An obscure provision in a New Jersey law could allegedly result in Atlantic City receiving around $ 14 million less in comparable revenue from its 2020 budget despite a rise in the recent performance of its nine casinos.
According to a report released on Thursday, this situation resulted from the state’s decision in 2016 to take control of the resort to prevent its bankruptcy. The deal included an agreement to pay taxes rather than taxes (PILOT), which was purported to provide Atlantic City with a steady source of revenue and to eliminate the possibility of local casinos from providing costly tax incentives.
The newspaper reported that this ten-year PILOT agreement, according to the casinos, provides for the payment of a tax to the Atlantic City government, which is tied to their annual gross aggregate gaming revenue and also includes a provision that keeps these rates at the 2015 level. To compensate for any deficits, the City of Atlantic County now has to use cash from the Alternative Investment Tax (IAT) levied by local gambling companies, even though it also has an upper limit set at 1.25% of annual revenue.
The Atlantic City press reported that the approximately 40,000 New Jersey residents received approximately $ 9.7 million in IAT funding for this year’s budget. Currently, however, a deficit of around $ 13.8 million is expected for the 2020 budget when combined gross annual gross gaming revenue is in excess. Casinos cost more than $ 3 billion.
Last year, the seven casinos in AC reportedly had record sales of just over $ 2.86 billion, while the city received around $ 70.2 million in taxes under the PILOT program. However, the subsequent premiere of legalized sports betting, along with the opening of Ocean Resort Casino and the Hard Rock Hotel and Casino Atlantic City, is expected to bring the total of 2019 well above the $ 3 billion mark.
Lisa Ryan of the NJ Department of Community Affairs acknowledged that the situation would improve in the last five years of the PILOT program, which would include budgets for 2022 to 2026, as the upper limit for IAT rates would be lifted. This agency handles all tax oversight responsibilities for AC and, conversely, also declares that the city can not increase the tax rate to cover any deficits in its budgets for 2020 or 2021.
“We are aware of the IAT issue and work with the city, especially its financial staff, to adapt to its short- and long-term impact on the city’s finances, which is currently short-lived but negative for 2022 and beyond , ”