Assembly panel approves casino tax breaks ahead of holiday

[vc_row][vc_column][vc_column_text]Lawmakers are pushing ahead a series of tax breaks for the state’s casino industry, a move proponents argue is necessary to prevent several gaming halls from closing.

The main proposal would reduce the annual remittances that casinos make to Atlantic City in place of property taxes, known as a Payment of Lieu of Taxes or PILOT arrangement. Those funds go to Atlantic City, Atlantic County and the local school district.

Assembly Bill 5587 would also remove online gambling and sports betting revenue from the tax calculations, at a time when both avenues have seen record activity.

Sports-betting brought in $1 billion of wagers in both September and October, the lion’s share of it online and via mobile phone apps. Online gaming became a lifeline for the casinos during the state-mandated three and a half month closure during the height of the pandemic last year, and reduced capacity through the early summer.

Meanwhile the third quarter net revenues for the casinos – which encompassed the summer months when the gaming sites and their restaurant, retail, event and entertainment operations could fully reopen – was up 53.9% from the third quarter in 2020 and 4.2% from the same period in 2019. Gross operating profits for those same months – July, August and September – doubled between 2020 and 2021.

“Given the successful rebound of Atlantic City casinos, it is unnecessary to adjust the PILOT payment,” said Peter Chen, an analyst with the progressive think tank New Jersey Policy Perspective.

Under A5587, the state would cut New Jersey’s PILOT payments to the resort town to $110 million in 2022. It was approved Dec. 13 by the Assembly Appropriations Committee and by the Senate Budget Appropriations Committee on Dec. 6.

Once the Assembly and Senate versions reconciled, the measure would go to both chambers for a full floor vote.

Assembly Bill 5943, would temporarily modify some of the taxes and credits for casinos licenses, and change the state’s promotional gaming credits to include coupons and table game wagers.

It was also approved by the Assembly committee in on Dec. 13 and by the Senate Budget and Appropriations Committee on Dec. 6.

The primary sponsor for the casino tax legislation – outgoing Senate President Stephen Sweeney, D-3rd District – warned that as many as four casinos could close, despite the industry’s improved fortunes coming out of the COVID-19 restrictions. He and casino industry executives have not indicated which casinos are at risk.

“Over the last five years we have seen one of the most stable tax environments in decades in this city,” Joe Lupo, president of Hard Rock Atlantic City and of the Casino Association of New Jersey, said in an email earlier in December. “If we don’t pass this legislation, we will completely reverse course, and several casinos could be in grave danger.”

According to the state Office of Legislative Services, the casino PILOT payments under the bill would be slashed by $55 million in 2022, “and probably between $30 million and $65 million in subsequent years through 2026. To partly offset the declines in PILOT revenue, the casinos will need to pay $5 million each year between 2024 and 2026, but the report maintained that it would be just a drop in the bucket.

“It’ll force Atlantic County taxpayers to pay more so that the casino industry gets a tax break,” Don Guardian – a former Atlantic City mayor – told lawmakers at the Dec 6  hearing.

Under the original PILOT agreement which is still in effect, the Atlantic City casinos are on the hook for a combined $165 million this year. Chen said that agreement already incorporated the potential for new financial uncertainty like COVID-19, meaning a change to the PILOT would not be necessary.

The decrease in PILOT payments would mean a $55 million hole in the local budget this year alone “without any contingency plan,” Guardian said.

Caesars Entertainment Regional Vice President for Government Relations Joe Tyrell told lawmakers on Nov. 15 that the PILOT system “has actually saved Atlantic City.”

“Without the PILOT, you wouldn’t have had Hard Rock open. You wouldn’t have Revel – now Ocean – open,” Tyrell said.[/vc_column_text][/vc_column][/vc_row]