Of all the New Jersey municipalities, Atlantic City has occupied a unique position. Since 1978, the city has been home to casino resorts, once believed to be cash cows doling out tax dollars to fill the coffers at city hall. No other municipality enjoyed such luxury.
But starting in 2007, the cow stopped producing as much cash. Competition from Pennsylvania made Atlantic City casinos less attractive. Less revenue coming into the casinos meant less money going out to the city. Successful tax appeals by the beleaguered industry reduced the city’s take even more, leading to the formation of the PILOT program in which casinos paid a fixed amount in exchange for not filing appeals.
Then came the coronavirus pandemic and the forced shut down of casinos in Atlantic City and beyond. Some six weeks later, there is no clear re-opening date and even when there is, the casinos face a long road back to normalcy in terms of gaming and other revenue.
That means Atlantic City faces a long road back to normalcy when it comes to property tax payments. Add to that the heavy reliance on state aid that has taken a hit and the issue gets even more complicated, according to the Press of Atlantic City.
In 2019, the combination of state aid and the casino’s collective payment accounted for nearly 43 percent of revenue in Atlantic City’s $208 million operating budget.
“It’s more about the uncertainty,” said Council President George Tibbitt, who sits on the city’s Revenue and Finance Committee. “I’m very concerned right now.”
Mayor Marty Small Sr., who chaired the municipal finance committee for several years at the start of a state takeover, said the city is on “solid fiscal ground for the foreseeable months ahead, which is a stark contrast from where the city was just a few short years ago,” he said.
Ah, but there’s the future to think of. Local officials are ready to deal with the situation in a proactive way, Small said, aware that municipal tax collections are likely to be lower than usual since non-casino property owners’ income streams have been cut off or reduced.
The fiscal crisis created by the coronavirus has renewed interest in revisiting the PILOT law which is directly tied to the industry’s gaming revenue. Revenue down. Taxes down. No other businesses have that kind of safety valve.
“(The indefinite shutdown of the casinos) is a part of the PILOT they never planned for,” Tibbitt said.
Assemblyman Vince Mazzeo, D-Atlantic, a primary sponsor of the 2017 PILOT legislation, said the bill had been working as intended, but lawmakers never saw the pandemic coming.
“We’re going to have to have a conversation about how to sustain, not only Atlantic City and the casinos and how they’re going to pay their bills, but the whole state of New Jersey.”
Under PILOT, Atlantic City casinos reported more than $3.2 billion in revenue in 2019 and will pay out roughly $152 million in 2020. Payments for next year will be a lot less.
“There are going to have to be new solutions here that can get everybody back to where they have to be,” Mazzeo said. “It’s going to be a slow process…and as legislators, we’re gonna have to come up with policies that help us along the way.”
