Atlantic City approved to issue over $15M bond to settle casino dispute

Atlantic City has secured approval from New Jersey’s Local Finance Board to issue more than $15 million in bonds to fund a legal settlement with Atlantic County. The dispute centers on amendments made in 2021 to the state’s casino payment-in-lieu-of-taxes (PILOT) law.

During Wednesday’s finance board hearing, Stephen Pearlman, bond counsel for the city, stated that the bond issuance would not affect Atlantic City’s finances. The settlement must be finalized by Aug. 1, he said.

City Council introduced an ordinance on May 21 authorizing the bond. The measure was discussed for approximately 40 minutes during that session, with council members also raising broader issues related to the PILOT law and ongoing state oversight of the city.

Discussions around the PILOT program, the Municipal Stabilization and Revitalization Act, and the use of investment alternative tax (IAT) funds are continuing.

John Lloyd, an attorney representing the state, told the council in May that the city was acting only as a conduit to pay the settlement amount and that the agreement would not impact Atlantic City’s budget.

City Business Administrator Anthony Swan said he believes the council will have the six votes needed to approve the ordinance. A final vote is scheduled for June 18.

The original PILOT law was enacted in 2016, leading to litigation by Atlantic County over its allocated share of casino payments. That dispute was resolved through a settlement that provided the county a guaranteed portion of the payments, calculated using gross gaming revenues from all sources.

However, in 2021, the Legislature amended the law to exclude online gambling and internet sports betting from the gross gaming revenue base used for PILOT calculations. This change reduced the total amount casinos were required to pay and, in turn, lowered the funds available to the county.

IAT funds are generated by a 1.25% tax on land-based casino revenues and a 2.5% tax on online gaming revenues. Prior to the state's fiscal intervention, these funds were allocated to the Casino Reinvestment Development Authority for projects aimed at enhancing tourism in Atlantic City.

Since 2019, Atlantic City has received $269 million in IAT funds to service debt linked to casino property tax appeal settlements, according to the New Jersey Department of Community Affairs.