No Verdict in Atlantic City PILOT Lawsuit Challenging Casino Tax Plan

Posted on: November 30, 2017, 06:00h. 

Last updated on: November 30, 2017, 02:39h.

Casino.org Staff Writer Read More
Expertise: Commercial Gaming.

The Atlantic City PILOT (Payment in Lieu of Taxes) program that allows the town’s remaining casinos to pay a flat property tax instead of fluctuating payments based on assessments was back in court on Thursday.

Atlantic City PILOT casino taxes
Judge Julio Mendez has the most difficult task in deciding the legal merits of the Atlantic City PILOT program. (Image: Michael Ein/Press of Atlantic City)

Superior Court Judge Julio Mendez listened to arguments as to why the tax scheme is allegedly in violation of the New Jersey Constitution.

The challenge is brought by a combined lawsuit from Atlantic County and “Liberty and Prosperity,” a New Jersey advocacy group that believes all real estate should be taxed in a uniformed manner.

This morning, Judge Mendez seemed to at least partially agree with the plaintiffs when he said, “Every time you single out entities and provide them with something that is different than everyone else, it raises concerns.”

Mendez’s comments were reported by the Press of Atlantic City, which sat in on the hearing. After almost three hours of testimony, Mendez ended the hearing and said he would make a decision at a later date.

PILOT Turbulence

Introduced by State Senate Speaker Stephen Sweeney (D), the Atlantic City PILOT bill was a bipartisan effort that Governor Chris Christie (R) signed into law in May of 2016. The tax plan was to deliver reliable property tax revenue to Atlantic City, as casinos continued to appeal their assessments due to tumbling gaming revenue.

Atlantic County and Liberty and Prosperity argue the PILOT is benefiting the casinos at the expense of local residents and businesses.

When the bill was first crafted, Atlantic City was still reeling from the recent recession. Gaming win fell from $5.2 billion in 2006, to $2.56 billion in 2015. But last year casinos posted their first annual slot, table, and internet gaming percentage gain in a decade, with their total take up 1.5 percent to $2.6 billion.

The market has seemingly stabilized, and the seven remaining casinos are up another two percent this year through October, and more than eight percent when the shuttered Trump Taj Mahal’s 2016 revenue is excluded.

State attorneys argued based on pre-PILOT property assessments, the casinos would pay $109 million in property taxes this year, meaning the state, county, and city are getting an $11 million premium. But lawyers arguing for the plaintiffs said the old assessments do not take into account improvements made to the resorts.

In 2016, the Tropicana spent $40 million to renovate 500 resort rooms, and the Borgata spent $50 million in property improvements. And through the Casino Reinvestment Development Authority, a series of non-gaming projects are being developed across the city that’s costing tens of millions of dollars.

Paying Fair Share

State officials say the PILOT, which runs for 10 years, will increase as the economy rebounds. Should the casinos stay on the current revenue trajectory and top the $3 billion mark, their annual payment for 2018 will be $130 million. That number can expand to $165 million should the market eclipse $3.4 billion in future years.

The problem is that each casino’s share might actually be reduced as potential new casinos return. Hard Rock is expected to reopen the shuttered Trump Taj next summer, and the former Revel, now named TEN despite remaining closed, could at some point resume operations.