PILOT law

New Jersey casino tax break violates 2018 agreement with Atlantic County, judge rules

Atlantic City's casinos.
2022-03-04
United States
Reading time 2:08 min

New Jersey violated the terms of a 2018 consent order between the state and Atlantic County by enacting its new casino PILOT law, according to Superior Court Judge Joseph Marczyk’s ruling last Friday. The controversial law gives tax relief to Atlantic City’s casinos by removing sports and online gaming revenues from the calculation of their payments in lieu of taxes.

The PILOT tax break, which was signed by Gov. Murphy in December, 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, although last year’s payments were based on depressed casino revenues from 2020, amid pandemic shutdowns.

The passage of the law led Atlantic County to file a lawsuit against the state, arguing the plan violated a signed consent order settled in a prior lawsuit against the original PILOT bill, which was signed into law in 2016. Marczyk’s decision now gives the county a partial victory.

In his order, the Superior Court Judge did not enjoin the state from implementing the law “except to the extent they are subject to sanctions and/or damages,” to be determined in a March hearing before Judge Michael J. Blee, reports The Press of Atlantic City.


Atlantic County Executive Dennis Levinson

According to Atlantic County Executive Dennis Levinson, what this implies is “they are going to decide now what damages” the county can collect, and how the county is harmed by this. Meanwhile, Gov. Phil Murphy’s office has not yet commented on the issue.

In 2018, the lawsuit over the 2016 PILOT bill was settled for specific percentages based on the original law details, to run through 2026. According to Levinson, more than $30 million is at stake for county taxpayers over the next five years.

Under the consent order, Atlantic Count was set to earn about 13% of PILOT funds calculated under the original law, which was interpreted as including online sports betting and internet gaming under GGR. “All we want them to do is keep their agreement, honor their commitments,” Levinson said.

The Superior Court Judge had previously urged the parties to go into mediation, but the state of New Jersey ultimately declined to do so in January. Last month, lawyer for the state John Lloyd argued the Legislature had the right to define gross gaming revenue any way it saw fit in spite of the previously signed consent agreement.

County lawyer Ron Riccio fired back, arguing the order was based on the understanding that all gaming revenues would be included in calculations, and had been so included for the first years of the PILOT. Judge Marczyk has sided with this line of reasoning, although partially: while he found it in violation of the county agreement, he did not rule it violates the state’s constitution.

Moreover, terms of a new deal with casinos, as well as the amounts of sanctions and/or damages the state will be the subject of, are yet to be determined. Additionally, the state could still seek to appeal the ruling, or reach a new settlement with the county, in a similar way as it did back in 2018.

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