OREANDA-NEWS. Restrictive gaming regulations in Northeast jurisdictions have not stemmed operator interest in developing large-scale projects, according to Fitch Ratings.

Casino projects are underway in New York, Maryland and Massachusetts, where tax rates are in excess of 20% and smoking bans are prevalent. This lies in comparison with New Jersey, where the tax on gaming revenue is only 8%, smoking is still permitted on a portion of the casino floor, and there is no defined minimum capital investment.

Fitch believes market attractiveness via proximity to metropolitan regions and geographical exclusivity can help outweigh regulatory hindrances. Wynn Resorts' Everett property is subject to a \$500 million minimum capital investment, an \$85 million license fee and a 25% gaming tax but will be the primary property serving the affluent Boston market. MGM Resorts Internationals' National Harbor property will be fed by the Washington DC region and affluent Virginia suburbs, outweighing Maryland's high gaming tax rates (67% on slots, 20% on table games). Fitch estimates a robust (by today's standards) 20% return on investment for both projects despite the high costs associated with capital investment and taxes.

Competitive pressures from neighboring states are outweighing the favorable regulatory environment of jurisdictions like Atlantic City, which has suffered eight straight years of revenue declines. To offset the loss of tax revenues and tap the lucrative New York City metropolitan market, the New Jersey legislature is considering expanding casinos to the northern part of the state, with a potential 66% tax on gaming revenues.

Potential operators have already shown interest in building large-scale casinos at the Meadowlands Complex and in Jersey City, regardless of potential high tax rates, because the sites are situated less than 10 miles from New York City. Resorts World and Empire City Casino, which serve New York City, generated \$1.3 billion in aggregate net gaming revenue during 2014, but are restricted from offering table games.

The Northeast has a meaningful pipeline of new supply and legislative pressure to protect current in-state operations. Eight casinos are slated to open over the next three years in Massachusetts, New York, Maryland, and Philadelphia. Four more could be built if New York, Massachusetts, and Pennsylvania award their final commercial licenses and the Mashpee Wampanoag Tribe has land taken into trust.

Operators that are heavily concentrated in the region include Marina District Development Company (Borgata) and Twin River Management in New Jersey and Rhode Island, respectively, and Mashantucket Pequot Tribal Nation (Foxwoods) and Mohegan Tribal Gaming Authority in Connecticut.

Fitch Ratings' latest series of 'Eye in the Sky' reports provide an overview and detailed analysis of the regulatory trends and current market environment in Massachusetts, New York, New Jersey, Maryland, and Pennsylvania. The reports list and summarize recent and pending gaming-related legislative bills, whose topics include gaming expansion, legalization of online gaming/sports betting, changes to gaming taxes, and license issuance.