Lawsuit against New Jersey PILOT Bill Filed by Constitutional Advocacy Group

Last updated on December 14th, 2021

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Liberty and Prosperity, described by the Press of Atlantic City as “a constitutional advocacy group“, has sued New Jersey to block the PILOT law involving Atlantic City casinos. Liberty and Prosperity claims the property tax bill is unconstitutional.

The PILOT (“Payments In Lieu Of Taxes”) was enacted in 2016 as an alternative to costly property tax assessments for Atlantic City casinos’ property taxes. Each year for the past 40 years, tax assessors would determine the property taxes for the casinos. The casinos would file tax appeals and both sides paid millions of dollars in legal fees to settle appeals.

A History of Costly Tax Appeals

That system caused Atlantic City significant distress. Because tax appeals sometimes remained in the courts for years, Atlantic City would receive taxes they later had to repay. When the Global Recession caused a loss of 5 casinos, the city was unable to repay taxes to the Borgata in excess of $150 million.

Advantages of the PILOT Bill

Under the PILOT law, Atlantic City casinos instead agreed to pay $120 million a year in property taxes, with that amount divvied up among the various operators. That PILOT bill was set for 15 years. If the Atlantic City casino industry hit hard times, the $120 million might be an undue tax burden. If the AC gaming industry prospered, the payment might be a tax break.

Either way, both sides had certainty. Atlantic City could depend on the $120 million-a-year in tax revenues, without the need to repay them at a later date. The casinos could plan business models based on the tax rate, knowing they had a set amount to pay each year. Both sides did not have to spend exorbitant amounts on legal bills, fighting out assessments in court.

PILOT Bill Called a Tax Break for Casinos

Liberty and Prosperity says the PILOT bill amounts to a tax break, which is against the New Jersey state constitution. Liberty and Prosperity’s spokesman, Seth Grossman, says that the state has the right to legislate tax exemptions on a statewide basis, but “special tax breaks for just seven casino properties at the expense of all other county taxpayers” is unconstitutional.

Mr. Grossman said that the state has the right to legislate tax breaks to encourage business development. The advocacy group has no problem with tax breaks per se, but the PILOT bill “expands those exceptions to the point of absurdity“.

Julio Mendez: Presiding Judge

Superior Court Judge Julio Mendez is set to hear the case in July. Legal briefs must be submitted by July 6. Oral arguments will be heard on July 17 in Judge Mendez’s court in the Atlantic County Superior Court Building.

Tax Abatements for New Jersey Businesses

Seth Grossman gave a preview of the legal brief Liberty and Prosperity would file when he said in the Press of Atlantic City, “In the past, tax abatements were given to a handful of blighted properties to encourage redevelopment. Today, these tax breaks are given to the richest corporations and most luxurious properties in the city.”

Mr. Grossman expanded on his criticism of the PILOT bill, saying that the tax abatement affects the entire tax structure of Atlantic City itself. Grossman added, “Because this applies to county taxes, every business and homeowner in the whole county is also affected.”

Call for Supporting Briefs

Liberty and Prosperity urged local business leaders and local officials to file supporting briefs with the Superior Court, because such arguments would reinforce their own brief with Judge Mendez.