Four Atlantic City casinos could close without tax break, Sweeney warns (updated)

Daniel J. Munoz//December 6, 2021

Four Atlantic City casinos could close without tax break, Sweeney warns (updated)

Daniel J. Munoz//December 6, 2021

[vc_row][vc_column][vc_column_text]A Senate panel approved a major tax break proposal for New Jersey’s nine casinos that would lower payments to Atlantic City, with lawmakers saying the move is necessary to prevent further casino closures.

Senate President Stephen Sweeney, D-3rd District, warned that four casinos — which he did not identify — could shut down without the reductions.

“I don’t want to be in a situation of ‘I told you that place was going to close’ and it closed,” he said during the Dec. 6 Senate Budget and Appropriations Committee hearing.

Under Senate Bill 4007, the state would cut the amount of payments in lieu of property taxes that the casinos pay to the resort town in 2022 to $110 million, and remove online gambling and sports betting from the tax calculations. It now goes to the full state Senate for a vote.

The bill passed with the support of the committee’s nine Democrats, with a single no-vote from one of the Republicans – the rest of the committee’s GOP members abstained.

Sen. Troy Singleton, D-7th District, said he was unhappy that no one from the casino industry was at the hearing to take questions or hear concerns on the proposal, “considering what we’re being asked to undertake today.”

But he ultimately voted for the bill, citing fears of the economic damage that casino closures could cause in Atlantic City. The shutdowns during the COVID-19 pandemic made the city’s unemployment rate among the highest in the nation.

The PILOT bill was introduced in June and has advanced quickly since the start of lame duck session, which continues until the new state Legislature is sworn in on Jan. 11.

Sweeney said during the hearing that there were mistakes made in the original PILOT bill, which was passed after the casinos successfully argued that their property values – and taxes – should be lowered because of decreased patronage caused by the Great Recession. The result was hole blown in Atlantic City’s budget, prompting the 2016 state takeover.

The Casino Association of New Jersey – a trade group for the nine casinos which has been pushing for the bill’s approval – also warned that some casinos would be in trouble without the PILOT changes. “Over the last five years we have seen one of the most stable tax environments in decades in this city,” Hard Rock Atlantic City and CANJ President Joe Lupo said in an email. “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.

Former Atlantic City Mayor Don Guardian. – NJBIZ STAFF

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 – Atlantic City’s mayor during the state takeover – told lawmakers.

But Sweeney contended at the hearing that “if we could tax less, maybe we can have more jobs.”

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.

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

“For months, casinos have posted record-breaking revenue numbers, far beyond anything imagined five years ago,” he added. “Casinos would like to change the [PILOT] formula to allow them to keep more of their profits.”

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 continued.

Other local officials like Atlantic County Executive Dennis Levinson, warned in May that “the non-casino businesses and taxpayers of Atlantic County… will once again bear the burden of this flawed legislation.”

Under the legislation, the lion’s share of the investment alternative taxes the casinos pay to Atlantic City would continue. That would add in another $50 million for the city, according to the CANJ.

PILOT payments for Caesars and Harrah’s would actually drop through 2025 under the new proposal, according to documents obtained by the Associated Press and not in the state legislation.

Payments would increase between now and 2025 for Hard Rock, Tropicana, Bally’s, Golden Nugget, Ocean Casino Hotel and Resorts.

This story was updated at 7:30 a.m. EST on Dec. 7, 2021 to add comments from the Casino Association of New Jersey. [/vc_column_text][/vc_column][/vc_row]