Will Chelsea Hotel & Hard Rock Gas Station Pay Taxes to Atlantic City, or PILOT?

Chelsea Tropicana Atlanti City PILOT BILL
Proposed Sky-way Between Trop & Chelsea.

Two recent announcements raised eyebrows and questions about Atlantic City losing more tax revenue due to the infamous PILOT Bill.

Take a look at the proposed Hard Rock gas station, and the Tropicana’s soon-to-be connected sky-way to the Chelsea hotel/tower. Will these projects divert tax dollars away from municipal coffers, and into the PILOT Bill?

Did the City Council of Atlantic City foolishly vote, and sign away Chelsea Hotel tax revenues?

We report. You decide. WATCH VIDEO.

In 2016, New Jersey enacted the “Casino Property Tax Stabilization Act,” which exempts Atlantic City casino gaming properties from property taxation and instead imposes and annual Payment-in-Lieu of Taxes (PILOT).

“Casino gaming property” is defined as one or more parcels of property, and adjacent property utilized in connection with such property, upon which there is located a facility licensed to be used for casino gaming in 2014 or thereafter, whether or not in actual operation, which has more than 500 guest hotel rooms and is not subject to recorded covenants prohibiting casino gaming.

The Act provides that beginning with calendar year 2017, and continuing for the next succeeding nine tax years, casino gaming properties located in the City of Atlantic City, including accessory hotels, conference centers, parking garages, and other appurtenant facilities, are exempt from local property taxation on real property.

In exchange for the property tax exemption, the owners of casino gaming property must sign a financial agreement with the City of Atlantic City promising to make quarterly payments to the city totaling $120 million in 2017. In 2018 and in each tax year thereafter, the total PILOT amount will be determined based on “gross gaming revenue,” or the total amount of revenue raised through casino gaming from all casino gaming properties in Atlantic City.

The amount of the payment in lieu of property taxes owed to Atlantic City will increase by 2% per year in every year in which there is no upward adjustment to the base amount of the payment in lieu of taxes from the previous calendar year.

The Act allows an owner of casino gaming property to withdraw from the financial agreement upon the commencement of the operation of a casino gaming facility in New Jersey that is located outside of Atlantic City. If a casino withdraws, the property would be subject to regular ad valorem taxation. An owner of casino gaming property is required to notify the municipal tax assessor, in writing, of its intent to withdraw no later than the September 15 next following the commencement of operation of the casino gaming facility outside of Atlantic City. The withdrawal will then be effective at the end of that calendar year. The gross gaming revenue of a casino gaming property that withdraws from the financial agreement will not be included in the PILOT calculation.

If the Act becomes operative, retroactive to calendar years 2015 and continuing through 2023, the owners of casino gaming property must also make separate payments totaling $110 million to the state. The amount owed for each casino gaming property is to be based on each casino gaming property’s proportion of gross gaming revenue for the prior year, as determined by the Local Finance Board in consultation with the Division of Gaming Enforcement. The state is granted a first priority lien on all payments made under the bill to secure repayment of any loans or aid to Atlantic City by the state. If a casino gaming property owner withdraws from the financial agreement, the amount of the non-tax payment will be reduced by the amount owed by the owner of casino gaming property which has withdrawn.

S.B. 1715, Laws 2016, effective as noted

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