A tentative budget deal announced today in Trenton contains the usual horse trading between the Democratic legislative majority, the Republican minority, and Republican Governor Christie.
Some numbers went up in the revised budget, and some went down ? like the administration?s estimated tax revenues for online gaming in the next fiscal year.
But as you?ll see, even the new number seems just a bit on the rosy side:
The estimated tax revenue for the online casino game offerings has been adjusted from $180 million to $160 million. Here?s the problem:
- A Wells Fargo analysis that foresees $1.5 billion worth of online gambling in the state as of the five-year mark is the blueprint for the administration?s figures, apparently. They estimated a $1.2B first-year mark, and at a 15 percent tax rate, there?s your original $180M.
- But if you look closer, the same report has a startup year figure of $650M to $850M. Split the difference and make it $750M, and that?s only $112.5M, not $180M ? or even $160M.
- The next problem is that the state?s fiscal year begins July 1. But the state isn?t expected to begin offering the games until late this fall, after Atlantic City casinos have made formal applications and the technology infrastructure is put in place. So $112.5M becomes closer to $75M if you shave off four months ? and even that likely is generous. So now we?re still at less than half the new claimed amount of $160M.
- More problems: The Wells Fargo estimate seems to be a but of an outlier. A December 2010 analysis provided for iMega, the online gambling industry?s lobbying arm, estimated revenues that would only lead to about $35M or so in the first full year. Two months ago, industry research firm Gambling Data?s figures would mean $39M in the first year of operation.
- Cut those two numbers by one-third to account for the less than full year of revenues in the first fiscal year, and you?re looking at roughly $25M ? not $160M.
A Treasury Department spokesman told me then that there were indeed ?widely varying estimates.? True, but the highest ones of all belong to the Governor?s office.
Meanwhile, one claim for a higher-than-expected rookie year could be that the brand name of PokerStars would instantly lure countless players to sign up immediately. But PokerStars is appealing a court ruling that voided its deal to buy The Atlantic Club ? and ownership of an AC casino is a must for would-be online gaming operators.
If PokerStars can?t right that ship in time, that surely will put a damper on first-year figures ? in part because some New Jersey-based brand-loyal players will be slower to embrace competing sites.
No one can say for sure if the administration?s numbers will be proven accurate. But based on all the evidence, it sure looks like a longshot.
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