Atlantic City's long-awaited PILOT is one step closer to taking control of the nose-diving casino resort.
On Thursday, the New Jersey Assembly voted in favor of accepting Gov. Christie's conditions on a package of bills - including a set "Payment in Lieu of Taxes" for casinos and redirected aid for the city - aimed at keeping Atlantic City solvent and free of crushing tax appeals in future years.
The Senate was scheduled to vote Thursday night but delayed the vote. If the Senate passes the bills, they will be sent back to Christie's desk for his signature. Christie conditionally vetoed the long-sought tax stabilization package a month ago, seeking added state control over the aid.
"This is a good day for Atlantic City," said assemblyman Vince Mazzeo, D-Atlantic a sponsor of the bills, in a statement after the evening vote.
State Sen. Jim Whelan, D-Atlantic, said of the Senate's failure to vote on the bills: "The dialogue will continue and I am hopeful that we can get them done before the lame duck session is concluded."
One bill spells the end of the Atlantic City Alliance marketing group, the people who created Do AC, for the purpose of redirecting its $60 million funding over the next two years to the city itself.So dependant on this legislation is Atlantic City, that its state-approved $262 million 2015 budget contains a $33.5 million revenue line item called "Casino Redirected Anticipated Payment," affectionately, or perhaps desperately, acronymed CRAP.
"We need the money to balance the budget," Atlantic City's Finance Director Michael Stinson said this week. He said the additional state controls in the new version were not a concern. "The state has all the control already," he said.
But even with that welcome news, the city was fighting a battle on another legislative front Thursday as committees in both the Assembly and Senate approved differing bills calling for a referendum to end Atlantic City's in-state monopoly on casinos and allow two North Jersey gambling houses.
Local officials and legislators have objected strongly to the idea, and continued to do so at hearings Thursday, warning of dire, if not fatal, consequences to Atlantic City's economy.And the city is also battling in court its most succesful casino, the Borgata, staving off deadlines to repay money from the damaging tax appeals the PILOT legislation is designed to end.
According to Debtwire, the city received a temporary court reprieve on Borgata's attempt to collect on an $88 million debt, but still owes Borgata $60 million by Saturday. The city's emergency manager, Kevin Lavin, has been in negotiations with Boyd Gaming, the parent company of Borgata, to resolve the debts.
The struggling casino resort has been on the brink of financial collapse since losing four casinos in 2014 amid a general downturn in total casino revenue.
Between 2010 and 2015, the city's property-tax base dropped 64 percent, from $20.5 billion to $7.3 billion in 2015. The city is carrying about $397 million in outstanding debt, much of it owed to Borgata and other casinos due to successful tax appeals.
The cornerstone of the legislative package is a bill that would require casinos collectively to pay $150 million annually to Atlantic City in lieu of property taxes for two years. For the next 13 years, they'd pay $120 million, though that could change based on gross gaming revenues.
The legislation initially calls for the casinos to form a council that would determine how much each would pay the city, based on a formula enshrined in statute.Christie's plan, approved by the legislature, eliminates that council and instead requires the state's Local Finance Board, in consultation with the Division of Gaming Enforcement (DGE), to determine how much each individual casino must pay. The state would use a similar formula outlined in the vetoed legislation.
The DGE already regulates casino and track gaming revenues, and the Local Finance Board monitors the city's finances, along with an emergency manager hired early this year by Christie.The bills also redirects $30 million in an alternative investment tax paid by casinos to the Casino Reinvestment Development Authority to pay down Atlantic City's debt and an additional $30 million authorized to fund the Atlantic City Alliance marketing group for two more years to plug AC budget gaps.
To get past a Christie veto, the governor is requiring that instead of sending that extra aid straight to Atlantic City, the casinos would give the money to the Finance Board, which would distribute to Atlantic City only after it subitted a plan to the state showing how it would "improve its financial condition and address its fiscal imbalance."
Mayor Don Guardian said the day after Christie's veto that he could accept the changes required by the governor. State Assemblyman Vince Mazzeo expressed disappointment with the veto, but later said the governor's changes left the bulk of the bill intact.
Atlantic City Council President Frank Gilliam said he had concerns about the long term implications of creating a set PILOT amount for casinos to pay, but that the city's dire financial needs outweighed any long term concerns for now. When you talk about locking an industry in at a particular number," Gilliam said, "I hope it is not one of these bills that destroy the city in the future."
Local officials have at various times questioned whether the city should reap a share of luxury and room taxes that now go exclusively to the state, and whether casinos taxes and levies should be determined based on all revenue, not just revenue from gaming.
The rough dollar figures of the billls does not change under Christie's plan. The casinos would pay at least $120 million the first two years; an additional $30 million that casinos currently give to the Atlantic City Alliance marketing organization would be remitted to the state.
That money essentially would be held in escrow, but would be available to the city after it submitted an acceptable fiscal plan.Christie also conditionally vetoed a bill under which revenue generated from a tax on gaming currently allocated to the Casino Reinvestment Development Authority would be redirected to Atlantic City for it to pay debt service on bonds it has issued.The $262 million budget, which included cuts to city payrolls and departments but no tax increases, also defers nearly $40 million in employee health and pension benefits.The city owes Borgata $88 million from a tax appeal, which it is has been paying back in $150,000 monthly installments, with an additional $50 million under appeal. The casinos had agreed not to file future tax appeals if the payment-in-lieu-of-taxes (PILOT) system were adopted.The city's Emergency Manager has been in negotiations with Boyd Gaming, parent company of Borgata, to settle the debt.