Atlantic County officials are prepared to take the State of New Jersey to court if state lawmakers pass New Jersey General Assembly bill A5587, lowering property tax for the Atlantic City nine casinos for 2022.
Atlantic County, where Atlantic City is located, receives 13.5% of the PILOT (payment-in-lieu-of-taxes) that the casinos pay every year.
PILOT began in 2016 when five casinos closed between 2014 and that year. The agreement reached between the casinos and the state is a way to determine how much the casinos will pay collectively in taxes. The figure is based on the prior year’s total gaming revenue of all the casinos combined.
However, state legislators want to eliminate sports betting and iGaming from the calculation. Governor Phil Murphy supports the measure, and if it’s signed into law, Atlantic City casinos’ 2022 property tax liability would dramatically drop. While that’s good for the casinos, it also means Atlantic County will lose much-needed tax dollars.
County Officials Have Long Opposed PILOT
Atlantic County Executive Dennis Levinson has opposed PILOT from the beginning. Levinson insists that helping the casinos ultimately passes the cost the county’s taxpayers. If the PILOT amendments pass, Levinson says Atlantic County is prepared to sue the state.
The New Jersey Office of Legislative Services, a nonpartisan group, predicts that eliminating sports betting and iGaming revenue from the PILOT calculation could save the casinos $30 million to $50 million every year until the PILOT program ends in 2026. That’s on top of the $55 million the casinos saved in 2022.
Levinson wants the state and the casinos to stick to the original 2016 agreement.
The Office of Legislative Services predicts that if PILOT is restructured, Atlantic County’s take will be reduced from$20.8 million to $17.5 million in 2022. Levinson thinks that in the years leading up to 2026, the county’s residents can expect the county to lose at least $5 million annually.
Levinson says that General Assembly bill A5587 put the the casinos, Atlantic City, and the state above the interests of Atlantic County taxpayers.
He is asking Governor Murphy to only sign PILOT legislation requiring that Atlantic County receive its full allotment of property tax under PILOT’s original structure.
One of the backers of the proposed changes to PILOT is outgoing state Senate President Stephen Sweeney. He made the bold assertion that without adjusting PILOT, four Atlantic City casinos could close. However, Sweeney failed to present specific data backing up that claim.
But, many legislators believe that “As Atlantic city goes, South Jersey goes,” prompting them to back the changes to PILOT.
Levinson counters Sweeney’s assertion as “preposterous.” Instead, he says the proposed changes are simply a money grab by the casinos.
Countering Levinson, Casino Association of New Jersey President Joe Lupo claims that the Atlantic City casinos have paid their fair share of property taxes since PILOT began.
Also, the casinos say that they’re still recovering from the loss of income resulting from Governor Murphy’s prolonged shutdown mandates. But, the casinos also recorded record-breaking gross gaming revenues, much of which came from online gaming and sports betting during the lockdowns. At the same time, thousands of Atlantic City residents normally employed by the casinos were out of work.
Atlantic City Casinos Doing Better Than Ever
While the lockdowns did drastically reduce casino revenue, Atlantic City’s casinos made a quick rebound.
Recently, the state Division of Gaming Enforcement released figures for Atlantic City’s nine casinos and three horse tracks, showing that they won close to $440 million collectively in November. That’s a 52% increase over last November. During the first 11 months of 2021, the casinos raked in $4.3 billion, a year-over-year increase of 69%.
Much of that increase is due to online sports betting and iGaming, the very things dropped from the PILOT calculations. But, casino executives point out that revenue must be shared with their technology and sportsbook providers. The casinos cannot keep all of that revenue.
But, Joe Lupo, Hard Rock Atlantic City president and head of the Casino Association of New Jersey, points out that in-person gambling in Atlantic City is down by 5.5%.
The director of the Lloyd Levenson Institute at Stockton University, Jane Bokunewicz, says the casinos’ in-person gambling revenue in September and October were robust. The reduced revenue in November was due to the cold weather keeping people at home and fear of the apparent increase in COVID-19 rates.
With New Jersey General Assembly bill A5587 sure to be signed into law, Atlantic County may need to find new sources of revenue.