Atlantic City: Does it pay to improve?; Bicycle Casino’s flat tire

New Jersey giveth, New Jersey taketh away. The priority of the Lege’s lame-duck session will not be ending smoking in Atlantic City casinos but something much nearer and dearer to casino executives’ hearts: Revising the PILOT (Payment In Lieu of Taxes) program. This is the brainchild of outgoing state Senate President Stephen Sweeney (D), prompting one wag to comment, “Perhaps he hopes to get a job at a casino so he can have a third pension.” The big, juicy incentive to get Big Gaming to go along is the exemption of sports betting and i-gaming from PILOT revenue calculations, a big gimme.

The casinos’ compliance will be needed in some cases because their PILOT fees will be going way up, usually if they have been engaged in capex reinvestment. We frown upon this because it creates a fiscal disincentive to improve one’s property (slumlords like Donald Trump, in his Boardwalk days, would have loved it). For instance, Borgata would slide down from $29 million due this year to $23 million in 2025. By contrast, Hard Rock Atlantic City would be walloped with a 100% increase from $8 million to $16 million.

Improvements at Bally’s Atlantic City are going to raise its tax bill from $5 million to $8 million. Caesars Entertainment has gone on record as favoring the bill, doubtless because two of its three properties are going to see massive take breaks. Caesars Atlantic City goes from $17.5 million to $9 million and Harrah’s Resort is reprieved from $25.5 million down to $18 million. Tropicana Atlantic City, however, will see a higher impost in 2o25: $11 million instead of the current $8 million.

Resorts Atlantic City gets hit the hardest, going from $3.5 million to $8 million. Fading Golden Nugget is upped from $5 million to $6 million and Ocean Casino Resort pays the penalty for upgrading the neighborhood with a PILOT increase to $11 million from $7.5 million. The logic is obvious that an improved property is worth more and should be taxed accordingly, but the unintentional message of all these PILOT course changes is that if you offer your customers a better casino it’s going to come out of your hide. Either way, Sweeney ought to find a cushy sinecure at either Borgata or Caesars when politics is done with him.

Every so often we come across a story so juicy, so improbable, so salacious that it simply has to go in S&G even if it’s a little old. It’s been over 10 days since the feds laid down the law against California card room Bicycle Casino but the settlement order is a doozy. True, Bicycle Club got off easy, paying only 500 grand in fines, and having to promise to “undergo enhanced review and reporting requirements designed to prevent future violations of federal law.” Frankly, the Biden Justice Department went so soft on Bicycle Casino that it really lowers the bar almost to the ground for what kind of lurid irregularities you can engage in and dodge serious punishment.

The confessions of Bicycle Club revolve around a Chinese high roller who was allowed to perpetrate some of the most brazen money-laundering acts we can recall offhand. They pertain to literally millions of dollars in cash transactions back in 2016. During a seven-month period, “When conducting cash transactions, the high roller relied on an assistant to conduct over $100 million in cash-in or cash-out transactions on his behalf.” Bicycle, in return, kept mum on aforesaid high roller and filed no suspicious cash-transaction (SARC) notices about what were—as we shall see—some pretty suspect activities.

Mr. X would play (what else?) high-stakes baccarat, paying his way with cash that was lugged about in duffle bags. “Huge sums” of cash in duffle bags. Geez, money laundering much? On one particular occasion, Mr. X engaged in an 11-hour session of baccarat that required him to withdraw $2 million from his player account, which Bicycle should have flagged but didn’t. Given the amount of money flowing through the card room, having to pay $500K for turning such a blind eye ought to have brought down the wrath of Uncle Sam but didn’t. We’ll see how long it is before a California card room strays from the straight and narrow (again).

Quote of the Day: “Life is not a matter of holding good cards, but of playing a poor hand well.”—Robert Louis Stevenson