By Blake Simokat
Key Facts
The Casino Property Tax Stabilization Act (CPTSA) is an Act in the New Jersey State Constitution that regulates gambling in Atlantic City. In March 2024, the plaintiff, a group called Liberty and Prosperity, sued the defendant, the State of New Jersey, for what they felt was an unjust action of giving certain groups tax breaks.
Relevant Legislation and Background
In 1976, the State of New Jersey allowed gambling within the State. The Casino Act permitted the State to tax gambling equipment and the casino operation itself in order to reduce other taxes, such as property tax. In 1977, the State enacted the Casino Control Act (CCA), the State claimed that casinos and gambling were “a unique tool of urban redevelopment for Atlantic City” and would be exempt from taxation. The CCA imposed an annual tax on “gross revenues” equal to eight percent of those revenues. The CCA then required casinos to make annual investments to improve Atlantic City, or the casino would have to pay an alternative tax. In 1984, the Casino Reinvestment Development Authority (CDRA) came into play, where casinos got the option to pay an additional 2.5% on gross revenues or invest in CDRA bonds. Atlantic City had a gambling monopoly for a while until nearby states also started allowing it. Thereafter, Atlantic City’s monopoly started to crumble. Due to the situation that Atlantic City was now in, of casinos rapidly closing, the CPTSA was put into play. The CPTSA made sure that there was certainty that the financial obligations of the casinos to the city were met. The CPTSA required casino owners to sign financial agreements with the City. This situation reached the federal level when in 2018, according to the legal document, “after the United States Supreme Court found unconstitutional a federal law that made it unlawful for a state to license or authorize gambling on competitive sporting events.”
Issues Presented
In Atlantic City, tourism and gambling are what make the economy thrive and give jobs to thousands of workers in New Jersey. The plaintiff claimed that the casinos are being taxed unfairly. The plaintiff claims “Atlantic City has experienced ‘an increase in unemployment due to the recent closing of four casino properties’ and a strain on [its] municipal budget due to property tax,” which was true for the time due to Atlantic City’s gambling monopoly crumbling.
The plaintiff claimed the defendant should support their casinos and gambling for their unique recreational opportunities, tourism attraction, and revenue-generating ability. The defendant countered that “to prevent the insolvency of Atlantic City, to facilitate the municipality’s rehabilitation and recovery, and to protect the citizens not only of the City but of Atlantic County, the region and the State from the ramifications of what would have otherwise been the imminent financial collapse of a tax base which uniquely funds State programs for senior citizens and disabled adults.”
The defendant is claiming that through the series of legislation, the casinos and gambling equipment need to be taxed significantly, and casinos should be required to invest in the city directly through higher taxes on gross revenue or through bonds. The defendant claims it wants to keep costs, such as property taxes, lower so it can protect its more vulnerable citizens, such as senior citizens.
The Reasoning of the Court
Citing extensive case law, including State vs. Trump Hotels & Casino Resorts in 1999, State v. Hemenway, 239 N.J. 111, 125, 216 A.3d 118 (2019), Mack-Cali Realty Corp. v. State, 466 N.J. Super. 402, 423-24, 246 A.3d 847 (App. Div.2021), and State v. Lenihan, 219 N.J. 251, 266, 98 A.3d 533 (2014), the court was unwilling to “rule a legislative act void, ‘unless its repugnancy to the Constitution is clear beyond a reasonable doubt.’” Lenihan. According to the court, the plaintiff “failed to meet that standard.”
Final Ruling
For the final ruling of this case the court wrote, “For these reasons, we reverse the portions of the August 29, 2022, final judgment denying in part defendants’ motion to dismiss the complaint, granting in part plaintiffs’ summary-judgment motion, and declaring the 2021 amendment null, void, and of no effect. We otherwise affirm.”
Implications The implications of this case for city, county, state, and federal leaders and lawmakers is that a city needs to be cautious when passing laws that affect the taxation of businesses that prove very lucrative for the city itself. Attempting to lower taxes in other places, but raising it for other business owners in return is unjust when done in the way that Atlantic City and the State of New Jersey did. Implications for sport managers include paying attention to where their revenue comes from and make sure that that source of income for their organization is being taken care of properly and not being taken advantage of financially.
Liberty & Prosperity 1776, Inc. v. State; Superior Court of New Jersey (Appellate Division); DOCKET NO. A-0487-22; 10/21/24
Simokat is a sports management student at The Citadel.
