ATLANTIC CITY — The city took a step toward revitalizing the neighborhood around Revel Entertainment Group’s unfinished $2 billion megacasino Wednesday night, approving Revel’s request to divert more than $50 million in future tax payments to the city, schools and county to improve public areas.

Council members voted 7-1 to make the improvements, including Boardwalk reconstruction and renovations at the nearby Garden Pier.

Revel’s original plan called for about $150 million in improvements over 20 years, but objections from a state deputy attorney general late last week reduced the scope of the potential funding.

City Council started the process recently when it created the Economic Redevelopment and Growth grant program, which mirrors a state program of the same name.

The state program is part of the New Jersey Economic Stimulus Act of 2009, signed by outgoing Gov. Jon S. Corzine in July. The programs are designed to help support costs related to public infrastructure improvements connected to redevelopment projects such as Revel.

Revel officials learned of the significant decrease in potential funding late last week. Revel attorney Nicholas Talvacchia said one of the state’s deputy attorney generals argued that the state constitution would allow for property taxes to be incrementally disbursed for redevelopment projects only at a lower amount over five years.

Talvacchia said after the meeting that Revel disagrees with the state’s reading of the constitution, adding that the numbers could change through further discussions.

The three measures council passed Wednesday, two of which are still subject to a second reading and vote, allow the state’s Local Finance Board to review the application at its next meeting on Dec. 9. The board is expected to make a ruling on Revel’s application at that meeting and could send back changes before council’s next vote.

Revel lobbying

Revel attorneys lobbied hard for council to pass the measures, telling council the plan would send developers a “powerful message.”

“If you don’t do this, I think it will send the wrong message to the development community,” Talvacchia told council before the vote. “The mayor had a big meeting about what we can do to improve (Atlantic City’s situation). Well, this is something you can do.”

Revel, due to open in 2011 and the only new casino project under way, is seen as key to helping the city’s economy.

Revel attorneys insisted the city would lose only about $12.1 million in property tax revenue and couched the loss as an investment in more than $50 million in infrastructure projects. The city’s financing would be combined with additional financing from the county and the city’s school board, which would forfeit more than $38 million combined in future tax revenue.

However, the actual, unrestricted property tax revenue the city will gain from Revel would be about $43.5 million less than it would receive without the plan.

The $12.1 million goes directly to funding overall infrastructure improvements. The additional $31.4 million would be split up on costs to administer the projects and on other future infrastructure grants, which also would likely aid Revel.

Councilman Timothy Mancuso was council’s lone vote against the project Wednesday, insisting the city could not afford to lose money as it faces a multimillion-dollar budget deficit next year and continued property tax increases from the recent revaluation.

“Right now we don’t have that in our budget to do that,” Mancuso said as Revel attorney Lloyd Levenson shook his head. “We’re going to be handed a budget from Mayor Langford that’s going to be big. We’re going to get crushed. What we should be doing is actually cutting and giving that money back to the taxpayers ... It’s a tough decision today, guys. It’s a big one.”

Talvacchia said he sympathized with the resident’s tax burden, but insisted the plan would ultimately benefit those same taxpayers.

“I don’t think anyone doubts that there is a need for capital improvements in the city,” Talvacchia told the council. “If the city is going to have new development, it needs to make investments in itself.”

Video surveillance

One of the six improvements outlined Wednesday was a citywide video surveillance project, similar to a plan the city failed to establish in 2008.

Although the proposal claims the project is citywide, Talvacchia said the state thinks the project should only be limited to the 1st Ward, where Revel is located. However, Revel officials plan to continue to advocate that a surveillance system throughout the city would encourage redevelopment elsewhere.

Several council members voted in favor but noted that it still required a second reading and vote.

As the city waits for the state’s ruling and prepares to take a final vote, Councilman Bruce Ward suggested tapping a financial analyst to ensure the city is taking the right step. That analyst would be paid for by Revel, according to one of the measures passed Wednesday, however, Talvacchia could not say whether Revel would be allowed to choose the analyst.

Ward, who co-sponsored the bills Wednesday with Councilman Dennis Mason, implored council to approve the application in order to make a necessary “bold move.”

“We’re at a tipping point,” Ward said. “If we don’t start taking some bold steps, two of our casinos could fold. ... We have been taking it hard in the chest in terms of the main industry, the number one industry, that supports our families.”

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