New Jersey sports betting unlikely to generate revenue jackpot

The looming legalization of sports betting in New Jersey will provide only slight winnings to the Garden State and Atlantic City, according to analysts.

New Jersey lawmakers are seeking to fast-track legislation to authorize and regulate sports gambling in Atlantic City’s casinos and the state’s horse racing tracks after the May 14 Supreme Court ruling that overturned a 26-year old federal ban. State Senate and Assembly committees both advanced sport betting legalization bills Monday that would provide for an 8.5% gross revenue tax on in-person wagering and a 13% levy for online sports bets.

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“While certainly a credit positive for Atlantic City casinos and tourism, sports betting will only provide a minimal lift in city tax revenues,” said Moody’s Investors Service analyst Baye Larsen in a June 1 report. “At the state level, New Jersey will experience a minor bump in tax revenue from the legal wagering relative to its budget.”

Larsen said Atlantic City would not directly collect sports betting tax revenue except via parts of the Investment Alternative Tax that is redirected from New Jersey to pay down city debt service under a state takeover plan that took effect in November 2016. Increased gambling collections would help contribute though to overall casino revenues and thus aid the size of their payments-in-lieu-of-taxes to the city, according to Larsen. She also cautioned that Atlantic City’s benefit from sports betting may also be muted if the state allows internet wagering.

“The sports betting bump is unlikely to be large enough to markedly increase the PILOT revenue size,” said Larsen. “Atlantic City’s economy remains in a troubled state, so even a modest bump would be beneficial.”

Municipal Markets Analytics analyst Lisa Washburn wrote in a May 21 report that under the “most advantageous scenarios” according to a recent Oxford Economics study, New Jersey would net sports betting revenues between $330 million and $650 million. She said this would translate to well under $100 million in direct gambling taxes to New Jersey with the potential for total fiscal impacts to the state and its local governments of between $100 million and $140 million.

“Even under these cases, the amount of revenues generated for the state’s use would be woefully short of the incremental $2.5 billion needed to fully fund pension contributions and stop the other one-time actions the state routinely engages in to balance its budget,” said Washburn.

Larsen said that based off of data from New Jersey's Office of Economic and Revenue Analysis, an 8% tax rate on sports betting revenues could increase the state’s total casino and gaming revenues by roughly 6%. The gambling revenues would remain a “very small” 0.7% of total state revenue, she said.

New Jersey State Treasurer Elizabeth Muoio estimated during a May 22 Assembly budget hearing that sports betting would likely only result in $13 million of new state revenue for the 2019 fiscal year that starts July 1. Gov. Phil Murphy has proposed a $37.4 billion budget proposal that relies on $1.56 billion of new tax revenues and is facing resistance from the legislature.