Dale Gerhard

Atlantic City could owe Borgata Hotel Casino & Spa more than $48 million after a tax court found the casino had been assessed at more than 2½ times its value in 2009 and 2010. The decision could be a huge hit to taxpayers who already have seen a 22 percent increase on their tax rate courtesy of previously successful casino appeals.

The city is looking to appeal, Solicitor Braun Littlefield said, calling Judge Patrick DeAlmeida’s decision “fundamentally incorrect,” and adding that Borgata challenged a 2008 revaluation that was made when Mayor Lorenzo Langford was not in office.

The ruling released Monday morning found that in 2009, the city assessed the casino’s properties at $2.26 billion, when the true value was less than 39 percent of that, or $880 million. In 2010, the assessment overage was more than 2½ times the actual value, the court found: $2.26 billion compared to $870 million.

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Tax courts do not assign an amount to the reimbursement. However, based on the tax rates for those years, Borgata would be owed about $23.6 million for 2009, and $25.2 million for 2010.

The figure could go even higher because it does not include any additional fees or interest, which is 5 percent annually, explained A. Paul Genato, a Princeton-based attorney who specializes in real estate tax appeals. Payment would not begin until a final judgment is entered.

Property owners already have been hit with a large tax increase this year. The owner of an average home — assessed at $229,000 — saw a tax-rate increase of $584 on their bill: from $2,588 last year to $3,172 this year. The amount does not include school, county and other taxes.

“If the decision stands, its impact could effectively exempt several other casino properties from local property taxation,” Littlefield said. “We maintain that this in an inequitable and grossly unfair position in which to place the taxpayers of this city.”

“This is a tremendous blow to every town in Atlantic County,” said Michael Stinson, the city’s director of Revenue and Finance.

But the Borgata Hotel Casino & Spa has been paying $58 million per year in property taxes, a significant portion of the city’s current $249 million budget, said Auggie Cipollini, senior vice president of operations.

“The considerable reduction based on the decision of the court is a positive development,” he said. “We believe Judge DeAlmeida’s decision was fair ... based on expert appraisals presented by both Borgata and the city over the course of a (nearly) five-week trial.”

While the city’s expert placed the casino’s total property value at $2.3 billion for each of the two years, the expert the judge found most accurate was an appraiser with 35 years’ experience presented by the Borgata. She placed the property at $880 million for 2009 and $870 million for 2010.

The court found the income approach to valuation is the most credible for determining true market value, meaning the foundering local casino market was relevant, the judge wrote in his ruling.

“The evidence admitted at trial establishes that, beginning in 2007, and continuing to 2009, powerful forces were combining to undermine the Atlantic City casino-hotel market in ways that threatened lasting adverse economic consequences,” he wrote.

“By late 2009, a virtual wall of casinos — constructed or planned — arose along the Pennsylvania-New Jersey border from Bethlehem to South Philadelphia and continued into northern Delaware,” he added. “These casinos, which offered slot machines, restaurants and other amenities attractive to the Borgata’s targeted customer base, skimmed clients from Atlantic City casino-hotels at a growing rate.”

It was not immediately clear what this could mean for the city’s current budget, whose entire tax rate increase has been attributed to a loss of $3.7 billion in ratables. Last year, the city had more than $114 million in bond issuances, mostly to cover casino property tax rebates.

“Over the last three years, the Atlantic City government has taken steps to minimize the adverse impact of these assessments on taxpayers,” Littlefield said. “This case, although wrongly decided, recognizes the misguided policies of the prior administration along with national financial factors that have essentially caused the collapse of the New Jersey casino industry.”

The city has not done a revaluation since the one in 2008, a requirement for state oversight to end. The city has advertised for revaluation bids, but has said that is to see what is available and is not a promise that one will be done.

Meanwhile, “the interest continues to run on this,” said Genato, a member of the state Supreme Court Committee on the Tax Court. “This is a devastating blow to Atlantic City.”

Staff writer Jennifer Bogdan contributed to this report.

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