Earlier this week, Atlantic City Emergency Manager Kevin Lavin recommended amendments to the city’s payment in lieu of taxes, or PILOT, bill.
The original version of PILOT first reached Governor Chris Christie’s desk in November of last year. Governor Christie conditionally rejected the bill due to the amount of control and cash flow PILOT would give to Atlantic City managers.
At the time, Governor Christie issued a statement to the legislature defending his reasons for rejecting PILOT:
“Regrettably, many of the City’s key stakeholders have failed to embrace the concepts of fiscal restraint and strong leadership, and instead have settled on a course toward self-preservation and vacillation.”
The newest version of PILOT was voted on and passed by the assembly in December. If the most recent version of PILOT passes the senate soon, the bill could reach Governor Christie for approval as early as January 11.
This current bill calls for a fifteen-year plan that would remove the requirements for casinos to pay traditional property taxes. Currently, casinos pay property taxes based on the value of their respective properties. If PILOT passes it would call for all casinos to collectively pay $120 million per year at most.
The bill is sponsored by Senator Jim Whelan and Assemblyman Vince Mazzeo. Both Whelan and Mazzeo believe that PILOT will help to counteract years of overvaluing casino properties by Atlantic City managers.
The excessive overvaluing of New Jersey casinos has left the city owing huge tax refunds. The biggest example of this is the roughly $150 million that Atlantic City owes the Borgata Casino. The city is on a scheduled payment plan for the debt, but in December missed a $62.5 million installment. Now, the Borgata is taking legal action against the city in an attempt to collect.
How can Lavin’s suggestions impact NJ casinos?
Emergency Manager Kevin Lavin has suggested that yet another set of amendments get added to the bill prior to PILOT heading to the Senate for a vote.
The proposed amendments would see the entire PILOT program sent to the State Department of Community Affairs for review every three years. Community Affairs would then decide whether or not to implement a $20 million increase to the owed casino tax pool. The decision regarding the $20 million increase would take into account things like physical enhancements to casinos or increases to non-gaming revenue.
Atlantic City Mayor Don Guardian spoke less than enthusiastically to the Press of Atlantic City about Lavin’s suggestions:
“Ultimately though, the governor, the state senate, the assembly – they make their own decisions on what’s going on. Even if Mr. Lavin recommends it, it doesn’t mean Trenton is going to accept it.”
How are state legislators reacting?
Many state legislators still have concerns both about Lavin’s suggestions and about PILOT itself. Several have criticized PILOT for being unfair to the average tax payer.
Republicans have argued that with the current debt of Atlantic City, PILOT would protect casinos from tax raises. The concern is that if the casino taxes can’t be raised, the deficit will fall upon the citizens of Atlantic City.
PILOT sponsor Whelan shared Mayor Guardian’s skepticism of Lavin’s proposed amendments:
“If we can get the casinos to pay more, then great. I can tell you that from my conversation with several of the casinos, they’re not interested in revisiting the gross gaming revenue versus overall revenue issues.”