As we rebuild and recover from the COVID-19 crisis, we must remain focused on preserving the stability of Atlantic City’s economy. The proposed S4007 amendments to the PILOT program are essential to Atlantic City and Atlantic County’s stabilization, which will protect thousands of jobs, investment dollars, as well as stimulate diversification, investment and growth. There has been a lot of misinformation about the PILOT program in recent weeks, and the Atlantic City casino industry is grateful that Atlantic City Mayor Marty Small Sr. and former Judge Steven Perskie have weighed in with their support for S4007 amendments and helped clarify that the new PILOT bill will benefit Atlantic City’s taxpayers and residents.
The Atlantic City casino industry believes transparency and candor are essential for us to work together to support the revitalization of this city. Five years ago, the PILOT program was created to bring stability to tax payments for the local government and operating casinos. While the PILOT program has delivered on its promise, the truth is that the market has changed since the program was first written and it must be updated to reflect the current reality. Two new properties have opened, resulting in the need to reallocate the variable payment to be fairly distributed between the properties; the casino industry and region have endured nearly two years of a global pandemic and an unprecedented shutdown; and Atlantic City gaming revenue has gone backwards since the pandemic, rolling the industry back to 2018 levels.
The proposed S4007 amendments are not a tax break for the Atlantic City casino industry. Under the amendments, Atlantic City will receive even more funding from the casino properties in 2022 than it did in 2021. Further, Atlantic County will receive the same amount of tax revenue in 2022 under the proposed amendments as it received in 2021. Finally, the city will continue to receive far more under the PILOT program than under traditional real estate taxation. To break it down:
In 2021, Atlantic City received approximately $155 million under the PILOT program with about $17.5 million of that going to Atlantic County.
With the proposed amendments, the city will receive approximately $165 million in PILOT payments in 2022 with about $17.5 million of that going to Atlantic County.
Additionally, PILOT payments will continue to increase annually by at least 2% over the next five years, with the city likely receiving up to $180 million in PILOT payments by 2026, if internet gaming revenue continues to increase.
If the PILOT were eliminated, and we reverted to traditional real estate taxation, the city would only receive about $116 million from the casinos, with $15.5 million of that going to Atlantic County.
It is important to understand that the PILOT program comprises three revenue streams from the casino industry which collectively produce these increases: direct payments, variable payments and fixed payments. The proposed amendments will continue to ensure the stability of Atlantic City for years to come through these three revenue streams:
Direct payments are equivalent to 1.25% of all gaming revenue at the casino properties and 2.5% of all internet gaming revenue. This revenue remains unchanged under the amendments — which means that the city will continue to receive PILOT funding based on internet wagering revenue. The amount expected to be received by the city in 2022 under this revenue stream is about $50 million.
With the amendments, the variable payment starts at $110 million in 2022 and can range between $100 and $120 million based on gaming revenue amounts generated at the casino properties (not including internet revenue).
S4007 proposes a new $5 million fixed payment to be paid directly to Atlantic City that is divided among the casinos. This additional payment is not included for 2024-2026 under the current PILOT law.
Internet gaming has previously been included in the formula to establish the annual variable payment amount and the allocation of this amount between properties, even though most of the online revenue is received by third-party companies — not land-based casinos. While online gaming has seen significant increases in recent months, these revenue increases have contributed to a great misperception around the financial health of Atlantic City casinos since the pandemic. The monthly reporting of revenue combines online and land-based gaming revenue and attributes the entirety to Atlantic City casino properties, thus creating a number that does not accurately reflect the current state of the industry. Removing it from the equation retains that stability for the city and county and allows the PILOT program to produce more revenue in 2022 and thereafter than it produced in 2021. Internet gaming is already taxed at 15% (in addition to the 2.5% tax that goes to the city), and that money goes to the Casino Revenue Fund which supports programs that benefit seniors and persons with disabilities.
While the PILOT program has been successful over the last five years, it is imperative to ensure its continued success through the S4007 amendments. As Mayor Small said this past week: “The great city of Atlantic City is in a better financial position than we were five years ago. There’s no question about it. And the great city of Atlantic City will be in a better financial situation five years from now than today, and that is because of the PILOT bill.” Atlantic City casinos believe the amended PILOT program will continue to generate increased revenue for the city and county, as well as improve Atlantic City’s infrastructure, enhance planning and zoning, and create a safer community for visitors and residents. We urge legislators to pass the amended PILOT legislation so we can get back to work in revitalizing our historic seaside destination resort.