The Atlantic City casino industry has cleared a legislative hurdle with their wish that sports betting and online gaming be stricken from the calculations of how much each property owes in taxes.
On November 15, the Senate Community and Urban Affairs Committee approved of a PILOT program enacted five years ago, according to the Associated Press.
PILOT—or payments in lieu of taxes—offered a steady income to Atlantic City without casinos winning tax appeals and wreaking havoc on the Atlantic City budget.
“The PILOT bill has actually saved Atlantic City,” said Joe Tyrell, a regional vice president with Caesars Entertainment, which owns Caesars, Harrah’s, and the Tropicana in Atlantic City. “Without the PILOT, you would not have had Hard Rock open, you would not have had Revel open as Ocean.”
The industry wanted sports betting and iGaming revenues taken off the books as the bulk of the money earned goes to third party sportsbooks and online operators, none of whom shared the tax burden.
The current version of the bill, sponsored by lame duck Senate President Steve Sweeney, would cut the annual payments from $120 million to $110 million in 2022. If approved by the full Senate and the Assembly, the revised PILOT would reduce payments for some casinos while others would pay more.
Borgata’s payments would decrease from $29 million this year to $22.8 million in 2025. Caesars would fall from $17.5 million to $9.3 million in 2025, and Harrah’s would shrink from $25.6 million to $17.8 million.
But Hard Rock PILOT payments would jump from $7.7 million this year to $15.9 million in 2025. Tropicana would increase from $8.3 million to $11 million; Bally’s would go from $5.3 million to $7.7 million; Golden Nugget from $4.8 million to $6.2 million; Ocean from $7.5 million to $11 million, and Resorts would leap from $3.5 million to $8 million.
Joe Lupo, president of the Casino Association of New Jersey, said Atlantic City’s in-person gambling revenue is down 7.5 percent from where it was before the pandemic hit. He said the legislation is needed as the region rebuilds and recovers.
According to figures obtained by the Associated Press that are not spelled out in the legislation, the Borgata’s payments would decrease from $29 million this year to $22.8 million in 2025.
Caesars would go from $17.5 million this year to $9.3 million in 2025; and Harrah’s would go from $25.6 million to $17.8 million.
Hard Rock, on the other hand, would see its PILOT payments rise from $7.7 million this year to $15.9 million in 2025. Tropicana would go from $8.3 million to $11 million; Bally’s would go from $5.3 million to $7.7 million; Golden Nugget would go from $4.8 million to $6.2 million; Ocean would go from $7.5 million to $11 million, and Resorts would go from $3.5 million to $8 million.
State Senator Troy Singleton, chair of the senate Community and Urban Affairs committee, said he has serious concerns about removing internet and sports betting revenue from the calculations because of the growth of both categories.
Over the first nine months of this year, internet gambling has brought in some $1 billion, an increase of 44 percent while sports betting revenue amounted to $557 million, a gain of 150 percent over that same period.
The Assembly version sponsored by John Armato drew criticism from Atlantic County officials. “We will obviously end up back in court,” County Executive Dennis Levinson said. “I’m going to fight for the taxpayer.”
Casino industry interests are being placed before those of the hard-working middle-class families and retirees of Atlantic County, state Senator-elect Vince Polistina told the Press of Atlantic City. “A last-minute push to try and sneak this bill in is exactly what was attempted in May and is a prime example of the type of legislators the voters rejected on November 2.”
The purpose of the revision of PILOT calculations is to help casinos hurt by the impact of Covid-19 pandemic. Casinos had a rough 2020, having closed for more than three months and then operated under restrictions for several more months.
But this year, the industry has rebounded.
PILOT required casinos to collectively pay $120 million in the law’s first year in 2017, with payments in subsequent years determined by total gaming revenue that included brick and mortar, internet, and sports gaming. The PILOT payments increased to about $132 million in 2018 and $150 million in 2020, then fell somewhat in 2021 due to the pandemic, although sports and internet gaming softened the fall.
The county sued the state in 2017 to get its promised 13.5 percent of the PILOT payments and settled for roughly that percentage in most years.
“We didn’t want it (the PILOT) in the first place. We fought and sued them, and they made a settlement with us,” said Levinson, who would have preferred the city hire an assessor capable of accurately assessing casinos, as every other gaming resort does. “Let the governor explain why, when he signed a settlement, did he do it with his fingers crossed. They made a deal, and they ought to stick to their agreements.”
According to data from the New Jersey Division of Gaming Enforcement, total gaming revenues through the second quarter rose 33 percent compared to 2019, with all gaming revenue included. Based on in-casino revenues alone, the numbers fell 12 percent.
The argument for the bill is that online gaming revenue is money earned by bets made outside of the Atlantic City borders, therefore that revenue should not be split with Atlantic City. But the very justification for the legalization of online gaming and sports betting in New Jersey said the bets were being made inside the borders because the servers that transmit those bets are located in Atlantic City. This was the justification of legalizing online gaming to begin with. Remember, casino gambling is illegal in New Jersey unless it’s conducted in Atlantic City, the only jurisdiction where it is legal as per the state Constitution, amended in 1976 to legalize casino gambling only in Atlantic City. If online gaming and sports bets were legal outside of Atlantic City, a second constitutional amendment would have been necessary so the technicality of bets being made on the servers in Atlantic City was invented. So the bill itself may be unconstitutional.
