It has been five years since New Jersey lawmakers passed a bill shifting Atlantic City casino operators from traditional property taxes to PILOTS, or payments in lieu of taxes.
The casinos agreed to pay a set amount of at least $120 million annually, with government officials gaining the advantage of a defined stream of revenue. Previously, casinos repeatedly fought for, and won, decreases in their tax bills based on what were found to be outdated and too-high assessments of the properties.
Much has changed in those five years, including a stabilization of the total number of casinos at nine since 2018. But with a vacant state Senate seat up for election in the Atlantic City region, PILOTs once again are on the radar politically.
“In Atlantic City, things hit the fan pretty hard with four casinos closed” in 2014, Democratic candidate Vince Mazzeo told The Press of Atlantic City editorial board earlier this month. “We as the majority party put together a couple of pieces of legislation that saved Atlantic City. I took a lot of heat, but the PILOT bill took away tax appeals and gave the city steady revenue.
“The PILOT has been a savior in Atlantic City,” Mazzeo added during a recent debate with Republican candidate Vince Polistina.
Taxing apples like oranges?
Casino operators in the city have complained about online casino revenue and sports betting revenue getting lumped in with traditional brick-and-mortar earnings as equivalent revenue. The casinos take in some revenue on sports betting through their retail sportsbooks, but the online casino deals are just partnerships with other operators that keep a majority of the revenue for themselves.
Hard Rock Atlantic City President Joe Lupo made the case for the casinos earlier this year, saying, “I don’t know why there isn’t more transparency in the reporting. This metric that we’re reporting all of the licensee revenues under the casinos isn’t giving the proper validity, and I think it’s hurting the perception” of the economic health of the casinos.
Mazzeo has expressed some sympathy for the casino owners’ plight, but Polistina disagreed.
“You have twice now tried to take county taxpayer money and give it to the casino owners,” Polistina said. “This latest one to eliminate online gaming revenue and sports gaming revenue from calculations for PILOT is irresponsible. There is no reason for giving more money to casino operators when [the city and county] have so many needs.
“If we could get casinos valued appropriately and go back to a regular property tax system, that would be the way to go,” Polistina added.
What is the casinos’ tax responsibility?
“Sports gaming and internet is why revenue went up so high,” Mazzeo said. “Naysayers were saying they’d only be paying $90 million or $100 million [in taxes], and now they’re paying $150 million. COVID put the kibosh on that, but it will get back up there.”
Asked what percentage of city taxes the casinos should be paying, Mazzeo replied, “I’ve heard somewhere between 50 and 55% that casinos should pay. To get more revenue, my next idea is rental to owner occupancy. Put construction incentives for people to build, and get the owner percentage from 20% now to 80%.”
Democratic Assemblyman John Armato, who is running for reelection, defended his sponsorship of a bill that proposes to adjust the casinos’ tax burden.
“The bill was designed to open up a conversation between the city, casinos and Atlantic County,” Armato said. “It did exactly what it was supposed to do.”
Atlantic City tourism district a topic
Polistina, who took part in the decision in 2011 to turn part of the city into a “tourism district” run by the state, was asked how he sees that having turned out.
“We created the district to give the state a partnership,” Polistina said. “I don’t think we’ve done enough. The notion we’ve had billions and billions of investment and the city still looks the way it does, it’s a tragedy. It’s not even fathomable to think it has been 43 years [since the first casino opened in the city], and there are parts of that city you wouldn’t even want to go to.
“Concerning the takeover, it would have been a lot better if we let Trenton focus on what they do and let the county be a partner. One of the things I would push is to bring the county executive and commissioners in and have them be a real partner with what’s going on in Atlantic City.”