Atlantic City Casino Industry’s Poor Summer Will Impact AC 2021 Budget
The ongoing Coronavirus pandemic and associated state-imposed restrictions wreaked havoc on Atlantic City casinos this spring and summer. It will also mean millions of dollars less for Atlantic City’s budget for 2021.
Under the terms of the PILOT bill enacted in 2016, the amount of money that the casinos must pay to Atlantic City each year depends on the total gaming revenue tier they reached for the previous year.
Since the ruling covers a period of 10 years, it remains in effect for 2021. In the past, each casino paid property taxes based on the casino’s assessed value. But with the passage of the PILOT bill, that policy ended.
Lower Atlantic City casino revenue for 2020 means less money for Atlantic City 2021
In 2019, Atlantic City casino total gaming revenue surpassed $3.2 billion, and as a result, the casinos paid Atlantic City more than $150 million. However, 2020 gross gaming revenue is expected to be significantly lower. Therefore, PILOT payments to Atlantic City in 2021 will be significantly reduced as well.
Can the casinos fully recover from their first and second quarter losses between now and December? Probably not.
Through July 2020, the gross gaming revenue reported by the Atlantic City casino industry amounted to slightly more than $1.2 billion, as compared to nearly $1.845 billion for the first seven months of 2019.
The difference comes as no surprise, considering the fact that from March 16 until July 2 all of the Atlantic City casinos remained closed. Meanwhile, the onus fell on online and mobile gambling to pick up the slack, but it wasn’t enough.
Even after the casinos reopened in July, they did so at 25 percent capacity only and with travel restrictions, social distancing, and a complete ban on indoor dining and beverage consumption. Under those conditions, the casino industry’s lackluster performance extended through the summer.
In fact, the revenue the casinos generated from slots and table games decreased by more than 58 percent this year through July as compared to the same period in 2019.
We should see a nice bounce back in the third quarter of 2020. However, the chances of recouping sufficiently to match last year’s revenue look extremely remote.
The casino industry would need to significantly overperform from September through December to even come close to matching the total revenue for 2019, which is unrealistic. So that means that the city’s budget for 2021 must make do with the smaller contribution they receive from the casinos.
According to Lisa Ryan, spokesperson for the State Department of Community Affairs (DCA), “DCA believes there will be enough of an IAT (investment alternative tax) offset so that casino payments in 2021 don’t appear to present any dramatic concerns for the city’s budget.”
But even so, the city will have to operate with a very tight budget.
The Atlantic City casinos might not even be able to manage the smaller payments
Furthermore, according to an Aug. 30, 2020 article on ThePressofAtlanticCity.com, counting on all of the Atlantic City casinos to at least come through in full with the smaller payments could be premature.
Michael Busler, a public analyst and finance professor at Stockton University, anticipates that the casinos will have a tough time even meeting those payments in 2021. He made that point clear in the following statement:
Atlantic City is going to be in for some very difficult financial times, at least for the next year, and I’m not sure how they’re going to get out of it.”
Busler also said that Gov. Murphy’s long-awaited Aug. 31 executive order to allow indoor dining, even though with capacity limits, maybe the casino industry’s and Atlantic City’s best hope for salvaging the remainder of 2020. He fears that without easing the state’s restrictions, many small businesses in Atlantic City might not survive. That would further deplete the city’s tax base and worsen its financial woes.
But maybe revising the PILOT bill is the answer
Meanwhile, what worries many local residents is the possibility that the government’s financial difficulties will directly impact them in the form of higher property taxes and reduced municipal services.
Back in 2016, when the PILOT bill was enacted, its rationale was to eliminate the costly property tax appeals and stabilize the city’s tax base. Assemblyman Vince Mazzeo, a prime sponsor of the bill, stated last week that before COVID-19, the PILOT bill worked as intended. But now both the casino industry and Atlantic City face extraordinary circumstances.
Referring to the possibility of either amending the PILOT legislation or taking other states legislative action to compensate for the anticipated revenue shortfall, Mazzeo said the following:
“We have to walk a fine line here because we want the casino industry back to where it was prior to COVID, but we don’t want it on the backs of the residents of Atlantic City or Atlantic County.”
State Senator Chris Brown, who voted in favor of the PILOT bill in 2016, has more recently advocated for modifications. Brown is especially concerned about the welfare of Atlantic County families currently struggling to make ends meet. As Brown pointed out:
“Obviously, no one in 2016 foresaw this pandemic, which put over 55,000 of our friends and neighbors out of work.” However, now that the circumstances have “dramatically changed,” Brown maintains that “it’s only right to revisit the PILOT in a bipartisan manner to find a way to ease the tax burden on Atlantic County’s middle-class families.”
Summary and conclusion
Even though we face extraordinary times, Atlantic City has faced economic crises before. Therefore, just as its great resiliency has led to a recovery in the past, I foresee the same happening next year.
Meanwhile, as restrictions gradually become lifted, I think the most important thing for residents and visitors alike is to follow the official guidelines to the letter and act safely and responsibly.