An innovative plan to tax casinos based on their revenue was unilaterally amended in 2021 which has saved the casinos millions of dollars that would have been earmarked for the Atlantic County tax coffers. The county has sued to recoup those funds and the latest legal battle between the parties will play out this week.
Brief History
In 2016, an interesting solution was reached regarding how New Jersey’s casino property taxes would be paid to Atlantic County. Because of the economic struggles the casinos had encountered, a compromise was reached that their property taxes would be predicated on their revenues.
The revolutionary bill was named the Casino Property Tax Stabilization Act but it became known as PILOT (payment-in-lieu-of-taxes) and it worked quite well. However, in 2021, the bill was amended to exclude revenues from online casino gambling and sports betting. Subsequently, those amendments were challenged in Superior Court where it was ruled that those changes violated the county agreements and even the state constitution.
The county and a non-profit group, Liberty and Prosperity, had two different angles when they brought their grievances to the state’s highest court but both were successful. Superior Court Assignment Judge Michael Blee found that the changes made in the PILOT law violated the original 2016 agreement between the state and the county. It also ruled against the state in Liberty and Prosperity’s lawsuit, stating that the changes were unconstitutional and the casinos garnered an unfair advantage.
Appellate Decision
However, the casinos have appealed the decision and this week we will find out how the Appeals Court views the Supreme Court’s decision in 2022. The folks from Atlantic County and the nonprofit group, Liberty and Prosperity, are the aggrieved parties and will be in attendance when the appeals process begins.
“The county’s argument is they should be getting a bigger piece of the pie, ours is there should be a bigger pie,” Liberty and Prosperity founder Seth Grossman said. “We are saying the casinos should be paying more. There was a deal that allowed them to pay less than what their properties are worth.”
And there is quite a bit of money at stake. In 2024, the Boardwalk casinos will pay Atlantic County approximately $18.3 million. But if the revenues generated from iGaming and online sports betting were factored into the equation, it would mean additional revenues of about $14.1 million.
Atlantic County Executive Dennis Levinson said, “If we are successful, the state will owe us $14 million.” Furthermore, Levinson surmised that the state believes the county must not need the money because the county has been frugal and has lowered property taxes but only because property values have increased.
“But the casinos do (need the money)?” Levinson rhetorically asked. “That is our money.”
More Questions
The question continues to be begged as to why the superior court ruling didn’t immediately trigger the taxes derived from online gaming to be directed to the county.
“Now if the court rules casinos will have to pay retroactive money, it brings in a whole new dynamic that did not exist a year and a half ago,” Grossman said.
The dynamic Grossman is referring to is that those retroactive payments may cause the casino operators to cry poor and thus stave off paying because they could contend that the consequences could lead to job losses and perhaps even casino closings. But that is a topic for another day. The fight is now on to determine which way the Appeals Court will rule. We shall soon find out.
