Atlantic City Casinos at Center of Property Tax Dispute
This is a reminder that, in most NJ municipalities, the deadline to file a 2023 property tax appeal is fast approaching on April 3, 2023. If you believe you may be overassessed, contact us at info@mrod.law for a complimentary evaluation of your 2023 property tax assessment.
Last year, a Superior Court judge struck down a controversial law adopted by the Legislature in 2021, which provided casinos in Atlantic City with property tax relief after both the casinos and the Atlantic City budget felt the pain of shrinking attendance and occupancy at the casino resorts, leading to several successful property tax appeals whereby the City was ordered to pay property tax refunds to casino property owners totaling millions of dollars and which shrunk the City’s ratable base by billions. Some of the specific case studies and impacts were covered in our blog post from 2013 (that’s right 2013), but the stories continued for years thereafter. The impacts on the City were many and included a hit on the “other” taxpayers in Atlantic City, who witnessed huge increases in the tax rate to help absorb the lower ratable base as the City tried to make ends meet.
This situation was thought to reach a near crisis situation during the COVID-19 pandemic, as hotels and casinos were shuttered and, when they reopened, the crowds were scarce, causing concern that there may be more property tax reductions. Then came along the New Jersey Legislature to the rescue, which adopted in late 2021 (by a narrow majority) amendments to the Casino Property Stabilization Act, a 2016 law that attempted to right the ship in Atlantic City when it came to the methods of assessing casino properties. The 2021 amendments modified the ways in which the City’s property tax regime for its casinos would function, by replacing ordinary property tax revenues with payments in lieu of taxes or “PILOT” payments. These PILOT payments were set to a formula based on the gross gaming revenue “GGR” of the casinos in the City. The legislative intent was for the casino properties to have a method of property taxation that was more in line with their revenues and less prone to over-assessment.
The 2021 revised Act adjusted the PILOT formula from the original law, removed internet and online sports gambling revenues from the formula, and capped the PILOT payment amounts. The revised Act also included new provisions which deal with scenarios in which new casinos may open in Atlantic City, while also providing for the possibility of a current casino ceasing to be a “casino gaming property”. We covered the 2021 revised act in this blog post.
Like many well-intentioned efforts, the adoption of the 2021 amendments was not met with universal praise. A non-profit organization called Liberty and Prosperity challenged the constitutionality of the law in court, arguing the state Constitution bars New Jersey from giving special tax treatment to an industry. In August 2022, Superior Court Assignment Judge Michael Blee agreed, holding that the law violated the State Constitution because it intended to aid a specific industry and did not serve a valid public purpose.
But the controversy did not end there, as both sides appealed and are awaiting action by the appellate court. Given the interests at stake, Judge Blee issued a stay of the enforcement of his own ruling pending the appeal.
The matter was in the news again recently, as Governor Murphy discussed it in his January 2023 State of the State address, commenting that the casinos would pay their “fair share” of taxes.
We’ll be watching this one closely, as it involves a story that is all too common in MROD’s professional world. While this controversy analyzes the constitutionality of PILOT payments for casino properties, one of the principal incentives in local redevelopment projects undertaken under New Jersey’s Local Redevelopment and Housing Law is that those projects also qualify for PILOT agreements, where private redevelopers are permitted to enter into agreements with towns to fix their property tax payments for up to 30 years. These incentives are said by some to be necessary to encourage the private sector to undertake redevelopment projects in blighted areas, but they too have resulted in controversy, as opponents suggest that the politically-favored redevelopers are getting tax breaks for new construction projects, thereby forcing the rest of the taxpayers to pick up the tab for the gap in the municipal budget that may be created by incentivized tax structures.
Whether the casino PILOTs are viewed favorably by our appellate courts like redevelopment PILOTs remains to be seen, but it certainly seems like any recognition by our courts or legislature that “underutilized” properties in redevelopment projects are entitled to property tax breaks is not altogether than the proferred “public” purpose of assisting underutilized properties such as casinos.
