“PILOT” means “Payments In Lieu of Taxes”. It is a tax break that can be given to properties that redevelop “blighted” areas”. When politicians qualify some properties for “PILOT”, taxes usually go up for everyone else to make up the difference.
PILOT programs corrupt politics. They reward people who use politics to get special deals for themselves rather than efficient government and low taxes for everyone.
In 2016, Republican Governor Chris Christie and Democrats enacted a ten-year PILOT law for all casinos in Atlantic City. They pay “PILOT” based on their income instead of property taxes. In 2021, the casinos complained that they were still paying too much. They then lobbied state legislators to change the law and exclude their online gaming profits in calculating their PILOT.
That law expires next year. Republican State Senator Vince Polistina wants to extend it. That would be a big mistake.
Casinos don’t need special tax treatment. They are routinely assessed and taxed like other commercial properties all over the world.
Atlantic City’s problems were NOT caused by casino tax appeals in 2016. They were caused gross misconduct and neglect by state officials appointed by Governor Christie during the previous six years.
Until 2008, twelve casino properties paid more than 2/3 of Atlantic City’s taxes. This was far more than their fair share. The city’s tax assessor valued them by their costs construction. This was inflated because they were built in a hurry.
In 2008, there was a world-wide financial collapse. There was also competition from new casinos in nearby Philadelphia. Four Atlantic City casinos closed. The rest struggled to stay open. Non-casino businesses also lost money. Thousands of employees lost their jobs and stopped paying rent.
This made every property in Atlantic City worth much less than before.
Atlantic City’s government failed to adjust. Its assessor refused to reduce the assessments on the properties it taxed. Its politicians refused to cut spending.
In 2009, all the casinos disputed their tax bills and challenged their assessments in court. So did most other taxpayers. They all paid the taxes they disputed in full as required by law. However, they were entitled to full refunds if they won.
In 2010, Republican Chris Christie became Governor. That October, he appointed a state “monitor” to “supervise” Atlantic City’s finances. For the next six years, the state let Atlantic City sink deeper into debt. It let Atlantic City spend every dollar it collected in taxes even though more than $60 million of that money was disputed each year.
In 2013, New Jersey’s Tax Court ruled that Atlantic City over-assessed the Borgata Casino by $1.4 billion in 2009 and 2010. It ordered Atlantic City to return $48.8 million of disputed taxes plus interest. The court later made similar rulings for the other casinos.
Even then, the state did not force Atlantic City to cut its budget and hold disputed tax money in escrow. It allowed Atlantic City to instead hire expensive lawyers to try to get the Tax Court overruled.
While all this was happening, Chris Christie was running for President. He ran for re-election as Governor in 2013. He wanted to win by a landslide. He gave Democrats, unions and government employees almost everything they wanted. Christie did not want a messy fight over salary cutbacks or layoffs in Atlantic City.
In 2016, Christie finished dead last in New Hampshire. He quit running for President and went back to being Governor. By then, Atlantic City owed nearly a half billion dollars in tax refunds and other debts.
Christie worked with Democrats to enact the “Municipal Stabilization and Recovery Act”. It let state officials scrap civil service laws and collective bargaining agreements. They then drastically cut payroll. They gave Atlantic City a balanced budget and affordable taxes by the end of the year.
Christie and Democrats also let Atlantic City use the “Casino Reinvestment Development Tax” to pay down its debt. After ten years, that debt is now roughly $220 million. It needs that tax for ten more years to pay off that balance.
Finally, Christie and Democrats enacted a law that let the casinos pay PILOT instead of real estate taxes. The PILOT was based on casino income. This was unnecessary. The Tax Court had been using income to assess casino properties since 2013.
Atlantic City still needs the Casino Reinvestment Development Tax to pay back Christie’s debt. It does not need the Casino PILOT.
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Seth perhaps I may be right, or maybe not. But when casinos opened and started building more casinos, the tax assessor in Atlantic City has never been qualified because a special assessor from Nevada should’ve done assessment. Atlantic City tax assessor had no experience assessing a building for casinos
Even though I was on City Council during the 1980s boom years, I didn’t pay attention to what the assessor was doing. My hunch is that he didn’t have to be a qualified expert. All he had to do was assess the casinos at what they paid to buy the land and build their hotel casinos. Casino profits were so enormous in those days that casinos paid top dollar for their land and a fortune on “fast track” construction so they could open quickly. The casinos knew that while they were technically over-assessed in the 1980s and 1990s, it did not make sense to appeal their assessments for three reasons. First, it was hard to argue that their casino buildings were not worth what they paid to buy and build them. Second, they were making lots of money, and paying less total taxes than most other gaming jurisdictions. Third, New Jersey law bars casino executives and many employees and contractors from running for public office or actively engaging in politics. Every casino executive was afraid of getting whacked by New Jersey politicians at any time. . . like the Tropicana in 2007.