Atlantic City plans to borrow $103 million to help cover refund payments to casinos that won successful tax appeals this year. That's in addition to the $35 million the city borrowed for the same purpose last year. And the possibility remains that it may have to borrow another $40 million next year to cover ongoing tax appeals.
That's bad news for other city taxpayers, who can expect to see increased tax bills for servicing that debt for the next 20 years. The worse news, of course, is that those other taxpayers are also going to be paying a larger share of the city's budget going forward.
There's not much point in trying to assign blame here. The city's last property assessment, in 2007, occurred just before the bottom fell out of the real estate market and the recession kicked in. At the same time, competition from other gaming markets increased, casino revenue fell - and so did the property values of Atlantic City's casinos.
For example, Resorts Casino Hotel was assessed at $479 million when it sold in 2010 for $31.5 million. Trump Marina Hotel Casino was assessed at $653 million last year, when it was sold for $38 million and became the Golden Nugget casino hotel.
You can't blame casino owners for filing tax appeals under those circumstances. Any business or any homeowner would do the same. And many other area businesses (including The Press of Atlantic City) filed tax appeals when real estate values fell in recent years.
But in a city where the casino industry is responsible for 65 percent to 75 percent of property value (by city Revenue and Finance Director Michael Stinson's estimate), those successful appeals have been devastating.
In fact, Atlantic City's tax base has dropped from about $20.5 billion in 2010 to about $16 billion today. Based on the current tax rate, successful tax appeals within the past year could reduce annual tax revenues by nearly $40 million.
The city can't expect other taxpayers - residents and small business owners - to make up such a loss. The current $234 million budget approved in May reduced spending by 5 percent but still included a tax increase of 9 percent.
Atlantic City must cut spending, and cut it dramatically. That's the reality facing city officials - and city workers. Employee unions have to realize that there simply isn't any way for the current level of staffing, salaries and benefits to be maintained.
The city has been looking at some cost-cutting measures, but so far the projected savings don't make a big enough dent in the budget. Alternative-energy initiatives could save $500,000 annually, and a new prescription plan for city workers could save $200,000. Converting municipal vehicles to natural gas could save another $420,000.
You don't have to be an accountant to see the problem. A revenue shortfall in the tens of millions of dollars won't be met by those kind of savings.
And yes, city officials could have seen this coming several years ago and should have already begun the necessary austerity measures.
But the pertinent question is, what are they going to do now?