With three bills designed to stabilize casino tax revenue in Atlantic City awaiting legislative action, Moody’s Investor services warned that the bills alone won’t be enough to solve the city’s fiscal crisis.
New Jersey Governor Chris Christie conditionally vetoed the bills including the main provision that the eight city casinos make payments in lieu of taxes (PILOT) of a cumulative $150 million for two years and $120 million for 13 years after that. The bill hopes to stabilize city revenue and stop a long line of casino tax appeals which has been stripping millions in revenue from the city over the last few years.
The bills also include a provision that $30 million in casino funded marketing funds—used to fund the city marketing arm the Atlantic City Alliance—be diverted to the city’s budget to pay down debt for two years.
The Moody’s report says the city could face an about $34 million budget shortfall in 2017 when the $30 million in marketing funds runs out.
“If Atlantic City received the full funding available under the complete rescue package within the next two years, expenditures will surpass revenues by $34 million, once the $30 million of funds from the former ACA expire,” the report said according to a review by the Press of Atlantic City. “The gap will widen further if state aid or grants are cut, or if the city is required to pay on the approximately $150 million of tax appeals it is currently negotiating.”
Christie’s conditional veto of the bills will also withhold about $30 million in PILOT funds from the city for two years unless the city adopts a state approved fiscal plan.
“The city will need to figure out a way to avoid the deficits,” said Josellyn Yousef, Moody’s vice president.
Meanwhile, Christie’s conditional veto has set off a series of meetings and negotiations on the rescue package. The Press reported that state and local officials have been meeting to discuss the future of the rescue package.
Atlantic County Executive Dennis Levinson also met in Newark with Christie, the Press reported.
“It was a frank and hopefully productive meeting,” Levinson said.
The state legislature has until January 12 to either accept Christie’s changes or attempt to override the veto.
The veto has also led to opponents of the bills coming out with alternative plan. New jersey Assemblyman Christopher Brown—who represents Atlantic City—has proposed a plan that eliminates the PILOT agreement, freezes Atlantic City’s property-tax rate for five years, and expands the pool of taxable revenue the city’s casino’s generate to include revenue from food, beverage and entertainment operations, according to the Press.
However, the city’s current 2015 budget counts on about $33 million from the plan.
“It’s down to the wire, and now everybody’s throwing in different plans,” said Atlantic City Councilman Timothy Mancuso to the Press. “We can’t have that.”
In another move, Atlantic City Mayor Donald Guardian said the city will hold off on planned layoffs of 22 employees in anticipation of receiving funding from the rescue plan.
“This was some long-range planning that we had done as part of the original layoff plan,” Guardian told the Press. “At this point, there is no need to have these layoffs.”
In a related item, the city also asked a federal judge for permission to sell tax certificates for $12.4 million in property taxes allegedly owed by Trump Taj Mahal and Trump Plaza. The unpaid taxes represent 9.5 percent of the city’s 2015 budget, according to the Press.
Trump Entertainment has been involved in a long bankruptcy proceeding. The Plaza closed in 2014.
According to the Associated Press, the closed Revel casino also owes an unidentified amount of back taxes and the city is considering selling tax certificates on that debt as well.
In a tax sale, investors or the city can buy liens called tax sale certificates. If the property owner pays the delinquent taxes, the certificate holder is paid interest. If the tax debt is not paid within two years, the investor can foreclose on the property, according to the AP.
