Borgata To Atlantic City: Pay Us What You Owe Us Or Else

Written By Steve Ruddock on February 8, 2016 - Last Updated on April 8, 2020

In a story that could frankly only happen in Atlantic City, the most successful casino (and arguably business) in the city’s long, tumultuous history could wind up being the proverbial straw that broke the camel’s back.

Borgata is suing the city for yet-unpaid tax refunds dating back as far as 2009. If the city can’t come up with this money (and it likely can’t) or find a compromise with Borgata, the financially challenged city is likely headed toward full-fledged bankruptcy, as Borgata intends to stop paying its current tax bills until the city’s obligations are met.

Atlantic City Mayor Don Guardian said it “would be devastating to Atlantic City,” if Borgata decides to make good on its threat to stop paying its current property taxes, something Borgata attorneys have said will happen if the city doesn’t refund some $62 million in overpayments the city has balked at paying from the period of 2009 and 2010. Borgata claims the city owes the casino an additional $108 million in tax refunds from 2011-2015 on top of that.

As Reuben Kramer reported from the courtroom on Friday, the Borgata intends to withhold its current $7.5 million tax bill if the city doesn’t come through with the refunds. The city has said this would bring about devastating effects, including an inability to pay for essential services, speeding up the municipality’s timeline for running out of money:

In Kramer’s excellent reporting on the matter, Joe Corbo, an attorney for Borgata, said the decision to draw a line in the sand was not made lightly, and was a result of years of failed attempts to get the city to pay its obligations. He said Borgata “can wait no longer.”

So what happens next?

To say Atlantic City is facing a crisis is an understatement. The city’s recent financial struggles are well-documented, and along with the decline of gambling revenue (four of the city’s 12 casinos were shuttered in 2014), led to Governor Chris Christie appointing an emergency manager. There have also been several (so far failed) legislative efforts to bail the city out.

To date, nothing has worked. And if Borgata withholds its upcoming tax payment, the city will run out of money far sooner than expected, by the end of February, instead of April, according to the city. At that point, things would go from bad to worse. But, the fall could be a necessary evil, and could be a precursor to the city’s ascent.

Sometimes you have to hit rock bottom before you rise

Despite its current financial woes, Atlantic City has been showing signs of a rebirth in recent years, and most of this progress occurred after the city’s main industry was decimated.

For the city’s casinos, bottom was hit during the devastating year of 2014, when Atlantic Club, Revel (the disaster of all disasters), Showboat, and Trump Plaza all closed their doors, and a fifth casino, Trump Taj Mahal, was thrust into bankruptcy.

However, the industry is now showing signs of life, and the long-held belief by many that the city’s gaming industry needed this market right-sizing appears to have been spot on, as the remaining casinos are by and large thriving in the new, slightly less crowded market. Gaming revenue is down, but on a case by case basis, the remaining casinos are in much better shape in 2016 than they were in 2014.

Atlantic City’s struggles have also caught the attention of astute investors, who see potential amid all the problems.

After one of the strangest sales in history (again, a story that could only occur in Atlantic City), the currently-shuttered Revel was purchased by developer Glenn Straub for pennies on the dollar. Straub is expected to reopen the property, but what it will be reopened as is still unclear at this time.

Investment efforts are also happening outside the gaming sector, as developers are working on revitalizing the city’s famed Steel Pier, the creation of upscale housing complexes, and improved shopping and family entertainment options to compliment the city’s gaming industry.

So, while the city’s struggles are going to be harmful in the near-term, they could also be the driver for the sorely needed future (non-gaming) investment that could help rejuvenate Atlantic City, although it would be preferable to all involved if the Borgata didn’t have to follow through with its threat, and if the legislature could figure out a way to bail the city out.

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Steve Ruddock

Steve covers nearly every angle of online poker in his job as a full-time freelance poker writer. His primary focus is the developing legal and legislative picture for regulated US online poker and gambling.

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