Atlantic City may have to add close to $200 million to its current $245 million in outstanding bonds to cover more tax-appeal payouts this year.
The city needs to borrow at least $100 million this year, Revenue and Finance Director Mike Stinson said. But that could nearly double, he said, if a decision on the city’s appeal in a casino case comes through.
Last year, a tax court found Borgata Hotel Casino & Spa was owed more than $48 million in overpaid taxes for 2009 and 2010, not including interest and other costs. The city appealed, calling Judge Patrick DeAlmeida’s decision “fundamentally incorrect.”
Currently, the city is paying off about $244.8 million in principal on bonds through 2033. With interest, the total is nearly $321 million. Any bonds taken out this year would likely be for 20 years, meaning payment would be complete in 2034.
“Out of $245 million (in principal), more than $200 million is tax appeals,” Stinson said of the city’s debt.
That includes repaying the schools’ portion of taxes, he explained. Since they technically run without a surplus, the money overpaid to them is the city’s responsibility.
While it’s still the same amount for residents — just split differently in their tax bills — Stinson said the schools should feel some of the financial pinch as well.
Both Mayor Don Guardian and his predecessor, Lorenzo Langford, have talked about the need for a new method to decide how casino properties are assessed. But that would take either legislation or a constitutional amendment.
“If we didn’t have this situation, the city would have no debt,” Stinson said.
That is the city’s fault for not doing a property revaluation, Atlantic County Executive Dennis Levinson charges.
The last revaluation was done in 2008. Since then, the city has come under state financial oversight and was told a new revaluation was a condition to end that. Instead, the administration insisted it couldn’t afford one. The state said not doing one would cost more. The state, Levinson said, was right, as successful casino tax appeals have cost the city — and the county.
“Atlantic City — because of their reluctance to do a reval — has had a devastating effect on the rest of the county,” he said.
In addition to the city having to repay the casinos for both city and school taxes, the county has to repay its portion as well.
“If we ruled by decree and could have forced Atlantic City to do the reval, we would have,” Levinson said. “The county has done its job. This year, we’re $3.5 million below the cap. Last year, we were $3.6 million below the cap. Our general-purpose tax is down 2 cents.”
Levinson likened it to the state pension problems, in which employees paid their share but the state did not.
“They did the right thing; unfortunately, the state did not pay their share,” he said. “So that’s why we’re where we are now.”
Levinson said he believes the new administration understands the problems. A citywide revaluation will begin at the end of this year, with 2016 expected to be the year that every property owner is assessed accurately.
“There are good people on City Council that just need the proper guidance and leadership, which they didn’t receive in the past,” he said. “We do feel better moving forward, but they have to make up for their past indiscretions.”
In the meantime, the city is working on settlements with several casinos to take them until that goal year to avoid more litigation. Council has been brought some tentative deals. Stinson declined to give numbers, because nothing is official.
The city hopes 2016 will bring an end to casino tax appeals, but “history says casinos appeal their taxes every year,” Stinson said.
Last year, Moody’s Investor Services downgraded Atlantic City to Baa2, just one above its lowest rating. It means the city is considered a moderate credit risk. But a second report by Standard & Poor’s Rating Services gave the city an A- in the long term, with a stable outlook. The rating means the city has a strong capacity to meet financial commitments but is somewhat susceptible to adverse economic conditions and changing circumstances.
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