ATLANTIC CITY — Superior Court Judge Julio Mendez is hearing arguments Thursday morning in the ongoing legal fight over the constitutionality of the casino payment-in-lieu-of-taxes agreement.
The hearing began about 9:30 a.m.
12:10 p.m. - The hearing has ended. Mendez said he will review the briefs and make a decision.
11:45 a.m. - After a short recess, the hearing resumed.
10:48 a.m. - The county attorney said the PILOT program should have been put up for public vote, but enacted the program because they knew the legislation wouldn't get passed through referendum. He also said the casino industry would not have agreed to the PILOT agreement if it didn't benefit them.
The county received more tax revenue from PILOT in 2017 than it did under traditional tax payments in 2016. The county received $12.4 million in 2017 and $11.3 million in 2016.
10:39 a.m. - Judge Mendez warned if he ruled against the PILOT agreement, the county could lose the $11 million in tax revenue if they followed the traditional taxation program.
10:15 a.m. - The court discussion turns to the county's percentage of PILOT funds. State attorney John Lloyd said the county would receive a full 13.5 percent if it provided certain services. Even though the county didn't get that share, the $12.4 million the county is getting through the PILOT program is more than the county would have received under a traditional property tax payment system, Lloyd said.
A county attorney, however, said the state never gave a reason for the county not to receive the full 13.5 percent of PILOT funds. A lack of funding could cost the county $40 million over the course of the 10-year program.
As it stands, the county's share now is roughly 10.4 percent.
10:00 a.m. - Lloyd said casinos would pay about $109 million in taxes without the PILOT program. Because of the program, the city and county are getting $11 million more in taxes, Judge Mendez said.
An attorney for the county said the PILOT program does not take into account improvements made at properties and would not protect the county if the gaming market crashed.
"Every time you single out entities and provided them with something that is different than everyone else, it raises concerns," said Judge Mendez on the PILOT program with respect to a clause in the Constitution which allows the federal government the power of taxation.
9:50 a.m. - John Lloyd, an attorney for the state, said casino revenues are expected to pass the threshold. Casinos will pay $130 million in taxes instead of the $120 million in taxes in 2018. Minutes earlier, Judge Mendez said casino properties make up half of Atlantic City's value and 11 percent of the county's value.
The agreement has been subject to legal challenges over the past year. In May, Liberty and Prosperity, a constitutional advocacy group, sued the state to block the law. In September, Atlantic County filed suit against the plan, claiming it was unconstitutional. The county claims that not receiving a 13.5 percent share of PILOT revenues will lead to tax increases.
Earlier this year, Mendez combined the county and Liberty and Prosperity suits into one hearing.
The casino PILOT program requires casinos to collectively pay $120 million this year instead of property taxes. The measure was intended to stabilize the city’s tax-collection base, which had been fluctuating wildly after a rash of costly casino tax appeals. Those appeals led to a massive budget deficit and the eventual state takeover, which is about to enter its second year.