Mayor Don Guardian lauded casino execs like Carl Icahn for “finally” putting Atlantic City over profits.
Atlantic City’s financial overseer settled the city’s remaining tax appeals with Carl Icahn and several other AC casino operators. The settlement covers tax appeals from 2014 to 2017.
The deal includes settlements for six different Atlantic City casinos, including Carl Icahn’s Tropicana and (former property) Trump Taj Mahal. Three Caesars Entertainment casinos are included: Caesars Atlantic City, Harrah’s Resort, and Bally’s Atlantic City.
The deal also includes Golden Nugget Atlantic City.
Jeff Chiesa Negotiates with Carl Icahn
Though Atlantic City represents the other side in the negotiations, Jeff Chiesa, a state-appointed financial overseer, negotiated the settlement. The state government did not reveal financial details of the settlement.
Former U.S. Sen. Jeff S. Chiesa did say that an $80 million bond issues introduced by the city council of Atlantic City in July 2017 would be used to fund repayments.
Because the State of New Jersey stepped in to oversee Atlantic City’s finances, the bond issue presumably is guaranteed by the state treasury. Atlantic City tried to raise a bond issue to cover the city’s debt before the state took over its finances in 2016, but its credit rating was not good enough to cover the debt.
“Settlement Agreements…That Are Favorable to the City”
Jeffrey Chiesa, who was designated by Gov. Chris Christie in the October 2016 as the financial overseer, said in a prepared statement, “The city was overwhelmed by millions of dollars of crushing casino tax appeal debt that they hadn’t unraveled when we arrived last fall. We made it a priority from day one to reach settlement agreements with casinos that are favorable to the city.”
Debt stemming from the tax appeals was a key part of Atlantic City’s financial troubles these past few years, and also the key reason the New Jersey State Legislature approved a “Pilot in Lieu of Taxes” or “PILOT” bill last year. Each year, Atlantic City would assess property taxes on the city’s casinos, then face a bruising tax appeal process.
$72 Million Borgata Settlement
Over the past few years, the appellate court found that Atlantic City’s assessment of property taxes was off by tens of millions of dollars each year. Eventually, the city owed $165 million in back taxes to Borgata alone. That debt was settled for around $72 million earlier this year, so Chiesa saved Atlantic City $93 million in his negotiation with Borgata.
$80 Million Atlantic City Bond Issue
The $80 million bond issue and knowledge of casino revenues over the past few years suggest the casinos involved in the current settlement combined to receive a bit more than Borgata did. Over the past 5 to 10 years, Borgata consistently has generated roughly 40% to 45% of the city’s gaming revenues, as (by far) the city’s most successful casino. It stands to reason the remaining settlement would be for around $80 million or so.
With this week’s deal in place and the PILOT bill now active, Atlantic City will not be overpaid taxes anymore. Instead, the city knows it will receive $120 million in PILOT payments each year. That should allow for considerable certainty in knowing how to budget for the coming year.
Marty Small: “Great News for the City”
The city council president, Marty Small, said after the settlement was announced, “This is great news for the city. These are issues that have been nagging the city for years. With the PILOT coming in, we will not be seeing these type of appeals.”
Chris Christie empowered Jeff Chiesa to handle all aspects of Atlantic City’s finances, including personnel decisions in the city government and negotiations with labor unions. Christie gave Chiesa a 5-year mandate, so it is expected the former senator will continue to control Atlantic City’s finances until 2021.
Guardian: “When Everyone Finally Works Together”
Though Mayor Don Guardian opposed the designation of Chiesa by the governor, he offered praise for the financial overseer and the casino executives who came to an agreement this week. The Atlantic City mayor emphasized the sacrifices the casino executives made in negotiating a settlement, because they likely received 50-cents-on-the-dollar for their tax rebates.
Yesterday, Mayor Guardian said, “When everyone finally works together for the best interest of Atlantic Citys taxpayers and residents, great things can happen. Today’s announcement is more good news for Atlantic City’s taxpayers that we have been working toward since 2014, including the 5% tax decrease in the municipal tax rate this year and the over 11.4 percent decrease in overall property-tax bills.”
With the negotiation ended, Atlantic City’s casino industry appears headed towards a period of stability, or perhaps even growth. Earlier this year, Hard Rock International paid $50 millon to purchase the Trump Taj Mahal from Carl Icahn. Hard Rock announced it would invest $500 million into the iconic property, then reopen the casino in May 2018 under the name Hard Rock Atlantic City. The renovation and expansion phase should create thousands of construction jobs, while the grand opening should create thousands of permanent resort staff jobs.
Chris Christie Praises the Deal
Gov. Chris Christie praised Chiesa’s deal and predicted good things for Atlantic City’s future. Christie, who ends his 8-year era as New Jersey’s governor in January 2018, said of the deal, “Because of the agreements announced today, casino property tax appeals no longer threaten the City’s financial future. City residents can breathe easier knowing the state put the city in a much better position to preserve public services as it pays down the tax refunds it owes to casinos.”
