In 1837, New Jersey and most of America suffered years of massive economic collapse. Most Americans knew it was caused by “systemic corruption” and unsustainable debt in state government. In 1844, New Jersey and most states adopted new state constitutions to fix these problems.
“Systemic corruption” happened when politicians enacted laws that did not apply equally to everyone. They instead were “special” laws that gave special benefits to political friends or punished or ignored opponents. It was difficult for any major business to succeed without getting special laws or financial help from politicians in Trenton. It was therefore normal for the biggest businesses in New Jersey to give massive financial help to politicians who helped them. As the same time, politicians could not win elections without financial support from big businesses. This “systemic corruption” allowed wasteful and inefficient businesses to succeed, while causing good businesses to fail.
New Jersey fixed that problem with provisions in its 1844 State Constitution that required all laws to be uniform throughout the state. This made it difficult or impossible for politicians to make special laws that only applied to help friends or hurt opponents. In 1875, an additional “Tax Uniformity Clause” was added to our State Constitution. It specifically provided that all real estate in New Jersey “shall be assessed according to the same standard of value. . . and taxed at the general tax rate of the taxing district in which the property is situated”.
Another cause of the 1837 economic collapse in America was unsustainable government debt. New Jersey and other state governments borrowed massive amounts of money that could not be paid back without massive tax hikes that ruined many people. When state governments could not collect enough taxes to pay their debts, banks collapsed, and many people lost their life savings.
To fix this problem, the 1844 New Jersey State Constitution added a “Debt Limitation Clause”. This required state government to have balanced budgets every year. It also did not allow the state to borrow money without approval by voters in special referendum votes.
Since the 1960s, the New Jersey Supreme Court refused to apply and enforce these key provisions of our 1844 State Constitutions. They allowed state politicians to use all sorts of excuses to adopt laws that gave all sorts of special deals and benefits for special people–just like in 1837. New Jersey’s Supreme Court also allowed the “Debt Limitation Clause” of our State Constitution to become meaningless. Since the 1960s, the New Jersey Supreme Court has allowed state politicians to set up dozens of “independent authorities” that have borrowed hundreds of billions of dollars. They include the New Jersey Economic Development Authority, the NJ Transportation Trust Fund Authority, and the South Jersey Transportation Authority. They also allowed the state to promise billions of dollars of future pension payments without setting aside enough money to pay for them.
Since the 1960s, our New Jersey Supreme Court has allowed state and local politicians to do the exact same things that caused years of nationwide economic collapse beginning with “The Panic of 1837”.
SETH GROSSMAN
Below is the decision and opinion of the Appellate Division of the New Jersey Superior Court dated October 21, 2024:
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-0487-22
LIBERTY & PROSPERITY 1776,
INC., a non-profit corporation of
New Jersey, JAMES MCLEAN, a
taxpayer of Atlantic City and
Atlantic County, New Jersey, and
KAREN BOREK and JANIS
HETRICK, residents and
taxpayers of Atlantic County,
New Jersey,
Plaintiffs-Respondents,
v.
THE STATE OF NEW JERSEY
and PHILIP D. MURPHY, in his
capacity as GOVERNOR OF THE
STATE OF NEW JERSEY,
Defendants-Appellants.
______________________________
Argued March 20, 2024 – Decided October 21, 2024
Before Judges Vernoia, Gummer, and Walcott
Henderson.
On appeal from the Superior Court of New Jersey, Law
Division, Atlantic County, Docket No. L-0170-22.
Tim Sheehan, Deputy Attorney General, argued the
cause for appellants (Matthew J. Platkin, Attorney
General, and Chiesa Shahinian & Giantomasi PC,
attorneys; Michael L. Zuckerman, Deputy Solicitor
General, Jean P. Reilly, Assistant Attorney General,
Melissa H. Raksa, Assistant Attorney General, Amy
Chung, Deputy Attorney General, Abiola G. Miles,
Deputy Attorney General, Victoria G. Nilsson, Deputy
Attorney General, Tim Sheehan, Deputy Attorney
General, of counsel and on the briefs; John Lloyd,
Ronald L. Israel, Brian P. O’Neill, on the briefs).
Seth Grossman argued the cause for respondents.
The opinion of the court was delivered by GUMMER, J.A.D.
Plaintiffs – a non-profit corporation, an owner of taxable real estate within
the City of Atlantic City, and residents and owners of taxable real estate within
Atlantic County – challenged the Casino Property Tax Stabilization Act (CPTSA
or Act), N.J.S.A. 52:27BBBB-18 to -28, and its 2021 amendment, L. 2021,
c. 315 (2021 amendment or Amendment). In the CPTSA, the Legislature
established a “payment in lieu of taxes” (PILOT) program for casino gaming
properties located in Atlantic City. In the 2021 amendment, the Legislature
altered the formula for calculating the PILOT payments.
In 2022, plaintiffs filed a complaint in lieu of prerogative writs, seeking a
declaration the CPTSA was not constitutionally permissible under the
A-0487-22
Page 2
Uniformity Clause set forth in Article VIII, Section 1, Paragraph 1 of the New
Jersey Constitution and the 2021 amendment was null and void.
Defendants moved to dismiss the complaint; plaintiffs cross-moved for summary-judgment.
The motion court granted in part and denied in part each motion. The
court found the Legislature had passed the CPTSA:
to prevent the insolvency of Atlantic City, to facilitate
the municipality’s rehabilitation and recovery, and to
protect the citizens not only of the City, but of Atlantic
County, the region and the State from the ramifications
of what would have otherwise been the imminent
financial collapse of a tax base which uniquely funds
State programs for senior citizens and disabled adults.
Holding the CPTSA had been “enacted for a public purpose” and had
“indisputably fulfilled that public purpose for the benefit of residents of the City,
the County, and the State,” the court concluded the CPTSA fell within the
Exemption Clause of Article III, Section 1, Paragraph 2 of the Constitution and
dismissed the part of the complaint in which plaintiffs sought a declaration the
CPTSA was unconstitutional. The court nevertheless found the Legislature had
not acted rationally or in furtherance of a public purpose in enacting the 2021
amendment to that Act and, in an August 29, 2022 final judgment, declared the
2021 amendment null, void, and of no effect.
Page 3
Defendants appeal from the portion of the judgment nullifying the
Amendment. They argue plaintiffs did not overcome the strong presumption of
validity vested in the Amendment. They contend the Amendment, like the Act
whose formula it seeks to adjust, rationally advances public purposes and falls
within the Exemption Clause.
Plaintiffs did not appeal from the portion of the judgment regarding the
constitutionality of the CPTSA. Thus, it is undisputed the CPTSA wasn’t a
subsidy favoring a particular type of business or a tax break for a failing industry
but instead, as the court found, served a public purpose that benefited citizens
of the local community and across the State.
Plaintiffs now seem to accept some, if not most, of the Amendment’s
provisions. Plaintiffs, for example, embrace the Amendment’s two-percent
upward adjustment in the PILOT payments under certain conditions, see
N.J.S.A. 52:27BBBB-20(f); they just complain the percentage is “not nearly”
enough. Plaintiffs focus their criticism on one aspect of the Amendment: the
Legislature’s exclusion of “revenue derived from Internet casino gaming and
Internet sports wagering during calendar years 2021 through 2026” from the
definition of “[g]ross gaming revenue.” See N.J.S.A. 52:27BBBB-20(a).
Page 4
Defendants, in reply, fault plaintiffs – and the motion court – for viewing
the provisions of the Amendment in isolation, rather than considering them as a
“cohesive whole,” linked to the constitutional Act and part of a decades-long
comprehensive legislative scheme. We agree and, accordingly, reverse the
court’s striking of the Amendment as unconstitutional.
I.
To put the CPTSA and its 2021 amendment in perspective, we provide
some historical background regarding legislative acts and constitutional
amendments concerning Atlantic City and the casino-gaming business.
In November 1976, New Jersey voters approved an amendment to our
State’s Constitution that enabled the Legislature to authorize the establishment
and operation of gambling casinos in Atlantic City. N.J. Const. art. IV, § 7,
¶ 2(D) (the Casino Clause); see also State v. Trump Hotels & Casino Resorts,
Inc., 160 N.J. 505, 510 (1999). The Casino Clause also permitted the Legislature
“to license and tax such operations and equipment used in connection
therewith.” Pursuant to the Casino Clause, any law authorizing the operation or
establishment of gambling casinos had to “provide for the State revenues derived
therefrom to be applied solely for the purpose of providing funding” that would
assist “eligible senior citizens and disabled residents of the State” by reducing
Page 5
their property taxes, rent, and utility charges and by expanding their access to
health and transportation services or benefits. N.J. Const. art. IV, § 7, ¶ 2(D).
By “State revenues,” the Legislature meant “the proceeds of a tax, initially
imposed at the rate of eight percent, on the annual gross winnings of casinos”;
it did not mean “the proceeds of other taxes, such as corporate, sales and
property taxes.” Trump Hotels, 160 N.J. at 529.
In accordance with the Casino Clause, the Legislature in 1977 enacted the
Casino Control Act (the CCA), N.J.S.A. 5:12-1 to -233. In passing the CCA,
the Legislature found legalized casino gambling was “a unique tool of urban
redevelopment for Atlantic City” that would “facilitate the redevelopment of
existing blighted areas” and “attract new investment capital to New Jersey in
general and to Atlantic City in particular.” N.J.S.A. 5:12-1(b)(4). Our
Constitution provides that “[t]he clearance, replanning, development or
redevelopment of blighted areas shall be a public purpose and public use” and
that “improvements made for these purposes and uses, or for any of them, may
be exempted from taxation . . . for a limited period of time . . . .” N.J. Const.
art. VIII, § 3, ¶ 1 (the Blighted Areas Clause). The Legislature also found
Atlantic City’s tourism industry was “a critically important and valuable asset”
Page 6
to the State and that “the economic stability of casino operations [was] in the
public interest.” N.J.S.A. 5:12-1(b)(2), (12).
The CCA imposed an annual tax on “gross revenues” equal to eight
percent of those revenues. N.J.S.A. 5:12-144(a). “Gross revenue” originally
was defined in the CCA as “all sums . . . actually received by a licensee from
gaming operations, less only the total of all sums paid out as winnings to
patrons.” N.J.S.A. 5:12-24 (1977). The proceeds collected from the tax were to
be deposited in the Casino Revenue Fund, N.J.S.A. 5:12-145(a), and used
exclusively for the purposes identified in the Casino Clause benefitting eligible
senior citizens and disabled residents, N.J.S.A. 5:12-145(c).
The CCA also “required all casinos whose annual gross revenue exceeded
their cumulative investments in the State to make annual investments in land
and real property improvements in Atlantic City and other parts of the State,
commencing after five years had elapsed, equal to two percent of gross
revenues.” Trump Hotels, 160 N.J. at 521; see also N.J.S.A. 5:12-144 (b) to (d).
A casino that failed to make the required capital investments had to pay “an
annual investment alternative tax [(IAT)] equal to two percent of gross revenue
and payable to the Casino Revenue Fund.” Id. at 511 (citing N.J.S.A. 5:12
144(e)).
Page 7
Casinos, however, made “little or no such investments . . . during the seven
years after the [CCA] took effect.” Ibid. In 1984, the Legislature “revised the
prospective investment obligations of casinos” and created the Casino
Reinvestment Development Authority (CRDA). Ibid. (citing N.J.S.A. 5:12
153). Again recognizing “the casino gaming industry as a unique tool of urban
redevelopment for the city of Atlantic City,” the Legislature identified several
purposes of the CRDA, including “to directly facilitate the redevelopment of
existing blighted areas,” “to address the pressing social and economic needs of
the residents of the city of Atlantic City and the State of New Jersey by providing
eligible projects in which licensees shall invest,” and “to provide licensees with
an effective method of encouraging new capital investment in Atlantic City,
which investment capital would not otherwise be attracted . . . by normal market
conditions . . . .” N.J.S.A. 5:12-160(a), (b). To enable the CRDA to achieve
those purposes, “the Legislature provided casinos with the option of either
paying an additional annual 2.5 percent [IAT] on gross revenues . . . or of
investing annually 1.25 percent of such gross revenues in CRDA bonds or in
investment projects approved by the CRDA.” Trump Hotels, 160 N.J. at 511
(citing N.J.S.A. 5:12–144.1).
Page 8
Atlantic City subsequently experienced a “long-held near monopoly on
East Coast gaming.” Marina Dist. Dev. Co. v. City of Atl. City, 27 N.J. Tax
469, 476 (Tax 2013), aff’d o.b., 28 N.J. Tax 568 (App. Div. 2015). In 2006,
Atlantic City casinos paid $417,528,000 to the State pursuant to the CCA’s
annual eight-percent tax on “gross revenues.” N.J. Div. of Gaming Enf’t,
Summary of Gaming and Atlantic City Taxes and Fees 2 (May 2022). But in
2007, that number fell to $393,707,000. Ibid.
“[B]eginning in 2007 . . . powerful forces were combining to undermine
the Atlantic City casino-hotel market in ways that threatened lasting adverse
economic consequences.” Marina, 27 N.J. Tax at 475. By 2008, it was “readily
apparent” that Atlantic City’s “near monopoly . . . was rapidly being eroded by
the expansion of casino gaming in nearby States.” Id. at 476. In addition, “[t]he
national economy began to soften in late 2007, primarily due to the subprime
housing crisis,” and by late 2008, “the economy suffered a significant downturn
triggered by the collapse of the mortgage markets” and major investment banks.
Id. at 481. “[T]he Atlantic City gaming industry was showing signs of distress,”
with plans for the construction of new casino-hotels being put on hold and other
casino-hotels filing for bankruptcy. Id. at 483-84. The amount of the proceeds
Page 9
collected pursuant to the CCA’s annual eight-percent gross-revenue tax
continued to fall. N.J. Div. of Gaming Enf’t, at 2.
The owner of the Borgata Casino complex successfully challenged the
property tax assessments set by Atlantic City’s municipal tax assessor for the
2009 and 2010 tax years, claiming they exceeded the true market value of the
property. Marina, 27 N.J. Tax at 475. In a 2013 decision, a Tax Court judge
issued judgments significantly reducing those assessments. Id. at 531-32. We
affirmed that decision in 2015. Marina Dist. Dev. Co. v. City of Atl. City, 28
N.J. Tax 568 (App. Div. 2015). In 2015, 6,355 property tax appeals were filed
in Atlantic City, nearly three times the number of appeals filed in 2008.1
The CPTSA was proposed in response to Atlantic City’s “dire situation”
and “fiscal challenges,” which arose in part from casino closures and the “large
property tax refunds” Atlantic City owed to the casinos that had successfully
appealed their property tax assessments. Sponsor’s Statement to S. 1715 (Feb.
29, 2016). The CPTSA’s purpose was “to provide certainty to the casinos with
respect to their financial obligation to Atlantic City, and to provide certainty to
1 That data was provided in the statement of material facts plaintiffs submitted
in support of their cross-motion for summary judgment and was supported by
information contained in an email from a representative of the Atlantic County
Board of Taxation, which was an attached exhibit to the certification plaintiffs’
counsel submitted in support of plaintiffs’ cross-motion for summary judgment.
Page 10
Atlantic City about the financial obligation of the casinos to Atlantic City,
Atlantic County, and the Atlantic City School District.” Ibid.
Enacting the CPTSA, the Legislature found it “appropriate . . . to address
the extraordinary situation in Atlantic City by devising a program that avoids
costly assessment appeals for both the casino operators and Atlantic City, and
that provides a certain mandatory minimum property-tax related payment by
casino properties that Atlantic City can rely upon each year.” N.J.S.A.
52:27BBBB-19(h) (2016). The Legislature described Atlantic City as having
experienced “an increase in unemployment due to the recent closing of four
casino properties”; “a strain on [its] municipal budget due to property tax
refunds required by successful assessment appeals of casino gaming properties;
and an increased property tax burden on Atlantic City and Atlantic County
residents based on the decreasing value of casino gaming properties.” N.J.S.A.
52:27BBBB-19(c) (2016).
The Legislature declared the Act served a public purpose “because
Atlantic City will be able to depend on a certain level of revenue from casino
gaming properties each year, making the local property tax rate and need for
State aid less volatile,” citing “the interest of the revitalization of Atlantic City
and the continuation of the casino industry and its associated economic benefits
Page 11
to the State,” the “unique recreational experience” casinos provide “to the
residents of New Jersey,” and the “support” casino revenues provide to “many
social programs, such as property tax relief for seniors, medical assistance,
housing for disabled residents, transportation assistance, and other social
services programs for elderly and disabled New Jerseyans.” N.J.S.A.
52:27BBBB-19(l), (m) (2016).
The Legislature also found it was “a primary public purpose” of the
CPTSA “to stabilize the casino industry for the benefit of the casino employee
workforce.” N.J.S.A. 52:27BBBB-19(n) (2016). The CPTSA would “greatly
enhance the ability of the casino gaming properties to adapt their business
models to the changes in the regional casino gaming market, which will in turn
allow them to remain open for business and to pay their employees good wages
and benefits . . . for many years to come.” Ibid. The Legislature determined the
“ability to depend on a stable [PILOT] obligation” would “in turn help to
stabilize the casino business models . . . , and the [Atlantic City] casino gaming
properties w[ould] be better able to compete with out-of-State casino gaming
properties in the region” and “to preserve, and perhaps grow, the many benefits
that casino gaming has brought to the State, and more particularly, to the
Atlantic City region.” N.J.S.A. 52:27BBBB-19(m) (2016).
Page 12
The CPTSA would achieve those goals in part by mitigating the impact of
the fluctuations in the annual value of the casino properties, which is “greatly
influenced by the performance of casino gaming properties in other nearby states
and by extreme weather events like Super Storm Sandy.” N.J.S.A. 52:27BBBB
19(g) (2016). The Legislature cited its constitutional authority “to grant
property tax exemptions by general law” and declared that laws applying only
to casinos, or “for economic purposes related to casino gaming,” are
constitutional. N.J.S.A. 52:27BBBB-19(i), (j) (2016). It explained that Atlantic
City is “a special class unto itself for economic purposes related to casino
gaming” because it is “the only municipality wherein casino gaming is
authorized.” N.J.S.A. 52:27BBBB-19(j) (2016). It further explained that
“[c]asino gaming properties represent a unique classification of property that
can be exempted from normal property taxation by general law, in favor of a
certain guaranteed mandatory minimum payment in lieu of property taxes when
it is primarily in the public interest to do so.” N.J.S.A. 52:27BBBB-19(k)
(2016).
In lieu of paying local property taxes, the CPTSA required the owner of a
casino gaming property to sign a ten-year financial agreement with Atlantic
City, promising to remit to the city that property’s “allocated portion of the
Page 13
annual amount of the” PILOT. N.J.S.A. 52:27BBBB-20(c)(1) (2016). The
PILOT was to be calculated annually “using a formula implemented by the Local
Finance Board, in consultation with” the Division of Gaming Enforcement,
“using the following criteria”: (1) “[t]he geographic footprint of the real
property, expressed in acres, owned by each casino gaming property”; (2) “[t]he
number of hotel guest rooms in each casino gaming property”; and (3) “[t]he
gross gaming revenue of the casino in each casino gaming property from the
calendar prior year.” N.J.S.A. 52:27BBBB-20(c)(4) (2016).
Instead of relying on “gross revenue” as defined in N.J.S.A. 5:12-24 for
the PILOT, the Legislature in enacting the CPTSA introduced the term “gross
gaming revenue” (GGR). N.J.S.A. 52:27BBBB-20(a) (2016). It defined GGR
as “the total amount of revenue raised through casino gaming from all of the
casino gaming properties located in Atlantic City,” as determined by the
Division of Gaming Enforcement. Ibid.
The Legislature did not intend in the CPTSA to make a casino’s PILOT
payments for the years 2017 to 2021 greater than the casino’s total real property
tax obligation for 2015. N.J.S.A. 52:27BBBB-20(c)(4) (2016). For those first
five years, a casino would receive a credit against its IAT obligation equal to the
amount its total PILOT obligation exceeded its 2015 property tax. Ibid.
Page 14
Whatever the total IAT amount was for any year, the portion not already pledged
for CRDA bonds or other CRDA contractual obligations would be “allocated to
Atlantic City for the purposes of paying debt service on bonds issued” before or
after the enactment of the CPTSA. N.J.S.A. 52:27BBBB-25 (2016).
The CPTSA also required casinos to make “additional payments” to the
State through 2023, in an aggregate fixed amount that would be remitted to
Atlantic City for use in its current-year budget. N.J.S.A. 52:27BBBB-21(c)
(2016).
The additional payments started at $30 million for 2016 and
progressively decreased to $15 million for 2017, $10 million for 2018, and $5
million thereafter. N.J.S.A. 52:27BBBB-21(a) (2016).
In 2018, after the United States Supreme Court found unconstitutional a
federal law that made it unlawful for a state to license or authorize gambling on
competitive sporting events, see Murphy v. Nat’l Collegiate Athletic Ass’n, 584
U.S. 453, 461, 486 (2018), the Legislature enacted a statute that authorized
sports wagering at casinos and racetracks, L. 2018, c. 33. See also N.J.S.A.
5:12A-10 to -19 (the Sports Wagering Act). The Sports Wagering Act was
preceded by a constitutional amendment about sports betting and a statute about
internet gaming.
Page 15.
In 2011 the Casino Clause was amended to allow the Legislature to
authorize “wagering at casinos or gambling houses in Atlantic City on the results
of any professional, college, or amateur sport or athletic event,” excluding “a
college sport or athletic event that takes place in New Jersey or on a sport or
athletic event in which any New Jersey college team participates regardless of
where the event takes place.” N.J. Const. art. IV, § 7, ¶ 2(D); see also Murphy,
584 U.S. at 462 (noting that in 2011, “New Jersey voters approved an
amendment to the State Constitution making it lawful for the legislature to
authorize sports gambling”).
Internet gaming was authorized by statute in 2013. L. 2013, c. 27; see
also N.J.S.A. 5:12-95.17 to -95.33. Internet gaming was defined as “the placing
of wagers with a casino licensee at a casino located in Atlantic City using a
computer network . . . through which the casino licensee may offer authorized
games to individuals . . . who are physically present in this State.” N.J.S.A.
5:12-28.1. “Internet gaming gross revenue” (IGGR) was defined as “the total of
all sums actually received by a casino licensee from Internet gaming operations,
less only the total of all sums actually paid out as winnings to patrons.” N.J.S.A.
5:12-28.2. The Legislature exempted IGGR from the CCA’s eight-percent tax
on gross revenue and instead applied a fifteen-percent tax on IGGR. N.J.S.A.
Page 16
5:12-95.19. The Legislature made IGGR subject to the IAT, except at double
the rates established for gross revenue in the CCA, N.J.S.A. 5:12-144.1,
meaning casinos had to pay an annual five percent IAT on IGGR or provide
2.5 percent of IGGR towards the alternative investment option, N.J.S.A. 5:12
95.19.
In passing the internet-gaming legislation, the Legislature found that
“stop[ping] the illegal Internet gambling market” and controlling how Atlantic
City casinos “accept wagers placed over the Internet for games conducted in
Atlantic City casinos will assist and enhance the rehabilitation and
redevelopment of existing tourist and convention facilities in Atlantic City
consistent with the original intent of the [CCA] and will further assist in
marketing Atlantic City . . . .” N.J.S.A. 5:12-95.17(i). The Legislature again
recognized the “vital interest” the State and general public have “in the success
of tourism and casino gaming in Atlantic City, . . . which by reason of its
location, natural resources, and historical prominence and reputation as a
noteworthy tourist destination, has been determined . . . to be a unique and
valuable asset that must be preserved, restored, and revitalized.” N.J.S.A. 5:12
95.17(c).
Page 17
Pursuant to the Sports Wagering Act, the Division of Gaming
Enforcement is authorized to issue sports wagering licenses to casinos, N.J.S.A.
5:12A-11(a) (2018), and a casino holding a sports wagering license may operate
a sports pool, ibid., which is defined as “the business of accepting wagers on
any sports event by any system or method of wagering,” N.J.S.A. 5:12A-10
(2018). A casino holding a sport wagering license also “may conduct an online
sports pool or may authorize an internet sports pool operator licensed as a casino
service industry enterprise . . . to operate an online sports pool on its behalf.”
N.J.S.A. 5:12A-11(a) (2018). An online sports pool is defined as “a sports
wagering operation in which wagers on sports events are made through
computers or mobile or interactive devices and accepted at a sports wagering
lounge through an [authorized] online gaming system . . . .” N.J.S.A. 5:12A-10
(2018). A sports wagering lounge is defined as “an area wherein a licensed
sports pool is operated located in a casino hotel or racetrack.” Ibid. A casino
operating a sports wagering lounge can offer online sports wagering through an
internet gaming affiliate, N.J.A.C. 13:69N-1.2(c), which is defined as a licensed
“business entity . . . that owns or operates an Internet gaming system on the
behalf of a licensed casino,” N.J.S.A. 5:12-95.32.
Page 18
Like IGGR, “sums received by the casino from sports wagering or from a
joint sports wagering operation, less only the total of all sums actually paid out
as winnings to patrons” were exempted from the CCA’s tax on gross revenue.
N.J.S.A. 5:12A-16. Instead, the Legislature imposed an 8.5 percent tax on those
sums from on-premises sports wagering and a thirteen-percent tax on those sums
from online sports wagering. Ibid. The Legislature also imposed on all sports
wagering revenue an additional tax of 1.25 percent, to be paid to the CRDA “for
marketing and promotion of the City of Atlantic City.” Ibid.
In the 2018 Sports Wagering Act, the Legislature also added the revenue
from “sports pool operations” to the definition of GGR used in determining a
casino’s PILOT payment. N.J.S.A. 52:27BBBB-20(a) (2018). Without
distinguishing between on-premises and online sports pools, the Legislature
redefined GGR as “the total amount of revenue raised through casino gaming,
including revenue from sports pool operations, from all of the casino gaming
properties located in Atlantic City.” Ibid.
In 2021, the Legislature amended the CPTSA, effective December 21,
2021. L. 2021, c. 315. In amending the CPTSA, the Legislature again
acknowledged it had enacted the CPTSA “to address a dire financial
circumstance that affected casino gaming properties in Atlantic City, and the
Page 19
finances of the city itself.” N.J.S.A. 52:27BBBB-19.1(a). The Legislature
found the CPTSA had had a “stabilizing effect . . . on the finances of . . . Atlantic
City and the casino gaming industry during the first five years of the law.”
N.J.S.A. 52:27BBBB-19.1(c). According to the Legislature, “Atlantic City’s
overall financial condition [was] more stable since the casino gaming properties
began making PILOT payments” and that “financial stability benefit[ed] the
casinos, their employees, property taxpayers in Atlantic City, and all New Jersey
residents.” Ibid.
The Legislature, however, found that that financial stability might be
“adversely impacted by certain provisions in the [then] current version of the”
CPTSA. N.J.S.A. 52:27BBBB-19.1(d). The Legislature specifically referenced
the calculation of the annual PILOT payment, which the Legislature had
designed such that “each casino gaming property would not pay more in the
annual PILOT payments than it paid in property taxes in 2015,” and the
impending 2021 expiration of the IAT credit that a casino received when its
PILOT payment exceeded its 2015 property tax. N.J.S.A. 52:27BBBB-19.1(d).
The Legislature also found the public health emergency declared in
response to the COVID-19 pandemic had “negatively impacted tourism in
Atlantic City by restricting the public’s right to travel”; totally and then partially
Page 20
closing casino gaming properties; “and closing other businesses that would have
been visited by tourists to the city for months as well.” N.J.S.A. 52:27BBBB
19.1(e). The Legislature was concerned the impact of those
public health emergency limitations on Atlantic City’s
casino gaming properties w[ould] affect the finances of
those casinos for the foreseeable future, and thereby
impact their ability to pay the required PILOT
payments to the city and . . . contribute to the quality of
life of the State’s senior and disabled residents who rely
on casino revenue deposited into the Casino Revenue
Fund to fund programs that reduce property taxes as
well as utility assistance programs benefiting those
residents.
[Ibid.]
The Legislature declared it was a “compelling public purpose for the State
to establish appropriate alternative obligations for the final five years of the”
CPTSA by amending it to (1) “adjust policies to reflect the operations of existing
casino gaming properties and to compensate for the impacts that the [COVID
19 pandemic] public health emergency . . . had and will continue to have on in
person and internet gaming”; (2) “lessen the financial impact of the end of the
IAT crediting mechanism at the end of 2021 on the casino gaming properties”;
and (3) “ensure that Atlantic City continues to receive sufficient PILOT
payments and IAT payments to fund its municipal budget.” N.J.S.A.
52:27BBBB-19.1(f). The Legislature further declared the amendments to be
Page 21
in the best interest of the casino gaming industry which
serves as a vital part of the economy of the State, in the
best interests of Atlantic City, and in the best interests
of the State’s senior and disabled residents who rely on
casino revenue . . . to fund programs that reduce
property taxes as well as rentals, telephone, gas,
electric, and utility charges.
[Ibid.]
The Legislature stated that its authority under the Exemption Clause
“empowered” it “to grant property tax exemptions by general law” and that both
its prior enactment of CPTSA and its enactment of the 2021 amendment were
valid exercises of that authority. N.J.S.A. 52:27BBBB-19.1(g).
In the 2021 amendment, the Legislature, among other adjustments,
redefined GGR for 2021 through 2026. While it retained the phrase “including
revenue from sports pool operations” in the definition of GGR, the Legislature
limited the phrase’s application to revenue from on-premises sports pool
operations by expressly excluding the revenue from online sports pool
operations by adding this sentence to the definition: “For the purpose of
determining the amount of the [PILOT] pursuant to this section, gross gaming
revenue shall not include revenue derived from Internet casino gaming and
Internet sports wagering during calendar years 2021 through 2026 as determined
by the” Division of Gaming Enforcement. N.J.S.A. 52:27BBBB-20(a). That
Page 22
additional language also made clear internet casino gaming revenue was now
expressly excluded from GGR. Ibid.
The 2021 amendment also provided for staged reductions from 2022 to
2026 in the credit a casino licensee would receive against its annual IAT
obligation if its PILOT exceeded its 2015 property tax obligation. N.J.S.A.
52:27BBBB-20(c)(5) to (9). The 2021 Amendment modified the allocation of
the annual aggregate IAT amount for 2022 to 2026. The portion not already
pledged for CRDA bonds or other CRDA contractual obligations would still be
allocated for Atlantic City’s debt service. N.J.S.A. 52:27BBBB-25(b). The
remainder, up to a cap of $13.5 million in 2022 that would grow to $31.1 million
in 2026, was to be allocated first to Atlantic City for “general municipal
purposes” other than debt service, until that allocation was 2.5 percent greater
than the allocation for the preceding year; the rest would then be allocated
among the CRDA, the Clean and Safe Fund, and the Infrastructure Fund.
N.J.S.A. 52:27BBBB-25(b), (c). The Legislature created in the 2021
amendment the Clean and Safe Fund and the Infrastructure Fund for Atlantic
City’s benefit. N.J.S.A. 52:27BBBB-25(b), -27, -28. The Legislature in the
2021 amendment extended by three years, to 2026, the casino gaming properties’
Page 23
obligation to make additional payments to the State. N.J.S.A. 52:27BBBB
21(a).
II.
“Our standard of review in determining the constitutionality of a statute is
de novo.” State v. Hemenway, 239 N.J. 111, 125 (2019). Engaging in that de
novo review, we follow these guiding principles.
“[S]tatutes are presumed to be constitutional.” In re M.U.’s Application
for a Handgun Purchase Permit, 475 N.J. Super. 148, 190 (App. Div. 2023).
When considering a facial challenge to the constitutionality of a statute, we
“afford every possible presumption in favor of an act of the Legislature.” Mack
Cali Realty Corp. v. State, 466 N.J. Super. 402, 423-24 (App. Div. 2021)
(quoting Town of Secaucus v. Hudson Cnty. Bd. of Tax’n, 133 N.J. 482, 492
(1993)), aff’d o.b., 250 N.J. 550 (2022). “Reviewing courts are ‘not limited to
the stated purpose of the legislation and “should seek any conceivable rational
basis”‘ to uphold it.” Id. at 424 (quoting Strategic Env’t Partners, LLC v. N.J.
Dep’t of Env’t Prot., 438 N.J. Super. 125, 145 (App. Div. 2014) (quoting
Secaucus, 133 N.J. at 494-95)). “Simply put, ‘the courts do not act as a super
legislature.'” Ibid. (quoting Newark Superior Officers Ass’n v. City of Newark,
98 N.J. 212, 222 (1985)). “Only a statute ‘clearly repugnant to the constitution’
Page 24
will be declared void.” Ibid. (quoting Secaucus, 133 N.J. at 492-93). We have
“recognize[d] that, ‘in the field of taxation, the Court has accorded great
deference to legislative judgments.'” Id. at 424-25 (quoting Secaucus, 133 N.J.
at 493).
“[T]he burden is on the party challenging the constitutionality of the
statute to demonstrate clearly that it violates a constitutional provision.” Ibid.
(alteration in original) (quoting Newark Superior Officers, 98 N.J. at 222).
“That burden is onerous.” Ibid. “A presumption of validity attaches to every
statute” and “‘any act of the Legislature will not be ruled void unless its
repugnancy to the Constitution is clear beyond a reasonable doubt.'” State v.
Lenihan, 219 N.J. 251, 266 (2014) (quoting State v. Muhammad, 145 N.J. 23,
41 (1996)). “Even where a statute’s constitutionality is ‘fairly debatable, courts
will uphold’ the law.” Ibid. (quoting Newark Superior Officers, 98 N.J. at 227).
In finding the Amendment unconstitutional, the motion court did not apply
that standard. The court did not consider the decades of legislative and judicial
findings recognizing the symbiotic and deep-rooted connection between
Atlantic City, the casino industry, and the State as a whole. It did not consider
its own conclusion that the Act was constitutionally permissible under the
Uniformity and Exemption Clauses set forth in Article VIII, Section 1, of our
Page 25
Constitution because it fell within a “public purpose” exemption. It did not treat
the Amendment as an adjustment to the PILOT-payment formula set forth in
that constitutional Act or recognize the Legislature’s determination that an
adjustment to the formula was appropriate to maintain the gains in the financial
stability of Atlantic City obtained as a result of the Act. Rather than reading the
Amendment in conjunction with the Act, the court analyzed the Amendment in
isolation, untethered to the constitutional Act it was intended to amend, as if the
public purpose served by the Act was wholly separate and apart from the
Amendment. It wasn’t.
Instead of “seek[ing] any conceivable rational basis” to uphold the
Amendment, Secaucus, 133 N.J. at 495, the motion court rejected the
Legislature’s rational bases supporting its enactment. The court acknowledged
courts must presume the Legislature’s judgment was based on factual support
when presented with no evidence establishing otherwise. See Reingold v.
Harper, 6 N.J. 182, 196 (1951) (finding “Factual support for the legislative
judgment is to be presumed. Barring a showing contra, the assumption is that
the measure rests upon some rational basis within the knowledge and experience
of the Legislature”); see also N.J. Shore Builders Ass’n v. Twp. of Jackson, 199
N.J. 38, 55 (2009) (same). The court nevertheless rejected the Legislature’s
Page 26
stated conclusions and concerns that led to its enactment of the Amendment
based on its determination that “facts on the record contradict[ed]” those
conclusions and concerns. The court erred in doing so, especially because the
record had not established that the “facts” on which the court had relied were
actually available to the Legislature when it enacted the Amendment.2 A court
cannot render void a legislative act based on information it assumed the
Legislature had or the twenty-twenty prism of future data amassed and presented
after the enactment of a statute.
Given the concerns identified by the Legislature, it was not irrational for
the Legislature to determine the CPTSA’s formula for calculating PILOT
payments should be amended. Reasonable minds might differ as to how the
2The court relied on a Division of Gaming Enforcement report entitled “Atlantic
City Gaming Industry Summary of Gaming and Atlantic City Taxes and Fees,”
and monthly casino revenue reports submitted by casinos to the Division for the
months of November and December 2021. The Division’s report was dated May
23, 2022, more than five months after the enactment of the amendment. The
casino revenue reports for December 2021 were submitted in January 2022, after
the amendment’s enactment. See Division of Gaming Enforcement, Monthly
Gross Revenue Reports, New Jersey Office of Attorney General,
https://www.njoag.gov/about/divisions-and-offices/division-of-gaming
enforcement-home/financial-and-statistical-information/monthly-gross
revenue-reports (last visited Oct. 14, 2024). And although the monthly reports
for November 2021 were submitted to the Division on various dates in
December 2021, it is not clear when the Division made those reports available
on-line.
Page 27
formula should have been amended but in such cases courts must defer to the
Legislature’s judgment.
[O]ur Supreme Court has emphasized “the long
established principle of deference to the will of the
lawmakers whenever reasonable men might differ as to
whether the means devised to meet the public need
conform to the Constitution . . . [and] the equally
settled doctrine that the means are presumptively valid,
and that reasonably conflicting doubts should be
resolved in favor of validity.”
[Mack-Cali, 466 N.J. Super. at 429-30 (quoting City of
Jersey City v. Farmer, 329 N.J. Super. 27, 46 (2000)).]
As we held in Mack-Cali, “[i]t is not for us to dispute the wisdom of the
Legislature’s choice.” Id. at 430.
The motion court found it was “unclear whether the Legislature acted with
. . . noble intentions in passing the Amendment.” But that isn’t the standard a
court applies when considering the constitutionality of a legislative act. A court
cannot rule a legislative act void “unless its repugnancy to the Constitution is
clear beyond a reasonable doubt.” Lenihan, 219 N.J. at 266 (quoting Brown v.
City of Newark, 113 N.J. 565, 572 (1989)). When “a statute’s constitutionality
is ‘fairly debatable, courts will uphold’ the law.” Ibid. (quoting Newark Superior
Officers, 98 N.J. at 227). The motion court did not apply that high standard, and
plaintiffs failed to meet it.
Page 28
For these reasons, we reverse the portions of the August 29, 2022 final
judgment denying in part defendants’ motion to dismiss the complaint, granting
in part plaintiffs’ summary-judgment motion, and declaring the 2021 amendment
null, void, and of no effect. We otherwise affirm.
Affirmed in part; reversed in part.
Page 29
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