Lawsuit challenging constitutionality of casino PILOT awaits decision
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As Atlantic County fights the state in court to get what it considers its negotiated share of casino payments-in-lieu-of-taxes, a nonprofit called Liberty and Prosperity is suing to force the end of the amended casino PILOT.
A hearing on the lawsuit was held Friday, and soon Judge Michael Blee will decide whether the amended PILOT violates the state Constitution's uniformity clause and should be thrown out, as Liberty and Prosperity contends, or the group's lawsuit should be dismissed, as the state contends.
The uniformity clause requires that "all real property assessed and taxed locally ... shall be assessed according to the same standard of value ... and such real estate shall be taxed at the general rate of the taxing district in which the property is situated," according to the Liberty and Prosperity legal brief.
The state argued in its brief that any PILOT under these circumstances is not a violation of the uniformity clause.
"Indeed, the principal shortcoming of Plaintiff's argument is that it fails to acknowledge the unique circumstances of the City and the casino industry from a constitutional perspective," the state's lawyer, John Lloyd, said in his legal brief. "A specific constitutional enactment authorized casino gaming in the City. That provision has historically supported unique treatment of the City and the casino industry."
According to Lloyd, the creation of the industry also compelled the imposition of "investment alternative taxes," which are a distinct tax on casinos not shared by other types of property in the state.
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The casinos pay 1.25% of casino gross revenue and 2.5% of internet gaming gross revenue in IATs. Also, there is a 1.25% additional tax on retail sports wagering gross revenue and internet sports wagering gross revenue, according to the state Division of Gaming Enforcement.
"The county is saying, 'We were promised a certain amount of money, and we want our money,'" said Seth Grossman, the lawyer arguing on behalf of Liberty and Prosperity, a group he leads. "We are saying the whole thing is unconstitutional, but we made a 10-year deal we thought protected taxpayers."
The original 10-year PILOT deal, made in 2016, was blown apart in December when the Legislature quickly amended the Casino Property Tax Stabilization Act, which created the PILOT, and Gov. Phil Murphy signed it into law.
The amended PILOT removed internet and sports gaming revenues from what the state considered gross gaming revenues, lowering total payments the casinos will have to make by about $40 million a year in 2022, according to a fiscal estimate from the Office of Legislative Services.
The county estimated that change would cost it about $5 million a year.
"The only logical thing is to throw out the Dec. 21 amendment," Grossman said, "and make casinos live up to the 10-year deal they signed up for back in 2016."
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Otherwise, the money to reimburse the county will come from state taxpayers, Grossman said.
Lloyd, on the other hand, called the CPTSA a "critical component of the Legislature's comprehensive statutory scheme to rehabilitate the City, for the benefit of the City, the county and the State, as a whole."
Blee is expected to rule soon on the Liberty and Prosperity lawsuit.
The judge recently ruled in favor of the county in its lawsuit, which is seeking to force the state to pay it the difference between what it would have received under the original PILOT and what it will get from the amended one.
But a state appellate court stayed that order until it takes further action on a state appeal.
