Judge grants 90-day stay on decision striking down law that gave Atlantic City casinos millions in tax breaks

A judge has granted a 90-day stay of his August decision striking down changes to the law governing how Atlantic City casinos pay property taxes, local media reports. Superior Court Judge Michael Blee said late Friday that the stay was contingent on either the Appellate Division or the New Jersey Supreme Court considering the case on an accelerated or emergent basis.

An extension will be possible should one of those courts not rule in time, Blee said, as reported by The Press of Atlantic City. In his ruling, the judge wrote that the public has “a compelling interest” in maintaining the status quo until a higher court could rule on whether a 2021 amendment that would have given gambling venues a tax break is constitutional.

Blee struck down the 2021 amendments to the 2016 payments-in-lieu-of-taxes (PILOT) law in an August 29 decision in a lawsuit brought by the nonprofit Liberty and Prosperity. The judge said at the time that the changes were introduced on dubious grounds, violating the state Constitution by favoring an industry –giving casinos significant tax breaks– over a public purpose.

The proposed amendments removed online gaming and sports betting revenues –two of the fastest-growing verticals in the state’s gambling industry– from calculations of gross gaming revenue, a move that saved the casinos millions in PILOT payments. The state has appealed the case, according to a spokesperson for Gov. Phil Murphy, The Press reports.

The Atlantic County has asked the state Supreme Court to take the appeal without going to Appellate Court to save time and litigation costs given whoever loses in Appellate Court would certainly appeal to the high court.

In his decision, Blee said the state had a good case for a stay because its request “revolves around a constitutional issue,” the cited source reports. “Statutes are afforded a presumption of constitutionality that can only be rebutted ‘upon a showing that the statute’s repugnancy to the Constitution is clear beyond a reasonable doubt,’” Blee wrote.

However, the judge strongly disagreed with the state’s lawyers on two points. Blee wrote that the state does not have a reasonable probability of success on the merits, and that it did not show that the state and city would suffer immediate, substantial and irreparable harm without a stay. Attorneys for the state had argued both of those points were valid in asking for the stay.

The PILOT law amendments were greenlighted by the legislature in late 2021 and signed by Gov. Murphy four days before Christmas. In its lawsuit, Liberty and Prosperity argued that the state had produced no evidence that the Atlantic City casino industry suffered more during the pandemic than other industries, and noted that the state Constitution specifically prohibits the Legislature from taxing one group of real estate differently than others in the same jurisdiction.

The amendments to the PILOT law were fast-tracked through the Legislature last year, which would have reduced the gaming companies’ total liability by about $55 million. While the law proved controversial from the very start, then-state Senate President Steve Sweeney argued the state was “risking four casinos closing” if the amendments were not introduced.

The August ruling on the Liberty and Prosperity lawsuit marked the second to come down against the PILOT law, as a judge had previously sided with Atlantic County in a separate suit alleging that the state had “violated the terms of a 2018 consent agreement” that guaranteed the county a certain percentage of the industry’s overall PILOT payment.