NJ judge urges state to decide whether to mediate or litigate lawsuit over casino tax break

A judge on Thursday morning ordered New Jersey to let him know by January 13 whether it is “agreeable to proceed with mediation” in Atlantic County’s lawsuit against the new casino tax break, The Press of Atlantic City reports.

New Jersey Gov. Phil Murphy signed the casino PILOT bill into law last month, which gives tax relief to Atlantic City’s casinos by removing sports and online gaming revenues -the two fastest-growing verticals in the state’s casino industry- from the calculation of their payments in lieu of taxes.

The new order follows a Wednesday conference between attorneys in the case and Superior Court Judge Joseph Marczyk, who said he wants the parties to go into mediation. The lawsuit is against the state and the governor, and was filed by the county and the towns of Somers Point, Hamilton and Egg Harbor townships, Absecon, Ventnor, and Weymouth Township.

The PILOT tax break lowers casino payments to an estimated $110 million from $165 million under the previous law. Atlantic County would receive the same amount in 2022 it received in 2021 -about $17.5 million-, although 2021 payments were based on depressed casino revenues from 2020, amid pandemic-related extended shutdowns.

According to estimates by the state Office of Legislative Services, the county would lose about $4 million a year under the new PILOT law, while Atlantic County claims the annual loss would range between $5 million to $7 million.

Atlantic County’s attorneys filed an order to show cause December 22 in Atlantic County Superior Court, local media reports, after the bills passed the Legislature on December 20 and Gov. Murphy signed them on December 21.

In the order, the county asked Assignment Judge Julio Mendez to temporarily enjoin the state from enacting into law Senate bill 4007 or Assembly bill 5587, The Press of Atlantic City further reports. Attorneys further asked for an emergency hearing date to be set to determine whether the bills violate the existing consent order from 2018 and should be blocked from taking effect.

Following this development, Mendez referred the case to Superior Court Judge Joseph Marczyk. He quickly signed the order to show cause to start the legal process, while deciding to not temporarily enjoin the law.

Atlantic County first sued over the constitutionality of the original PILOT bill, which was signed into law in 2016. In 2018, the case was settled for specific percentages based on the original PILOT details. According to Atlantic County Executive Dennis Levinson, the new law violates that settlement.

“We are going to try to get a settlement that is in the best interests of everyone,” Levinson said on Tuesday, according to the previously cited news source, “because the new PILOT, the way it is written, is only in the best interests of the casinos.”

The new PILOT law was the source of much controversy throughout the last weeks of 2021. The Casino Association of New Jersey, along with the main casino workers’ union in the state, both claimed the legislation would protect thousands of jobs and provide market stability, while State Senate President Steve Sweeney sponsored the bill, claiming four casinos would close should it not pass.

As we rebuild & recover from COVID-19, we must remain focused on preserving the stability of #AC’s economy. The proposed S4007 amendments to the PILOT are essential to #AC & Atlantic County’s stabilization. Read more in @ThePressofAC from CANJ's Joe Lupo 👇https://t.co/Xjc0MoTQfC

— Casino Association of NJ (@CasinosNJ) December 6, 2021

However, opponents of the bill claim no evidence for the statement had been offered, and no casino has publicly made that claim. Moreover, it has been argued that revenue figures show that casinos are not only recovering from 2020 but, in certain cases, also doing better when compared to the pre-pandemic year of 2019. When voting against the legislation, Assemblyman Vince Mazzeo, D-Atlantic, said he was “unable” to gather enough information on why the legislation was needed.

Casinos argue that while certain verticals and operations have returned to normalcy, in-person wagering is still down significantly from 2019. Moreover, they claim money from iGaming and sports betting are included in reports without taking into account revenue in these two streams must be shared with third-party providers, including technology platforms and sportsbooks.