Carl Icahn Files 10 Tax Appeals Worth Millions of Dollars for Atlantic City Casinos
Carl Icahn has tax appeals for Tropicana Atlantic City, Trump Taj Mahal, and Trump Plaza which could cost Atlantic City millions of dollars. Given the fragile state of Atlantic City’s finances, the tax abatements could make life harder for the city’s financial leaders.
The billionaire activist investor recently filed tax appeals for 2014 through 2017 for Trump Taj Mahal and Trump Plaza, which he bought when he took control of Trump Entertainment Resorts in 2015-2016. Icahn also filed for a new assessment of the tax liabilities of Tropicana Atlantic City for 2015 and 2016.
10 Tax Abatements Wanted
In all, it is ten different tax abatements. If the appeals and reassessments are successful, it would cost Atlantic City millions of dollars. The filings do not specific exactly how much Carl Icahn is seeking from Atlantic City.
When asked for a comment on his tax appeals, Carl Icahn only said, “Since we are currently in discussions, I don’t think it’s appropriate to comment.”
Jeff Chiesa on Casino Tax Negotiations
In light of the appeals, Atlantic City and Carl Icahn are negotiating a settlement. A spokesman for the New Jersey Department of Community Affairs also declined comment, stating that negotiations were ongoing. Jeff Chiesa, the state overseer who controls Atlantic City’s finances at the moment, released a statement on April 5 which said, “We’re in discussions with Mr. Icahn and his representatives right now about trying to resolve outstanding monetary issues regarding his casinos.”
New Jersey Gov. Chris Christie said last week that he was willing to negotiate with Carl Icahn to avoid a costly appeals process, but he warned the billionaire that the state only had so much flexibility. Christie said his negotiations would bargain “the same way we negotiated with the folks at Borgata. But what everyone needs to understand is there’s not much money left here.”
History of AC Tax Appeals
Over the years, successful appeals of casino taxes have cost Atlantic City hundreds of millions of dollars. Since that is a rough estimate of the debt Atlantic City faces, one can say the tax appeals have driven Atlantic City into debt.
For that reason, the New Jersey legislature passed a PILOT bill in 2016. “PILOT” stands for “payment in lieu of taxes”, and it replaces the usual process of assessment and appeals with a set, predictable tax payment.
The idea behind the PILOT bill is it works out for both sides. Atlantic City knows exactly what it will receive from the casino industry, and doesn’t have to give back revenues it cannot afford after a costly appellate process. The casinos can plan better, because they have fixed costs. Both sides avoid millions of dollars of legal fees each year in the appeals process. Only the legal staffs lose with the PILOT bill.
The PILOT Payments for Casinos
Under the current PILOT plan, the collective casinos of Atlantic City are going to pay the city $120 million this year. The system works for 2017, but critics say the state legislature should have passed a PILOT bill two years earlier, when it was first discussed by lawmakers.
Atlantic City Mayor Don Guardian is one of those critics. Mayor Guardian noted the December 2014 negotiations, which eventually failed to produce a PILOT bill. Mayor Guardian said, “The original PILOT bill was going to protect us (in 2015 and 2016). Unfortunately, that didn’t happen.”
One argument against a PILOT plan is it is not adjustable. If the revenues go up significantly over the 15-year period of the plan, then the state loses hundreds of millions of dollars in tax revenues. If the revenues go down significantly, then the casinos might have to pay unsustainable tax rates, leaving their operations in trouble. The current decline in the value of casino properties shows that a PILOT bill can be an advantage, though.
Carl Icahn’s Atlantic City Taxes
According to the City Clerk’s Office, Carl Icahn’s casinos paid $32.7 million in combined property taxes in 2016. The bill came to $22.4 million for the Tropicana, $8.7 million for Trump Taj Mahal, and $1.5 million for Trump Plaza. The problem for Atlantic City is, those bills were assessed for older property values.
Trump Taj Mahal’s property value was estimated at $812 million in 2014, but now sits at only $225 million. Trump Plaza was valued at $209 million in 2014, but is valued at only $31 million presently. Even the successful property of the three, Tropicana, has lost value due to the overall decline of Atlantic City’s casino economy. Tropicana Atlantic City was valued at $680 million in 2014, but is only valued at $580 million right now — despite having a financial turnaround.
Atlantic City’s Financial Troubles
That could spell trouble for Atlantic City, which has plenty of financial troubles already. Atlantic City’s financial situation has declined in a disastrous way in the decade of the 2010’s. The city’s tax base was $20.5 billion in 2010. Now, the tax base is around 30% of what it was, at only $6.5 billion in 2016. At one point, Atlantic City was considered the worst place in America to find a job — worse than Detroit.
With such an economic free fall, New Jersey had to step in last year to take over Atlantic City’s finances. Now, former senator Jeff Chiesa is set to control Atlantic City’s finances for the next 5 years. The state’s resources should help stabilize the situation, but at the cost of AC leaders ceding control of programs and jobs.
Stephen Sweeney Critical of Icahn
New Jersey State Senate President Stephen Sweeney remains critical of Carl Icahn. Sweeney recently said of the New York City billionaire, whom he seems to think has a vendetta against the city, “Why doesn’t he just help Atlantic City for once, instead of trying to hurt the city.”
Sweeney refers to the 2016 closure of Trump Taj Mahal, which came at a time when Icahn was facing a strike by 1000 of the Taj’s 3000 workers. The Local 54 of the UNITE-Here workers union was striking in July 2016, so Carl Icahn announced he would close the casino in October 2016. When rumors spread that Icahn wanted to close, then reopen under a new name and hire non-union workers, Sweeney passed a bill (vetoed by Gov. Christie) which would strip the Taj Mahal of its gaming license for 5 years, if such a move happened.
Eventually, Carl Icahn sold the Trump Taj Mahal, taking a $300 million loss on the property. Given the losses incurred, Carl Icahn likely wants to recoup whatever he can on the investment.
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