Rejection of New Jersey PILOT Program Could Lead to Casino Closure

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Senate President Steve Sweeney stated Monday that four of Atlantic City’s nine casinos could be closed if the amendments made to the casino PILOT bill are not passed. These comments were made during the Senate Budget and Appropriations hearing on the bill. The bill was approved by the committee and released for a vote by the Senate.

Updating State Gaming Revenue Laws

Sweeney claimed that there were mistakes made when they drafted the first PILOT law. These errors would be corrected by Bill S4007, he said. According to a four-page report by the state Office of Legislative Services (OLS), proposed changes to casino payment-in lieu of taxes could lead to payments being cut by $55 million in 2022.

The study determined, “We expect the bill will reduce the PILOT payment by $55 million in CY 2022, and probably between $30 million and $65 million in subsequent years through 2026. New mandatory payments of $5 million per year in CY 2024-2026 will partly offset this. There may also be some redistribution of IAT revenue if those revenues exceed the CRDA and city’s debt service requirements.”

Officials from the state confirmed last week that a financial study had been done. Atlantic City Mayor Marty Small Sr., along with Steven Perskie, a legal advisor, supported S4007. Perskie stated that his support for the bill was based upon his reading of it and an analysis of the state Department of Community Affairs and the state Department of Treasury. Small indicated that he had had numerous conversations with state officials about the issue.

However, the OLS Report was not available until late last week.

PILOT Bill Crawls Through Committees

It was presented on June 28 and passed through the Senate Community and Urban Affairs panel last month. However, many members and its chairman, Senator Troy Singleton, said they needed to know more details about the bill in order to vote for its final passage. Assemblyman John Armato D-Atlantic introduced an Assembly version in May.

Atlantic City Mayor Marty Small Sr. claimed last week that S4007 would help the city financially, even though iGaming and sports betting would not be included in the calculations of how much casino would pay.

A Casino Association of New Jersey spokesperson said last week that the amended bill will reduce the window on PILOT payments by $100 million to $120 million, based solely on brick-and-mortar casino revenues. However, it also gives the entire amount that the casinos pay in alternative taxes to the municipality — which he estimated to be up to $60 million.

However, the IAT taxes in full were due to be paid to the city starting in 2022, according to current legislation. The amended bill would maintain a $5 million annual payment to the city for its debt relief efforts through 2026. This $5 million annual payment under the original bill would end after 2023.

The IAT is a 1.5% tax on gross gambling revenues and 2.5% for internet gaming gross revenue. Casinos can keep some of the revenue under the current law, provided that their payments did not exceed pre-PILOT tax obligations. But that clause was to be removed in 2022.

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