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Sports Betting: A Gaming Industry Instant Replay

There is no instant replay in real life as there is in sports, regardless of how much we would like to see something one more time.  However, observers in the gaming industry may be on the verge of a replay.  The Supreme Court is considering the legality of a New Jersey law authorizing sports betting.  If the court rules in New Jersey’s favor, it will probably unleash a tidal wave of legalization.  Nearly every state with legalized casinos will at least consider legalizing sports betting. The spread of sports betting will look very much like the spread of casinos, except it will happen faster.  It took seventy years for gaming to expand into nearly every state in the country; for sports it could happen in two or three years.  The spread of sports betting will not mirror the spread of casinos exactly, but it will give us one more chance to watch the impact of expansion in one state on the existing industry in other states.  The process may begin as soon as this summer. New Jersey and Delaware are already lining up their ducks.

Delaware wants to be the first by using its unique legal status. It is one of four states with an exemption to the Professional and Amateur Sports Protection Act (PASPA) of 1992.  The law prohibited sports betting, but carved out exemptions for Nevada, Montana, Oregon and Delaware.  As a result, Delaware already has a limited form of sports betting.  If the high court strikes down the PASPA, the state wants to get started as quickly as possible.  Governor John Carey believes it can be done administratively and thus faster than other states.  His team hopes Delaware will have a year or so advantage before other states can pass legislation and develop the necessary infrastructure.  The Delaware director of finance said, “If we can get to market faster than some of our neighbors there could be some real upside.”

The strategy may work in the short-term.  But other states will follow Delaware as fast as their legislative processes allow.  Some of those states are too far away to impact Delaware, but the spread into neighboring states will quickly take away that advantage.  It will be a repeat of the impact that casinos in other states had on the Delaware’s racinos.  Since 2005, the combined table and VLT revenue at the racinos has fallen from a high of $343.8 million annually to $253.8 million in 2016.  A monopoly on sports betting could generate some instant cash for the racinos as customers will come from all over the region.  But in time those gamblers and their cash will go back home.

Delaware will not be alone in that respect.  New Jersey also plans on legalizing sport wagering as soon as it can.  Its success will be contingent on the absence of legal sports wagering in Pennsylvania and New York.  The process will repeat itself over and over as each new jurisdiction comes on line.  When most states have sport betting, it will add very little revenue to any one state.  Sports books like casinos will be dependent on the population within a few miles.  That is why I am viewing the impending spread of sports betting as a replay of the spread of casinos.  Regardless of the rhetoric in the halls of lawmaking, sports betting will not change the gaming landscape in any one jurisdiction.  Any initial advantage will dissipate over time.

Certainly, sports wagering will bring some new customers into casinos.  But casinos will have to compete with illegal opportunities online for those customers.  The online sites offer convenience and because of the large number people betting online they can offer better odds.  To be more attractive and able to compete with online gambling may be the biggest challenge for legalized sports books everywhere.  The rhetoric around legalization of sports gaming will sound very good.  We should not be easily fooled as we were with each new wave of gaming expansion.  We have already seen the game and know the final score.  Of course, some casinos such as Resorts World Queens will have a huge market and should do very well.  Those will be the exceptions.  For the individual states, except Nevada, sports betting will add slightly to the tax base.  And for most casinos it will help a bit by adding a little extra revenue.  It will not be a gamer changer for anyone.  In the end sports betting will be entering a very crowded market place.  It will have to fight for its share of people’s disposable income with all of the other options consumers have.


An Anniversary in Macau Shines a Light on Changes in Atlantic City

MGM Macau just turned ten years old; a celebration was held to honor the 1,900 employees who have been with the casino since day one.  MGM Macau has a total of 8,900 employees, but on January 29th, that number is likely to double when MGM Cotai opens.  CEO Jim Murren was unable to attend and spoke to the gathered employees via video. He thanked them for their efforts and promised a better world to come.  Although the CEO was not there in person, co-chairman of MGM China, Pansy Ho was on hand to thank the employees in person.  She said, “Ten years later today, we are in full swing to prepare for the opening of MGM Cotai and our growing team will continue creating unprecedented art and cultural experiences paired with advanced technology.”

Ms. Ho’s presence at the anniversary was significant.   Ten years ago, she was considered by MGM to be a very important person, critical in fact, to its efforts in Macau.  Pansy is the daughter of the legendary Stanley Ho, the godfather of gambling in the former Portuguese colony.  The Ho family had the experience and the contacts needed by MGM.  Ms. Ho was eager to step out on her own and work with MGM.  To MGM, she was so important that the corporation was willing to forgo its interest in the Borgata resort in Atlantic City to keep her as part of the team.

In 2010, New Jersey gaming regulators thought that Pansy Ho was too closely related to her gangster-connected father.  The Casino Control Commission proclaimed Ms Ho to be unsuitable for a gaming license in Atlantic City.  MGM was given a choice – throw Pansy under the bus or lose its license in Atlantic City.  MGM chose Pansy and Macau over Borgata and Atlantic City.  At the time, many of us wondered if MGM was making a mistake.  Even though Atlantic City was on a downturn, it was a known commodity.  Macau was on an upswing, but it was an unknown and looked a little risky. Both Macau and Atlantic City were undergoing major changes.

By March of 2010, Atlantic City’s revenues had fallen to $3.9 billion from a high of $5.2 billion just four years earlier.  The slot machines in Pennsylvania were having a huge impact on Atlantic City, but at that time no one understood just how bad it was going to get.  By contrast, Macau’s revenues had risen from $12 billion in 2007 to $28.9 billion in 2016.  Actually, revenue in Macau hit $45 billion in 2013, but fell after the “crackdown on crime and corruption” in China.  But it is once again in a growth mode.  MGM in Macau is not the biggest or the most profitable casino, but it does get significantly more cash flow from Macau than Boyd got from Borgata in MGM’s absence.

In another month, MGM will have a second casino in Macau and will likely get as much cash from two casinos in Macau than from all of the rest of its casinos combined.  No one in 2010 could have guessed at the ultimate size of the Macau market or the radical decline in Atlantic City.  In retrospect, MGM made the right choice taking Pansy Ho over Borgata.  In any case, MGM is back in A. C.  In 2017, MGM paid Boyd $900 million for complete control of Borgata.  It is still the most profitable casino in Atlantic City.  Unlike in 2010, regulators found no problem in approving MGM’s purchase and license.  It seems that in the wake of a really bad decade the gaming regulators can’t remember why they did not like Ms Ho.  Since Governor Christie took office, regulators have been less difficult to deal with.  The Atlantic City revenues have temporarily stabilized, but it is still only half of what it once was. In 2016, casino revenue was down 50 percent from that lofty $5.2 billion of 2006 and there were five fewer casinos.  The gaming regulators cannot be blamed for the fall, but the governor and the city’s casinos thought regulators had made the situation worse.

The tenth anniversary of MGM Macau is a significant event for the corporation.  However, it will be dwarfed by the impact of MGM Cotai.  Pansy Ho certainly deserves some credit for MGM’s success in Macau.  The anniversary celebration serves as a reminder of just how much has changed in gaming in the last ten years, both in Macau and Atlantic City.

Bridgeport Is Lost and Then Found Again

In November, during MGM’s third quarter earnings call, CEO James Murren announced a change in strategy for the corporation.  Murren said that after a very aggressive decade of expansion and construction, MGM would no longer be seeking opportunities in new markets, except in Japan.  If MGM does nothing more than open the two properties currently under construction, it will have accomplished a great deal since the end of the recession.  MGM has been the most active player in the gaming industry in the U. S.

In just two years, MGM completed a $900 million purchase of Boyd’s 50 percent share of Borgata. It opened the billion-dollar MGM National Harbor in Maryland. and created a real estate investment trust.  MGM plced 11 of its properties in MGM Growth Properties LLC.  In 2018, it will open the $950 million MGM Springfield in Massachusetts, the $3.3 billion MGM Cotai Strip in Macau and a remodeled, rebranded $450 million Park MGM in Las Vegas.  In its latest round of buying and building MGM has spent about $7 billion.  Still with all of that, Las Vegas is MGM’s home; nine of MGM’s properties are there and the combined income of those nine makes up 53 percent of the company’s revenue.

More than any other major national/international gaming company, MGM is centered in Las Vegas.  The percentage of revenue generated by its Strip properties is far larger than its peers.  By comparison, Wynn gets only 28 percent of its revenue from Vegas and the Sands even less at 13 percent.  In absolute numbers the Sands produces $1.3 billion more from the Strip than MGM, but it is a much smaller percentage of that company’s total revenue.  Wynn and Sands derive the majority of their revenue from Asia.  MGM has more properties in this country than Sands and Wynn.   Las Vegas Sands has only one casino in Pennsylvania and Wynn will not have an American casino outside of Vegas until Wynn Boston Harbor opens in 2019.   The current ratio of Las Vegas revenue to total corporate revenue will change next year when MGM Cotai opens.  Even with another casino in Macau, Las Vegas will remain the core of MGM’s business.

Nationally, MGM appears to have accomplished its goal of becoming the dominant player in the country; although a rejuvenated Caesars and a merger between Pinnacle and Penn National could change that.  But, if MGM falls short of its original goal it will not be by much; and there have only been a couple of misfires along the way.  In 2011-12, Miami seemed up for grabs and MGM threw its hat in the ring.  In 2013, MGM expressed a strong interest in a license in New York, if it could be close to New York City.  And earlier in 2017, MGM was in discussion with Sands Las Vegas to buy Sands Bethlehem in Pennsylvania.  However, when it was clear that some form of expansion would come out of the Pennsylvania legislature’s budget debate, MGM opted out of Pennsylvania.  And during the debate in Connecticut over a potential new Indian casino, another city, Bridgeport, surfaced as a possible site for a new MGM.

For MGM, Bridgeport was a defensive move intended to protect its investment in Springfield.  Connecticut and Massachusetts are squares in a chess game being played by the Mashantucket Pequot and Mohegan tribes and MGM for control of the region’s casino customers.  When MGM was awarded a license for a casino in Springfield, the tribes operating Foxwoods and Mohegan Sun in Connecticut petitioned lawmakers to allow them to jointly build a casino on the Massachusetts border to protect their revenue.  Not surprisingly, the tribes received a positive response from lawmakers.  Between them, the tribes have paid billions of dollars into the Connecticut treasury; they agreed to pay the state 25 percent of slot revenue in exchange for permission to have slot machines and an exclusivity agreement.  For at least 15 years, the tribes prospered and Connecticut benefited and everyone was satisfied.  But with the expansion of gaming in Pennsylvania, New York and Maryland tribal revenues began dropping as rapidly as those in Atlantic City.  Both the state and the tribes have been impacted by gaming expansion in other states and both realized that Springfield would take significant revenues from Connecticut.  With the threat of an MGM just 70 miles away, the tribes decided it was time to fight back; they plan to build and operate jointly a casino to protect their revenue streams.

The tribes were successful in convincing lawmakers to give them permission to build a new casino, but have yet to receive permission from the feds.  When MGM realized it was going to be facing competition just a few miles from its as yet unopened casino, it sued Connecticut claiming it was unconstitutional to allow an uncontested licensee to open a casino in the state.  And then MGM began an aggressive campaign for a license in Bridgeport, Connecticut where they offered to build a $675 million resort and to pay the same tax rates as Foxwoods and Mohegan Sun.  The plan found many supporters in Bridgeport and those supporters were willing to go to the legislature next year to help plead MGM’s case.

Interestingly, when Murren made his strategic change announcement, Bridgeport appeared to have fallen through the cracks.  Its absence was confusing as in September and October, MGM representatives were still enthusiastically pitching their case to Bridgeport and Connecticut lawmakers.  So when James Murren said MGM was finished expanding and building new casinos, it shocked many people as they were simply caught off guard.  “Did he forget Bridgeport,” they wondered?  It was strange indeed.  The tribes seized on the opportunity to poke fun at MGM.  The people in Bridgeport felt betrayed.

The situation is no longer as confusing; Murren is back on the road in Connecticut lobbying for legislation to permit bidding on a license.  The legislature will not be in session until “the Wednesday after the first Monday in January, but Bridgeport and a casino license are certain to be on the agenda.  In the meantime, we will all be looking forward to the fourth quarter earnings call by MGM to find out about their new strategy.  Inquiring minds want to know about the city that was once so important, but somehow forgotten and then remembered and restored to its former importance.

Sports Betting: Rethinking Some Old and Cherished Positions

The Supreme Court is hearing a case in December that may well lead to legalized sports gambling in many states.  As the hearing nears, a chorus of voices advocating an end to a federal ban on sports betting are singing what for many of them is a new song that might be titled, “A Change of Heart” sung to the tune of Dylan’s “The Times They Are A-Changin.”  For some, and I am among them,  that changing of minds was far from easy.  Very few things are more difficult than changing one’s mind.

November was a month of mind changing events for me and I suspect many others.  I have been forced to revisit some long held beliefs and rethink them.  It started with Roy Moore, Harvey Weinstein, Kevin Spacey and all of the other men who were accused of sexual harassment.  Clearly, those men were despicable and should be hounded out of public office and positions of power. The efforts to force Moore off the ballot and keep him out of the Senate appeared to be just to me.  However, a dilemma developed for me when Al Franken was accused.  If Moore is not fit to serve in Congress, then how could Franken be fit?

The second event that drove me to reexamine my beliefs was the death of Charles Manson.  Manson died at age 83 after 48 years of incarceration for some of the most horrendous murders of the 20th century.  He had been sentenced to death, but was saved from execution by the California Supreme Court when the court ruled against the death penalty.  I supported the decision that the death penalty was too extreme.  But after a half-century of Manson’s very public life in prison I questioned my own belief.  The family of his victims suffered all of those years he enjoyed notoriety.  In retrospect, would justice have not better have been served with his execution?

 The trend toward legalizing sports betting outside of Nevada has also caused me to rethink my previous position.  Opinions on the subject are changing before my eyes and increasingly it is becoming clear to me that I might have been wrong all of these years.  On December 4th the United States Supreme Court is hearing Christie v. NCAA.  To those that support New Jersey it is a states’ rights issue; to the opposition it is a case of illegal gambling.  In 2011, the voters in New Jersey approved sports betting.  The National College Athletic Association and the professional sports leagues sued claiming New Jersey’s law violated federal law.  The NCAA won the case at each level of adjudication and New Jersey appealed each decision to the next higher court and finally to the Supreme CourtThe NCAA and the NFL are still adamantly against legal sports betting, insisting it is against federal law and a danger to the integrity of sports.  However, the NBA, NHL and MLB are leaning towards a time when making a wager on sports is legal and well regulated at the state level.  In support of a move to legalization, the American Gaming Association has been diligent in lobbying for federal legislation and its efforts are beginning to have an impact.  Many in Congress are starting to support the idea; several states have already taken steps to prepare for the opportunity to legalize, regulate and tax betting on sporting events.  Globally, sports betting is popular and now it seems the U. S. might be on the verge of embracing it.

The money wagered on professional and college sports is often credited with the popularity of the games.  Fans who wager on a game are eager to either buy a ticket and go to the game or pay for a premium service to watch it at home.  However, as most people know, most of those wagers are illegal because sports betting is legal only in the state of Nevada.  Under current federal law, Nevada is in sole possession of the sports gambling turf.  That fact is the rationale behind my long-held desire to maintain the status quo.  But as the issue goes to the Supreme Court I find myself singing a different tune; maybe it is time to open up legal sports betting to the entire country.  If the court strikes down the federal ban, the decision does not legalize sports betting; rather is clears the way for other states to pass their own sports betting law as New Jersey has done.  The decision could be very important because it deals with the issue of states’ rights and that is much broader than simply sports betting.

A decision in New Jersey and Governor Christie’s favor would not be good for Nevada sports books and casinos.  If other states legalize sports betting it will have a major impact on Nevada gaming revenues, especially during the Super Bowl, March Madness, the World Series and the NBA finals.  But whatever the cost to Nevada, it is the right thing for the court to do and the correct decision for nation as a whole.  Nevada has enjoyed an unfair advantage for years; regulating sports betting like all other forms of gambling should have remained the privilege of the states to regulate.  November was difficult for me, letting go of long-held and cherished beliefs is painful, but sometimes necessary.

The Joys of Living in China’s Shadow

Macau is an intriguing casino destination filled with gamblers, scammers and legal uncertainty.  The casinos generate significantly more casino revenue than any other place on earth. Macau gaming revenues are forecasted to hit $36 billion in 2018; that is three and half times the annual gaming revenue of the entire state of Nevada.  The reason is simple; Macau lives in the shadow of China and its 1.8 billion increasingly affluent citizens.  Macau’s billion-dollar plus gambling palaces play host to millions of Chinese looking for a place to spend their money.  The Chinese love of gambling is legendary and that makes Macau as close to gambling heaven as it is possible to get.

There is however, a downside to Macau’s favored location.  The government of China is the city’s absentee landlord.  China tells those who govern Macau and regulate casinos what it expects.  There is nothing transparent about the situation.  One can never be certain what China expects or what new dictates it has issued.  Macau Chief Executive Fernando Chui visits China when summoned and he has a Chinese representative to advise him.  When he speaks, the echo of China can be heard.  In the last couple of months he has issued a number of ambiguous statements.  He is promising to “review and strengthen” the gaming rules and guidelines and “hold specific audits on the problems found” in junket operations.  Those are hardly exact statements and Chui has not given even a hint about his intentions or his instructions; all that can be said for sure is that some things are going to change.

The vagueness of impending regulatory changes can be anxiety creating.  Each time a new official statement is published analysts at major brokerage houses advise caution and warn investors of a potential downturn in the market.  The situation is made worse by the hidden nature of China’s influence.  The Communist Party of China has just finished a major conference.  President Xi emerged from the meeting firmly in control of the party and of China.  Xi has a grand vision for China and among other things, his vision includes Macau.  Macau has a role in “new silk road” and in the new region that includes the major province closest to Macau.  Macau is also part of a plan to bring international visitors and currency to China.  The city has become too important to China to allow self government and that includes casino regulation.

 As we approach the time to begin the license renewal process, the influence of China looms larger and larger.  In 2020, the first casino licenses in Macau come up for review.  No clear guidelines have yet been published and that leaves the future of each license clouded by doubt of its viability.  The uncertainty of the situation must cause the owners and managers of casino companies as much anxiety as it does to analysts and investors.  So, why would anyone want to be in business in Macau?  Clearly, casino owners do want to remain.  All of the operators have made billion dollar investments recently to build new properties or improve existing ones.  But in the face of the uncertainty I ask again why?

The question has fascinated me for years.  But I think I found the answer this week; 280 million customers.  The Sands’ Venetian just celebrated its tenth anniversary.  Sadly Sands Chairman Sheldon Adelson was unable to attend; he fell on his way to the festivities and broke his ribs.  At 84-years old, the fall is not a minor event and could be life changing.  But he promises to visit as soon as he is able to travel.  Why would an 84-year old man with broken ribs want to travel half way around the world?  The answer is the same – 280 million customers.  The chief operating officer of the Venetian filled in for Adelson at the anniversary celebration.  He told the gathered dignitaries that 280 million people had visited the Venetian in ten years. He also said that there were an additional 220 million visitors to the Sands China.  Wow! Five hundred million people have visited Sheldon’s casinos in Macau in a decade.  I suspect that is why he and the other operators put up with the hassle.  There is no place else on earth a casino can expect to have than many customers eager to make a wager.  Living in the shadow of China does have its upside.

When Will the First New Casino Open in Pennsylvania?

Pennsylvania is to have more casinos, but it is anyone’s guess when they will open. On October 30th, Pennsylvania Governor Tom Wolf signed a bill to increase gambling dramatically in the Keystone State.  The bill was part of the legislation passed during the budget process.  Pennsylvania has a $2.2 billion deficit. The additional gaming is intended to reduce the deficit, but the lion’s share of the deficit will be financed by borrowing $1.5 billion.  The gaming bill is only expected to generate $200 million annually in fees and taxes.  However, gambling already provides the state with $2.4 billion in revenue annually- $1.4 billion in taxes on casino play and $1 billion from the state lottery.  Although, the gaming bill was passed to help balance next year’s budget, it may take longer than that before the cash rolls into the state’s coffers.

The gambling bill, House Bill No. 271, authorizes ten mini-casinos, gambling at airports, video gaming terminals in truck stops, online casinos, online lottery products and sports betting when and if it becomes legal under federal law.  Each aspect of the expansion will have its own timeline.  For the mini casinos, communities have until December 20th to opt out; thus far seven potential sites have opted out and others are searching their souls. Several communities have indicated they are very interesting in hosting a casino.  After the opt out deadline, the state’s existing casinos can bid on one of the licenses – combining the slot machine and table game licenses will make the minimum bid $10 million.  If there are any licenses left over, the bidding will be opened to other interested parties.  Once a bid has been accepted by the state, the operator can begin construction.  In the meantime; the control board has to write the regulations that will govern casino operations.  The tax rate on slot machines will be 54 percent; in today’s world that could dampen the casino operators’ enthusiasm.  No one, except the lawmakers and governor expects to see new casinos in the state before 2019.  The Pennsylvania Gaming Control Board had this to say about the process, “Satellite casinos have a new auction process before we even get to awarding the license and the location and doing the background investigation. And that process is really not going to take place until mid next year or so.”  The board is referring to regulatory process, not the time necessary to raise the money and build a casino which can only begin after the board finishes its work.

The slots in the truck stops, airports and the online gaming both for casinos and lottery will have separate timelines.  The quickest to hit the marketplace will probably be the lottery’s online offerings.  There will be fewer regulatory requirements and the lottery commission does not need outside investments or approvals.  The online casino gaming should be simple once the regulations have been written, but each casino will have to separately assess the viability of going online; as with every other form of gambling, Pennsylvania wants a hefty share of the profits in taxes and that limits the value of going online.

Eight airports are eligible to offer gaming.  They are being described as interactive gambling parlors, but the legislation appears to authorize slot machines like those in airports in Nevada.  Each city with an eligible airport has to give its approval.  In addition, the gaming board has to approve the operations and the operator.  In theory, the airports could be up and operating within a year if the gaming commission is able to write regulations and issue the necessary licenses within that time frame.  Each new form of gaming that requires additional regulations and licensing puts further stress on the resources of the state’s regulatory agency and will slow down the process.  In Illinois, the process of writing the regulations and approving the VLTs for play took two years.

The last of the new gaming options is truck stop gambling.   The legislation anticipates 1500 to 2000 video gaming terminals – slot machines; each eligible facility can have five VGTs.  Thus the lawmakers were planning on no more than 400 truck stops to qualify.  However, one of the lawmakers that opposed the bill, said the definition was so broad that one could “drive a truck through it” and “most convenience stores” would also qualify.  The bill was 675 pages long so it is highly unlikely that the lawmakers read and understood the entire bill.  That lack of understanding will continue to complicate the process, especially when new surprises are discovered.

A week after the bill had passed, local media discovered one of those surprises.  It seems that Mount Airy Casino Resort got special treatment. In general, the bill said that a new casino could not be located closer than 25 miles to an existing one, unless the new casino and the existing one are owned by the same entity.  However, for Mount Airy the distance requirement different; new casinos must be at least a county away.  The states: “A category 4 slot machine license may not be located in a sixth-class county which is contiguous to a county that hosts a category 2 licensed facility.” That sentence guarantees that Mount Airy remains the closest casino to the New York market.  Only the lawmakers that inserted those words appear to have known of their existence.

It has only been two weeks since the governor signed House Bill No. 271.  It is impossible after such a short period of time to assess the impact, anticipate the timelines or even to fully understand the content of the bill.  At this point, all we have are questions and probably some doubts.  The investment firm, Moody’s, wonders if the end result will help or harm the existing operators; by asking the question the company is saying the expansion will add to overall revenues of the state, but harm the existing casinos.  Penn National is threatening to sue over the bill’s discriminatory nature and there will probably be other law suits over the definition of truck stops.  As Nelson Rose once famously said about the National Indian Gaming Act, “no one knows what the bill means until it has been litigated.”

Governor Tom Wolf signed the bill because the state needs money, not because he is pro-gambling.  However, much like Pat Quinn in Illinois, Wolf may forget about the expansion of gambling and the budget in the near future.  Five candidates have already declared their intent to oppose Wolf in the 2018 election.  He is not going to have much time to shepherd the new gambling options through the approval process when he is locked in battle for his office.  So, while the governor fights for his office, it will be left to Pennsylvania Gaming Control Board to set the timeline for each of the elements of the grand gambling expansion in Pennsylvania.  When will the first casino open in Pennsylvania?  It will open after the regulators finish their preparatory work and the operators complete the financing and construction; in other words, not in the near future.

A New Mayor Proclaims A New Era In Atlantic City

While the voters in New Jersey selected a new governor, the citizens of Atlantic City selected a new mayor.  Immediately after being elected mayor, Frank Gilliam proclaimed a new era for the city. The Democrat mayor-elect is replacing the unlucky Republican, Don Guardian who was a one-term mayor whose time in office was marred by a financial crisis.  Under his watch five casinos closed and the state took over control of the city’s finances.  For Guardian and Atlantic City, it was a tumultuous four years.  But it would be unfair to place much of the responsibility for the city’s financial woes on the mayor; Guardian inherited a city under siege. When he took office the casinos in Pennsylvania were eating the lunch of the city’s casinos month after month and year after year. In 2013 the year before Guardian took office, gaming revenues fell 6.2 percent to $2.9 billion.  In the six years preceding his first term, gaming revenue fell by nearly 50 percent.

By 2014, the situation had become untenable for the weakest casinos.  In January the Atlantic Club shut its doors and by the end of the year three more casinos had gone out of business.  It was Don Guardian’s first year in office.  The loss of four casinos and the relentless decline in casino revenue created a financial crisis for the city.  The city and mayor struggled through 2015 looking everywhere for a ray of hope, but none was to be found. In October 2016, the former Trump Taj Mahal became the fifth casino to close, leaving the city with just seven operating casinos.  But things got worse. In November, New Jersey Governor Chris Christie sent in his shock troops to take over the city.  Christie argued the city administration did not take the situation seriously enough and failed to make the difficult decisions that needed to be made.  The state cut the city’s budget, sold some of its assets, reduced the number of city employees and attacked the city’s employee benefits program.  It was a very dark day for Guardian, who had very few good days.  There was, however, some good news at the end of Guardian’s time in office. Hard Rock bought the shuttered Taj Mahl and is spending $400 million to refashion it as a Hard Rock casino.  Also, online gaming had become a significant source of income for the state and the Atlantic City casinos.  In September, online gaming revenue was $20.4 million, up 25 percent.  Still, those bright spots were over shadowed by the less than pleasant events that dominated Guardian’s four years in office.

Guardian was philosophical about his loss in the election.  He said the city has a new mayor, but the sun will come up tomorrow as it always does and he would go on with his life.  In making his comments after conceding the election, he sounded almost relieved.  By contrast, the new mayor sounded overjoyed to take the office as he proclaimed a new era for Atlantic City.  Gilliam is inheriting a better situation than his predecessor.  New Jersey has a new governor. Philip Murphy, a Democrat and former Wall Street banker, is replacing Chris Christie.  During his campaign, Murphy promised to end the government takeover of the city.  Besides a more favorable governor, the new mayor can look forward to Hard Rock opening in six months and he can anticipate continued growth of online gaming.

However, there are some other things on the horizon that could make the last couple of years of Frank Gilliam’s first term as dark as Don Guardian’s time in office.  Philip Murphy said he would support additional casinos outside Atlantic City and closer to New York City.  That would not be good for Gilliam or Atlantic City.  But, most threatening is a law just signed by Governor Tom Wolf of Pennsylvania.  The new law authorizes ten mini-casinos, slot machines at the airports, slot machines in truck stops and online gaming.  None of those things will happen in 2018 or maybe even in 2019, but by 2020 Pennsylvania is going to have added significant new competitive pressure on Atlantic City.  And to make matters worse, by then, Massachusetts, New York and Connecticut will have additional casinos, too.

Frank Gilliam is not a novice having been on the city council since 2009.  But I suspect he does not fully appreciate the importance of Pennsylvania to the financial well-being of Atlantic City.  The city is not an island isolated from events in neighboring states.  For the first thirty years of the casino industry, the casinos in Atlantic City were alone  in a sea of customers.  Customers came to the Boardwalk from all up and down the Eastern Seaboard, but the majority of them came from Pennsylvania.  The expansion of gaming in the states of New York, Massachusetts, Maryland, Connecticut and even Maine is important to Atlantic City.  But no state is more important than Pennsylvania.  Frank Gilliam may think it is a new era, a new day in Atlantic City.  However, in my opinion, Pennsylvania, not the mayor of Atlantic City controls the destiny of AC and if a new era is dawning, it is dawning in Pennsylvania, not on the Boardwalk.


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