Atlantic City Casinos Closer To COVID Financial Relief

Written By David Danzis on November 17, 2021

Atlantic City casinos could be getting some financial relief on their annual tax payments because New Jersey lawmakers are concerned about the coronavirus pandemic’s lasting effects on the industry.

A bill (S4007) advanced Monday by the state Senate Community and Urban Affairs Committee would eliminate online gaming and online sports betting revenue from the calculation used to determine the casinos’ payment-in-lieu-of-taxes, or PILOT. The bill would also recalibrate the amount owed by each of the nine properties to account for recent changes in market performance.

The proposed legislation amends the 2016 Casino Property Tax Stabilization Act. This is a 10-year law designed to stop the casinos’ costly property tax appeals that were contributing to Atlantic City’s economic troubles.

Since the implementation of the casino PILOT law, Atlantic City reduced its annual budget and avoided raising the municipal property tax rate in four out of five years.

Winners and losers among Atlantic City casinos

PlayNJ obtained the projected annual casino payouts that are not detailed in the new PILOT legislation.

The projected figures reflect the current state of the Atlantic City casino market.

Borgata is paying just over $29 million in 2021. Next year, the casino would pay nearly $23 million.

Caesars and Harrah’s Resort would also see PILOT reductions. Caesars would go from $17.5 million in 2021 to $9.3 million in 2022, while Harrah’s could go from $25.6 million to $17.7 million.

However, several other AC casinos would pay more. Here is the list with projected figures:

  • Bally’s: $5.3 million to $7.6 million
  • Golden Nugget: $4.7 million to $6.3 million
  • Hard Rock: $7.7 million to $16 million
  • Ocean: $7.5 million to $11.1 million
  • Resorts: $3.5 million to $8 million
  • Tropicana: $8.4 million to $11 million

When investment alternative taxes are included, Atlantic City casinos will pay roughly $155 million in 2021 based on the current PILOT law. Under the proposed changes, Atlantic City casinos will pay $160 million in 2022.

N.J. gambling industry results skewed heavily by online growth

Proponents of the new bill say the changes are necessary because of two significant, and unforeseen, variables — the explosive growth of online gambling and COVID-19.

Online gambling revenues increased by triple-digit percentages following the COVID-19 shut down of Atlantic City casinos in 2020. The massive growth of NJ online casino revenue and online sports betting earnings has drastically outpaced the recovery of brick-and-mortar revenues.

Since a substantial portion of online revenue goes to third-party operators, Atlantic City casinos are, essentially, paying taxes on revenue they never see.

N.J. lawmakers worry what that could do to a gaming industry that had only just begun to recover from the fallout of five casino closures just a few years ago.

Without amending the current casino PILOT law, some N.J. officials believe the fragile financial stability of Atlantic City, and its casinos, could be in jeopardy.

‘Last-minute push’ will end up ‘back in court’

Opponents contend the bill is a giveaway to a powerful and profitable industry, and would negatively impact Atlantic City, Atlantic County and the city school district.

Atlantic County took the state to court over the 2016 casino PILOT law. The county and the state settled on a set percentage after a lengthy legal battle.

“We will obviously end up back in court,” Atlantic County Executive Dennis Levinson told The Press of Atlantic City. “I’m going to fight for the taxpayer.”

Both versions of the new bill are sponsored by elected officials who were defeated in November’s General Election: Senate President Steve Sweeney, D-Gloucester, and Assemblyman John Armato, D-Atlantic.

“A last-minute push to try and sneak this bill in is exactly what was attempted in May and is a prime example of the type of legislators the voters rejected on Nov. 2,” state Sen. Vince Polistina, R-Atlantic, told the local newspaper.

In five years, much has changed with Atlantic City casinos

Atlantic City casinos had a considerable amount of influence when the original PILOT legislation was drafted.

The casino industry and some local officials believe the PILOT stabilized Atlantic City’s finances. The law also helped casino operators reinvest, create jobs and plan future projects.

“The PILOT bill has actually saved Atlantic City,” Joe Tyrell, a regional vice president for Caesars Entertainment, which owns Caesars, Harrah’s and Tropicana, said during Monday’s Senate hearing.

But much has changed since the 2016 law went into effect.

Hard Rock Hotel & Casino Atlantic City and Ocean Casino Resort opened in 2018.

Sports betting was legalized that same year.

However, the biggest change is online gambling.

Internet gaming generated just under $149 million for all of 2015, representing less than 6% of the yearly gross revenue. Through September of this year, online gaming has generated $988.7 million and accounts for 29% of the industry’s reported revenue.

Atlantic City casinos still rebounding, not recovered

Atlantic City casinos have been quietly pushing for changes to the PILOT law for several years. The industry supports the proposed changes.

“The PILOT will continue to provide stability to Atlantic City’s economy while providing added financial benefits to residents and businesses across Atlantic County,” said Joe Lupo, president of the Casino Association of New Jersey and president of Hard Rock AC. “The COVID-19 pandemic had a devastating impact on our state and local economy.

“No other region has been more severely impacted than Atlantic County. Atlantic City land-based casino revenue has yet to return to pre-COVID-19 levels, seeing a 7.5% decline in 2021 through September compared to 2019, which takes Atlantic City gaming revenues back to 2018 levels. Gaming taxes, online gaming taxes and CRDA taxes must remain constant through this economic recession, as the region continues to rebuild and recover from the pandemic.”

AP Photo/Wayne Parry

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David Danzis

David Danzis is the lead writer for PlayNJ. He is a New Jersey native and honors graduate of Rutgers University. As a newspaper reporter for the New Jersey Herald and Press of Atlantic City, David earned statewide awards for his coverage of politics, government, education, sports and business. Today, he is PlayNJ’s Atlantic City “insider” and gaming industry expert on casinos, sports betting and online gambling. David lives in Mays Landing with his wife and two children. When not on the beach, a golf course, or snowboarding, David enjoys watching his beloved New York sports teams — Yankees, Jets, Rangers and Knicks.

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