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Casino operators in New Jersey could be on the verge of seeing their payments to local and state governments change for the second time in five years. That’s if an Atlantic City casino bill continues to proceed.
The bill has adamant support from some in the NJ Senate and the owners of AC’s nine casinos. Although its future is unclear right now, it seems those parties are intent on pushing for some kind of change to the status quo.
Atlantic City casino bill clears NJ Senate committee
Earlier this week, the NJ Senate Budget & Appropriations Committee held a hearing on a bill that would reconfigure the PILOT (Payments In Lieu Of Taxes) program that AC casinos participate in. The casinos have been making PILOT payments to the city, Atlantic County, and the state for years.
A PILOT program essentially allows the casinos to make regular payments throughout the year instead of paying annual property taxes. The benefit for the casinos and recipient governments is that those payments are more predictable, especially over time.
The amendment that the committee considered would adjust the formula the state uses to determine those payments. Among those who testified at the hearing was current NJ Senate President Steve Sweeney.
“There are four casinos in jeopardy of closing,” Sweeney stated. “We do not want that to happen. I don’t want to have a situation where it’s, ‘I told you that place was going to close, and it closed.”
After all comments, the committee held a vote on the amendment.
The amendment now proceeds to the NJ full Senate floor. Its passage might depend on helping legislators to understand what it would and wouldn’t do.
How the amendment would change PILOT payments
Currently, AC casinos make PILOT payments based on a formula that takes their collective gross gaming revenue over a period and then redistributes the burden for making payments according to the formula among them. They do this in lieu of paying property taxes, the assessments of which can vary greatly from year to year.
It’s important to note that this bill would not affect the privilege tax on gaming revenue the casinos pay. It only pertains to the formula for the PILOT property tax program.
A problem has arisen with that formula, now, however. Some AC casinos capture a lot more revenue through retail gaming operations than through online gaming channels. Others do quite the opposite. The current formula taxes online revenue at 2.5% and retail revenue at just 1.5%.
So, essentially, the smaller casinos like Golden Nugget and Resorts are paying more than their fair share of the PILOT program total. As the online share of their revenues continues to grow, that burden will only increase.
The amendment would exempt NJ online casino, online poker, and NJ online sports betting revenue from the equation. As a result, the bigger casinos who do more action in-person would pay a larger part of the tab.
That doesn’t mean the casinos will get a break on their PILOT payments. Next year, for example, the total would increase by a couple of million dollars if the amendment becomes law.
What are the chances of that happening right now? That’s actually where the math might become fuzziest.
What are the prospects for the bill moving forward?
As long as Sweeney retains his leverage, it seems likely that it will at least come up for a vote. The clock is ticking there, though. Sweeney lost his reelection bid last year, so his time in office is waning.
It’s currently uncertain how much support the amendment has in its current form in the NJ General Assembly and with Gov. Phil Murphy. That’s where a united front from AC casino operators could prove most effective.
No representatives from any of the nine casinos testified during the Senate hearing. They might have to take a more active stance in order to get the bill moving from this point forward, though.
If their future depends on this change to the extent Sweeney suggested, then it seems an important issue. Given Sweeney’s short time left in office, the best opportunity to apply pressure seems to be now.
