Trump Entertainment will receive a record $54 million in property tax credits from Atlantic City in settling its real estate assessment challenge, according to forms filed with the Securities and Exchange Commission Thursday.
The settlement, which was authorized by the City Council several weeks ago and finalized Wednesday, represents the largest credit given to a single city casino owner so far, said Michael Stinson, city finance director. He said the deal will lead to a large downsizing of the city’s ratable base, which had been at about $18 billion.
“It’s going to have a significant impact,” Stinson said. “Just this settlement will put us closer to $16 billion.”
The city has been fighting tax appeals as every one of the 12 casinos in the area has filed a challenge to their tax assessments in light of the real estate and economic downturn.
Earlier this year, Caesars Entertainment received $27 million in credits for three years’ worth of taxes paid from 2009 to 2011 for Bally’s casino. As part of that deal, no credits were issued for its affiliated casinos, Harrah’s Resort and Caesars.
In contrast, the settlement with Trump is over five years — 2008 through 2012 — and was entered into with three subsidiaries, Trump Taj Mahal, Trump Plaza and the property formerly known as Trump Marina. Marina was sold last year and now operates as Golden Nugget.
The tax credit — which could be issued through a cash refund should the city choose that option — only would apply to future tax payments for Trump Taj Mahal over the next five years. The credit would start with $15 million in 2013; $9 million each for the following three years; and $12 million in 2017, according to Trump’s filing.
Trump agreed to pay real estate taxes in 2012 based on the city’s assessment in exchange for significant discounts the following year. That means in 2013, Trump Taj Mahal will receive a 40 percent reduction in its tax assessment to $1 billion and Trump Plaza Hotel will receive a 66 percent reduction to $250 million, according to the filing.
Overall, the valuation has been decreased by about half. While Trump Entertainment was issued the reduction, the other casinos that still have outstanding tax appeals — Revel, Tropicana and Borgata — must make their own case, Stinson said.
According to state law, commercial property owners can have their assessment based on the cost of construction, income or comparable sales.
Because Revel recently opened, Stinson said he believed the casino has a harder hurdle to overcome in proving its assessment shouldn’t be based on the $2.4 billion that it took to build the casino. Tropicana and Borgata also have their own challenges in proving their case, according to Stinson.
Christopher John Stracco, a Parsippany-based lawyer who has worked on casino tax cases in the past, said in general well-run casinos are at a disadvantage when it comes to taxes due to the role income plays in the assessment calculation. However, the economic downturn substantially cut into the profits of nearly every casino, which gives them a basis to appeal their taxes.
“It just stands to reason if you are looking at a property valuation,” he said.
Bob Griffin, chief executive officer for Trump, issued a statement in connection with the settlement Thursday evening.
"I am very pleased, for our company and for our employees, to have the outstanding issues concerning our real estate tax assessments resolved,” he said. “We thank the leadership of the city of Atlantic City for their cooperation which led to a successful conclusion."
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