Atlantic City faces a new hurdle in its struggle to revive its declining gambling industry: Its 13 casinos say their properties collectively are worth billions of dollars less than they were just a few years ago, and they want lower taxes to reflect that shift.
In the latest and largest blow, a New Jersey tax court ruled last month that the city owes the Borgata Hotel Casino & Spa a roughly $50 million refund on its property taxes for 2009 and 2010. That number represents 20% of the city's annual revenue, according to Moody's Investors Services.
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Judge Patrick DeAlmeida, who presides over the Tax Court of New Jersey, said the overall climate for Atlantic City's casinos has crumbled since neighboring states have opened their own gaming facilities.
"The gaming market had been reset and the economic prospects for Atlantic City's casino-hotels dimmed for the foreseeable future," he wrote in the Oct. 18 ruling.
Gov. Chris Christie staked considerable political capital on reviving Atlantic City since he took office in 2010. But more than halfway into his five-year plan to help Atlantic City, the casinos have had long stretches of declining revenue, and now the city's finances hang in the balance as well.
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Borgata Hotel Casino & Spa in Atlantic City. AP
"There is no one single silver bullet that is going to solve this problem," said state Sen. Jim Whelan, a Democrat and former mayor of Atlantic City. "The value of the casinos is down. That's the reality."
The city's property-tax base has shrunk by 30%, to just more than $14 billion from about $20.5 billion, in the past three years, due largely to property-tax appeals by casinos including the Atlantic Club, Caesars, Tropicana and Trump Entertainment Resorts Inc., which owns the Trump Taj Mahal and Trump Plaza.
The Atlantic Club Casino Hotel and Golden Nugget both said they now also plan to appeal their assessments for later years.
Tom Pohlman, executive vice president and general manager at the Golden Nugget, which took over the Trump Marina in 2011, said the casino plans to appeal assessments for the time since it took over. "Borgata is the most valuable property in town. It was them paving the way for everyone else to say we're way overvalued as well," he said.
For now, the city said it plans to borrow money and raise taxes on local business and residential properties, to make up for declining tax revenues from casinos. Residential property taxes in Atlantic City rose 20% between 2012 and 2013 alone, according to the city.
The city is likely to appeal the tax court's decision, but if it loses, it could spell long-term trouble for the municipality, analysts and city officials said. When the Borgata and other casinos appeal their assessments for later years—to seek even larger reductions than they have received so far—they are likely to point to the recent ruling, which takes into account casinos' declining revenues.
"It's a constant bringing down the values," said Michael Stinson, Atlantic City's director of revenue and finance. "It's something that's going to keep going on and on."
Some experts warned that weakening the property-tax base could hasten the decline of both the city and, ultimately, its gambling industry, which relies on many of the local services.
"I don't know how high they can raise property taxes," said John Kempf, a gambling analyst with RBC Capital Markets. "The last thing [casinos] want to do is put Atlantic City into bankruptcy, because you rely on the city for the police, the firefighters, the municipal services."
Borgata executives said the casino has been paying more than its fair share, and disagreed the appeal would hurt city residents. "The