Atlantic City announces 5.23-cent tax rate decrease in $225.8 million budget

ATLANTIC CITY — Mayor Marty Small Sr. announced a 5.23-cent tax rate decrease for the 2023 budget Tuesday.

Small made the announcement during a news conference at the Carnegie Library on Dr. Martin Luther King Jr. Boulevard. He said this year’s tax cut exemplified the progress the city has made since its financial crisis in 2016.

“We all know where we’ve been, and it was a dark place. Let me take you back to 2016, when we were teetering on the brink of bankruptcy,” Small said. “Fast forward to 2023, we’re nowhere near bankruptcy. As a matter of fact, this is the strongest that the city’s finances have been in a very, very, very long time. And we’re just getting started.”

The property tax cut of 5.23 cents per $100 of assessed property value comes from a budget with about $225.8 million in general appropriations, city officials said. That figure is about $9.2 million less than the total general appropriations from the budget the city adopted in 2022, amounting to a proportional cut of about 3.91%.

The reduction in general appropriations is paired with a decrease in the overall amount of taxes collected from city homeowners and businesses. Auditor Leon Costello said he anticipated the total tax levy would be over $37.1 million, down from the $38.6 million collected from taxpayers in 2022 and from the $40 million collected in 2021. This revenue will be generated from a tax ratable base of $2.3 billion, said Costello. This excludes the value of the city casinos as they are not taxed but rather make payments in lieu of taxes set by state law.

The tax rate for 2022 was budgeted at $1.5997 per $100, an approximately 5 cent per $100 decrease from 2021. The 5.23-cent tax decrease for this year would lower that tax rate to $1.5474 per $100. Average homeowners in 2022 with an assessment of $125,000 would see their local taxes decrease by about $60.38. The tax bill is also determined by the budgets set by the Atlantic City School District and Atlantic County, although the former has already announced it anticipates reducing its tax levy.

City Business Administrator Anthony Swan said the mayor’s prioritization of tax cuts required some sacrifice on the part of the individual departments, ultimately requiring line-item cuts to reduce their total budgetary requests by $25 million. Swan said the city had to deny requests for wage increases and other kinds of department requests.

“That is not an easy task. That takes a lot of discussion,” Swan said. “This budget is very difficult to put together.”

Swan said his work on the budget was centered on the Small administration’s demand for a tax cut.

“With that one revenue source (property taxes), the mayor told us, ‘You will not increase the tax burden on the residents, so figure it out, fund everything you need to fund, but there will be no tax increases on the residents,’” Swan said. “So those were our marching orders.”

City Chief Financial Officer Toro Aboderin said the city was able to deliver a tax cut despite strains from inflation.

“As you know, this is not news to anyone, everything out there is more expensive than it was last year, and somehow, we’re still able to make it and still give the taxpayers of the city a great tax decrease,” Aboderin said.

Aboderin said the city would continue to work to live within its means during the next fiscal year and continue to provide services to residents and avoid going overbudget.

“The budget is done, the work begins now,” Aboderin said. “We have to manage it.”

Small said the priority of his administration heading into the budget process was to effect a tax cut. He said he had originally aimed for a double-digit-cent tax reduction before proposing a 7.85-cent cut. After conversations between Lt. Gov. Sheila Oliver and city officials, the Small administration settled on the 5.23-cent rate reduction. City officials said the 5.23-cent cut is the fifth under the Small administration.

“This is once again the Small administration saying what it means and meaning what it says on behalf of the taxpayers here in the great city of Atlantic City,” Small said before leading the audience in brief chants of “great day” and “tax decrease.”

Costello said the tax cuts for this year were reasonable and were not the outcome of temporary financial mechanisms. He praised Small during the news conference, calling him “awesome to work with” and an adept financial leader.

Small said the city expected to see tax cuts for the next five years. Future budgets over the next three years will be bolstered by the retirement of significant swaths of city debt, with debt payments dropping from $36 million to $23 million, a reduction Small said will be directed to provide further tax relief.

The city’s total debt is still relatively high. A city spokesperson said its debt was currently over $414.8 million, an amount that is about 18% of its ratable base excluding the value of its casinos.

The Atlantic City tax cuts break from a trend that has largely seen municipalities hike taxes in the region. Those officials have typically cited mandated state expenses, such as increased group health insurance costs and higher pension contributions.

“It’s simple, it’s being proactive and it’s relationships,” Small said. “We saw this coming, everybody saw it coming, but we didn’t sit on the sideline, we did something about it.”

Small said the city has worked extensively with state and federal officials to secure more aid, citing his trip to Washington, D.C. and meeting with U.S. Housing and Urban Development Secretary Marcia Fudge last month.

The state of the city today is a far cry from its position nearly a decade ago, when casinos were closing and the 2008 recession was a more recent memory. As the remaining casino properties filed tax appeals, the city’s ratable base lost 64% of its value, dropping from $20.5 billion in 2008 to $6.6 billion in 2016.

Amid the city’s financial turmoil, then Gov. Chris Christie signed a law in 2016 authorizing the state takeover of Atlantic City, endowing officials in Trenton with the authority to veto certain city decisions. Gov. Phil Murphy extended that takeover in 2021 for another four years.

While the city remains under control of the state, Small stressed that this year’s budget was the work of city officials and was not the byproduct of the state takeover.

“I’m going to make that crystal clear, it’s not the state’s budget, as some people have categorized it,” Small said. “It’s the city of Atlantic City’s budget.”

The city continues to receive PILOTs from the casinos. During the news conference, Small alluded to a change in state law that exempts online gambling when calculating the payments casinos owe the city, as well as the Atlantic City School District and Atlantic County. He later clarified that he did not intend to try to change the existing PILOT agreement and said the city was “very happy” with the agreement. Atlantic County and the conservative nonprofit Liberty and Prosperity 1776 have successfully challenged the new state PILOT formula in court, although the state has appealed.

“Now is not the time to rewrite the PILOT bill,” Small said. “That has an expiration date. We will explore it then.”

City Council is set to introduce the budget at 5 p.m. Wednesday at City Hall.