An obscure provision in a piece of state legislation in New Jersey could reportedly see Atlantic City receive about $14 million less in comparable tax revenues for its 2020 budget despite an uptick in the recent performance of its nine casinos.
According to a Thursday report, this situation arose out of the state’s 2016 decision to assume fiscal control of the seaside resort city in order to stop it from going bankrupt. Included in this takeover was a payment in lieu of tax (PILOT) agreement that was purportedly designed to provide Atlantic City with a steady revenue stream and eliminate the ability of local casinos to lodge costly tax appeals.
The newspaper reported that this ten-year PILOT deal reportedly requires casinos to pay an amount of tax to the government of Atlantic City that is tied to their annual aggregated gross gaming revenues while moreover encompassing a stipulation that holds these rates to their 2015 levels. To make up any shortfalls, the Atlantic County city is now required to use cash from the investment alternative tax (IAT) it collects from local gambling establishments although this too contains a cap that is fixed at 1.25% of any yearly takings.
The Press of Atlantic City reported that the New Jersey city of some 40,000 people received around $9.7 million in such IAT funds for this year’s budget but is now looking at a shortfall of approximately $13.8 million for its 2020 budget should the combined annual gross gaming revenues of its casinos exceed $3 billion.
Last year reportedly saw the seven casinos in AC record aggregated gross gaming revenues of just over $2.86 billion while the PILOT scheme subsequently meant that the city received about $70.2 million in tax. However, the subsequent premiere of legalized sportsbetting along with the opening of the Ocean Resort Casino and the Hard Rock Hotel and Casino Atlantic City properties are expected to push 2019’s combined tally well above the $3 billion mark.
While acknowledging the possible coming shortfall, Lisa Ryan from the NJ Department of Community Affairs said things would improve in the final five years of the PILOT program, which would encompass the budgets for 2022 to 2026, as the cap on IAT rates is removed. This agency handles all fiscal oversight duties for AC and conversely also explained that the city will not be able to raise the rate of these duties to cover any deficits that may arise from its 2020 or 2021 budgets.
“We are aware of the IAT issue and are working with the city, particularly its finance staff, to adapt to its near and long-term impact on the city’s finances, which, as it stands now, is negative in the short-term but positive for 2022 and beyond.”