ATLANTIC CITY — Sports betting has been an undeniable boon for the city’s casinos and their online gaming partners, while also helping to grow the state’s tax coffers.
In a little over a year, New Jersey sportsbooks have accepted more than $3 billion in legal wagers, generating $284.6 million in gaming revenue and more than $36 million in taxes.
But while Trenton, casino operators and the host municipalities of the state’s two racetrack sportsbooks are reaping the financial benefits, Atlantic City is not.
At least not directly, as some local officials believe it should.
“In 14 months, New Jersey has overtaken Las Vegas as the No. 1 sports betting destination, and a lot of it has to with the success of Atlantic City and online,” Mayor Marty Small Sr. said during a recent meeting of the city Taxpayer’s Association. “But we don’t get one penny. ... That’s unacceptable.”
Small said he wants to see Atlantic City get the additional sports betting tax so it can be used exclusively for property tax relief.
“My first, and foremost goal, as it was as council president and will continue to be as mayor, is more rateables for the city and more revenue streams to offset our taxes,” he said.
Different for racetracks
Unlike East Rutherford, Bergen County, and Oceanport, Monmouth County, home to the Meadowlands and Monmouth Park racetracks, respectively, Atlantic City, as a host municipality to eight sports betting facilities, does not receive any direct tax revenue generated from sports wagering.
Following the passage of a bill in 2018 to regulate and tax sports betting in New Jersey, lawmakers proposed a second piece of legislation, A4230, that imposed an additional tax on gross sports betting revenue. The bill sailed through committees in the state Senate and General Assembly and was approved by both chambers with only one dissenting vote. Gov. Phil Murphy, who conditionally vetoed the original legislation, signed the bill into law in October 2018.
The bill mandates that an additional 1.25% tax generated by an Atlantic City casino from sports betting or a “joint sports wagering operation,” go to the Casino Reinvestment Development Authority for “marketing and promotion” of the city.
Meanwhile, East Rutherford, Oceanport and their county governments receive portions of the additional tax — .75% goes to the municipality and .5% to the county — for “economic development purposes, which shall include, but not be limited to, improvements to: transportation and infrastructure, tourism, public safety, and properties located on or near the racetrack.”
From the launch of legal sports wagering last year through the first six months of 2019, the additional tax has resulted in $1.14 million being directed to the CRDA and $1.4 million for the racetrack’s beneficiaries, according to data from the state Division of Gaming Enforcement.
Small emphasized that city officials are “ecstatic” about the “excitement and energy” that sports betting has brought and want the gaming industry in Atlantic City to prosper. But, the mayor and other elected officials believe that the city should reap some of the financial rewards.
“Money generated in Atlantic City needs to stay in Atlantic City,” said Assemblyman John Armato, D-Atlantic, who voted in favor of the sports betting tax legislation, along with his district mate, Assemblyman Vince Mazzeo.
Any change to how the additional sports betting tax is directed would have to be the result of legislative action.
The two state legislators said that while they have not yet been approached by city officials to address the issue, both indicated they were willing to explore options for how the tax revenue should be used.
“In theory, it’s good to have advertising dollars for Atlantic City because it increases visitation, which, in turn, gets more people to spend money in Atlantic City,” Mazzeo said. “But, we need to be looking at long-term sustainability, and we’re certainly open to ideas for long-term property tax relief.”
Tax distribution unique
The sports betting tax distribution in New Jersey is unique, particularly when it is compared to nearby competing states. In Pennsylvania, a portion of the 36% tax rate is redirected to counties and host municipalities.
In New York, sports betting is taxed at 10% with a portion returned directly to host counties and municipalities.
The disparity in how New Jersey treats Atlantic City as a gaming jurisdiction compared to how other states handle theirs is not lost on industry experts.
Michael Pollock, managing director of Spectrum Gaming Group, said it was not unreasonable to view New Jersey’s apparent reluctance to allow the city to directly recoup a portion of gaming tax revenue as a “function of the history between the state and city.”
“There has never been a great deal of confidence in the municipal government of Atlantic City to effectively manage its finances,” Pollock said.
Dustin Gouker, lead sports betting analyst for PlayNJ.com, said that as “an outside observer” it appears the state does not trust Atlantic City.
“I’m not aware of another state that handles a jurisdiction with kid gloves,” Gouker said. “I would be frustrated if I was someone who lived or worked in Atlantic City.”
One of the sports betting tax bill’s primary sponsors, Assemblyman John Burzichelli, D-Cumberland, Gloucester and Salem, said the legislation was not a reflection of how the state views Atlantic City’s ability to effectively manage its finances. He said the other sports betting municipalities do not have a redevelopment authority like Atlantic City does with the CRDA and that the provision reflects that dynamic.
“Atlantic City is different,” he said. “The tax is getting to Atlantic City, it’s just going through the Casino Reinvestment Development Authority.”