The Law That Granted Casinos in Atlantic City Millions of Dollars Violates the State Constitution

By John Isaac,
Editor at online-gambling.com

John Isaac Editor at online-gambling.com

John Isaac is an editor with many years of experience in the gambling industry. He writes expert articles on card games like blackjack and poker. In addition, he is also well aware of the US gambling laws and the Indian and Dutch gambling markets. You can rely on verified information and insightful details.

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Last updated: August 29, 2022

A state law that gave casinos in Atlantic City tax breaks worth millions of dollars was recently overturned by a superior court judge in New Jersey. The judge said that the law violated the constitution of the state and that it was passed on questionable grounds.

This ruling was a setback for the state’s legislative leaders and Governor Phil Murphy. Last year, they fast-tracked the legislation via the legislature. This decision will directly impact the gaming industry. The industry had argued that the bill was required because it was facing challenges in the wake of the COVID-19 pandemic.

The debatable law called for modifications to the PILOT (payment in lieu of taxes) local taxing program. Since 2016, each casino did not pay property taxes. Instead, they paid a share of an industry-wide assessment distributed to Atlantic City and its school district to fund various operations.

Last year, the industry pushed for changes, and it eventually won an essential legislative change to that formula. The total PILOT liability of the gaming companies was reduced by about $55 million. Some people rejected the revenue reduction because they felt it impacted Atlantic City disproportionately.

Liberty and Prosperity 1776 Challenged the Constitutionality of the Law

Liberty and Prosperity 1776, a conservative nonprofit group, challenged the law’s constitutionality. The group said that the founding document of the state forbids preferential tax treatment. The state claims that because the new law served a public purpose that is permissible, it was exempt from that restriction. Last month, Judge Michael Blee, Atlantic County Assignment, finally took sides with the nonprofit. This will potentially raise casino tax bills and inject millions of dollars into local coffers.

Even though online gaming revenues were on the rise when the bill was passed, some of the state’s lawmakers and leaders in the industry argued that the change was needed to prevent financial loss. Steve Sweeney, the state’s Senate President at the time, argued that without the change, they were “risking the closure of four casinos”.

The Casino Industry Was Already Bouncing Back From the Impacts of COVID-19

The casino industry, however, had already begun to recover from the pandemic downturn. The industry recorded its best year in over a decade. Despite claims of financial trouble, Atlantic City Casinos reported gross operating revenue of $767 million in 2021.

Financial reports even demonstrate that revenue generated from in-person gambling is now more than the levels from before the pandemic. The nine casinos in the city reported gross operating profits of $339 million through the first half of 2022. This shows an increase of 17% over the same period last year and follows a pattern of increased revenue in the US. DraftKings has reported a massive increase in revenue in Q2 of 2022 alone, which is a good sign for the gambling industry.

Additionally, according to Blee, “there is no evidence to suggest that casinos could not meet their PILOT obligations under the Original Act.” He said the legislation was advanced “to aid what was actually a resurging industry.” On the other hand, the spokesperson for the governor Murphy? Alyanna Alfaro Post revealed that the state intends to oppose the decision of the judge and that they are very positive that it will be overturned.