(Source: By Emily Previti, The Press of Atlantic City, Pleasantville, N.J. (MCT) Atlantic City government’s debt would more than double this year if support continues for $102.5 million in loans preliminarily approved Thursday to help pay more casino tax appeal settlements.
City Council voted 5-0 to seek the loans to help cover $108 million in refunds due casinos for what are now considered overpaid taxes because they were based on property values since determined to be too high.
Of that, $27 million will go to Caesars Entertainment for overpayments on Bally’s Atlantic City. Another $54 million is due Trump Entertainment for taxes paid on its local properties: Trump Taj Mahal, Trump Plaza and the former Trump Marina, which has since been sold and is now the Golden Nugget Atlantic City. The rest will refund $27 million for payments made on the former Hilton property now operated as Atlantic Club Casino Hotel, according to city settlements with those companies.
The loan proposed Thursday is expected to tack $61.24 to the nearly $4,869 average annual residential tax bill, according to the city’s application to the Department of Consumer Affairs.
“If you didn’t do it and credited the casinos, in the first year, that would be $50 million the city wouldn’t collect,” city Director of Revenue & Finance Michael Stinson said. “You can’t do that with a $232 million budget.”
Before the city can take out the loans, it needs another approval from City Council and one from the state Local Finance Board. The second and final City Council vote is scheduled during the meeting of the governing body scheduled for Sept. 26. The Local Finance Board will vote on the matter during its next meeting Sept. 12 in Trenton.
So far this year, the board has signed off on more than 60 loans to help municipalities offset the costs of tax appeals, according to a list provided by the DCA.
Exempt from the 2 percent state cap on annual tax-levy increases, the loans include one for $38.5 million taken by Atlantic City in July.
The loan was used to refund other Atlantic City casinos for overpayments and brought the municipality’s debt to $160 million.
Another set of approvals from City Council and the Local Finance Board would officially authorize the loans discussed Thursday. That would further increase city debt to $263 million — more than double the $121 million debt in 2011.
Assuming a 4 percent interest rate, the annual cost of the loan over 20 years breaks down to $5.2 million. The actual yearly payment plan would start at $4 million and increase to about $6 million over the duration of the loan to allow the city to pay off other existing debts, Stinson said.
The loans would address only what the city owes in refunds as warranted by lower property values — not the accompanying ratable base changes. Because casino property devaluations account for most of the reduction, noncasino taxpayers make up the difference.
To deal with that in the long term, the city needs to pursue cuts on a larger scale than the savings obtained recently by changes such as tweaks in health coverage for city workers, 6th Ward Councilman Tim Mancuso said.
“That’s all good, but if our ratable base is going down, and our assessments level off, we’re going to have to work within that number,” Mancuso said. “We can’t keep borrowing, we have to spend less.”
Police, firefighters and the beach patrol could be targets for budget cuts, given those public safety agencies make up such a large percentage of the budget. Meanwhile, local officials need to lobby for changes to state law that would prevent tax appeals from resulting in huge swings in property values that throw off local government budgeting, he said.
Atlantic City did cut its budget 5 percent this year. But some functions have been taken over by the Casino Reinvestment Development Authority. And the city didn’t cut any programs or services this year, according to its application to the DCA.
The application helps determine whether a municipality prepared or cut costs before resorting to borrowing money. That information will inform the Local Finance Board’s approval — which could be conditional, Stinson said.
Application questions include whether a municipality pays elected officials or provides them with taxpayer-funded vehicles and health benefits.
In Atlantic City, council members get all three. The municipality also has not cut any programs or services within the past year, according to its application.
The Atlantic City Public School District has scaled back on programs to adjust, however. Although not responsible for directly repaying the casinos, the school district is affected by changes in the ratable base, said recently retired Superintendent Fred Nickles.
The district also cannot “just go out and borrow money” to make up for ratable base losses, Nickles said.
Many of the same people whose tax burden has increased also are the voters who directly approve the school’s annual budget — an added pressure to keep borrowing, and spending, at a minimum.
So instead, the district cut back on field trips, school recreation programs and other such activities to compensate during the past couple of years, Nickles said.
Reached late Thursday on his cellphone, he could not immediately estimate the monetary value of those adjustments.
“Quite honestly, when you deal with students in Atlantic City, which is the fifth-poorest school district (in New Jersey as far as average student household income), those are the things the children really need, to go out and experience things that because of ratable base we had to cut out,” he said.
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©2012 The Press of Atlantic City (Pleasantville, N.J.)
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