NJ broke promise, changed PILOT and hurt Atlantic City, Atlantic County

Featured Image Above:  “The Quarter” Luxury Shops And Restaurants of the Tropicana Casino on the Boardwalk.  In 2016, The State Passed A Special Law Exempting All Nine Atlantic City Casinos From Property Taxes And Letting Them Make “Payments In Lieu of Taxes” Based On Their Gambling Receipts.  The State Law Said The Casino Properties Qualified For The Exception Allowing Tax Breaks For the Development of “Blighted” Areas.  

Originally published in Press of Atlantic City on July 3, 2022. Click here for link. NJ broke promise, changed PILOT and hurt Atlantic City, Atlantic County | Columnists | pressofatlanticcity.com

In 2016, Atlantic City’s local government was broke. It could not pay its employees or fund its public schools. Republican Gov. Chris Christie and the Democratic majority state Legislature responded with two drastic new laws.
A “Municipal Stabilization Act” created a new state office with the power to disregard union contracts and civil service rules. It then cut salaries and fired employees.
A “Casino Property Tax Stabilization Act” exempted Atlantic City’s eight casino properties from local property taxes for 10 years. It had them pay their share for public schools and local government with “payments in lieu of taxes” (PILOT) based on their gross gambling income.
I was then the attorney and executive director for a local organization called Liberty and Prosperity. One of our core missions is to promote awareness and compliance with federal and state constitutions.
We did not oppose the 2016 Municipal Stabilization Act. It complied with the state constitution and was long overdue. Big cuts in government spending were needed to match big drops in taxpayer income after the subprime mortgage recession and competition from Pennsylvania casinos in 2008.
However, we did oppose the Casino Property Tax Act. We filed a lawsuit declaring that it was unconstitutional. Since 1875, the State Constitution required all real estate to be assessed and taxed equally. Exceptions can only be made by amending the constitution — not just by passing a new law.
Two years later, we settled that lawsuit. The Municipal Stabilization Act cut spending, and balanced the city’s budget with sustainable taxes. Its yearly budget dropped from $262 million in 2015 to 225 million in 2018.
We also saw from two years of actual tax collections that the PILOT law did not reduce what the casinos would have been paying in real estate taxes. The increase in internet gambling income made the alternative tax method work.
Finally, when the case was about to be decided, the state agreed to a very fair court settlement. The state promised that it would not allow the 10 year PILOT law to “negatively impact” taxpayers in Atlantic City or Atlantic County.
The eight Atlantic City casinos were not parties to that lawsuit or the settlement. However, they were actively involved in writing the PILOT legislation. They also closely monitored the litigation. They never objected to what the state was doing in public or in court.
If the state kept its promises, the PILOT program would have quietly continued until it expired at the end of 2026. By then, most of Atlantic City’s debt from its 2010 to 2018 financial crisis would have been paid off. Atlantic City casino properties would then be taxed like all other real estate, as required by the State Constitution.
However, the state broke its promise. Last December, the state changed the Casino Property Tax law so casinos would no longer include internet gambling in calculating the casino PILOT payments. The casinos would pay roughly $5 million less to Atlantic City government in 2022 and roughly $19.3 million less to Atlantic County government over the next five years.
That is why we are back in court. We want the state to again use internet gambling income to calculate the casino PILOT payments. If that cannot be done, we want the court to enforce the State Constitution. We want casino properties to again pay regular real estate taxes like everybody else.
Atlantic City’s nine casino properties are worth more than half of the total value of all real estate in Atlantic City. They should pay more than half the cost of public schools and local government.
Also, the casinos together with their employees, professionals and suppliers have far more political clout than any other group in Atlantic City. They should be financially motivated to demand honest and efficient local government that benefits all taxpayers — not special deals for themselves. This is why the equal taxation provision was added to the State Constitution in 1875.
Finally, state mismanagement created Atlantic City’s financial mess. The state took over Atlantic City’s finances in 2010, but waited seven years to cut spending. During that time, the state broke its own balanced budget laws for local government. That put Atlantic City taxpayers more than $400 million into debt. Both the state and the casinos have a legal and moral obligation to pay their share of it.
The case is now before Judge Michael Blee. He is scheduled to decide this case on Aug. 5.

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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