If you’re keeping score, it’s Atlantic County 2, New Jersey 0. Actually, make that 3-0.
A Superior Court judge in New Jersey struck down the amended PILOT program as a violation of the state constitution. The ruling, handed down August 29, hands a defeat to Governor Phil Murphy and the legislators, as well as the casino industry, according to the Press of Atlantic City.
The court case challenged a local taxing program known as PILOT, or payment in lieu of property taxes. Since 2016, instead of paying property taxes, each casino has paid a share of an industry-wide assessment that was distributed to Atlantic City, its school district and the county.
Calculations were culled from total gaming revenue the prior year.
The amended law, enacted late last year, eliminated online gaming and sports betting from the calculations, a move requested by the casinos to get them over the hump resulting from Covid-19. A conservative group known as Liberty and Prosperity 1776 filed a suit against the law, challenging preferential tax treatment.
Judge Michael Blee sided with the group.
“This court finds that the amendment was enacted to aid the casino industry and not for a public purpose,” Blee said in his decision.
At the time, the casino industry was rebounding from a pandemic slump. The industry insisted it was in financial peril, but had its best year in a decade. Financial reports show that revenue from in-person gambling exceeded pre-pandemic levels. The nine casinos reported $339 million in gross operating profits.
The legislation, Blee wrote, was advanced “to aid what was actually a resurging industry.”
The Casino Association of New Jersey declined to comment on the decision. Seth Grossman, of Liberty and Prosperity, was pleased with the decision. Grossman expects this won’t be the end of the industry effort.
The state expects to appeal.
Atlantic County Executive Dennis Levinson said the lawmakers should have left well enough alone.
“Had the governor responded to our concerns about the PILOT amendment prior to and after its passage during a lame duck session, four days before Christmas, this could have all been avoided, saving the taxpayers of New Jersey hundreds of thousands of dollars,” Levinson said in a statement.
Blee also awarded Atlantic County more than $176,000 in attorney fees and costs related to the PILOT lawsuit, Levinson said.
“Judge Blee ruled in July the state made a calculated decision to willfully violate multiple court orders when it shortchanged the county on its scheduled May 15, 2022 payment,” he said in a county news release. “His decision on August 22 reaffirmed that.”
A spokesperson for the state indicated that it hopes the decisions will be overturned.
“The state continues to believe that the trial court’s decision in favor of Atlantic County earlier this year was erroneous and is optimistic that this decision will be reversed on appeal,” spokesperson Alyana Alfaro said in an email.
On July 29, a court order required the state to pay the county almost $2.4 million with additional payments in August and November. An appeals court put the order on hold.
Superior Court Judge Joseph Marczyk ruled in February that the amended law violated a 2018 consent order and would be subject to the sanctions or damages as to be determined by Blee. The state filed a motion to appeal Marczyk’s ruling as well.
Levinson said the state’s decision to appeal was “a poor example of leadership” and came at a cost to both county and state taxpayers.
“The rulings have been in our favor, yet the state continues to file motions to prolong the court proceedings,” Levinson said. “Sometimes you need to know when to fold.”
