Atlantic County, New Jersey Executive Dennis Levinson has promised a lawsuit if state legislators approve an amended version of the PILOT program. The acronym stands for payments in lieu of taxes; the program would subtract sports betting and internet gaming revenues from the calculation of what casinos owe.
Despite Levinson’s threat, the state Senate and Assembly passed the amended PILOT on December 20 and Governor Phil Murphy signed it into law on December 21. The county filed a lawsuit on the morning of December 22, according to the Press of Atlantic City.
“What we want to do is let them know we had a consent agreement they violated,” Levinson said. “It’s just a question of fundamental fairness.”
The county also sued the state over the original 2016 PILOT law and settled the litigation in 2018. A spokesman for Murphy declined comment on pending litigation. The county filed an order to show cause in Atlantic County Superior Court.
The change would lower the payments from the casinos, who argued that the two streams of revenue involve third-party operators who receive the bulk of the revenue but do not contribute to PILOT.
For 2022, the new PILOT gives the county the same amount it received in 2021, about $17.5 million. However, the 2021 payments were based on casino revenues from 2020, a year impacted by the Covid-19 pandemic.
The state Office of Legislative Services has estimated the county will lose about $3.9 million in 2022 under the new law, but the county estimates its losses at $5 million to $7 million a year. The office says the city will lose money as well but will make some of that up with an increase in the investment alternative tax, which the county does not share.
“To show you how bad this is, the sponsor of the legislation can’t even support it,” Levinson said of Assemblyman John Armato, who voted against the bill along with Assemblyman Vince Mazzeo.
“They realized they couldn’t do that to their friends and neighbors who live in Atlantic County,” Levinson said.
Outgoing Senate President Steve Sweeney, who sponsored the Senate amendment bill, said Atlantic County received too much money from the original legislation. But the 13.5 percent figure was set as part of the court settlement. Sweeney said as many as four of Atlantic City’s nine casinos would be in danger of closing without the amendment. But he offered nothing to back that statement up.
“Like the original PILOT law that averted casino bankruptcies, these new laws were needed to prevent the potential closures of two to four casinos in the wake of two rocky years of reduced tourism and convention cancellations due to Covid-19 restrictions and fears,” Sweeney said in a press release.
The Casino Association of New Jersey said in a statement the changes “will protect thousands of jobs and provide certainty and stability to the market” while helping to improve Atlantic City’s infrastructure and improve safety in the resort.
The county suit in 2016 challenged the constitutionality of the original PILOT bill. In 2018 the county agreed to a settlement for specific percentages. Levinson has said the new bill violates that settlement.
The PILOT amendments were intended to help the casinos recover from the coronavirus pandemic by reducing large increases in payments expected if the bill was not approved. While the casinos would pay more to everyone next year over 2021 even with the new bill, the payments for the current year were based on the depressed revenues in 2020.
The casinos say their core business—in-person gamblers—has declined compared to pre-pandemic 2019.
The new guys in town, Hard Rock Hotel & Casino Atlantic City and Ocean Casino Resort, say their revenue has risen when compared to 2019, but the other seven properties were down 22 percent.
The thrust of the initial bill was the casino industry successful appeal of their property tax assessments after five casinos shut their doors, sending gaming revenue in the resort downwards.
The successful appeals proved devastating to Atlantic City’s budget. The PILOT bill stopped further appeals while coming up with a financial formula which would result in a budget the city can count on.
Before the case goes to court, Superior Court Judge Joseph Marczyk has scheduled a conference with lawyers on January 4, and he will order mediation to settle the lawsuit. He asked both sides to come up with potential mediators.
The county asked for a temporary restraining order against the new law, but the judge said no.
Marczyk said the case “involves important matters of public policy and complex financial issues and calculations” and he needed more details before such a decision.
Levinson said a lot of lawmakers were embarrassed by the way the bills got fast-tracked.
“They promised the casinos they would do this, and they did,” Levinson said. “They didn’t say it was going to stick.”
A spokesman for Gov. Phil Murphy said the office does not comment on pending litigation.
The new legislation lowers casino payments from an estimated $165 million under the current law to $110 million under the new one. It gives the county the same amount in 2022 it received this year, about $17.5 million, but this year’s payments were based on depressed casino revenues from 2020 during the worst of the Covid-19 pandemic.
