Fiscal pain from Atlantic City's decline is countywide

Tumbling casino tax revenue has forced other Atlantic County towns to kick in revenue Atlantic City once provided.
Tumbling casino tax revenue has forced other Atlantic County towns to kick in revenue Atlantic City once provided. (TOM GRALISH / Staff Photographer)
Posted: March 31, 2014

ATLANTIC CITY As the casino industry here flourished throughout the 1980s and '90s, it fueled rapid growth for surrounding communities, such as Mays Landing, Egg Harbor, and Ventnor.

Thanks to Atlantic City's draw, demand for housing skyrocketed throughout the Shore among casino employees and their families. New roads, schools, and shopping centers sprang up.

Things have come full circle. These same Shore towns are now having to support Atlantic City as tax revenue from the casinos dwindles - a trend that started in 2007 because of new gambling competition - and as property values plummet.

Of 23 Atlantic County municipalities, 22 had tax increases from 2012 to 2013, mainly because Atlantic City contributed less revenue to the county budget, according to data obtained from the Atlantic County Board of Taxation last week. Tax rates for 2014 are not yet available.

Corbin City had the smallest increase, at 1.6 percent, Atlantic City the largest, at 17.5 percent. But Atlantic City's municipal rate increase was partly offset by a 22 percent reduction in its county tax rate.

Egg Harbor Township was the exception. It was revalued last year for the first time since 1996, which significantly increased assessed values and lowered its tax rate 33 percent.

"Everything in Atlantic City lost value, partly because the casinos lost value, and with the jobs they've pared, there is less demand for housing and commercial properties in Atlantic City," said Keith Szendrey, of the county taxation board. "It has had an effect on properties in and around Atlantic City."

A significant blow

The countywide ripple comes from a one-two punch: Atlantic City is not generating nearly the same gambling revenue it once did, and a series of casino tax appeals have decreased the city's ability to raise revenue through property taxes.

Since 2007, tax appeals filed and won by the casinos have resulted in more than $270 million in refunds or tax credits.

"Just paying off the bonds will be a significant hit to their budget in coming years," Szendrey said. The city is borrowing to pay off more than $100 million of the refunds.

But other county municipalities are taking a hit as well. In Ventnor, for instance, the tax rate increases 10 cents per $100 of assessed value from 2012 to 2013.

'Share the pain'

"Atlantic City is a curse and a blessing," said Ventnor's Mayor Michael Bagnell, who is halfway through his first four-year term. "When it's doing great, taxes for everybody else countywide are lower. Now it's faltering. Everyone else has to share the pain."

Atlantic City has been under a state fiscal monitor the last three years because of the adverse impact the casino tax appeals have had on city coffers. The new mayor, Don Guardian, submitted an application on March 14 seeking $20 million in state aid from the New Jersey Department of Community Affairs to help bridge the gap between revenue and spending in the budget year that starts July 1.

"We need this money," Guardian said as he presented a $262 million budget to City Council earlier this month. He said Atlantic City residents could expect a 47 percent tax increase - 65 cents per $100 of assessed value - because of decreased property values.

This comes after city residents absorbed a 22 percent tax increase last year.

The downturn

In the 1970s and 1980s, Atlantic City gaming revenue was growing every year, and the casinos were increasing in value in billions of dollars. Both have gone the other direction since 2008.

The reduction in assessed value because of the appeals allows the casinos to pay less toward county taxes. Atlantic City has been contributing less to Atlantic County's budget each year since 2008. Its share dropped from 38.5 percent that year to 28.7 percent in 2013, while other municipalities are paying a larger share.

The county tax rate went up more than 10 percent in Margate, Longport, and Ventnor last year, even though the county budget rose less than 2 percent.

"The drop in revenue among the casinos cost many of our residents a drop in income, whether it be from loss of work, reduced work, or loss of sales and service to the industry," Brigantine City Manager Jennifer Blumenthal said. "This is a hardship to our taxpayers, who are not only experiencing less income from the casino decline, but will now be paying more taxes."

Brigantine's tax rate went up 8.7 percent - from $1.20 per $100 of assessed value in 2012 to $1.30 per $100 of assessed value last year.

Margate homeowner and business owner Ed Berger is not taking his town's increased tax burden lightly either. Margate's tax rate went up 6.6 percent, from $1.37 per $100 of assessed value in 2012 to $1.46 last year.

"As long as the [Casino Reinvestment Development Authority] can spend millions of dollars on projects to bring Bass Pro Shops into town and help Tropicana build another $50 million expansion, there is no reason in the world for my taxes to go up," he said of recent projects in Atlantic City.

'Financial distress'

But there's a huge reason for taxes to rise.

Twenty-eight years - from 1978 to 2006 - of soaring gaming profits came to a halt as casino competition sprung up around the resort. Pennsylvania opened its first casino in late 2006.

Atlantic City had not prepared for the substantial drop in casino tax revenue. County tax officials say the city kept planning its annual budget as if it had the same revenue each year.

There are now 11 casinos here after the Atlantic Club closed in January. In 2006, the then dozen casinos were 81 percent of the city's ratable base. Last year, they were 61 percent.

City Tax Assessor Novelette Robinson said the decrease resulted from casino tax appeals and a significant number of residential and non-casino, commercial properties also filing successful appeals.

"Atlantic City is in a state of financial distress," said Michael Busler, professor of finance at the Richard Stockton College of New Jersey. "The substantial reduction in real estate values will continue to lower the city's revenue."

'Very painful'

Negotiations that city government entered in 2012 with multiple casinos covering several years resulted in $6 billion in assessment reductions. Atlantic City had an assessed value of $20 billion in 2010. That has been cut to $11.8 billion this year.

"As the value of the city goes down, even if spending remains the same, the tax rate has to go up just to raise the same amount of money," Szendrey said.

But "these tax rate increases may actually result in less revenue if residents are forced out of the city by taxes they simply cannot afford to pay," Busler said. "The short-term solution to the budget problem is likely to be very painful."

And countywide.

As the immediate border town to Atlantic City, Ventnor has experienced good and bad from the casinos. The city's year-round population doubled from about 6,000 to more than 12,000 in the 1980s and 1990s. It is now about 12,910.

"A lot of people moved into the city and bought these nice beachfront homes," Bagnell said. "The price of real estate was elevated during all those years, even as late as 2006. There was a lot of new construction, and new businesses came in."

The flip side?

"All use our streets as throughways to Atlantic City, and that's a heavy volume of traffic," he said. "Our road service wears out faster, it cost more to maintain our roads, and more people are using our water and sewer system


Ventnor's tax rate went up 5.8 percent from 2012 to 2013.

"The problem is that Atlantic City has been the largest tax source for the county since it was founded," Bagnell said. "When you take one leg of that support, the county still needs to come up with the money to function."

856-779-3928 @SuzParmley

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