New Jersey Officials Refused to Provide the Numbers Behind New Casino Tax Breaks. So We Did the Math.

by Alison Burdo, The Press of Atlantic City

This article was produced for ProPublica’s Local Reporting Network in partnership with The Press of Atlantic City. Sign up for Dispatches to get stories like this one as soon as they are published.

When New Jersey officials passed sweeping tax cuts for Atlantic City’s casinos last year, they offered broad claims but little evidence.

At issue, they said, was just how much the industry’s taxes were going to rise under the system that determines how much casinos pay in lieu of property taxes.

“We are risking four casinos closing,” said then-state Senate President Steve Sweeney, without providing specifics.

Likewise, former Judge Steven P. Perskie, an Atlantic City adviser and the former state lawmaker who authored the Casino Control Act legalizing gaming, predicted dire consequences. “The impact of the increases that would take place in 2022 would put a significant portion of the industry in extreme financial distress,” he said, citing a “comprehensive” financial analysis conducted by the state.

But when The Press of Atlantic City and ProPublica sought that financial analysis from the New Jersey Department of Community Affairs, which is tasked with direct oversight of Atlantic City, the agency would not produce it. In an interview, Sweeney also declined to provide evidence of potential closures, saying it would be clear “if you do your homework and you look at the increase that some of these casinos were facing.”

So that’s what we did.

Over the past few months, The Press of Atlantic City and ProPublica filed a series of public records requests with local and state agencies to help calculate the casino tax liabilities that the state refused to reveal.

Our analysis centered on two taxes, one called PILOT, which stands for payment in lieu of taxes, and the other called the investment alternative tax.

PILOT was designed to replace typical property taxes beginning in 2017, after casinos repeatedly challenged those annual assessments, and the money collected under that system was distributed to the city, its school district and the county. And the investment alternative tax was a longstanding levy, devoted to community investment in Atlantic City and elsewhere in the state, that casinos had received a temporary break on. Each was set to rise in 2022, largely because casino revenues were up.

To determine what the industry would have paid under the original PILOT system, before the law was changed last year, the news organizations collected three key data points on each casino: gross gaming revenue, including money from online gaming; number of hotel rooms; and acreage. We then plugged those figures into the formula outlined in the 13-page tax law and confirmed the results with the state. What we found cast doubt on officials’ claims of financial ruin. (For a detailed methodology, see the last section of this story.)

According to our analysis, the gaming industry’s nine properties would have collectively owed $165 million in PILOT in 2022, a $35 million hike compared to 2021. Two of the city’s nine casinos would have actually seen a decrease in their PILOT.

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This content originally appeared on Articles and Investigations - ProPublica and was authored by by Alison Burdo, The Press of Atlantic City.