A Superior Court judge in New Jersey has struck down a law that would grant Atlantic City casinos tens of millions of dollars in tax breaks. The judge says that the measure was passed initially on dubious grounds and violated the state constitution.
This ruling delivers a severe blow to Governor Phil Murphy and state legislative leaders, who did everything in their power to fast-track the bill last year. It also serves as a rebuke to the gaming industry which had pushed the law, arguing it was necessary to boost the economy amid the Covid-19 pandemic.
A conservative nonprofit group called Liberty and Prosperity 1776 was among those challenging the law, saying the state’s founding document prevents preferential tax treatment.
The legislation pertained to a local taxing program known as PILOT (an acronym of payment in lieu of property taxes). Since 2016, instead of paying property taxes, each casino has instead been allotted an amount of tax to pay, based on an industry-wide assessment. These taxes are then distributed among Atlantic City, its school district and the county to fund various operations.
Last year, amid the pandemic crisis, the gaming industry successfully pushed through a legislative change to exclude online gambling from the program. This cut gaming companies' total PILOT liability by $55m – revenue cuts that disproportionately impacted Atlantic City smaller businesses. However, legislative leaders argued the changes were necessary to prevent four retail casinos from closing.
Now it appears that Atlantic City’s nine major casino resorts are rebounding from the slump: through the first six months of 2022, they reported $339m in gross operating profits, a 17% year-on-year increase.
Atlantic County Assignment Judge Michael Blee commented: “There is no evidence to suggest that casinos could not meet their PILOT obligations under the Original Act.” Blee suggests that the changes were made “to aid what was actually a resurging industry.”
