Lawsuit At ‘Standstill’ As PILOT Program For AC Casinos Costing Taxpayers Millions

Written By David Danzis on March 8, 2024 - Last Updated on March 14, 2024
Skyline of Atlantic City casinos for a story on the PILOT program costing taxpayers millions of dollars.

New Jersey’s insistence on maintaining the unique property tax structure created for Atlantic City casinos is costing Atlantic County taxpayers millions of dollars, according to one of the region’s highest-ranking public officials.

Atlantic County Executive Dennis Levinson said NJ’s ongoing appeal of a court ruling against the casino PILOT (payment in lieu of tax) program is tying up money that could otherwise be used to offset the taxpayers’ obligations in the annual budget.

The state appellate court will begin hearing the case March 20.

Atlantic City casino PILOT appeal drags on into 2024

During the 2024 budget presentation, Levinson said the county’s lawsuit against the state is “still at a standstill with no movement toward resolution,” according to local news reports. It was the same message Levinson had for the Board of County Commissioners the year before.

The county will receive roughly $18.3 million this year from the PILOT, up from $17.9 million in 2023. Levinson said the county could be due an additional $14.1 million this year if the court rejects the state’s appeal. But, since the judicial process is moving so slowly, those funds are not included in the 2024 budget.

“Despite the initial rulings in our favor and a willingness on our end to discuss the matter,” Levinson said,  “the state remains steadfast in its determination to stall and appeal, which only serves to deny Atlantic County taxpayers what is rightfully theirs and to also pass along the cost of this prolonged litigation to taxpayers throughout the entire state.”

The good news for taxpayers in Atlantic County is that Levinson introduced a $262.1 million budget for the year that includes a tax cut. In NJ, annual property taxes are the cumulative total from three taxing entities — county, municipal and school.

What is the PILOT program?

The highly controversial 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 NJ online casinos and NJ sports betting from the gross calculation, thereby reducing the casinos’ tax obligations.

You can find a more detail, through explanation on the AC casino PILOT legislation by clicking here.

Gamblers across US are going digital

Internet gambling is the fastest-growing industry segment in New Jersey and across the country.

Not only has online sports betting been legalized in 29 US jurisdictions, but online casinos are also live in seven states and generating annual revenue nearly on par with land-based operators.

New Jersey online casinos generated more than $1.9 billion (+19.1% YoY) in revenue in 2023, while internet sports gambling netted another $962.4 million. Comparatively, Atlantic City’s nine casinos reported $2.85 billion (+2.2% YoY) in revenue from land-based gamblers.

History of AC casino PILOT lawsuits

Atlantic County filed one of two legal challenges against amending the Atlantic City casino PILOT legislation. A local political organization called Liberty & Prosperity brought the other.

Although the lawsuits are very different, the courts have, thus far, ruled in favor of Atlantic County and L&P. New Jersey is appealing decisions in both cases.

Atlantic County sued NJ to prevent the 2021 amendments since the changes would have altered a previous court-ordered settlement resulting from the original law. That 2018 settlement guarantees the county a certain amount of money for the life of the PILOT law.

Atlantic County has argued that the amendments could cost local taxpayers as much as $26 million over the five-year period. The latest numbers from Levinson’s budget address suggest that figure is significantly outdated given the annual growth of online casino and sports gambling in NJ.

L&P is arguing that PILOT legislation is unconstitutional on the grounds that it violates a requirement that all real estate be assessed and taxed equally. L&P settled a lawsuit against the original PILOT but resumed its legal opposition after the 2021 amendments.

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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 Atlantic County, NJ with his wife and two children.

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