ATLANTIC CITY - City Council voted 6-1 Wednesday night to borrow $38.5 million to settle up with taxpayers - casinos, mainly - who have overpaid on property taxes.
One of the casino operators, Trump Entertainment, is owed $14.5 million.
At 3.5 percent, interest on the five-year loan will amount to more than $3.5 million - the cost of making up for erroneous past tax assessments. Currently, multiple properties pay nothing because they are credited for past overpayments - and that excess money is long since spent.
Sixth Ward Councilman Tim Mancuso cast the lone no vote granting final approval of the measure. He said he hoped to address the issue using money unspent this year by the city - equivalent to $8 million and an impossibility, unless the city wants to start next year behind financially, director of revenue and finance Michael Stinson has said.
Councilman Dennis Mason did not attend the meeting. George Tibbitt abstained as a precaution because he is appealing his taxes.
Before local officials actually borrow the money, they must get approval from the state Department of Community Affairs' Local Finance Board, as per the terms of the DCA's plan overseeing city finances. That oversight started in October 2010 and was extended another year despite protest from the city.
In this case, however, the approval amounts to a formality because Stinson said he met with DCA staff before council first considered the move two weeks ago.
About 90 percent of the loan will be used to repay casinos. It does not affect pending tax appeals that, once resolved, could reduce revenue by millions of dollars.
Property owners, including casinos, appeal assessments in a bid to lower their taxes. During the appeal, they pay taxes on their assessed value, but if they win their appeal, the city owes them for what they overpaid.
The city has handled those appeal losses in the past by giving out tax credits, not cash refunds.
But some businesses and casinos have accumulated so many credits that they are not even paying taxes currently, and that can hurt the budgeting process.
The loan will repay:
- $1.7 million to the former owner and operator of the Sands Casino Hotel, ACE Gaming.
- $8 million to Pinnacle, which bought the former Sands property
- $10 million to Resorts Atlantic City
- $14 million to Trump Entertainment. The company owns the Trump Taj Mahal Casino Resort and Trump Plaza Hotel and Casino.
The city already has settled appeals with Pinnacle, which bought the land formerly home to the Sands after its implosion four years ago, and Resorts Casino Hotel. Those agreements block property assessment challenges by those casinos through 2014.
The 10 other casinos currently operating continue to fight their property assessments. Revel Entertainment Group also is challenging its assessment, but Business Administrator Michael Scott said he expects about $30 million in tax revenue from the company's $2.5 billion resort once it opens in May.
Officials have not ruled out the possibility that they could work out those agreements in a way that helps recoup interest owed on the loan approved Wednesday night.
"If we do this and pay casinos what's due to them, it's almost a wash," 3rd Ward Councilman Steve Moore said Wednesday. "The taxes they will now begin to pay will be practically the same amount as the debt service of the bond for the year. So the offset is negligible."
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