Atlantic City loses another round to Borgata
ATLANTIC CITY - The bad news keeps piling up for Atlantic City, just days from running out of cash. A day after the State of New Jersey filed suit to compel the city to turn over tax payments due to its school district on April 15 before it meets its own payroll, a judge issued a ruling that opens the door to still more court battles with Borgata Hotel & Casino over past tax appeals.
ATLANTIC CITY - The bad news keeps piling up for Atlantic City, just days from running out of cash.
A day after the State of New Jersey filed suit to compel the city to turn over tax payments due to its school district on April 15 before it meets its own payroll, a judge issued a ruling that opens the door to still more court battles with Borgata Hotel & Casino over past tax appeals.
Atlantic County Superior Court Judge Julio Mendez ruled the city had violated a settlement agreement to repay $88.2 million to Borgata for appeals filed for the years 2011, 2012, 2013, and 2014. The city also owes Borgata an additional $62 million from a tax appeal case that was not settled, but the result of a judgment in Tax Court that reduced its assessment from $1.2 billion to $880 million.
However, the judge - who is also hearing the companion case regarding enforcing the $62 million Borgata judgment on a separate Borgata tax appeal, as well as the newly filed New Jersey v. Atlantic City schools case - ordered the parties to continue negotiations and report back to the court "on a regular basis," on their progress, including Thursday afternoon by telephone.
"The parties have been and continue to be open to negotiations for a global resolution of all the tax years," Mendez wrote.
Borgata general counsel Joe Corbo declined to comment. The Mayor's Office did not respond to a request for comment.
Shut out of bond markets to borrow, the city had been paying $150,000 a month toward the $88.2 million, as prescribed by the settlement. But Mendez ruled that the agreement still allows Borgata to pursue an appeal if it did not get repaid in full by the end of 2014.
The city has been trying to avoid any further tax appeal trials, and legislation twice vetoed by Gov. Christie would set up a Payment in Lieu of Taxes (PILOT) system for casinos that would prevent the appeals, which have played a large part in the city's current financial meltdown.
Mendez said he recognized the city "has made a good-faith effort to obtain bond financing to pay Borgata," but ruled the settlement still allows Borgata to take the case to Tax Court. The $150,000 monthly payments were to stop when Borgata elected to pursue an appeal.
Citing "the public interest involved here," Mendez's ruling keeps the settlement agreement in place pending further action in tax court to allow mediation to continue.
Mendez said he had delayed ruling on the case "to allow for settlement discussions" but moved forward "upon Borgata's request."
"In weighing the equities, the Court takes into account that the City substantially over assessed the real estate value of Borgata's Properties for years and has received an over payment of taxes during that time," Mendez wrote.
He said the city does not need to continue its $150,000 monthly payments to Borgata.
In the companion case, Borgata obtained permission from Mendez to withhold its quarterly $7.2 million payment earlier this year, to offset the $62 million owed to it by the city in the appeal for the years 2009 and 2010.
The legislation, along with more than $60 million in redirected casino revenue to help the city pay off debt and a takeover bill, are stalled in Trenton amid an impasse among top elected officials: Christie, State Senate President Stephen Sweeney, and Assembly Speaker Vincent Prieto.
In the suit by the state, meanwhile, Mendez set 1:30 p.m. Friday for a telephone conference on the state's request that the city "show cause" as to why the judge should not prohibit it from spending any money - i.e., making payroll - that would prevent the city from making school district payments.
The suit acknowledges that the city is up to date in payments to the school district, having made a March payment of $8.5 million. The next payment is due April 15, also for $8.5 million. Mayor Don Guardian has said he will continue to make payments to the school district.
The hearing is set for the same date the city is supposed to pay its workers and then run out of cash until quarterly tax payments arrive May 2. The City Council is expected to approve a plan to pay workers on a 28-day cycle, which would allow the city to keep operating during the rest of April.
The impasse has pitted elected officials against one another, and also unions. While the building trades unions have supported Sweeney and his championing of North Jersey casinos, the municipal unions have rallied behind Prieto, who has refused to post the takeover bill to be voted on because it would give the state the right to terminate collective-bargaining agreements.
Meanwhile, the NJEA, the teachers' union, which has historically had a chilly relationship with Christie, came out in favor of state action to ensure that the city makes its schools payment.
The takeover bill supported by Christie specifically exempts the teachers' union from language allowing the state to unilaterally terminate or modify city union contracts.
The lawsuit filed by Christie's education commissioner to force the city to pay the schools before it makes its own payroll basically pits city payroll against school payroll.
Keith Bennett, the state delegate for the Atlantic City Policeman's Benevolent Association, said the governor seemed to be courting the NJEA, perhaps in anticipation of Sweeney's run for governor. Sweeney has the support of building trades unions.
Christie, in turn, accused Prieto of blocking the takeover legislation by playing "public sector union politics," as a way to boost the gubernatorial campaign of Jersey City Mayor Steve Fulop.
The governor is set to be in Atlantic City on Wednesday for a news conference with County Executive Dennis Levinson, in the county office building across from City Hall.
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