Moody's: Online Gambling Is Credit Positive for New Jersey

New Jersey’s plan to introduce of online gaming is a credit positive for New Jersey state government, Moody’s Investors Service said.

On Feb. 26 New Jersey Governor Chris Christie signed legislation authorizing online gambling for a 10-year trial period.

Pressured by new competition from gambling in New York, Maryland and Pennsylvania, revenues at New Jersey’s gambling location, Atlantic City, have been declining since fiscal year 2008.

Along with this decline has come a contraction in gambling tax revenue for the state. New Jersey casino tax revenue has declined 43% to an estimated $235.4 million in fiscal year 2013 from $413 million in fiscal year 2008.

Underperforming casino revenues make up 12% of a $350 million budget gap for the state this fiscal year, wrote Moody’s vice president Baye Larsen and associate analyst Andrew Nowicki.

New Jersey is projecting that online gambling would add $180 million in tax revenues in fiscal 2014. Online gambling may be available by Christmas, experts told the Newark Star-Ledger.

The recently enacted bill will have the state collect 15% of all casinos’ winnings. The online gaming equipment is to be based at the casino facilities.

Moody’s and other experts are questioning whether it is realistic for New Jersey to expect $180 million in the first fiscal year. “Given the lack of historical data available for estimating online gaming revenues, the budget will remain vulnerable to potential over-projection of this new resource,” the Moody’s analysts wrote.

New Jersey’s general obligation debt is rated Aa3 with a stable outlook by Moody’s, AA-minus with a stable outlook by Fitch, and AA-minus with a negative outlook by Standard & Poor’s.

Delaware and Nevada have also adopted online gaming laws. They are expected to have online gaming available to their state’s residents in the next few months. Delaware expects to gain $9 million in tax revenue in its first full fiscal year after implementation. Nevada has not estimated how much it will receive.

Bills to allow online gaming are advancing in Mississippi, Iowa and California. Other online gaming bills are in earlier stages in other states.

Nevada is crafting its regulations to only allow online poker playing. Since this is not in the state online gaming law proper, the state could make the regulations more flexible to allow other games in the future.

New Jersey, on the other hand, is planning on having all sorts of casino type games available online from the start.

New Jersey plans to use technology to monitor the location of the computer or mobile device used to place bets. In this way bets from out-of-state residents will initially be blocked. Over time, regulators want to create agreements with other online gaming states to allow interstate betting.

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