Atlantic City Casino PILOT Challenge Must Enter Mediation or Litigation Soon

Posted on: January 7, 2022, 08:31h. 

Last updated on: January 7, 2022, 10:34h.

Devin O'Connor @CasinoorgDevinO Read More

Expertise: Asia Pacific Gaming, Commercial Gaming, Legislation, Politics.

The controversial Atlantic City casino tax bill passed by the New Jersey Legislature and signed by Gov. Phil Murphy (D) in December is being contested by Atlantic County. A judge this week gave the state a January 13 deadline to enter into mediation with the county or respond to the litigation by moving to court.

New Jersey Superior Court Judge Joseph Marczyk believes mediation is in each party’s best interest. Atlantic County is challenging the state agreeing to strike iGaming and online sports betting revenue from the nine casinos’ annual property tax calculation.

Under the 2016 PILOT (payment-in-lieu-of-tax) terms, the casinos are to pay a collective property tax sum that is based on the prior year’s total gross gaming revenue (GGR).

The recent legislative change to the PILOT calculation will result in Atlantic County missing out on millions of dollars of tax revenue that it would have otherwise received under the original terms.

Decision Needed

New Jersey’s Office of Legislative Services estimates that Atlantic County will receive $4 million less annually under the revised PILOT. County officials say the number is likelier around $5 million to $7 million.

Marczyk hopes the state and county can find a resolution without moving to court. Attorneys for the two sides met this week before the judge. Marczyk gave the state until next Thursday to decide whether to allow the court to appoint an independent mediator approved by the parties, or proceed in its defense of the county lawsuit.

We are going to try to get a settlement that is in the best interests of everyone,” Atlantic County Executive Dennis Levinson said Tuesday. “The new PILOT, the way it is written, is only in the best interests of the casinos.”

The casinos argue that much of the iGaming and online sportsbook revenue goes to third-party operators, such as DraftKings and FanDuel. Those entities, the casinos contend, don’t have much skin in the game when it comes to Atlantic City’s future.

Since the GGR is generated online, with most of the action occurring remotely outside of Atlantic City, the casinos say that income shouldn’t be tacked on to their property tax bill. Outgoing state Senate President Stephen Sweeney (D) agreed. He championed the PILOT adjustment on claims that as many as four casinos are at risk of closing without some sort of tax break.

Repeat of Last Year

December numbers are still being tallied. But through 11 months of 2021, GGR from internet gaming operations totals more than $1.23 billion. Reducing that number from the PILOT computation will slash the casino tax bill from $165 million to $110 million.

Atlantic County will receive roughly the same amount in 2022 that it did in 2021. But last year’s county allocation was computed on depressed casino revenue experienced during the 2020 height of the COVID-19 pandemic.

Atlantic County receives 13.5 percent of the annual PILOT money.