Upping Atlantic City Hotel Tax Could Preserve Jobs for Cops, Firefighters

John Reitmeyer | February 2, 2017 | Politics
Beleaguered resort’s $100 million budget shortfall could mean deep cuts to public-safety services and serious damage to the city’s reputation as tourist destination

atlantic city fire
With the local government in Atlantic City facing a $100 million budget hole and a state takeover of the resort’s finances now in full swing, cutbacks to local police and firefighting services appear inevitable.

But a bill moving through the state Legislature is seeking to ease any hit on public safety by establishing a $2 hotel-room tax in Atlantic City, and protecting the reputation of the struggling resort is emerging as a key issue in the debate.

The hotel-tax measure is sponsored by Assembly Speaker Vincent Prieto, a Democrat who led efforts last year to prevent the state takeover that the administration of Republican Gov. Chris Christie eventually launched in late 2016, after it rejected a plan put forward by city leaders to address its deep financial problems.

The $2 tax envisioned by Prieto (D-Hudson) would be instituted for two years, only in Atlantic City, and all proceeds would be dedicated to paying for police and firefighting services. The nonpartisan Office of Legislative Services has estimated that the proposed tax would generate up to $8.6 million in new annual revenue, funds that Prieto says could help offset the $14 million in givebacks that union officials have said the Christie administration has been seeking as part of the takeover.

The proposed tax has drawn the support of union officials from the city’s public-safety services who argue that given the resort’s reliance on tourism and major business conventions, it can ill afford to take the public-relations hit that massive layoffs would generate. Several lawmakers also spoke of the need to maintain robust public-safety services while voting in favor of the proposed tax as it was moved out of committee earlier this week.

But representatives of the resort’s business community warned against establishing the new tax, saying hotel rooms in Atlantic City are already hit with some of the highest taxes and fees in the region, and another increase could push tourists and convention organizers away completely.

Tale of the takeover

The state’s formal takeover of Atlantic City’s local government was authorized in November by the Local Finance Board, a Trenton-based agency that oversees municipal and county government finances in New Jersey. The board’s decision followed an earlier rejection by the commissioner of the state Department of Community Affairs of a five-year fiscal-recovery plan that was submitted by Atlantic City officials under the terms of state takeover legislation signed into law by Christie in late May.

The takeover law — which Prieto initially opposed over concerns about the impact it could have on public safety and collective-bargaining — didn’t launch the immediate intervention that Christie had originally asked lawmakers to grant him. Instead, it gave his administration the sole power to first determine the viability of the city’s recovery plan.

Shortly after the city’s plan was rejected and the formal takeover was authorized, the Christie administration selected former chief counsel Jeffrey Chiesa to lead the Atlantic City recovery effort. Chiesa and Christie have longstanding ties, with Chiesa serving under Christie when he was U.S. Attorney for New Jersey before becoming governor in early 2010. In addition to filling the role of Christie’s chief counsel, Chiesa has also served as state attorney general, and he was picked by Christie in 2013 to temporarily fill a U.S. Senate opening created by the death of U.S. Sen. Frank Lautenberg.

$14 million in givebacks from public-safety unions

Union officials said during a meeting of the Assembly Appropriations Committee that was held earlier this week that through powers authorized in the takeover law the state has been seeking $14 million in givebacks from police and firefighter unions. The fire department alone would be hit with a loss of 106 out of 225 jobs. And that would come even as service calls are up by more than 20 percent, in part due to efforts to respond to drug overdoses using the opioid antidote Narcan under an initiative that’s been backed by Christie, who has become a vocal advocate for increasing efforts to combat drug addiction.

George Borek, vice president of the Professional Firefighters Association of New Jersey, described the proposed hotel tax as a way to provide a temporary “lifeline” for the resort’s firefighters.

“They have not created a robot to do my job as a firefighter yet,” Borek said.

Eric Richard, legislative affairs coordinator for the AFL-CIO, suggested the $2 per-room tax would be a small price to pay to prevent the negative attention that Atlantic City would receive from making widespread public-safety layoffs.

“The last thing we want for a struggling city like Atlantic City — everyone here is well familiar with how bad the economic (picture) is, how dire the situation is — is to have a perception that this city is now not safe due to public-safety layoffs within the fire department and the police department,” Richard said

“We need to ensure that Atlantic City has a reputation that it is safe, particularly for our tourists and for its residents,” he said. “If there is a perception that it’s not safe, with all due respect, folks are not going to book those conventions in Atlantic City.”

Taxing hotel rooms out of market

But Bob Marshall, director of advocacy and legislative affairs for the Greater Atlantic City Chamber of Commerce, also raised the perception issue while speaking out against the proposed tax. He said thanks to a host of other taxes and fees that are already levied in the city, hotel rooms are already taxed at 15 percent. The rate is even higher on rooms at the casinos, hitting 19 percent, said Marshall, whose organization represents 700 member businesses.

According to a study released last year by HVS, a New York-based hospitality-industry consulting firm, the highest hotel tax rates among the nation’s 150 largest cities are levied in Las Vegas, at 18 percent. New York City’s hotel tax is 14.75 percent, and Philadelphia’s is 15.5 percent.

Increasing the room tax by another $2 could mean Atlantic City hotels won’t be able to compete for convention business that for years has served as a key source of economic development for the city, which has already seen five of 12 casinos close in recent years.

“Adding another $2 would be higher than nearby cities like Philadelphia, Baltimore, and Boston,” Marshall said.

Despite that testimony, lawmakers on the panel ultimately voted to advance the legislation out of committee. Assemblyman John Burzichelli, the panel’s chairman, urged the union officials to “hang on.”

“Sorry you’re having to go through this cycle,” said Burzichelli (D-Gloucester).

A spokeswoman for the Department of Community Affairs declined comment when asked yesterday if the state is seeking $14 million in givebacks through the takeover.