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Atlantic County argued that a new casino tax law in New Jersey took away its seat at the table. A superior court judge might have just pulled that chair back up with his ruling in an Atlantic City PILOT lawsuit.
Although the County didn’t get everything it wanted, it has clearance to move forward to recoup what it says could amount to millions of dollars in lost revenue. The exact of a potential new deal with casinos in the city remain murky, though.
Atlantic City PILOT lawsuit ruling opens door for county
Last Friday, Judge Joseph Marczyk found some middle ground. He did not rule the state’s new PILOT (Payment In Lieu Of Taxes) program for Atlantic City casinos violates the state’s constitution.
At the same time, he did determine the law makes the state “subject to sanctions and/or damages.” A court hearing later this month could determine the exact amount. The damaged party? Atlantic County.
The state enacted the previous PILOT law in 2016. In a similar fashion, the County filed suit against the state then as well. That led to a 2018 settlement that gave the county 13.5% of the PILOT payments.
The new law effectively canceled that arrangement. There is no provision in the law for payments from the state to the county. Once again, the county filed this suit almost immediately after Gov. Phil Murphy gave his signature to the bill.
Mediation failed, and Marczyk has rendered his opinion. It’s unclear if the state will appeal or try to work out another settlement with the county. It may prove beneficial to do so prior to the next court hearing.
Why another settlement might make sense for both sides
Now that the court has ruled that the state has some liability, it might get a better deal from the negotiating table than the courtroom. It’s uncertain what the county might find acceptable. However, the state has some bargaining chips.
For one thing, it can argue that the county expecting to get payments of the same value as it did under the old law is unrealistic. The new law cuts all revenue from online gaming out of the PILOT equation. Thus, the size of the pot is likely to be smaller.
The county could counter by prioritizing its share of the revenue as opposed to the size of the payments. They could argue that the amount of the payments should not affect the percentage of the revenue they receive.
Other possibilities include a diminished rate with a guarantee for the state to provide a minimum payment if the math doesn’t hit that threshold on its own. If the county and state can’t agree on a new deal, the court will decide the issue for them.
The court’s decision might leave one side, or potentially both, unhappy. For the county, though, any cut of the over $2.51 billion in brick-and-mortar gaming revenue Atlantic City casinos in New Jersey reported last year is better than nothing.
Barring an appeal by the state, it looks like Atlantic County will get a slice of that money going forward. That piece of the pie might not be as big as the county has received in the past few years, though.
