Large East Coast states’ legislatures have potential to expand gaming in their respective states; however, large-scale expansions in the US face uphill battles, according to Fitch Ratings.
Fitch said: “Possible expansions will have uneven credit consequences for gaming issuers, but we believe most casino operators should be able to weather competitive impacts since the expansions are mostly focused on underpenetrated areas, such as Georgia, are somewhat marginal relative to the existing capacity, such as Florida or concessions for incumbent operators exist, such as New Jersey.”
In Georgia, a measure to permit four casinos, including two in the Atlanta area, will require a referendum. That is also the case in New Jersey, where there has been consistent, albeit diminishing, public opposition to casinos outside Atlantic City. Florida is looking to extend Seminole Tribe of Florida’s authority to operate table games. The new compact, which permits additional type of games, needs to be ratified by the Legislature, but the politicians are slow to agree on the fine print such as what concessions to give to the states’ racetracks. The fine print, such as the tax rate, is also lacking in New Jersey’s efforts, which may slow the initiative there as well.
Other states where gaming remains a hot topic across the state capital halls include California, Illinois and Pennsylvania. California has been looking to pass an online poker bill for years but cannot get consensus from the tribes on what that should look like. Illinois has been deadlocked for years. Pennsylvania is considering online gaming and video lottery terminals at bars.
Fitch added: “Of the bills that have a real shot of passing in 2016, New Jersey’s bills raise the most concern for incumbent operators in Atlantic City, eastern Pennsylvania and New York. Impact on Atlantic City’s operators will be somewhat offset by concessions considered by the legislators. A set of bills grant Atlantic City operators priority in the application process and, in addition, a revenue share provision with Atlantic City exists. The latter can directly benefit Atlantic City casinos by granting the city more flexibility to reduce the property tax burden, which is a major expense for Atlantic City operators.”
“Still, an expansion in the state could mean closure for the Taj Mahal, which has been struggling and recently emerged from bankruptcy,” it added. “Other casinos are on more sound footing since the four closures in 2014 took out excess capacity from the market; however, more closures are possible.”