New Jersey: Atlantic City casino tax break bill appeals heard by court, decision could take weeks

On Wednesday, an appellate court panel heard the state’s appeals in two cases over 2021 amendments to the law determining how much money casinos pay in lieu of property taxes in New Jersey. 

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 in 2022. The parties argue that removing internet gaming and online sports betting from calculating how much casinos would pay costs the county taxpayers $5 million a year, and that it violates a 2018 consent agreement to settle an earlier lawsuit and the state Constitution.

Tim Sheehan of the New Jersey Attorney General’s Office, arguing for the state, said changes in the law were needed because a large share of fast-growing internet and online sports betting revenues is kept by a third party and not by casinos.

"The Legislature acted to exclude internet gaming and (online) sports gaming revenues ... to ensure casino taxes continued in a predictable revenue stream," Sheehan told the judges, and to avoid "a ruinous tax hike," as reported by The Press of Atlantic City.

According to Sheehan, had the amendments not been made, three casinos would face a more than doubling in PILOT payments and would likely close — Bally’s Atlantic City, Golden Nugget Atlantic City and Resorts Casino Hotel — and the amount paid by casinos would go down.

Meanwhile, Seth Grossman of Liberty & Prosperity said the state’s concern over three weak casinos is a false argument. The amendments shifted the burden from all casinos, whether they were doing well or not, to other property owners, he said.

"If they can’t pay their full amount, it is shifted to ... non-casino hotels, restaurants, who are ailing as much as casinos," Grossman said, according to the above-mentioned media. "There is no justification to shift the burden from casinos to non-casino (property owners)."

Grossman also said the state Constitution does not allow lawmakers to create laws to benefit one industry over other taxpayers.

In the Atlantic County lawsuit, Sheehan said Superior Court Judge Joseph Marczyk was wrong when he ruled that the state had violated the terms of a 2018 consent order when it changed the rules of casino PILOT payments. "The state Legislature has the right to change laws any time it wishes," Sheehan said.

If the county wanted a guarantee the consent order’s underlying facts wouldn’t change — based on legislation — it should have insisted the guarantee be in the consent order, Sheehan commented.

The attorney for Atlantic County, Ronald Riccio, said the Legislature cannot act in a way that changes a court order. "The unmistakability doctrine has nothing to do with contracts," Riccio said. "It applies to the interpretation of a statute." He added that if laws could amend court orders, it would be "encroachment on the judicial function."

After the arguments, Riccio said the court had a good grasp of the issues, but he declined to guess how the decisions would go. According to Riccio, a decision is likely to take weeks.

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.