Atlantic City officials won a huge victory in court on Friday as a federal bankruptcy judge ruled that Revel Casino Hotel would be forced to pay $30 million in unpaid taxes on the property.
The Wall Street Journal reported that city officials had petitioned the court back in September for the rights to sell the tax debt but now they will be able to collect on the taxes or sell the debt.
Parties Wouldn’t Deal So Judge Forced the Issue
U.S. Bankruptcy Judge Gloria Burns issued the ruling on Friday in Camden, N.J. after parties on both sides were unable to come to an agreement on a settlement. Burns had instructed both sides last week to work towards a settlement, but neither party appeared to budge.
Revel’s tax bill for 2014 stands around $37 million. Revel had been seeking protection from the court as they were challenging the current year’s property valuation of $1.5 billion. Their request was denied because their challenge was actually of a settlement that they made with the city in 2012.
Back in 2012, Revel challenged the property valuation and ultimately reached a settlement with the city. As part of that settlement, the city set property valuations for the casino through 2015. Some may remember that Revel spent over $2 billion to build the property. Current valuations are set at nearly half that amount. The property recently sold at auction for $110 million. Once the company closes on the deal, they will move forward with plans to reopen the casino. It is unclear at this time whether Brookfield plans to offer online poker in New Jersey.
How Will the State Be Paid?
The city must now go through the process of actually getting paid, a process that could still take months depending on how quickly Brookfield Asset Management closes on the property.
One option would be that the city waits until Brookfield settles on their $110 million purchase. The New Jersey Herald quoted AC Attorney Jason Holt as saying that a portion of proceeds from the auction sale would go towards settling the $30 million tax debt.
Of course, the city could go another route. Should the property not close before next month, the city could sell a tax sale certificate. With a tax sale certificate, an investor buys the tax debt and tries to collect. If unpaid after two years, they could foreclose on the owner of the property.
Atlantic City will certainly pursue whichever option gives them the most guaranteed money. The city successfully argued that failure to recoup these taxes would create a “severe adverse impact on its budget and finances.” Revel’s tax valuation of $37 million is about 10% of the city’s revenue from tax collection. It also represents about 18% of the city’s annual budget.