30-second summary
- Hard Rock International has won a tax dispute with Atlantic City
- As a result, the group will receive payments totaling $4.8m from the city
- This comes when the fortunes of the city’s casinos are starting to improve
Details of the dispute
The Hard Rock International (HRI) group has won a tax obligation dispute with Atlantic City. As a result, HRI will receive $4.8m (￡3.6m) from the city.
The payment will be spread over four years, in installments of $1.2m (￡0.9m). The first payment will be made in 2020. Atlantic County will be responsible for 8% of the payments, and the city itself will pay the remainder.
The case was based on a dispute dating back to 2017. New Jersey officials asserted that all of the tax appeals from casinos in the region had been settled, as well as bonded in Atlantic City.
The total sum of these tax appeals was $80m (￡60.6m). However, it seems that a mistake was made.
Lisa Ryan, a spokesperson for the Department of Community Affairs in Atlantic City, explained:?“Because of the timing of Hard Rock’s purchase of the [Taj Mahal Casino Resort] and the work that needed to be done to get the casino into the PILOT (payment in lieu of taxes agreement for casinos), the 2017 appeal was not able to be included in the $80 million bond ordinance the city approved in August 2017 to fund other property-tax appeals.”
Details of the program
Between 2014 and 2017, various tax appeals from casinos were settled. However, because the Trump property closed in 2016, it was not covered for the entire period. There were other issues with this PILOT program.
New Jersey state was the target of a lawsuit from the Revel Casino Hotel over this program in 2017. There were also issues with $68m (￡51.5m) worth of bonds that were sold by the New Jersey authorities to provide funds for the tax appeal settlement sums.
It appears that this latest settlement with Hard Rock International will finally wrap up this issue once and for all. Ryan is on record as saying that there are no active tax appeal cases by former or existing casinos that still have to be settled.
Fortunes of Atlantic City
Atlantic City has a long winding history with its gambling trade. Casinos first became legal in 1976 and the first casino opened in 1978. This move was made to revitalize the fortunes of the city.
Revenues were steady until the 1990s when the Atlantic City casinos began facing increasing competition. Las Vegas was largely redeveloped, which underpinned its stance as the leading gambling destination in the country. Other states also started to legalize casinos, with two opening in nearby Connecticut in the 1990s.
Numerous redevelopment plans were in the works in the early 2000s, but they did not come to fruition. The plan was to create mega-casinos such as those seen in Las Vegas. When the global recession hit, a lot?of the?mega-casinos that were in development or in the planning stages were scrapped.
The recession, of course, hit the area hard and devastated many of the casinos, causing a number of them to close their doors. Casino revenues were almost cut in half following the recession. In 2006, total casino revenues were $5.2bn (￡3.9bn), but they fell to $2.9bn (￡2.2bn) in 2013.
With revenues from the 8% tax on these figures declining, the state had to find ways to make up this loss. As of 2017, there were only seven casinos operating in Atlantic City, with total revenues of about $206m (￡156m). There are now nine casinos in operation.
Signs of improvement
There are some signs of improvement in the city. Primarily because sports betting was legalized, 2018 was a strong year. New Jersey was one of the first states to legalize sports betting following the ending of the federal ban in May 2018.
Sportsbooks are bringing more people into the facilities, and the casinos in Atlantic City are planning to start mobile sportsbooks. To date, mobile sports betting has been more popular than sports betting at physical locations in New Jersey. Many people cross state lines into New Jersey regularly to place mobile sports bets.
