Atlantic City’s Woes Deepen as Borgata Wins in Property Tax Battle

by: Anthony F. Della Pelle
11 Apr 2016

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Borgata filed tax appeals challenging the property assessment for tax years 2011, 2012, 2013, 2014, and 2015.  On June 30, 2014, Atlantic City and Borgata entered into a settlement agreement wherein the original assessments for tax years 2011, 2012, and 2013 were reduced and, as a result, Borgata was entitled to refund of approximately $88 million.  The parties also stipulated to a reduction of the 2014 assessment for which the tax credit would be applied to Borgata’s future tax liability.  The settlement agreement also provided that the refund amount and tax credit be paid to Borgata no later than December 31, 2014.  If the refund amount and balance of the tax credit was not paid within the 30-day grace period following December 31, 2014, the City was obligated to make a monthly payment of $150,000 to Borgata until all payment obligations under the agreement were satisfied.

Atlantic City complied with certain aspects of the agreement.  The City lowered Borgata’s property assessments for the respective tax years pursuant to the agreement, and has also applied a credit of $5 million to Borgata’s third and fourth quarter taxes for 2014.   Nonetheless, due to difficulties in obtaining bond financing the City was unable to pay the refund amount of $88 million within the time prescribed by the agreement.  Thus, pursuant to the agreement the City has been paying a monthly payment of $150,000 to Borgata.

Although an executed settlement agreement was in effect, the parties agreed to stay the pending tax appeals in Tax Court until all terms of the agreement have been satisfied.  In the event the refund amount and 2014 tax credits were paid by the City, Borgata would have withdrawn its pending tax appeals and the matters would have been dismissed.  However, in light of the City’s inability to pay the refund amount, Borgata elected to pursue its filed tax appeals with the Tax Court and filed an application to enter judgments pursuant to the Freeze Act.  Borgata had obtained judgments for tax appeals filed for the 2009 and 2010 tax years in late 2015 and sought to invoke the Freeze Act for tax years 2011, and 2012.  In response, the City filed a complaint in Atlantic County Superior Court seeking declaratory and injunctive relief.  The City contended that it had complied with all material terms of the settlement agreement and that Borgata’s actions to litigate at the Tax Court and pursue its tax appeals violated the parties’ agreement.

The trial court agreed with Borgata that the City had breached a material term of the settlement agreement by failing to pay Borgata the refund amount of $88 million.  As the parties stipulated in the agreement, Borgata reserved its rights and remedies to pursue its filed tax appeals at the Tax Court in the event the refund amount was not paid by December 31, 2014.  The court rejected the City’s argument that Borgata had waived its right and should be estopped from pursuing its filed tax appeals given its ten-month delay.  The court recognized that the City has been paying $150,000 per month to Borgata as a condition of the agreement and this payment would cease upon Borgata’s written election to pursue its filed appeals.  Moreover, both parties were aware at the time the agreement was signed that the City would need time to obtain bond financing.  The City’s contention that Borgata had waived its right to pursue its appeals due to the ten-month delay simply had no merit.  In addition, the court recognized that the City had complied partially with certain terms of the agreement and made a good faith effort to obtain bond financing.  Nonetheless, the City’s inability to pay the refund amount constituted a material item “one which encompasses a significant aspect of the agreement,” and thus, amounted to a material breach.

The City also argued that Borgata had agreed to a settled tax assessment value for tax years 2011 and 2012 which constituted a waiver of Borgata’s right to file a Freeze Act application for those years.    The trial court rejected the City’s argument noting that there was no implied or express waiver in the agreement by Borgata on its right to file an application under the Freeze Act.  The court found that “Borgata could not have intentionally waived a right it was unsure it yet had” where the Tax Court’s final judgments for 2009 and 2010 was entered on October 22, 2015, over a year after the parties entered into the settlement agreement.  Moreover, the trial court held that the language of the settlement agreement evidences that Borgata’s intention was to reserve and hold any and all of its remedies at law related to the filed tax appeals in the event the agreement was breached.

With the trial court rejecting the City’s request for declaratory and injunctive relief, Borgata is now free to pursue its filed tax appeals in the Tax Court.  Given the City’s current fiscal turmoil, and with State takeover looming, the timing of this certainly will not help Atlantic City.

A copy of the court’s opinion can be found here.


NJ Property Tax Appeal