Atlantic City reached property tax appeal settlements with numerous casinos last month, and the state government says it’s funding the payments through the issuance of municipal bonds.
Bally’s, Caesars, Golden Nugget, Harrah’s, Tropicana, and the former Trump Taj Mahal and Trump Plaza all reached tax deals that totaled $68 million, a staggering sum, but also one that saved many millions for Atlantic City. New Jersey says it has already sold $68 million in state bonds to cover the disbursements, and even better, the debt investments were issued on relatively low interest rates.
State-appointed takeover leader Jeff Chiesa, a former US senator for New Jersey, revealed that the bonds have a 4.1 interest rate, which will save the city and state millions.
“The fact that the city obtained bond insurance and sold the bonds at a low-interest cost means it is well-positioned to responsibly pay down the tax refunds it owes to casinos while preserving critical public services,” Chiesa explained in a statement. He went on to say that the fiscal turnaround is excellent considering the city “was contemplating bankruptcy before we stepped in to manage its finances.”
Under the current PILOT (Payment In Lieu of Taxes) program, casinos guarantee the city $120 million annually. In exchange, the town cannot increase property taxes on the resorts, but the resorts also cannot appeal the fee in the future.
Beginning in 2009, as the US recession was firmly felt across the nation, Atlantic City casinos began appealing the valuations of their resorts. The local government, in desperate need of revenue as gaming and tourism plummeted, decided to instead increase the assessed values of the properties in order to gain additional taxes.
A legal fight ensued over the course of many years, with courts eventually siding with the resorts that they had indeed been paying far too much for several years.
The Borgata, the city’s biggest revenue earner, sent in $165 million more than it should have between 2009 and 2015, a court deemed. On the hook for the return, Chiesa’s takeover office managed to swindle a sweet deal by settling with the MGM-owned resort for just $72 million.
Cleared for Recovery
The looming appeals was a leading reason New Jersey Governor Chris Christie (R) and the state legislature decided to take control of Atlantic City’s finances. The former presidential candidate said Mayor Don Guardian’s inability to settle the property tax disputes forced the state to intervene.
Uncertain as to just how much property tax money Atlantic City was going to be forced to return impeded the beachfront gambling town’s financial future, Christie explained.
“The settlements reached with these casinos are the culmination of my administration’s successful efforts to address one of the most significant and vexing challenges that had been facing the city,” Christie said last month.
Chiesa has the authority to govern the city’s finances for up to five years. Both the state and Atlantic City government hope the recovery is executed much faster.