LEGISLATIVE FISCAL ESTIMATE

[First Reprint]

SENATE, No. 2575

STATE OF NEW JERSEY

216th LEGISLATURE

 

DATED: DECEMBER 23, 2014

 

 

SUMMARY

 

Synopsis:

Reallocates casino investment alternative tax to Atlantic City to pay debt service on municipal bonds issued.

Type of Impact:

Revenue increase to Atlantic City; revenue reduction to the Atlantic City Tourism District.

Agencies Affected:

Casino Reinvestment Development Authority; city of Atlantic City.

 

 

Office of Legislative Services Estimate

Fiscal Impact

Year 1 

Year 2 

Year 3 

 

Casino Reinvestment Development Authority

Indeterminate Revenue Decrease- See comments below

 

 

City of Atlantic City

Indeterminate Revenue Increase- See comments below

 

 

 

 

·         This bill would reallocate the receipts from the collection of the casino investment alternative tax from the Casino Reinvestment Development Authority (CRDA) to the city of Atlantic City for the purpose of paying debt service on municipal bonds issued.

·         Under current law, casinos are required to pay a casino investment alternative tax (IAT) of 2.5 percent of gross gaming revenues to the State or 1.25 percent of gross gaming revenues to the CRDA for investment in the Atlantic City Tourism District and community development in Atlantic City.

·         Casinos are also required to pay the IAT on Internet gaming gross revenues, but the tax rate on Internet gaming is 5 percent to be paid to the State or 2.5 percent to the CRDA for investment and community development purposes.

·         Fiscal Year (FY) 2013 IAT revenues were $35.9 million (most recent reported) and are projected by the CRDA to be approximately $31 million in FY 2015 with the anticipated closing of the Trump Taj Mahal casino.  In addition, the CRDA estimates that the amount of available IAT revenues for reallocation to the city would be reduced by a projected $8 million in FY 2015 that has been pledged for the payment of bonds issued by the CRDA or has been otherwise contractually obligated by the authority prior to the effective date of this bill.  These committed amounts fluctuate based on the terms of certain bond covenants and may be slightly higher or lower accordingly.  According to financial reports, Atlantic City debt service was approximately $36.7 million in the city’s 2013 budget year.

 

 

BILL DESCRIPTION

 

      Senate Bill No. 2575 (1R) of 2014 would reallocate, for a period of 15 years, the moneys derived for the payment of 1.25 percent of gross gaming revenues to the city of Atlantic City for the purposes of paying debt service on municipal bonds issued by Atlantic City prior to the effective date of the bill.  It would also reallocate the investment alternative of 2.5 percent of Internet gross gaming revenues for the same purpose.  The bill excludes from the reallocation any amount of the revenues pledged for payment of bonds issued by the Casino Reinvestment Development Authority or otherwise contractually obligated by the authority prior to the effective date of the bill.

 

 

FISCAL ANALYSIS

 

EXECUTIVE BRANCH

 

      None received.

 

 

OFFICE OF LEGISLATIVE SERVICES

 

      Under current law, casinos are required to pay 2.5 percent of gross gaming revenues to the State or 1.25 percent of gross gaming revenues to the CRDA for investment in the Atlantic City Tourism District and community development in Atlantic City.  This tax is known as the casino investment alternative tax (IAT).  Casinos are also required to pay the IAT on Internet gaming gross revenues, but the tax rate on Internet gaming is 5 percent to be paid to the State or 2.5 percent to the CRDA for investment and community development purposes. 

      This bill would reallocate the receipts collected by the CRDA from the IAT for the Atlantic City Tourism District to the city of Atlantic City for the purposes of paying debt service on municipal bonds issued, excluding any amount of the revenues pledged for payment of bonds issued by the CRDA or otherwise contractually obligated by the authority prior to the effective date of the bill.  The IAT revenues have declined by 21 percent since FY 2011, or by about 11 percent per year.  FY 2013 IAT revenues were $35.9 million (most recent reported) and are projected by the CRDA to be approximately $31 million in FY 2015 with the anticipated closing of the Trump Taj Mahal casino.  In addition the CRDA estimates that the amount of available IAT revenues for reallocation to the city would be reduced by a projected $8 million in FY 2015 that has been pledged for the payment of bonds issued by the CRDA or has been otherwise contractually obligated by the authority prior to the effective date of this bill.  These committed amounts fluctuate based on the terms of the bond covenants and may be slightly higher or lower accordingly.  According to financial reports, Atlantic City debt service was approximately $36.7 million in the city’s 2013 budget year.

Section:

State Government

Analyst:

Kimberly McCord Clemmensen

Senior Fiscal Analyst

Approved:

David J. Rosen

Legislative Budget and Finance Officer

 

This legislative fiscal estimate has been produced by the Office of Legislative Services.

 

This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).