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.