Atlantic City Casino Property Tax Break Ordered to Mediation

Posted on: December 27, 2021, 09:16h. 

Last updated on: December 27, 2021, 10:10h.

The Atlantic City casino payment-in-lieu-of-tax (PILOT) amendment signed by New Jersey Gov. Phil Murphy (D) last week is headed towards mediation.

Atlantic City casino PILOT property tax
The Atlantic City Boardwalk is seen earlier this month outside Ocean Casino Resort. A lawsuit challenging property tax breaks for the town’s casinos is heading towards mediation. (Image: AP)

Soon after the state passed S4007/A5587 to greatly reduce the amount of collective property tax the nine Atlantic City casinos will pay next year and through 2026, Atlantic County filed a lawsuit against New Jersey. The county, which is expected to lose $4 million in 2022 due to the PILOT calculation change, contends that the new agreement unlawfully violates the terms the casinos and state agreed to in 2016.

Atlantic County’s own fiscal analysts project that $5 million to $7 million is a more probable 2022 tax loss that the county will miss out on under the PILOT revision.

New Jersey Superior Court Judge Joseph Marczyk, after reviewing the estimated fiscal projections and PILOT legislation, said he believes mediation is the best solution. Marczyk informed the state and county before Christmas to ready their arguments.

An initial conference is set for January 4, with mediation scheduled to begin soon after both sides agree to an intermediary.

PILOT Not Grounded

Marczyk did not go so far as to issue a temporary injunction or restraining order against S4007/A5587 to prevent the legislation from being enrolled and enacted. Instead, he believes a mediator can find common ground that will appease the county and allow the new PILOT calculation to move forward.

S4007/A5587 removes gross gaming revenue (GGR) from iGaming and mobile sports betting from being factored into the casinos’ PILOT calculation. The casinos’ property taxes are determined by using total GGR from the preceding year.

The casinos successfully argued that since much of the online GGR is shared with third-party operators like DraftKings and FanDuel that are not invested physically in Atlantic City, that income shouldn’t be included in the property tax. State fiscal projections expect the revision to save the casinos $55 million next year, and between $30 million to $65 million each year through the 2026 expiration of the PILOT arrangement.

Atlantic County receives 13.5 percent of the total PILOT money.

Atlantic County Executive Dennis Levinson wrote Murphy earlier this month, expressing his concerns that the PILOT savings afforded to casinos will come at the expense of county taxpayers.

[Atlantic City] Mayor Marty Small Sr. and his advisor, retired Judge Steven Perskie, contend that these bills are good for Atlantic City, but no one has confirmed they are equally beneficial for Atlantic County taxpayers nor have there been any financial statistics or budget calculations provided at this time on which to base these evaluations,” Levinson argued.

Small has supported the PILOT change since it could better ensure the longevity of the nine casinos and the thousands of workers that they employ. The city will continue to collect its local 2.5 percent tax levied on iGaming and online sports betting revenue.

Mediation Explained

Mediation is a dispute resolution process in which an impartial third party intervenes in legal disputes, with the goal of reaching a mutually acceptable settlement.

The major difference between mediation and arbitration, the New Jersey Courts website explains, is that, unlike an arbitrator, a mediator does not determine the outcome of a case. Instead, the mediator aids both parties in working towards a solution that satisfies each side.

“The purpose of mediation is not to decide who is right or wrong. Rather, its goal is to give the parties the opportunity to express feelings and diffuse anger, clear up misunderstandings, determine underlying interests or concerns, find areas of agreement, and, ultimately, incorporate these areas into solutions devised by the parties themselves,” the state court website details.