A judge will not hear a case involving Atlantic County’s share of a portion of annual effective tax dollars until April 25 — or 24 days after the original hearing and ruling were expected.
In February, the county won a case before Superior Court Judge Joseph Marczyk, who found that a state law enacted late last year regarding the payments-in-lieu-of-taxes, or PILOTs, owed by the city’s nine casinos violated a 2018 settlement between the county, the state, and the casinos.
At issue is whether revenue from mobile sports betting and online casino gaming should be part of the gross gaming revenue figure that determines the amount owed to the county, which collects 13% of the total. The casinos won over lawmakers who concluded that because the casinos only keep a minority share of the revenue compared to their partner operators who run the sites and apps, state Division of Gaming Enforcement regulators were wrong to include those dollars in calculating the PILOT.
The change in definition of revenue could cost the county $3 million to $5 million per year, experts have concluded.
The judge did not address the legality of the new law, but instead directed a subsequent judge to determine the amount of damages the county should be awarded.
The revenue from online casino gaming through NJ casino apps — first legalized in 2013 — was included in both a 2016 law directing that a portion of gross revenue go to the county and a 2018 consent order among the parties that settled previous disputes. Sports betting — about 90% of which is derived via mobile means, rather than walkups to tellers or wagers at kiosks at brick-and-mortar casinos and racetracks — was legalized in mid-2018.
Reneging on a promise?
State attorneys have argued that “gross gaming revenue,” for the purposes of calculating the annual PILOT payment, is whatever the state DGE says it is. County lawyers have countered that the 2016 and 2018 deals were based on an understanding that revenue from new sources such as online casino and mobile sports betting also were to be considered part of the figure that sets the PILOT level.
The issue was publicly dramatized at a Senate Budget and Appropriations Committee hearing in December, when outgoing Senate President Stephen Sweeney — loser of a stunning race against an unknown Republican truck driver a month earlier — argued that up to four Atlantic City casinos might have to close without an adjustment to boost the casinos’ bottom lines.
“I do not want that to happen,” Sweeney said. “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.”
But former Atlantic City Mayor Don Guardian testified that the casinos themselves set the current tax model in 2016, before online casino revenue skyrocketed and before the 2018 U.S. Supreme Court ruling that set the stage for legal sports betting in New Jersey — which averaged more than $1 billion in monthly wagering handle throughout the 2021 football season.
“Before the bill went up for vote, the gaming industry decided to gamble,” Guardian recalled of the casinos’ collective decision to set a PILOT price to be based on annual gross revenue.
The bill that became law set a scenario where if the casinos had as difficult a time as was feared, the tax bill would actually decline. But with the new sources of gambling dollars, casino revenue has risen to record highs — leading to more money due to the city, county, and state.
“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 for those casinos.
Guardian said that he opposed the bill exempting certain revenue from the PILOT calculation 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.”
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