The state has contributed more than $800 million in funding to the resort’s budgets since 2016 to help pay off casino tax appeals and steady the city’s finances when it was on the brink of bankruptcy, according to state records. But the city is hoping to reduce its reliance on state funding over the next couple of years, state and local officials said. The city has received $269 million through Casino Reinvestment Development Authority investment alternative tax funds to help pay off the debt the city incurred while paying off casino property tax appeals, according to the state Department of Community Affairs. Those appeals resulted in the creation of a payment-in-lieu-of-taxes plan for the casinos that expires next year, though some officials are working on an extension of the program.
The city also received more than $532 million in other forms of state funding, such as transitional aid, according to state records. The state funding has helped lead in part to six straight property tax decreases, a reduction in the city’s tax levy and several bond rating upgrades. In 2015, the city’s tax levy was more than $128 million. Last year, it was $34.8 million. It also has helped pay off the casino tax appeals the city had to bond for by $194 million over the past five years, Mayor Marty Small Sr. said during his State of the City address in January. “This is money the City of Atlantic City is entitled to,” Small said of the state funds. “If there was no PILOT program, the casinos would be subject to traditional taxes, so money the city gets from IATs is money the city would otherwise be owed if we were to tax the casinos.”
In September, Moody’s Ratings upgraded the city’s long-term bond issuer rating to Ba2 from Ba3, with the outlook remaining positive. “The positive outlook reflects Atlantic City’s stronger operating environment and structural improvement, along with ongoing state oversight, which has enabled the city to produce balanced operating results and maintain its financial and liquidity positions heading into 2025,” according to a Standard and Poor’s report. The city’s 2024 budget, which totaled $225 million, was supported by
$120 million in state funds, including IATs, transitional aid and other forms, according to budget records. Using state aid to help balance budgets in the city is a practice that has gone on for decades, said Marc H. Pfeiffer, senior policy fellow and faculty researcher at the Bloustein Local Government Research Center at Rutgers University.
“In New Jersey, we have a single way of raising money, which is property taxes,” Pfeiffer said of municipal budgets. “Atlantic City has always been an exception to that because you have the hotels and then the casinos. You’ve always had a policy of state engagement to support Atlantic City’s municipal budget in particular.” The city’s economic makeup, a unique mix of luxury casino palaces and residents — nearly 34% of whom live below the poverty line — has led to it being treated differently when it comes to state funding, Pfeiffer said. “It’s always been treated in a way that is different,” Pfeiffer said. “It never really met the formula requirements for state aid like places like Camden, Asbury Park and Newark because of its property wealth.”
The state’s transitional aid program allocates supplemental aid to ensure municipalities experiencing fiscal distress can adopt a balanced budget. The program also provides municipalities with local government advisers and fiscal oversight to help them achieve a stable budget through improved operations, best practices and sound financial planning, said Lisa Ryan, spokesperson for the DCA, which oversees the city under a 2016 state takeover law.
Municipalities receiving transitional aid must sign a memorandum of understanding with DCA’s Division of Local Government Services that sets conditions, requirements and benchmarks aimed at concluding the municipality’s need for transitional aid, Ryan said. “Per Atlantic City’s MOU, the city has been decreasing its transitional aid by 15% each year and will also be doing that in CY2025. This transitional aid decrease is a positive indicator of the city’s strengthening financial position,” Ryan said. Small said the state funds make up for the revenue the city does not receive from luxury, parking and sports betting taxes.
The Atlantic City luxury tax applies to sales of alcoholic beverages for on-premises consumption; room rentals in hotels, inns, rooming and boarding houses; and tickets for events in the city. Small has pushed for years for the city to receive a portion of those funds. “Remember, the Great City of Atlantic City doesn’t benefit from luxury, parking, sports gaming and other taxes where, if we did, we wouldn’t need this additional funding. Sports gaming alone is a billion-dollar industry, and the city doesn’t see a penny of it.”