to get back that flow of planned capital investment, which means it must
be a place where investors can make money. The Revel project, one casino hotel
that was well under way and which now needs funding, is widely viewed as the
linchpin that could determine Atlantic City’s fate. If Revel gets the necessary
funding it can turn the resort’s fortunes around.
In the meantime, many well-intentioned people
in New Jersey are looking for ways to get Atlantic City jump-started. One
common theme that I hear over and over again is to cut regulatory costs.
Regulatory reform is an important issue, and I note that significant reform
took place in the early 1990s, which led to renewed interest in Atlantic City
later that decade. I do not suggest that regulations should be immune to
cost-cutting, I just caution anyone involved to take an appropriate
approach.
Policymakers in New Jersey — like their
counterparts in other states and nations — have to start by asking some
fundamental questions: What is regulation designed to accomplish? Do we want to
promote public confidence in our games? Do we want to keep unsavory characters
out? Do we want to ensure that all revenues are being properly counted? Once
those and other essential questions are answered you then must devise (or
revise) a cost-effective means of delivering on those promises. Gutting
regulation for the sake of saving money in the short-term is likely not to
result in wise policy decisions.
Other states are looking to see how New Jersey
handles its current challenges. If New Jersey wants to remain the gold standard
it has to handle those challenges wisely.
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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