A Superior Court judge has declined to overturn a bill that was signed into law by New Jersey Governor Phil Murphy in December last year. The judge found that the Casino Property Tax Adjustment violated a 2018 consent order. The PILOT Bill is more commonly referred to as the Casino Property Tax Stabilization Act.
Atlantic county first launched the legal battle and sued over the constitutionality of the original PILOT bill, which was signed into law in 2016. However, an agreement was reached in 2018 that settled the case after parties agreed to particular percentages based on the details contained in the original PILOT. The bill that was signed by the governor in 2021, therefore violates the agreements and percentages that were settled on in 2018.
The newest pilot bill, signed in December last year, was created to assist casinos to recover from the impact of the pandemic. The bill would do so by limiting payment increases to compensate for property taxes. In the last week of February, however, a New Jersey Superior court judge named Joseph Marczyk ruled that the government had overstepped when it approved the bill.
Under the 2016 law, the county would receive an estimated 13% of the PILOT funds. The law covered online wagering on sports and iGaming as gross gaming revenues. The county opted to sue the state because it would end up receiving less than originally agreed upon had the bill been signed into law- approximately $15-26 million less than it would typically collect through to 2026.
Please note that even though the court has deemed the state wrong by passing the bill into law, the judge did not explicitly annul last year’s PILOT amendment. However, the court has required the state to involve the county in the process. The next hearing in this matter is expected to be held on March 23rd before Judge Michael J. Blee.
At the start of the year, the state refused to engage in mediation that would see the dispute with the county resolves. Both parties had prior been encouraged by the Superior Court Joseph Marczyk to enter into mediation after the county filed an order to show cause in the last week of December last year.
County officials accused the state of refusing to involve the county in the process. Officials in the county complained that they had not been involved in the planning or implementation of the bill even though they were a primary stakeholder in the issue. Even though the county was willing to undergo the mediation process, the state blatantly refused to take part in the process, which has led to further breakdown in communication.
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History of the PILOT
New Jersey Governor Phil Murphy ratified the casino PILOT bill to law in December 2021. The PILOT law was created to give tax relief to the city’s casinos by eradicating sports and online gaming revenues from the calculation of their payments in the place of taxes. These have always been the fastest-growing verticals in the casino industry.
When the bill was passed by the legislature, it made changes to a law that was made in 2016. This 2016 law required the city’s 9 casinos (at the time) to make PILOT payments to the Atlantic City, county, as well as the school system. Unfortunately, even though the bill helped to give operators much-needed relief, especially in the wake of the pandemic, the governor’s signature did generate legal dispute.
As a result, county executives came forward claiming that they would file a lawsuit once the governor had signed the bill. According to arguments made by county executives, the new PILOT arrangement would give the county approximately $5 to $7 million less this year than it would have generated under the terms of the original bill.
Before it was approved, the new PILOT bill was a source of controversy all through last year. Even though the city, county, and the schools were not pleased with its implementation, the Casino association in the state, alongside the casino workers’ union commended the signing of the bill into law. Both the workers union and the Association believed that the PILOT bill was exactly what was needed to save thousands of people from losing their jobs while providing stability to a market that had been severely affected by the pandemic.
According to the casino association of New Jersey, the PILOT would have been critical for the rebuilding and recovery from the pandemic. The proposed amendments were therefore deemed essential by many industry executives and players. Sadly, Atlantic County’s stabilization will be that much harder to achieve now that the judge has disputed the legalization of the bill.
The bill was sponsored by outgoing senate president Steve Sweeney, who worked extremely hard to defend the need for the PILOT legislation. According to the senator, without the legislation, many of 9 casinos in the city stand in danger of getting shut down. However, opponents have since opposed these remarks claiming that the senator and supporters of the bill have done nothing to collect and share evidence of massive job losses in the sector.
New Jersey Revenue Continues to Improve
Despite the legal battles and challenges, New Jersey’s revenue picture has continued to make gradual improvements to the delight of all parties involves. Just recently, the state smashed sports wagering and iGaming records at the start of this year when punters wagered a record $1.35 billion on sports in January. IGaming revenue also reached a new record in January despite New York legalizing its mobile sports betting market this year.
New Jersey has continued to perform in an exemplary manner in February, thanks to the recently concluded Super Bowl that saw bettors in the state wager billions across various events. If the county and the state want the market to keep performing well, a resolution to the PILO bill dispute must be found sooner rather than later.
Final Thoughts
New Jersey will want to do its best to make sure that it has resolved the PILOT bill issue, especially as March Madness approaches. The Garden State is already under threat now that New York’s sports betting market is up and running.
