New Jersey: Atlantic City casino tax break bill lawsuit at a "standstill with no resolution"

New Jersey's refusal to change the unique property tax structure created for Atlantic City casinos is proving to be a financial burden for taxpayers in Atlantic County, according to Atlantic County Executive Dennis Levinson.

Levinson pointed out that the state's decision to appeal a court ruling against the casino PILOT (payment in lieu of tax) program is preventing the county from using funds that could alleviate taxpayers' obligations in the annual budget.

During the 2024 budget presentation, Levinson said the county’s lawsuit against the state is "still at a standstill with no movement toward resolution," according to local news reports.

Atlantic County Executive Dennis Levinson

The county will receive roughly $18.3 million this year from the PILOT, up from $17.9 million in 2023. Levinson said the county could be due an additional $14.1 million this year if the court rejects the state’s appeal. However, since the judicial process is moving slowly, those funds are not included in the 2024 budget, as reported by PlayNJ.

"Despite the initial rulings in our favor and a willingness on our end to discuss the matter, the state remains steadfast in its determination to stall and appeal, which only serves to deny Atlantic County taxpayers what is rightfully theirs and to also pass along the cost of this prolonged litigation to taxpayers throughout the entire state," Levinson said. 

What does the PILOT program consist of?

The 10-year PILOT bill, formally known as the Casino Property Tax Stabilization Act, was signed into law in 2016. The legislation directly ties the amount of property taxes owed by casinos to their annual gross gaming revenue.

In 2021, the law was amended. Among several modifications was the elimination of revenue from New Jersey online casinos and New Jersey sports betting from the gross calculation, thus reducing the casinos’ tax obligations.

Internet gambling is the fastest-growing industry segment in New Jersey and across the country. Online sports betting has been legalized in 29 US jurisdictions and online casinos are also live in seven states, generating annual revenue nearly on par with land-based operators.

New Jersey online casinos generated more than $1.9 billion, up 19.1% year-over-year, in revenue in 2023, while internet sports gambling netted another $962.4 million. Comparatively, Atlantic City’s nine casinos reported $2.85 billion in revenue, up 2.2% from the prior year period.

A long-standing conflict

Atlantic County filed one of two legal challenges against amending the Atlantic City casino PILOT legislation, while local political organization Liberty & Prosperity brought the other. Although the lawsuits are different, the courts have thus far ruled in favor of both Atlantic County and L&P. Meanwhile, New Jersey is appealing decisions in both cases.

Atlantic County sued New Jersey to prevent the 2021 amendments since the changes would have altered a previous court-ordered settlement resulting from the original law. That 2018 settlement guarantees the county a certain amount of money for the life of the PILOT law.

Atlantic County argues that the amendments could cost local taxpayers as much as $26 million over the five-year period. The latest numbers from Levinson’s budget address suggest that figure is significantly outdated given the annual growth of online casino and sports gambling in NJ.

L&P is arguing that PILOT legislation is unconstitutional on the grounds that it violates a requirement that all real estate be assessed and taxed equally. L&P settled a lawsuit against the original PILOT but resumed its legal opposition after the 2021 amendments.