Atlantic City Tax-Break Bill: Crucial For Industry Survival Or Unneeded Windfall?

Outgoing state Senate president and ex-Atlantic City mayor spar over controversial proposal
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The catastrophic effects of the closure of four Atlantic City casinos in 2014 and another in 2016 remain fresh in the minds of state lawmakers. But so, too, does sensitivity about potentially being perceived by voters as in the pocket of giant corporations.

So when lame-duck state Senate President Stephen Sweeney and Republican Don Guardian — a former mayor in the city — took opposing viewpoints on a tax-break proposal for the city’s casino industry during Monday’s hearing of the Senate Budget and Appropriations Committee, several members found themselves struggling to choose a side.

“We are risking four casinos closing,” Sweeney bluntly told the committee of the perils of not passing a revision of the five-year-old payments-in-lieu-of-taxes (PILOT) plan. “I do not want that to happen. I don’t want to have a situation where it’s, ‘I told you that place was going to close, and it closed.’ I don’t want to get to say I was right.”

The bill would set the annual PILOT payment for the industry at $110 million — or $55 million lower than is otherwise projected for 2022. But casino executives have complained that the estimates are based on all gross gaming revenue from the booming online casino and mobile sports betting industries, when the lion’s share of that money actually is kept by the operators who run the sites.

Guardian of the city … and county?

But Guardian, who was mayor five years ago and last month gained election to a state Assembly seat, said the original version of the bill set the annual PILOT payment at $120 million.

“Before the bill went up for vote, the gaming industry decided to gamble,” Guardian recalled, at a time when there was discussion of bringing casinos to North Jersey, before sports betting was legal, and prior to the exponential explosion of online casino revenue.

The bill thus was amended so that if the casinos had as difficult a time as feared, the financial obligation would be lessened. Instead, revenue has risen to record highs, according to the state Division of Gaming Enforcement’s calculations.

“Now we know that was a bad bet [for casino operators], but we shouldn’t be paying for that bad bet,” Guardian said, referring to rising PILOT costs.

Guardian said that he opposed the bill because “county taxpayers would have to pay more so that the casino industry gets a tax break. I’m asking for fairness. With casinos paying less, everyone else has to pay more. There are too many unknowns, and what is known is not good.”

In response to Sweeney’s casino closure claims, Guardian said, “I agree that one property has not kept up with the other properties, but others have changed drastically.”

Legislators on the fence

Republicans Declan O’Scanlon and Steven Oroho each said they came to the hearing to vote against the bill, but each announced they would abstain after hearing Sweeney’s comments about possible closures. Colleague Michael Testa also abstained after asking Guardian a series of questions, and Republican Samuel Thompson voted against the bill.

Troy Singleton, a Democrat, said he was disappointed that “no one from the [casino] industry thought it important enough to come and answer basic questions. I have a distaste for the disrespect shown many of us. I don’t like how this came out.”

Singleton ultimately voted “yes, with grave reservations,” echoing comments that he made three weeks ago when a bill on the same topic was up for discussion in the Senate Community and Urban Affairs Committee that he chairs.

Committee Chairman Paul Sarlo, also a Democrat, said that details in the bill had been negotiated with Atlantic City Mayor Marty Small Jr. and with the city council. Sarlo disagreed that the complex revisions will result in a net loss of tax revenue for the state.

Which casinos might be in jeopardy?

Neither Sweeney nor Guardian offered specifics on casinos that might be endangered. There now are nine properties after mid-2018 reincarnations of Revel as Ocean Casino and Trump Taj Mahal as Hard Rock.

In the first three quarters of 2021, gross operating profits ranged from a high of $126.6 million for Borgata to a low of $7.9 million in losses incurred by Bally’s. Coming in behind Borgata and ahead of Bally’s, in order, were Tropicana, Hard Rock, Harrah’s, Ocean, Caesars, Golden Nugget, and Resorts.

In the same span this year, Borgata also led in gross gaming revenue at $441.7 million, while Bally’s also placed last in that category at $105.9 million. Bally’s, which is in the midst of a three-year, $100 million upgrade, was followed in GGR by Hard Rock, Ocean, Harrah’s, Tropicana, Caesars, Resorts, and Golden Nugget.

Safety bill also passes in committee

Another bill introduced on Monday would add a daily $3 per room surcharge to Atlantic City hotel rooms, with the money funding the city’s police and fire departments. The bill is estimated to raise $25 million over two years before expiring.

One resident asked why the funds would go to those two departments rather than other public programs.

“We think we need Atlantic City to be safer, and I think people would rather see more police than less police,” Sweeney replied before the resident replied, “It depends on who you are, senator.”

The bill passed unanimously.

Photo: Shutterstock

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