A bill working its way through the state Legislature would provide millions of dollars in temporary and permanent tax cuts for Atlantic City’s nine casinos to help the industry survive a months-long shutdown because of the coronavirus.
But even if the proposal stabilizes New Jersey’s gaming industry, it also would deplete funding for programs that aid seniors and disabled residents while siphoning money away from the Casino Reinvestment Development Authority, potentially putting Atlantic City initiatives — such as a new supermarket and additional law enforcement funding — in jeopardy.
Officials from the CRDA could not immediately be reached for comment.
Exact figures for the total loss of state-collected taxes are unknown because of uncertainty surrounding the industry’s recovery timetable and consumer demand as a result of COVID-19. But, based on recent industry performance, the bill could reduce the amount of casino taxes and fees paid to the state and CRDA by more than $225 million over a two-year period.
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Dan Heneghan, a gaming industry consultant and retired spokesman for the Casino Control Commission, said that while the tax relief “changes will certainly provide a benefit for casino operators and help them get reestablished as the city opens up again,” it would come at the immediate expense of statewide programs and services.
Atlantic City’s nine casinos have been closed since March 16, and no date has been set for their reopening. In April and May, the industry reported record losses in gaming revenue. More than 26,000 casino employees have been out of work for months.
The CRDA, the Casino Revenue Fund and the Casino Control Fund, which partially funds the state’s two gaming regulatory bodies, would all see a reduction in revenue if the bill is signed into law.
“The casino industry faces one of the most severe economic challenges in its history with potential consequences for Atlantic City, the region and the entire state. As we learned from the Great Recession, we cannot wait until casinos are closing before we respond,” said the bill’s primary sponsor, Senate President Stephen Sweeney, D-Salem, Gloucester, Cumberland. “The harm to the programs gaming revenue supports will be far worse if we stand by and do nothing.”
The bill, S2400, moved out of the Senate Budget and Appropriations Committee on Thursday by a 7-1 vote with four abstentions. The Assembly companion bill, A4032, cleared the budget committee earlier this month.
The Office of Legislative Services said it could not provide an exact number but noted that changes to slot machine, parking, hotel and tourism fees alone would result in an estimated loss of $66.2 million over a 24-month period.
The OLS estimate does not include temporary reductions to table game revenue tax collection or permanent changes to provisional gaming credits and match-play coupons.
“Revenues will be further diminished by an indeterminate amount because of the bill’s provisions that provide a temporary alternative calculation for casino licensees’ tax liabilities and a permanent enhanced deduction for promotional gaming credits and coupons,” the OLS said in its fiscal analysis.
Since 2008, Atlantic City casinos have been permitted to take deductions from their annually reported gaming revenue for redeemed free slot play that exceeded $90 million. In 2019, $384 million was wagered in promotional gaming credits and the casinos received a deduction of $23.5 million, resulting in 77% of its free slot play not being taxed.
The proposed 100% reduction of promotional gaming credits could result in a two-year loss of more than $26 million to the Casino Revenue Fund, which was created after New Jersey voters approved casinos in Atlantic City for the sole purpose of using gaming taxes to fund programs for the state’s seniors and disabled residents, such as food distribution, medical and public transportation, and emergency housing needs.
In addition to promotional gaming credits, casino licensees will be permitted to deduct match play coupons and table game wager coupons as a result of the bill.
“The enhanced deduction is a permanent change and will reduce a casino licensee’s tax liability, which in turn reduces the amount of revenue the state receives into the CRF for all future fiscal years,” the OLS report states.
Combined with losses in gaming revenue taxes, parking and hotel taxes and fees, the CRF could lose nearly $161 million through 2022.
The CRDA could see a two-year reduction totaling almost $66 million in losses from investment alternative taxes, promotional gaming credit taxes, tourism promotion, and hotel and parking fees.
OLS noted that the fees waived by the bill are used, at least in part, to satisfy debt service and operational costs of CRDA and the state agency “may have to utilize other sources of funding for debt service and operations that are traditionally covered by those fees.”
Prior to the onset of the global pandemic, the CRDA had been discussing ways to assist with either partially or fully funding a supermarket in Atlantic City, with a price tag of more than $5 million. The agency also has committed more than $10 million toward additional law enforcement in the city.
The bill was recently amended to include a $100 million allocation to the state Economic Development Authority for small business assistance. The amendment was included after OLS had completed its fiscal analysis of the bill.
