New Jersey Judge Sides With Atlantic County in Casino Tax Dispute

Posted on: May 3, 2022, 01:55h. 

Last updated on: May 4, 2022, 12:09h.

Devin O'Connor @CasinoorgDevinO Read More
Expertise: Asia Pacific Gaming, Commercial Gaming, Legislation, Politics.

New Jersey Superior Court Judge Michael Blee this week upheld a lower court’s ruling that found the state’s new payment-in-lieu-of-tax (PILOT) arrangement with the nine casinos in Atlantic City violated a 2018 consent order.

New Jersey Atlantic County PILOT Atlantic City casino
Atlantic County Executive Dennis Levinson. Another New Jersey Superior Court judge has come down in favor of Atlantic County in its lawsuit against the state regarding Atlantic City casino property taxes. (Image: New Jersey Association of Counties)

Superior Court Judge Joseph Marczyk fielded Atlantic County’s lawsuit last year against the state. The county argued that the state’s amended 2021 PILOT terms with the casinos — which removes iGaming and online sports betting revenue from the calculation used to determine how much property tax the nine casinos collectively pay under the PILOT — ran afoul of a 2018 legal outcome that guaranteed Atlantic County 13.5% of the annual tax sum.

The county estimates that the 2021 PILOT change would reduce its casino property tax revenue by $5 million to $7 million annually. Marczyk initially recommended the state and county enter into mediation to settle the dispute. But after the state refused, the judge was tasked with deciding the matter.

In February, Marczyk ruled that the 2021 PILOT bill, which was signed into law by New Jersey Gov. Phil Murphy (D) in December, indeed violates the 2018 terms guaranteed to the county. Blee this week announced that the state’s request for reconsideration has been denied.

County Victory

Atlantic County Executive Dennis Levinson says the denial for reconsideration means the state will be required to continue directing the county what it would have received under the previous PILOT calculation.

Everybody in this county ought to take a victory lap,” Levinson said yesterday. “Now you have two judges, Marczyk and Blee, who are in agreement that the state was wrong and that the taxpayers of this county were being treated extremely shabbily.”

Blee and Marczyk’s rulings do not prevent the 2021 PILOT’s enactment. What it does is require that Atlantic County continue to receive its 13.5% tax allocation based on annual gross gaming revenue that includes internet gaming and mobile sports betting income.

The state argued that the 2018 consent order only says that Atlantic County must receive 13.5% of the PILOT tax, but didn’t specify what constitutes “gaming.” Attorneys representing the state’s interests said lawmakers are free to determine what is included in the gaming revenue calculation. But the judges disagreed.

PILOT Lifeline

After his shocking upset in the 2021 November election, then-New Jersey Senate President Stephen Sweeney (D) championed the PILOT amendment in the casinos’ favor. The longtime politician said as many as four of the nine casinos were in peril of closing unless the state reduced their tax obligations.

Sweeney didn’t name names regarding the four at risk of closing without tax breaks. But the New Jersey Division of Gaming Enforcement said eight of the nine casinos were profitable last year — Bally’s being the lone exception, as the Boardwalk property recently changed ownership and is amid a $100 million renovation. The nine casinos combined to post a gross operating profit of $174.4 million in 2021.

Murphy’s office has yet to comment on this week’s ruling from Blee.