The settlement of a long-running tax assessment dispute between the owners of the Atlantic Club Casino Hotel and city that ended in a reduction of the property's assessed value by nearly two-thirds — from $543 million to $165 million — is part of a downward trend in property values in the seaside gaming resort, according to the attorney who represented the casino.
"Effectively, the value of the casino hotels has diminished as a consequence of the downturn in the market," said Gil Brooks, partner at law firm Duane Morris LLP.
Brooks said the city's 2008 reassessment was based on conditions before the global economic crash and the impact of widespread regional gaming competition.
Along with the city's overall ratables, Brooks said casino property values have fallen, dropping from a peak of approximately $5.2 billion last decade to a $3 billion to $3.5 billion market today. Among the reasons, according to Brooks, is falling revenue.
In the Atlantic Club's tax appeal case, which started in 2006, the owners of the former Atlantic City Hilton have received a reduction in the property's tax assessed value in an agreement that includes $19.5 million in tax credits, cash and payment of back taxes, according to the law firm. The city council agreed to the settlement on Wednesday.
One the big issue in the Atlantic City tax assessment challenges is how casino hotels are valued, Brooks said. Three methods of assessment are available — market value, income stream-based calculations similar to those used in business sales and property replacement value, Brooks said.
"From the taxpayer's perspective, the market value is best right now, and potentially income stream," Brooks said, pointing to benchmark sale prices of $31.5 million for Resorts Atlantic City and $38 million for the Golden Nugget Atlantic City property.