Casino “Investment” Tax Should First Pay $200 Million Unpaid Debt from Christie Takeover of Atlantic City.

Former GOP Governor Chris Christie left more than seven years ago. Yet $200 million of the half billion dollars of debt he gave Atlantic City taxpayers is still unpaid.

When Christie became Governor of New Jersey, Atlantic City government was so broke it could not make payroll or adopt a budget. The “Global Financial Crisis” of 2008 plus competition from Philadelphia casinos crippled the casinos and every business in Atlantic City. Atlantic City real estate lost two-thirds of its value. Many owners stopped paying taxes and walked away from their properties. However, Atlantic City continued to increase salaries. It refused to cut spending and reduce its tax assessments. In 2010, Republican Governor Chris Christie got a court order to take control of Atlantic City’s finances because of its “gross failure” to comply with the state’s “Local Budget Law”.

Above Images: October 12, 2010 Superior Court Order Allows NJ State Government To Take Control Of Atlantic City government finances:  “The allegations include the inability of the City of Atlantic City to fund an operating deficit in their current budget and therefore prepare a cash basis (balanced) budget, in contravention of NJSA 40:4-42 and 40A:4-3… The parties have agreed that this matter should be resolved without the need for further litigation…. Therefore… it is determined that there has been a gross failure on the part of the City to comply with the provisions of the Local Budget Law which substantially jeopardizes the fiscal integrity of the City”.

 

However, Christie did nothing to cut spending. For six years he refused to balance Atlantic City’s budget as required by the Local Budget Law. He let Atlantic City spend over $80 million more than it took in for the next six years. He did it by allowing the city to dishonestly assess all properties in the city at inflated pre-2008 levels. When owners won their tax appeals, Christie approved the hiring of expensive lawyers and delay final decisions for years–and allow the illegal deficits to continue.  By 2015, Atlantic City lost every case it contested and was $524 million in debt.

Christie did not cut spending in Atlantic City because he was running for President. His biggest selling point was that he was a “different” Republican. He was a Republican who embraced Barack Obama and criticized the Republican majority in the House of Representatives. Christie criticized Republican Governor Scott Walker for laying off government employees to cut taxes in Wisconsin. Christie bragged of getting support from Democrats like State Senate President Steve Sweeney and many labor unions.

In 2016, Christie came in last in the New Hampshire Primary. He then stopped running for President. Only then did he, Senate President Steve Sweeney, and other Democrats in the Legislature enact laws to drastically cut spending by Atlantic City government.

Four city council members tried to hire a lawyer to put the city into bankruptcy to cancel that massive debt.

However, this was not necessary. In 2015, Republican Christie and the Democrat majority legislature adopted new laws to have that debt paid by a state tax on casinos for “reinvestment” and “development”.

That “Casino Reinvestment Development” tax began as a compromise in New Jersey’s original 1977 law that legalized casinos.

The Democrat controlled legislature at first wanted a 10% tax on the “Gross Gaming Revenue” (GGR) of Atlantic City casinos. The casinos wanted a lower tax, so they improve their properties and rebuild Atlantic City. The final law was a compromise. It had a reduced 8% tax on Gross Gaming Revenue. However, all Atlantic City casinos had to “reinvest” another 2% of their gross revenue in acceptable projects in Atlantic City. The State’s Casino Control Commission would decide which projects were “acceptable”.

However, that compromise did not work out. The state refused to approve the “development” projects proposed by the casinos. It wanted the casinos to instead fund projects supported by Trenton politicians. The casinos refused, and nothing was built.

In 1985, a Republican Governor and a Republican NJ Legislature adopted a new casino “reinvestment” law. It created a new CRDA, a Casino Reinvestment Development Authority. The casinos could pay CRDA a 1.25% “Investment Alternative Tax” (IAT) instead of investing 2% of their GGR on their own projects. The CRDA was effectively controlled by local Republican State Senator Bill Gormley.

CRDA then “invested” $1.8 billion on dozens of its own projects in Atlantic City and throughout New Jersey.  One was the Yogi Berra Museum in Montclair University. Another was two years of empty railroad cars making four-hour trips to and from New York and Atlantic City. During those years, the IAT was little more than a political slush fund. It rewarded donors and supporters of influential New Jersey politicians. It made  State Senator Bill Gormley one of the most powerful politicians in New Jersey from 1985 to 2007.

Gormley left office suddenly in 2007, and the economy collapsed the following year. Since 2015, the Investment Alternative Tax was used to pay down the $524 million debt left by former Governor Chris Christies. About $200 million of that debt remains.

Republican State Senator Vince Polistina wants to the CRDA to immediately fund projects like it did during the Gormley days. We believe that would be unfair. State officials created that $524 million debt which is now down to $200 million. The state and the casinos should continue to pay the rest of it. 

LibertyAndProsperity.com is a tax-exempt, non-political education organization of roughly 200 citizens who mostly live near Atlantic City, New Jersey.  We formed this group in 2003. We volunteer our time and money to maintain this website. We do our best to post accurate information. However, we admit we make mistakes from time to time.  If you see any mistakes or inaccurate, misleading, outdated, or incomplete information in this or any of our posts, please let us know. We will do our best to correct the problem as soon as possible. Please email us at info@libertyandprosperity.com or telephone (609) 927-7333.

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  • Seth Grossman

    Seth Grossman is executive director of Liberty And Prosperity, which he co-founded in 2003. It promotes American liberty and limited constitutional government through weekly radio and in-person discussions, its website, email newsletters and various events. Seth Grossman is also a general practice lawyer.

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