Atlantic City has a new budget-funding issue arising the next two years. Stepping back and looking at the flow of funds overall, it seems like it’s the kind of “problem” most municipalities wish they had.

As part of New Jersey’s 2016 takeover of then nearly bankrupt Atlantic City, revenue from casino hotels was stabilized by replacing property taxes vulnerable to appeal with a 10-year schedule of payments in lieu of taxes, or PILOT. Anticipating a possible future in which the casino industry performed better and the PILOT payments increased, it called for an offsetting two-year credit of the industry’s investment alternative taxes, or IAT.

The good news is that, with the opening of two new casino hotels and the addition of sports betting, the city’s casino industry is on track this year to hit the $3 billion total gaming revenue benchmark that would trigger the IAT credit. As a result, industry PILOT payments are expected to rise from $132.6 million to $152.6 million this fiscal year. That will benefit Atlantic County and the city’s school district, which get shares, but not Atlantic City municipal government for a couple of years.

Under the Municipal Recovery and Stabilization Act of 2016, hitting the revenue benchmark would see the city’s IAT funds diverted to the credit. While PILOT funds to city government would increase about $10 million a year, IAT funding of $14 million to $15 million a year would disappear for a couple of years. Then the funding would return for five years, during which total casino industry payments to the city would surge.

In addition to helping turn around the city’s economy and outlook, the state takeover has stabilized Atlantic City government’s finances with a notable degree of consideration for local taxpayers and government workers. The budget adopted last month, worked out by the state Department of Community Affairs and city officials, again avoids raising the municipal property tax rate. Full-time, non-uniformed city workers will get raises of 2 percent per year for the next three years, as well as a $1,000 stipend. And low-wage workers will be brought up to at least $25,000 a year. Pretty good for a city on the brink of bankruptcy that is paying down more than $400 million in debt.

Local state legislators are looking into addressing the two-year funding drop due to the diversion of the IAT. The funding gap looks like a larger version of the kind of cash-flow problem common to household and business budgets.

The state has done a good job of balancing Atlantic City stakeholder interests to revive the metropolitan economy for everyone’s benefit. That inspires confidence that state officials will handle this issue appropriately — perhaps just through its overall budgeting oversight and management — with that overarching goal in mind.

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