After using the lure of a windfall from online gaming revenue taxation to gain its passage, the state of New Jersey is quickly realizing that there won’t be bounteous amounts of money flowing into the state’s coffers, at least for its first year.
Noted New Jersey gaming writer John Brennan of NorthJersey.com took a look at the latest reports for full online casino gaming in the Garden State and the numbers aren’t impressive. Tax revenues from online gaming in New Jersey totaled only $1.4 million for the month of January after the final six weeks of 2013 saw $8.4 million come into the state’s coffers. At the current rate, that would mean that tax revenues would fall far short (estimated between $10 and $20 million) of the projection of Governor Chris Christie’s administration.
As New Jersey prepared to open up online casino gaming last summer, Christie estimated that it would pull in $160 million in tax revenues in the first year of online gaming operation. That number was set on assumptions that New Jersey online gaming would draw in roughly $1.1 billion in total revenues, of which New Jersey would take a 15% cut ($160 million). Brennan notes that this and other factors have contributed heavily to the shortfall that has arisen.
Brennan states that the estimated first year gross online gaming revenues for the casinos taking part in the industry, set by Wells Fargo, was far more ambitious than other projections made by industry insiders. Another reason was the late start of the New Jersey gaming scene. It kicked off on November 26, leaving only seven months in the fiscal year (a fiscal year runs from July 1-June 30) for goals to be met. Finally, the geolocation issues that have plagued the New Jersey startup (many players well within the borders of the state could not access the gaming sites) has kept players away and the continued denial by banking institutions to allow gaming transactions online has made funding accounts difficult.
There is some backlash among legislators in New Jersey regarding the Christie administration’s estimations. New Jersey State Senator Ray Lesniak, who has long been a proponent of online casino gaming, stated to Brennan that he warned the Christie administration about overinflating the numbers with the first year of online gaming. The figures touted by the Christie administration had “no basis in reality,” Lesniak said to Brennan. “He (Christie) made numbers up out of thin air to help balance the state’s budget going into (his) reelection campaign,” Lesniak alleged.
For its part, the Christie administration is keeping mum on the issue. “The governor will be addressing revenues and expenses in his budget address to the Legislature on February 25,” was all Christie spokesman Michael Drewniak would say to Brennan.
The news isn’t entirely dismal for New Jersey online gaming’s future, according to Brennan. He points out that the Wells Fargo analysis that was used by the Christie administration does indeed see $1.5 billion in annual revenues, but not until the fifth year of its existence. In the first year, Wells Fargo projected that revenues would be between $650 million to $850 million; the resulting tax revenues from those numbers would be between $97 million and $127 million.
Brennan reports that, on Thursday, Fitch Ratings has projected revenues for the 2014 calendar year from New Jersey’s online gaming industry will fall between $200 to $300 million, which would translate out to $30 to $45 million in tax revenues for the state’s coffers.
It is of interest to note that New Jersey has had full disclosure of its online gaming industry revenues. Nevada, which was the first to open intrastate online poker to its citizens, still hasn’t reported physical numbers for Ultimate Poker and WSOP.com because three online rooms have yet to open.
The revenues matter comes out as some of New Jersey’s online poker rooms continue to improve on their numbers. According to PokerScout.com, the overall leader in the New Jersey online gaming industry is Party Borgata, which has a seven day average of cash game players of 220 (good for 31st overall in the industry). Coming up quickly, however, is WSOP.com New Jersey, which is averaging 190 players over a seven day span (good for 34th overall). The All American Poker Network sits in third with its 140 player average, while other rooms lag much further back.