#ScrewAC. Grossman Decodes Atlantic City’s Financial Cluster-F

Seth Grossman

The latest from Seth Grossman, director of LibertyandProsperity.com.

On New Year’s Day, Atlantic City’s Mayor Frank Gilliam and City Council were ambushed with a $55 million extortion demand. It came from Gov. Chris Christie’s outgoing state officials including Jeff Chiesa, the West Orange attorney who has been running Atlantic City for the last 14 months.

If City Council gives in, they will pay for it with years of new tax hikes.

Thanks to the new and previous PILOT tax break laws, Atlantic City’s casinos and 110 outlet shops and restaurants won’t pay any tax hikes for the next eight years. That is another reason why the lawsuit by Liberty and Prosperity, of which I am president, against the 10-year tax break for Atlantic City casinos is so important.

This began seven years ago, early in Christie’s first term. New Jersey has a “Local Budget Law” law that requires all municipalities to have balanced budgets each year. They can only borrow for improvements like new roads, buildings and equipment. They cannot borrow to for payroll or other day-to-day expenses.

In 2010, Christie’s director of Local Government Services found that Atlantic City was breaking that law by spending millions more than it was taking in.

The city had lost two thirds of its tax base, but was doing nothing to cut costs. Instead it was hiring new people, raising salaries and doing business as usual.

The state went to court and put Atlantic City under state supervision. However, instead of forcing Atlantic City to balance its budget, state officials ignored the law themselves. They let Atlantic City spend roughly $80 million more than it took in during each of the next six years. As a result, Atlantic City now has debts of nearly a half-billion dollars.


What state officials did in 2015 was especially troubling. Mayor Don Guardian’s officials failed to make any of the four quarterly payments of $38 million owed to the state for mandatory employee health insurance and pension contributions. Some of this money was probably withheld from employee paychecks. This should have gone to a grand jury.

Instead, Guardian and state officials failed to inform City Council and the public of these missed payments for more than a year.

They also failed to include and pay this money in their 2016 or 2017 budgets. Then they quietly added $17 million in interest and other charges. This increased the amount of the missed payments to $55 million.

Chiesa’s law firm was in on this since November 2016. They waited until after the election to put this in the budget.

By not including and paying that $55 million in the 2017 budget, state officials let Republican Mayor Guardian falsely claim that he had cut property taxes when he ran for re-election. They may have also cut local taxes paid by Atlantic City casinos and raised taxes for everybody else.

The 2016 casino PILOT law lets casinos pay a fixed $120 million per year with 2 percent yearly increases for inflation. That amount was based on Atlantic City’s 2015 and 2016 budget numbers. Atlantic City’s casinos then paid roughly half of Atlantic City’s $240 million yearly budget. Because that $38 million (now $55 million) was not in those Atlantic City’s budgets, it was left out in calculating the payment in lieu of taxes to be paid by casinos.

Besides casinos, another 11 percent of taxable properties like the 110 outlet shops in Atlantic City also pay PILOTs and are also exempt from tax increases.

If Superior Court Judge Julio Mendez fails to throw out the casino PILOT law, only 39 percent of Atlantic City taxpayers will pay most of that $55 million claim from three years ago.

Atlantic City taxpayers need quick and decisive action from Mayor Gilliam and City Council.

First, they need to reject the state’s $55 million extortion demand. Second, they need attorneys they can trust to wipe out or cut down that claim. Third, they need to support the Liberty and Prosperity lawsuit against the casino PILOT law so casinos pay their fair share of future expenses. Finally, to pay for this, they should audit the bills submitted by Chiesa’s law firm for $4 million and claw back a big chunk of that money.

Attorney Seth Grossman, an Atlantic City resident with a Somers Point law office, is president of the 140-member, nonprofit civic education organization Liberty and Prosperity. He was an Atlantic City councilman and Atlantic County freeholder in the 1980s.

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