ATLANTIC CITY — While floating a plan to spend $10.5 million in luxury tax revenue to renovate parts of Jim Whelan Boardwalk Hall for the Board of Education, supporters called it a way to use the heavily restricted funds to help city residents.
Under state law, the almost $40 million a year collected in luxury taxes can only be used for marketing, debt service, maintenance and construction at Jim Whelan Boardwalk Hall and the Atlantic City Convention Center.
Debate over the BOE project, which was shelved due to lack of support from the board, brought up a question — is it time to consider broadening how the taxes on resort hotel rooms, alcohol and ticket sales can be used?
The Department of Community Affairs, which oversees the state takeover of Atlantic City, has expressed interest in expanding use of the taxes, but stressed it would take state legislation.
“DCA is open to being part of any discussion around a more expansive use of the luxury tax in order to address the modern day challenges that Atlantic City faces,” wrote Department of Community Affairs spokeswoman Lisa Ryan in an email response to questions. “If raised, it is likely an issue that involves many stakeholders. That said, we are not aware of any legislation having been proposed.”
Casino Reinvestment Development Authority Executive Director Matt Doherty declined to comment for this article.
Some CRDA board members, however, caution legislative changes shouldn’t happen without first establishing goals and priorities for CRDA spending, which they say remain murky.
“I want to see a clear set of what our priorities are organizationally — what our vision is and what we hope to accomplish,” said CRDA board member Howard Kyle, chief of staff in Atlantic County. “Then we can make a plan and get it done.”
The state determines the CRDA’s focus, and officials have instructed it to work to improve life in the resort for residents as outlined in the 2018 Atlantic City transition report from Special Counsel Jim Johnson.
That report called for the agency to fund programs to address a broad array of social, educational, governmental and cultural deficits to help those who live in the resort.
At the same time, CRDA’s largest ongoing funding source cannot be used for that mission. Instead, the CRDA’s general fund must be used for projects like community police officers and expansion of the AtlantiCare Regional Medical Center — both funded this year.
The luxury tax is the CRDA’s only revenue stream that is currently replenishing itself, Doherty has said when discussing the agency budget.
The general fund balance, now at about $70 million, is dwindling as its former main source of revenue, the Investment Alternative Tax, has been diverted to pay down city debt.
The CRDA mission is the successful revitalization of Atlantic City for the benefit of both residents and the wider community, Kyle said. But he said the organization has not yet defined how to best meet that mission, under the Murphy Administration’s focus on recommendations of the Johnson Report.
Without that plan, “everything is a one-off,” Kyle said. “Someone comes in with an idea that sounds great, we say ‘Let’s do it.’ It’s why nothing congeals into an economic whole with some kind of power behind it.”
Kyle was one of many board members who balked at the Board of Education proposal for Boardwalk Hall.
Board member Ed Gant, a former union electrician and labor leader, agreed the CRDA hasn’t made its priorities clear enough, and said he has additional concerns about changing the rules for luxury taxes.
“I worked in those buildings as an electrician. Boardwalk Hall is 90 years old,” Gant said, and so extremely expensive to maintain. “I think we have to be very conservative when we talk about deleting anything there to take care of those buildings.”
Luxury tax revenue, which came in at about $37 million last year and is expected to top $38.5 million this year, is spent every year on debt service, marketing and other expenses related to running the two buildings. There is also $25 million in a reserve fund, according to Doherty and the agency’s financial statements.
Kyle said luxury tax revenues flow when the economy is good, but downturns are inevitable.
“Luxury tax revenue is subject to fluctuation and economic cycles,” Kyle said. “In a recession they are going to go down. We have ‘x’ amount of dollars today but that doesn’t mean it’s always going to happen. You have got to plan for the bad times.”
CRDA has not done enough analysis on what the Convention Center and Boardwalk Hall structures will need over the next 10-20 years, Kyle and Gant said.
“When you are dealing with a building that is 90 years old you can’t predict costs. You can’t have enough in reserves for what goes on,” Gant said. “If you get to $100 million, I’d say all right. Over that number let’s spend it. Let’s go.”
Luxury tax funds ideally are spent in a way that generates more business for the city, Kyle said.
“If you fund an event that’s going to bring in 100,000 people over the course of 2 to 3 days, they come in and eat, drink, stay in hotels,” Kyle said. “You recover funds through the luxury taxes they pay. It becomes self replenishing.”
“If you fund the Board of Education offices, it doesn’t replenish itself,” he said.
There are signs board members are struggling with what the Murphy Administration’s focus on community means for the future of Atlantic City.
“Really what we need is ratables,” Gant said. If we get ratables, it solves all the problems,” citing the Borai market-rate rental housing project that opened last year.
“We’ve moved away from the basic concept that makes the most sense,” Gant said. “If we are going to make it a subsidized city in every aspect, people should acknowledge that. Or we can go back to a redevelopment agency that is proactive in bringing people here.”