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Atlantic City's finances 'uncertain' as coronavirus cripples economy
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Atlantic City's finances 'uncertain' as coronavirus cripples economy

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{child_flags:top_story}{child_flags:breaking}Virus hits A.C.’s wallet in PILOT, state aid

{child_byline}DAVID DANZIS

Staff Writer

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ATLANTIC CITY — The novel coronavirus has wreaked havoc on government budgets at all levels, but the resort’s heavy reliance on state aid and fluctuating annual casino property tax payments presents a unique challenge going forward.

In 2019, the combination of state aid and the casino’s collective payment in lieu of taxes accounted for nearly 43% of revenue in Atlantic City’s $208 million operating budget. As both of those revenue streams depend on a healthy economy, the longer businesses remain shut to slow the spread of COVID-19, the more worried some local officials are becoming about potentially massive revenue shortfalls.

“It’s more about the uncertainty,” said Council President George Tibbitt, who sits on the city’s Revenue and Finance Committee. “I’m very concerned right now.”

The state Department of Community Affairs, the agency with direct fiscal oversight of Atlantic City as a result of the 2016 Municipal Stabilization and Recovery Act, did not make anyone available to answer questions about the city’s financial future.

Mayor Marty Small Sr., who chaired the municipal finance committee for several years at the start of the state takeover, said the city is on “solid fiscal ground for the foreseeable months ahead.”

“We’re in pretty good shape for months to come, which is a stark contrast from where the city was just a few short years ago,” he said. “We’re keeping an eye on the future, including next year. So we’re not sitting on our hands. We’re prepared to deal with issues as they come in a proactive way.”

Small said city officials were, however, aware that municipal tax collections are likely to be lower than usual since non-casino property owners’ income streams have been cut off or reduced. The quarterly payment deadline has been extended to June 1, and Small was unable to provide an anticipated collection rate.

The fiscal crisis created by the coronavirus has also elicited renewed calls to take a harder look at the casino PILOT law that is directly tied to the industry’s gaming revenue.

Tibbitt pointed out the inherent flaw in the law that allows casinos to pay less during the economic crisis while non-casino businesses and residential property owners have no relief.

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“There’s not much more we can do,” Tibbitt said, referring to more than $60 million in cuts to the city budget since 2016. “It just shows what the PILOT has done to Atlantic City, how terrible it is for the city and how no one ever expected something like this to happen. ... (The indefinite shutdown of the casinos) is a part of the PILOT they never planned for.”

Assemblyman Vince Mazzeo, D-Atlantic, was a primary sponsor of the 2017 legislation that was supposed to help stabilize Atlantic City’s finances by eliminating costly casino property tax appeals for a decade. Mazzeo said the bill had been working as intended, but lawmakers never envisioned a scenario where all of Atlantic City’s casinos would be shuttered indefinitely.

“It was going to be a good thing for Atlantic City,” Mazzeo said Friday, “but, unfortunately, no one could predict a pandemic coming down the road like this. So we’re going to have to have a conversation about how to sustain, not only Atlantic City and the casinos and how they’re going to pay their bills, but the whole state of New Jersey.”

The PILOT bill created payment tiers based on the prior year’s total gaming revenue that are divvied up among the city, the school board and the county. In 2019, Atlantic City casinos reported more than $3.2 billion in revenue and will pay out roughly $152 million in 2020.

The lowest tier in the law assumes annual gaming revenue of $1.8 billion and a payment of $90 million. While that worst-case scenario is unlikely, March’s monthly gaming revenue reports showed a 43% decrease compared to the prior year, a clear impact of losing just 15 days after Gov. Phil Murphy ordered the indefinite shutdown March 16.

“We’ve never faced this. Nobody’s faced this. So there are going to have to be new solutions here that can get everybody back to where they have to be,” Mazzeo said. “It’s going to be a slow process to get back to where we were. And, as legislators, we’re gonna have to come up with policies that help us along the way, and that’s a conversation not just about casinos but all businesses to be fair and equal to everybody.”

Murphy has often spoken about the coronavirus’ impact on the state’s finances and recently pleaded with the federal government to provide additional relief. The governor has also frozen nearly $920 in discretionary spending, including more than $44 million in municipal aid.

“The impact of COVID-19 on the state, its economy, and budget and finances is unpredictable and rapidly changing, but the state believes that events surrounding COVID-19 will negatively impact the state’s economy and financial condition,” the treasurer said in a March financial disclosure.

Any losses of state aid would have an adverse impact on Atlantic City’s budget. Sixth Ward Councilman Jesse Kurtz said the city’s budget already relied “to a very large extent” on state aid, even before the pandemic.

“To see the state acknowledge that they’re in a position where budgeted expenses on their end do not have matching revenues, both in real time because of the slowdown in fees and tax collection, but also based on projections with the impact of COVID-19, at some point that does ripple over to the different accounts that deal with transitional aid that is very important for our budget picture,” Kurtz said.

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Contact: 609-272-7222

ddanzis@pressofac.com

Twitter @ACPressDanzis

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Staff Writer

I cover Atlantic City government and the casino industry since joining The Press in early 2018. I formerly worked as a politics & government reporter for NJ Herald and received the First Amendment: Art Weissman Memorial NJPA Award two years in a row.

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