(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the
convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in
the interests of brevity, portions of any opinion may not have been summarized).
Argued January 21, 1999 -- Decided August 2, 1999
STEIN , J., writing for a majority of the Court.
This appeal as of right concerns the constitutionality of the investment alternative tax provision enacted as
part of the 1984 amendments to the Casino Control Act (Act) and the constitutionality of amendments to the Act
made in 1993 that established certain parking fees payable by casino hotels for the use of the Casino Reinvestment
Development Authority (CRDA) to be spent on eligible projects in Atlantic City. A central question is whether the
proceeds of casino investments made pursuant to the 1984 legislation and the proceeds of the 1993 parking fee
legislation constitute “State revenues” that are to be used solely for the benefit of senior citizens and disabled New
Jersey residents pursuant to the 1976 constitutional amendment that authorized the Legislature to establish casino
gambling in Atlantic City.
The litigation that led to this appeal arose from a dispute between defendant, Trump Hotels & Casino
Resorts, Inc. (Trump) and plaintiffs, the State of New Jersey and the CRDA, over actions taken in connection with
the development of a major new casino hotel project in Atlantic City by Mirage Resorts, Inc. (Mirage). The
location of this project is a section of Atlantic City known as the Marina District, which currently is the site of two
casinos, Trump's Castle and Harrah's. To make the proposed casino development possible, the site requires
environmental remediation and the construction of a direct highway link between the Atlantic City Expressway and
the Marina District.
Mirage and various public entities entered agreements by which, among other things, Mirage would
assume full responsibility for remediating any environmental contamination at the site and the State would build the
necessary highway link. Mirage has agreed to offset a substantial portion of the road construction costs by
contributing $55 million in cash for the road project, and additional financing is to come from the South Jersey
Transportation Authority, which is to issue bonds collateralized, in part, by $55 million in CRDA-approved
investment tax credits under the Casino Reinvestment Act (CRA) and revenues from parking fees to be collected
under the 1993 legislation after the new casino hotels open.
In declaratory judgment actions brought in the Superior Court, Law Division by the State and Trump,
Trump challenged the constitutionality of the Mirage agreements, contending that the use by the State of the sales
tax revenues from casino hotels to reimburse Mirage and of revenue from casino parking fees and casino investment
alternative tax obligations to repay and collateralize bonds to fund the highway construction is an improper use of
funds that are constitutionally intended to benefit senior and disabled New Jersey citizens.
Trump's constitutional challenges were rejected by the Law Division and the judgment of the Law
Division was affirmed by the Appellate Division. Trump appealed to the Supreme Court as of right pursuant to R.
2:2-1(a).
HELD: The amendments to the Casino Control Act to permit casino licensees to take certain investments intended
to revitalize Atlantic City as a credit against an additional tax on gross gaming revenues and to require licensees to
pay parking fees for the use of the Casino Reinvestment Authority do not violate Article IV, § 7, ¶ 2 of the New
Jersey Constitution, which requires State revenues derived from the operation of gambling establishments to be used
solely for the benefit of New Jersey's senior and disabled citizens.
1. The legislative history of the Casino Amendment shows clearly that a fundamental objective of the sponsors of
the Amendment and the Act was the rehabilitation of Atlantic City as a tourist and resort center. The constitutional
dedication of the proceeds of the 8 percent tax on the gross gaming revenues of casinos for the benefit of senior and
disabled citizens was a crucial portion of the Amendment and was the primary inducement used to solicit voter
approval of the Amendment. Also, it seems clear from the legislative history that the Legislature as a whole
understood that this dedication of 8 percent of gaming revenues was intended to coexist with a legislative
mechanism designed to compel investment in land and real property improvements in Atlantic City or elsewhere in
the State by imposing an additional 2.5 percent tax on the gross revenues of casinos that failed to make such
investments. Further, it was understood that the proceeds of other taxes paid by the casinos ( such as corporate, sales
and property) were not to be considered “State revenues” dedicated to senior and disabled citizens. (pp. 8-31)
2. The “investment” options available to casinos under the 1984 amendment to the Act, which entitle the casino
investor to a credit against the additional 2.5 percent tax on gross revenues, include the following: the purchase of
CRDA bonds; making investments in projects approved by the CRDA for investment; and making donations of
money or realty to a project, facility or program deemed eligible by the CRDA. ( pp. 31-34 )
3.The literal language of the Amendment suggests a broader meaning of “State revenues” than can be supported by
the legislative history of the Amendment and the Act, for read literally, the Amendment would require the
dedication of the proceeds of corporate, property, and sales taxes to disabled and senior citizens as State revenues
and Trump concedes such proceeds are excluded. ( pp. 34-40 )
4. Based on the structure of the 1984 investment alternative amendment and its history, it is apparent that the
Legislature did not intend the amendment to generate an increase in funds dedicated to seniors and the disabled; the
Legislature's primary purpose was to stimulate casino investments in Atlantic City and, later, elsewhere in the State.
This amendment is not an impermissible grant of a tax credit against a constitutionally dedicated tax. ( pp. 40-46)
5. The character of the proceeds of investments made by casinos pursuant to the 1984 amendment is such that those
proceeds cannot be considered “State revenues” under the Casino Amendment. ( pp. 47- 55 )
6. Although the parking fees paid by casinos to the CRDA pursuant to the 1993 legislation are revenue to the State,
the fees are not revenue derived from the “operation of gambling establishments,” for even non-gamblers may use
casino parking, so use of those funds by the CRDA is not improper. ( pp. 55-56 )
The judgment of the Appellate Division is AFFIRMED.
JUSTICE O'HERN, concurring, emphasizes that New Jersey's senior and disabled citizens have received and will
continue to receive their promised share of gross gaming revenues.
JUSTICES HANDLER and POLLOCK, dissenting, are of the view that by its express terms, the sole purpose of
the Casino Amendment was to apply casino revenues for the benefit of senior citizens and the disabled. If the
Legislature wishes to divert currently dedicated revenues to other purposes such as the revitalization of Atlantic
City, it should do so by way of referendum or perhaps by allowing a deduction from “gross revenues,” as defined by
the Act, for State capital improvement investments.
CHIEF JUSTICE PORITZ and JUSTICES GARIBALDI and COLEMAN join in JUSTICE
STEIN's opinion. JUSTICE O'HERN wrote a separate concurring opinion. JUSTICES HANDLER and
POLLOCK wrote a joint dissenting opinion.
SUPREME COURT OF NEW JERSEY
A-
225 September Term 1997
THE STATE OF NEW JERSEY, and THE
CASINO REINVESTMENT DEVELOPMENT
AUTHORITY,
Plaintiffs-Respondents,
v.
TRUMP HOTELS & CASINO RESORTS,
INC.,
Defendant-Appellant.
Argued January 21, 1999 -- Decided August 2, 1999
On appeal from the Superior Court, Appellate
Division, whose opinion is reported at 314
N.J. Super. 536 (1998).
John J. Barry argued the cause for appellant
(Tompkins, McGuire, Wachenfeld & Barry,
attorneys; Mr. Barry, Herbert J. Stern, Adam
N. Saravay, Thomas F. Doherty and Tal S.
Benschar, on the briefs).
Michael R. Cole argued the cause for
respondent Casino Reinvestment Development
Authority (DeCotiis, Fitzpatrick & Gluck and
Connell Foley & Geiser, attorneys; Mr. Cole
and Theodore W. Geiser, of counsel; Mr. Cole,
Mr. Geiser and William Harla, on joint brief
with Jeffrey J. Miller, Assistant Attorney
General).
Jeffrey J. Miller, Assistant Attorney
General, for respondent The State of New
Jersey (Peter Verniero, Attorney General of
New Jersey, attorney).
Jan Alan Brody submitted a brief on behalf of
amici curiae, United Senior Alliance, Senior
Truth Squad, New Jersey Council of Senior
Citizens, Independence Park Senior Citizens
Friday Club and Michael Agnello (Carella,
Byrne, Bain, Gilfillan, Cecchi, Stewart &
Olstein, attorneys; Mr. Brody and Kenneth L.
Winters, on the brief).
The opinion of the Court was delivered by
STEIN, J.
The primary issue posed by this appeal concerns the
constitutionality of the investment alternative tax provision
enacted as part of the 1984 amendments to the Casino Control Act
(Act), L. 1984, c. 218, §3, and codified at N.J.S.A. 5:12-144.1.
A related issue involves the constitutionality of 1993 amendments
to the Act, L. 1993, c. 159, that established a minimum charge of
$2.00 per day for motor vehicles parked on property owned or
leased by a licensed casino hotel, N.J.S.A. 5:12-173.2, and
imposed a fee of $1.50 per day for the use of such parking spaces
payable by the casino hotel for the use of the Casino
Reinvestment Development Authority (CRDA) to be expended on
eligible projects in the corridor region of Atlantic City. See
N.J.S.A. 5:12-173.3 and .4. We sustain the constitutionality of
the challenged statutory provisions.
A brief overview of the constitutional issue may be helpful
to an understanding of the discussion to follow.
The challenged statutory provisions are alleged to violate
the 1976 casino gambling constitutional amendment, N.J. Const.
art. IV, § 7, ¶ 2 (Casino Amendment or Amendment). That
amendment was approved by the voters in November 1976 and
permitted the Legislature to authorize the operation of gambling
casinos in Atlantic City:
It shall be lawful for the Legislature to
authorize by law the establishment and
operation, under regulation and control by
the State, of gambling houses or casinos
within the boundaries, as heretofore
established, of the city of Atlantic City,
county of Atlantic, and to license and tax
such operations and equipment used in
connection therewith. Any law authorizing
the establishment and operation of such
gambling establishments shall provide for the
State revenues derived therefrom to be
applied solely for the purpose of providing
funding for reductions in property taxes,
rental, telephone, gas, electric, and
municipal utilities charges of, eligible
senior citizens and disabled residents of the
State, and for additional or expanded health
services or benefits or transportation
services or benefits to eligible senior
citizens and disabled residents, in
accordance with such formulae as the
Legislature shall by law provide. The type
and number of such casinos or gambling houses
and of the gambling games which may be
conducted in any such establishment shall be
determined by or pursuant to the terms of the
law authorizing the establishment and
operation thereof.
[N.J. Const. art IV, § 7, ¶ 2(D)
(emphasis added).]
Pursuant to the Casino Amendment, the Legislature in 1977
passed the Casino Control Act, L. 1977, c. 110. Consistent with
the amendment, the Act imposed an annual eight percent tax on
every casino's gross revenues, N.J.S.A. 5:12-144, but uniquely
defined gross revenue in terms of the "take" from gaming
operations, i.e., the "total of all sums . . . actually received
by a casino licensee from gaming operations, less only the total
of all sums paid out as winnings to patrons and a deduction for
uncollectible gaming receivables . . . ." N.J.S.A. 5:12-24.
Casino operating expenses were excluded from consideration in the
definition of gross revenue. Consistent with the Casino
Amendment, the proceeds of that tax were to be deposited in a
separate account known as the Casino Revenue Fund and used
exclusively for programs benefitting eligible senior citizens and
disabled residents. N.J.S.A. 5:12-145. The 1977 legislation
also required casino licensees to make capital investments in
Atlantic City and elsewhere in the State, commencing five years
after the first calendar year of operation in which a casino's
annual gross revenue as above defined exceeded its cumulative
investments in the State during that year. N.J.S.A. 5:12-144(b).
The required annual investments in land and improvements, either
promoting the tourist industry or in projects approved by the
Casino Control Commission (Commission), were required to be in
amounts not less than two percent of annual gross revenue.
N.J.S.A. 5:12-144(b) to (d). Failure to make the required
investments would subject the licensee to an annual investment
alternative tax equal to two percent of gross revenue and payable
to the Casino Revenue Fund. N.J.S.A. 5:12-144(e).
As a result of the five-year deferral of casino licensees'
investment obligations under the 1977 legislation, little or no
such investments by casino licensees were made during the seven
years after the Act took effect. In 1984, L. 1984, c. 218, the
Legislature revised the prospective investment obligations of
casinos and also established the Casino Reinvestment Development
Authority, N.J.S.A. 5:12-153, endowing the CRDA with broad powers
to encourage casino licensees to make economically and socially
desirable investments in Atlantic City and throughout the State.
N.J.S.A. 5:12-160. To facilitate the CRDA's discharge of its
statutory responsibilities, the Legislature provided casinos with
the option of either paying an additional annual 2.5 percent
investment alternative tax on gross revenues as defined by
N.J.S.A. 5:12-24, or of investing annually 1.25 percent of such
gross revenues in CRDA bonds or in investment projects approved
by the CRDA. N.J.S.A. 5:12-144.1. We will describe in more
detail the precise investment alternatives made available by the
1984 legislation later in this opinion. Infra at ___-___ (slip
op. at 31-34). The CRDA's 1998 Annual Report indicates that
since the 1984 amendments to the Act the aggregate amount of
investments made by casino licensees in Atlantic City and
throughout the State as of December 31, 1998, was approximately
$550 million dollars. By way of comparison, from the inception
of casino gambling until December 31, 1998, the amount of State
revenues received and dedicated to eligible senior and disabled
citizens was approximately $3.5 billion dollars.
In addition, the Legislature amended the Act in 1993, L.
1993, c. 159, to generate funding for road improvements in the
Atlantic City "corridor region" (the road network connecting the
Atlantic City Expressway with the Boardwalk). N.J.S.A. 5:12
173.1 to .8. As noted, the Legislature established a minimum
charge of $2.00 per day for casino parking spaces and required
casino licensees to pay $1.50 per day for each used parking space
to the CRDA. N.J.S.A. 5:12-173.2 to .4. Proceeds from the
parking fees are to be used by the CRDA for projects "related to
improving the highways, roads, infrastructure, traffic regulation
and public safety" in the corridor area of Atlantic City.
N.J.S.A. 5:12-173.4
In this litigation, as in the prior litigation instituted by
Trump Hotels & Casino Resorts, Inc. (Trump) in 1997 in the United
States District Court, Trump contends that the proceeds of
"investments" authorized by the 1984 amendments to the Act as
credits against the 2.5 percent investment alternative tax
constitute "State revenues" within the meaning of that term as
used in the 1976 Casino Amendment, and that accordingly such
proceeds unconstitutionally have been diverted away from the
eligible senior citizens and disabled residents that were
intended by the Casino Amendment to be the sole beneficiaries of
such "State revenues." Trump advances the same contention about
the proceeds of the parking fees authorized by the 1993
legislation, contending that those proceeds also constitute
"State revenues" that have been diverted from senior and disabled
citizens in violation of the 1976 Casino Amendment. The federal
litigation has since been dismissed. While it was pending, CRDA
and the State instituted this suit seeking a declaratory judgment
that the proceeds of casino investments made pursuant to the 1984
legislation and the proceeds of the 1993 parking fee legislation
do not constitute "State revenues" within the meaning of the
Casino Amendment. Trump seeks a declaratory judgment that the
use of such proceeds in accordance with the 1984 and 1993
amendments to the Act violates the Casino Amendment.
Although the events that apparently prompted Trump's
institution of the federal litigation are irrelevant to our
resolution of the constitutional issue, in the interest of
completeness we include the Law Division's explanation of the
events leading up to this litigation:
The litigation arises in the context of
a dispute between Trump and plaintiffs over
actions taken in connection with the
development of a major new casino hotel
project in Atlantic City by Mirage Resorts
Incorporated ("Mirage"). At present, two
casinos -- Trump's Castle and Harrah's -
operate in the northern, bayside section of
Atlantic City, known as the Marina District.
Immediately to the west of Trump's Castle
sits a 178-acre parcel of land ("H-Tract"),
most of which is owned by Atlantic City. That
parcel, part of which was formerly a solid
waste landfill, offers a prime location for
multi-casino development. In order to make
the H-Tract suitable for multi-casino
development, however, at least two
significant problems must be addressed.
First, the H-Tract, as a former municipal
solid waste landfill, is in need of
environmental remediation. Second, the
current city streets linking the Marina
District to the Atlantic City Expressway are
inadequate to handle the increase in traffic
that new development would bring. A direct
highway link between the Expressway and the
Marina District would be required.
On May 3, 1996, following receipt of
competitive proposals for development of the
H-Tract, Atlantic City entered into an
agreement ("the Development Agreement") with
Mirage, a Trump competitor, in which Mirage
agreed to develop a multi-casino complex on
the H-Tract. As part of that contract,
Mirage agreed to assume full responsibility
for remediating any environmental
contamination at the site. Upon completion
of the remediation and the opening of
business on the site, part of Mirage's
remediation costs may be reimbursable under
the Remediation Act.
In addition, pursuant to the Development
Agreement, Mirage's obligation to take title
to and develop the H-Tract is contingent on
the State agreeing to construct an adequate
highway connecting the Marina District to the
Atlantic City Expressway. To that end, the
State signed a contract with Mirage on
January 10, 1997, in which the parties agreed
to construct "the Westside connector," a 2.2
mile highway linking the Marina District to
the Expressway. Although it would appear that
all businesses in the Marina District and the
neighboring City of Brigantine will benefit
from the construction of the Westside
connector, Mirage has agreed to offset a
significant part of the costs of constructing
this public road through a contribution of
$55 million in cash for the road project.
Additional financing will come from the South
Jersey Transportation Authority ("SJTA")
which will issue bonds collateralized, in
part, by $55 million in CRDA approved
investment tax credits under the Casino
Reinvestment Act and revenues from parking
fees to be collected under the Parking Fee
Act once the new casino hotels are operating.
The plan was challenged by Trump through
a complaint filed in the United States
District Court. In that action Trump
asserted:
Defendants have agreed and resolved
to violate Art. IV, § 7, ¶ 2 of the
New Jersey Constitution -- which
strictly limits the use of revenues
derived from the establishment and
operation of casinos solely to the
reduction of certain charges, and
increase in certain benefits, to
senior and disabled citizens of New
Jersey . . . .
a. By using sales tax revenues
from casino hotels to be built
on the H-Tract to reimburse
Mirage, pursuant to the
Remediation Act, for up to 75
percent of the costs of its
environmental cleanup of the
H-Tract;
b. By using State revenues
from casino parking fees and
from casino investment
alternative tax obligations to
repay and collateralize bonds
issued by SJTA to fund the
design and construction of the
Westside connector.
[State v. Trump Hotels & Casino,
314 N.J. Super. 651, 655-56 (Law
Div. 1997).]
The Law Division rejected the constitutional challenges
asserted by Trump. Id. at 678-79. The Appellate Division
affirmed,
314 N.J. Super. 536 (1998), substantially for the
reasons expressed by Judge Williams in the Law Division. Id. at
539. Trump appeals to this Court as of right. R. 2:2-1(a).
To the extent that the legislative history of the Casino Amendment may bear on the resolution of the issues before us, we shall take advantage of Judge Williams's extensive description of portions of that history in his opinion for the Law Division:
That analysis must begin with a review of the legislative history of the amendment. On January 19, 1976 Assembly Concurrent Resolution No. 126 was introduced by Assemblymen Perskie and Kupperman from Atlantic County. The measure proposed amending the Constitution of the State [of] New Jersey to allow for casino gambling in Atlantic City. The casino amendment proposal represented an attempt to deal with the serious deterioration of Atlantic City. At one point, Atlantic City's access[i]bility and central location in the heavily populated metropolitan corridor combined to make the city one of the major convention centers and seaside resorts in the United States. However, the city failed to maintain this prominence. By 1970, the city showed signs of serious decline. The population had decreased significantly, the unemployment rate was high, housing required replacement or rehabilitation, and the number of hotel rooms had substantially decreased. See Barbara P. Lampen, The Role of Legalized Gaming in New Jersey as a Stimulus for Tourism and Urban Redevelopment: A Regulator's Viewpoint, 6 Seton Hall Legis. J. 55 (1982).
The public hearing on ACR-126 by the Assembly State Government and Federal and Interstate Relations Committee elicited extensive testimony on the conditions in Atlantic City and the reasons for seeking constitutional authorization of casino gambling. A sampling of this testimony is set forth below.
* [R]ecent employment figures indicate that the unemployment rolls now claim . . . 37 percent of a once proud host town. Since 1970, we have experienced a loss of more than 15 major hotels, motels and restaurants which employed in excess of 3,500 employees. In a four-year period mercantile licenses have declined from 3,568 to 2,986 -- a barometric indicator of what is happening to our business community -- or a loss of 582 mercantile licenses and another additional loss in employment approximating 4,100 people . . . . Welfare [rolls] have swelled to an all-time high and the people of this state are paying for that. Due to business failures and an inability to pay, our uncollected taxes in Atlantic City alone are at a high of $6,846,922. As a matter of interest, we are currently budgeting $4 million for uncollected taxes in 1976. In 1975 we were only able to collect 82 percent of our total taxes . . . . Coupled with this fact is an increase in our tax rate of 57 percent in four years due to a decline in ratables . . . . Pure and simple, we are on an expressway to disaster and we will become a ward of the state. It is well known that we are no longer able to accommodate many of the larger national conventions, our very lifeblood. We are trying to support 50,000 people on a ten week economy and this . . . is impossible. We no longer attract the much needed investment to rejuvenate our tired city. We have to expand to a 52 week economy.
[Thomas Coggins, President of the Greater Mainland Chamber of Commerce. Public Hearing before Assembly State Government and Federal and Interstate Relations Committee on ACR-126, April 14, 1976, at 16A.]
* As one city decays, such as what is happening in Atlantic City, it spreads like cancer into surrounding areas and the reverse is true of a healthy city. We revitalize Atlantic City; we help the entire state. We have lost over 400 properties in Atlantic City, forcing the citizenry to pay a higher tax rate. Casino gambling could help replace those empty lots with good tax-paying property. Atlantic City is . . . desperately in need of boosting our tourist industry.
[Pierre Hollingsworth, Commissioner, City of Atlantic City. Id. at 35.]
* You will hear city officials here who will explain to you that we have an 80 percent collection rate on property taxes -- which property tax is approaching a $9 rate. You will hear that we have some 20-25 percent of the land in Atlantic City no longer on the tax rolls. You will hear from . . . officials of the Housing Authority who have been trying to market a large tract of land that [it] is difficult, if not impossible, to attract the investment capital to build in Atlantic City. You will hear from some of the merchants and some of the working people, the labor people in the Atlantic City community who will say that without this kind of proposal they have no resources with which to attract the kind of investment capital that will give us again the type of full-based tourist economy upon which the people of Atlantic City can build . . . . We have to have [casinos] if we are to continue to survive as a viable economic force, as part of this State, as the linchpin of the second largest industry in this State which is the tourist industry. We cannot do it alone. We ask nothing of the people of the State of New Jersey by way of dollars and cents. We ask only that they authorize this proposal to allow us to pull ourselves up and to invest in our own community and to attract the kind of capital that will enable us to accomplish that.
[Assemblyman Steven Perskie, Prime Sponsor of Assembly Resolution No. 126. Id. at 3.]
* Here is a chance for the State to take one of its cities, which is having a problem . . . and without the expenditure of a dime, without any funds being appropriated from the budget, without any other part of the budget being cut to put funds into Atlantic City, with the passage of this law we can bring an entire area back to where it should be, and not only bring the area back to where it should be, and bring it out of the red and into the black, but we can derive a benefit to the entire State of New Jersey. I think most of the people who will testify here today will talk about the benefit to Atlantic City. I don't think that can be emphasized enough.
[Assemblyman Howard Kupperman, Second Prime Sponsor of ACR-126. Id. at 7.]
* [T]he one that is nationally and internationally recognized is Atlantic City. It is a Mecca, just as, let's say, Las Vegas is . . . . Recall, if you will, it took Las Vegas 35 years to get to the stage they are today. This did not occur overnight, and even should this pass, should Atlantic City get gambling, we do not anticipate an immediate resurgence of Atlantic City. It is going to be an incentive, a keystone, to attract capitalization to a resort, and attempt to rebuild it.
[Senator Joseph McGahn.
Id. at 12.]
* We are talking specifically
about the legalization of casino
gambling in Atlantic City for a
specific purpose, and that specific
purpose is the revitalization of
the tourist industry in Atlantic
City. And that is what we think we
need, and that is what this bill is
geared at.
[Charles Worthington, County
Executive of Atlantic County.
Id. at 17.]
The legislative history, which is
replete with references to the problems
facing Atlantic City, indicates that the
revitalization of Atlantic City was a primary
concern of those supporting the
constitutional amendment. It was envisioned
that this revitalization would come in the
form of a rejuvenated tourist industry,
increased employment, capital investment, and
much needed urban redevelopment. It is
instructive to note that one of the prime
advocates for adoption of the amendment, was
a group calling itself the Committee to
Rebuild Atlantic City. Young v. Byrne,
144 N.J. Super. 10, 15,
364 A.2d 47 (Law Div.
1976).
A second purpose to be achieved by the
amendment was to raise revenue to benefit
senior and disabled citizens. How this
revenue would be raised was addressed by
co-sponsors of the casino amendment during
the public hearing before the Assembly State
Government and Federal and Interstate
Relations Committee on ACR-126. Assemblyman
Kupperman noted, "There will be profits
derived from casino gambling, not only for
Atlantic City, but for the State. The State
will have a take from the very top, and this
money very specifically is set forth."
Public Hearing before Assembly State
Government and Federal and Interstate
Relations Committee on ACR-126, April 14,
1976, at 6.
Senator McGahn, co-sponsor of the
identical Senate version of ACR-126, in
response to a question regarding anticipated
casino revenues, made reference to a
feasibility study conducted by Depodwin
Associates, Inc. Id. at 9. That study,
entitled Feasibility of Casino Gaming for New
Jersey, which was available to members of the
committee, was conducted, among other things,
"to assess the merits of adding casino gaming
as a source of revenue for New Jersey . . .
." Id. at 2. Significantly, the Depodwin
study, which evaluated various forms of
taxation used in several major countries that
had legalized gambling casinos, concluded,
"Our proposed choice is a straight tax on the
winnings of the casino." Id. at 19. This
tax was chosen because it provided a simple,
inexpensive means of collection. The study
found, "The most popular form of taxation is
a tax on the gross revenues from casino
gaming obtained from operators, i.e., the
winnings of the house. Use of this base
avoids detailed calculations of deductions
and subsequent audits." Id. at 19. The
conclusions of the study were later reflected
in the testimony of Assemblyman Steven
Perskie at a public hearing before the
Assembly State Government and Federal and
Interstate Relations Committee on the Casino
Control Act. The Assemblyman proposed a
straight tax on gross revenues from gambling
and commented, "Before arriving at the figure
of 8 percent, we looked at some of the tax
structures that exist in other jurisdictions
and we tried to make a simplistic tax
structure that would be a little easier to
administer . . . ." Public Hearing before
Assembly State Government and Federal and
Interstate Relations Committee on A-2366,
December 15, 1976, at 8.
A similar focus on the State deriving
its dedicated revenue from gambling
activities was expressed by Charles W. Davis,
Executive Vice President of the New Jersey
Hotel-Motel Association, which commissioned
the Depodwin study. He stated, "ACR-126 must
be looked upon with favor, since the revenue
derived from legalized gambling will be
dedicated to our senior citizens." Public
Hearing before Assembly State Government and
Federal and Interstate Relations Committee on
ACR-126, April 14, 1976, at 35A (emphasis
added). While testimony concerning revenues
to be devoted to senior and disabled citizens
was less extensive than that related to
Atlantic City's redevelopment, nevertheless
every witness who dealt with the subject
focused on revenues derived from gambling
itself as the source for state taxation.
That such an understanding was commonplace
prior to the vote on the referendum is
further evidenced in Young v. Byrne,
144 N.J.
Super. 10,
364 A.2d 47 (Law Div. 1976). The
court, in dealing with declaratory judgment
actions brought to determine the
constitutionality of ACR-126, observed,
"ACR-126 specifically earmarks the gambling
revenues to a special fund for senior
citizens and disabled residents of New
Jersey." Id. at 19,
364 A.2d 47. All of the
pre-referendum comments focus solely on
revenues derived from gambling activities as
the source of dedicated funds for senior and
disabled citizens.
Legislative action immediately after
passage of the referendum is consistent in
reaffirming and reinforcing the
pre-referendum understanding. Following the
passage of the casino amendment in November
1976, the same Legislature moved promptly to
consider the enabling legislation. On
November 22, 1976, Assembly Bill No. 2366,
known as the Casino Control Act, was
introduced by Assemblymen Perskie and
Kupperman. Six weeks following the passage
of the casino amendment, on December 15,
1976, the Assembly State Government and
Federal and Interstate Relations Committee
held a public hearing to consider testimony
on the bill. Further evidence of the intent
and purpose of the casino gambling amendment
can be gleaned from both the testimony at
hearings as well as from the text of the
legislation itself.
Perhaps nowhere is the legislative
intent of the casino amendment, with respect
to the redevelopment of Atlantic City, more
clearly articulated than in the actual text
of the Casino Control Act of 1977. [N.J.S.A.]
5:12-1. The Legislature declared that
legalized casino gambling was approved by the
citizens of New Jersey as a unique tool of
urban redevelopment for Atlantic City.
N.J.S.A. 5:12-1(b)(4). The Legislature
further noted:
[T]he introduction of a limited number
of casino rooms in major hotel
convention complexes, permitted as an
additional element in the hospitality
industry of Atlantic City, will
facilitate the redevelopment of existing
blighted areas and the refurbishing and
expansion of existing hotel, convention,
tourist, and entertainment facilities;
encourage the replacement of lost
hospitality-oriented facilities;
provide for judicious use of open space
for leisure time and recreational
activities; and attract new investment
capital to New Jersey in general and to
Atlantic City in particular.
[Id. (emphasis added).]
That the Legislature viewed casino gambling
as a means toward redevelopment rather than
simply as a revenue raising measure or as an
end in itself was clearly evidenced in the
Casino Control Act which provided:
Restricting the issuance of casino
licenses to major hotel and
convention facilities is designed
to assure that the existing nature
and tone of the hospitality
industry in New Jersey and in
Atlantic City is preserved, and
that the casino rooms licensed
pursuant to the provisions of this
act are always offered and
maintained as an integral element
of such hospitality facilities,
rather than as the industry unto
themselves that they have become in
other jurisdictions.
[N.J.S.A. 5:12-1(b)(5).]
This is consistent with the testimony of
Senator McGahn in the public hearing on the
casino amendment. He commented, "Now,
nationwide today there are any number of
states that are exploring gambling by the
State as a means of increasing revenue. We
do not consider this, to be perfectly honest
with you, as primarily a revenue producing
measure." Public Hearing before Assembly
State Government and Federal and Interstate
Relations Committee on ACR-126, April 14,
1976, at 29A.
The redevelopment theme was manifest in
the statutory scheme adopted by the
Legislature. One of the early redevelopment
strategies employed by the Legislature
focused on the development and upgrading of
the inventory of hotel rooms in Atlantic
City. The Legislature mandated that no
casino hotel could be licensed unless it
contained at least 500 sleeping units meeting
certain minimum statutory standards.
N.J.S.A. 5:12-27, -83. Another strategy
adopted by the Legislature required a
licensee to make capital investments in
approved projects or face the prospect of an
additional tax. N.J.S.A. 5:12-144(b) [to]
(e). Specifically, a licensee, whose gross
revenues exceeded the cumulative investments
in the State during a particular year, was
obligated to make additional investments of
at least 2 percent of their gross revenues.
N.J.S.A. 5:12-144(b). Failure to make such
investment within five years would subject
the licensee to an investment alternative tax
in an amount equivalent to 2 percent of the
gross revenue. The Legislature contemplated
that these investments would be used for the
following:
[T]he improvement, furtherance, and
promotion of the tourist industry
in this State through the planning,
acquisition, construction,
improvement, maintenance and
operation of recreational,
entertainment, and other facilities
for the public, including, without
limitation a performing arts
center, the beaches and shorefront
of this State, and transportation
facilities providing or enhancing
service in resort areas of this
State, or . . . the improvement,
furtherance, and promotion of the
health and well-being of the people
of the State through the planning,
acquisition, construction,
improvement, maintenance, and
operation of a facility, project or
program approved by the commission.
[N.J.S.A. 5:12-144(d).]
The proposed Casino Control Act
explicitly addressed the goal of providing
economic assistance to senior and disabled
citizens. The Act provided for an 8 percent
tax on gross revenue which was to be
dedicated to eligible senior citizens and
disabled residents. N.J.S.A. 5:12-144(a) and
5:12-145. The 8 percent tax was to be
derived solely from "gaming operations."
N.J.S.A. 5:12-24. It was clear, however,
that casino hotels would be responsible to
pay other taxes levied against businesses in
New Jersey as well. This conclusion finds
support in the testimony of the measure's
supporters and critics alike.
Assemblyman Perskie, in discussing why
an 8 percent tax was preferable over a 12
percent tax, noted:
As I understand it, the Governor has
commissioned some individuals in the
Department of Treasury to focus on this
whole [tax] structure. Before arriving
at the figure of 8 percent, we looked at
some of the tax structures that exist in
other jurisdictions and we tried to make
a simplistic tax structure that would be
a little easier to administer, for
example, than Nevada that has a county,
local and a state tax, a set of table
fees and what not. We also tried to
provide a sufficiently sizable figure
that would generate substantial revenue
for the constitutionally-dedicated
purpose, yet also keep in mind the
economic realities of the casino
industry . . . . So the direct answer
to your question is I think that the 8
percent is a realistic figure. If it
can be shown that 12 is a realistic
figure, considering all of the criteria
I have just articulated, I could support
it. But I rather suspect, upon
investigation, you will find,
structuring the tax, as it is, on gross
revenues as opposed to net revenues, and
providing in any event that the casino
operators are going to be paying the
corporate business tax in New Jersey or
the personal income tax, whichever is
applicable, and the property taxes and
all of the other taxes that we have,
that this is a realistic figure.
[Public Hearing before
Assembly State Government and
Federal and Interstate
Relations Committee on
Assembly Bill No. 2366,
December 15, 1976, at 8[]
(emphasis added)[.]]
Even the opponents of gambling did not
question that the Legislature could impose
taxes or collect fees which would not be
dedicated to seniors and the disabled. Dr.
Samuel Jeanes, a leading opponent of
gambling, commented:
Now, if the entire 8 percent
promised to our disabled and senior
citizens is not paid to them, I
believe our lawmakers will have
broken faith with these citizens
who have served our State so well.
This was a promise and that promise
ought to be kept. These gambling
casinos are privately owned and
privately operated, and there is no
reason why the State should pay one
penny of the taxpayer's money to
assist their operation. So we
would recommend that the 8 percent
tax on gross revenues of the
casinos be allocated entirely for
senior and disabled citizens as was
promised and that an additional
tax, not less than that now being
paid by the racetracks of New
Jersey, be levied on the gross
revenue of the casinos to pay the
cost of the administration of this
act.
[Public Hearing before
Assembly State Government and
Federal and Interstate
Relations Committee on
Assembly Bill No. 2366,
December 15, 1976 at 73[]
(emphasis added).]
It appears that in 1976 both supporters
and opponents of gambling alike understood
that the constitutionally dedicated funds
would come only from this 8 percent tax on
gross gambling revenues and that additional
taxes or charges on other aspects of casino
hotel operations were not required to be
dedicated to support for seniors and the
disabled.
In addition to the 8 percent tax on
gross revenues, the Casino Control Act
imposed a fee for the issuance or renewal of
a casino license, N.J.S.A. 5:12-139, and a
licensing fee on slot machines, N.J.S.A.
5:12-140. The revenues from these fees were
to be deposited in the Casino Control Fund
for the operating expenses of the Casino
Control Commission and the Division of Gaming
Enforcement. N.J.S.A. 5:12-143.
Furthermore, the Act required payment of the
corporate business tax, N.J.S.A. 5:12-148(b),
and casino licensees were also required to
pay unemployment compensation taxes to the
State. N.J.S.A. 43:21-7.
The common understanding at that time
was later reflected in a 1982 article, Casino
Gambling: The Elements of Effective Control,
6 Seton Hall Legis[.] J. 55 (1982), by R.
Benjamin Cohen, former General Counsel and
Director of the Legal Division of the Casino
Control Commission. In discussing both the
casino amendment, and the Casino Control Act,
Cohen noted:
Pursuant to the authority of [the casino
gaming amendment] the Legislature
enacted the Casino Control Act which was
signed into law on June 2, 1977, by
Governor Brendan T. Byrne. This law was
the culmination of legislative
initiative, months of study by a Staff
Policy Group on Casino Gambling
designated by the Attorney General and
the State Treasurer at the Governor's
request, a report by the Commissioner of
Investigation, and a good deal of debate
and discussion in the state Legislature
. . . .
In addition to the revenues
generated by increased corporate
business taxes, property taxes,
state and federal income taxes,
sales taxes and luxury taxes, the
Casino Control Act imposes an eight
percent tax on the gross revenues
of the casinos. This gross
revenues tax is deposited into a
special account known as the Casino
Revenue Fund. Moneys in this fund
are appropriated exclusively for
reductions in property taxes,
rentals, and utilities charges of
eligible senior citizens and
disabled residents of New Jersey.
The cost of the governmental
regulation of the casino gaming
industry is borne by the industry
itself in the form of license fees
rather than by tax dollars.
[Id. at 3-5 (emphasis added).]
[Trump Hotels, supra, 314 N.J.
Super. at 663-73.]
The legislative history of the Casino Amendment described in
Judge Williams's opinion resolves some but not all of the
questions that are collateral to our resolution of this appeal.
That history demonstrates clearly that the rehabilitation of
Atlantic City as a tourist and resort center was a fundamental if
not the primary objective of the sponsors of the Casino Amendment
and the Casino Control Act, even though the constitutional
dedication of the proceeds of the tax on casino wagering for the
benefit of senior and disabled citizens was a crucial element of
the Amendment and the primary inducement used to solicit voter
approval of the Amendment. Less clear is whether the sponsors
intended that the rebirth of Atlantic City would occur simply as
an indirect byproduct of the authorization of casino gambling, as
Trump contends, or whether the Legislature intended and the
public understood that legislatively mandated investments by the
casinos were an integral part of the plan to revitalize Atlantic
City. Fairly read, the legislative history of the Casino
Amendment and the Casino Control Act suggests that the
contemporary understanding, at the time the Casino Amendment was
submitted to the voters in November 1976, was that legislatively
mandated investments in Atlantic City were part and parcel of the
overall legislative design. As noted, when first enacted in 1977
the Casino Control Act required all casinos whose annual gross
revenue exceeded their cumulative investments in the State to
make annual investments in land and real property improvements in
Atlantic City and other parts of the State, commencing after five
years had elapsed, equal to two percent of gross revenues.
Failure to make such investments would expose the casinos to
liability for an additional two percent tax on gross revenue,
payable to the Casino Revenue Fund for the benefit of senior and
disabled citizens. N.J.S.A. 5:12-144(c).
Direct evidence that the legislatively mandated investment
mechanism was a matter of public record before the Casino
Amendment was approved by voters is revealed by the transcript of
the public hearing on the Casino Control Act. Assemblyman Steven
Perskie, the Act's sponsor and a strong proponent of the Casino
Amendment, testified in part as follows:
I think what should be in the
legislation is the articulation of the kinds
of commitments that we made in support of
this referendum question to the people of New
Jersey, and for which they voted on November
2nd. It was no accident that Assemblyman
Kupperman, Senator McGahn and I, and the
Committee to Rebuild Atlantic City under the
chairmanship of Mayor Lazarow, quite
deliberately and quite intentionally,
released what is in essence this bill, on
September 30, 1976. . . . There are some
changes and there will be others, but it is
essentially the same bill. That was no
accident. We did that quite deliberately in
order to make some specific kinds of
commitments to the people of New Jersey.
[Public Hearing before Assembly
State Government and Federal and
Interstate Relations Committee on
Assembly Bill No. 2366, December
15, 1976, at 9-10.]
Accordingly, there appears to be incontestable evidence that
at least the sponsors of the Act and the Casino Amendment, and in
all likelihood the Legislature as a whole, understood
contemporaneously with the approval of the Amendment, or very
shortly thereafter, that the dedication of eight percent of
gaming revenues to senior and disabled citizens was intended to
coexist with a legislative mechanism designed to compel
investment in Atlantic City or elsewhere by imposing on casinos
that failed to make such investments an additional two percent
tax on gaming revenues. Unanswered by the legislative history,
but to be resolved by this Court, is the constitutionality of the
mechanism included in the 1984 amendment to the Act that induces
casinos to make approved annual investments equal to 1.25 percent
of gross revenues by imposing as an alternative to such
investments an additional 2.5 percent tax on gaming revenues
payable to the Casino Revenue Fund.
The Casino Control Act's legislative history also suggests
that the legislative understanding of the critical phrase "state
revenues derived therefrom" contained in the Casino Amendment was
that such revenues were only those to be derived from the
proposed eight percent tax on the casino's winnings or "take."
At the public hearing on the Casino Amendment, Assemblyman
Kupperman, a co-sponsor, observed: "There will be profits
derived from casino gambling, not only for Atlantic City, but for
the State. The State will have a take from the very top, and
this money very specifically is set forth." Public Hearing
before Assembly State Government an Federal and Interstate
Relations Committee on ACR-126, April 14, 1976, at 6. At the
same hearing, Senator McGahn, a co-sponsor of the Senate version
of the Amendment, responding to a question about estimated State
revenues from casino gambling, id. at 9, referred to a study
prepared by DePodwin Associates, Inc. entitled Feasibility of
Casino Gaming for New Jersey. That study, conducted to "assess .
. . the merits of adding casino gaming as a source of revenue for
New Jersey," id. at 2, apparently recommended a tax imposed
directly on casino winnings: "Our proposed choice is a straight
tax on the winnings of the casino." Id. at 18. The study
stated: "The most popular form of taxation is a tax on the gross
revenues from casino gaming obtained from operators, i.e., the
winnings of the house. Use of this base avoids detailed
calculations of deductions and subsequent audits." Id. at 19.
As noted by Judge Williams, supra at ___-___ (slip op. at
20-21), Assemblyman Perskie, testifying at the public hearing on
the Casino Control Act, elaborated on the decision to incorporate
in the legislation an eight percent, rather than a twelve
percent, tax on casino winnings:
We also tried to provide a sufficiently
sizable figure that would generate
substantial revenue for the
constitutionally-dedicated purpose, yet also
keep in mind the economic realities of the
casino industry.
So the direct answer to your question is
I think that the 8 percent is a realistic
figure. If it can be shown that 12 is a
realistic figure, considering all of the
criteria I have just articulated, I could
support it. But I rather suspect, upon
investigation, you will find, structuring the
tax, as it is, on gross revenues as opposed
to net revenues, and providing in any event
that the casino operators are going to be
paying the corporate business tax in New
Jersey or the personal income tax, whichever
is applicable, and the property taxes and all
of the other taxes that we have, that this is
a realistic figure.
[Public Hearing before Assembly State
Government and Federal and Interstate
Relations Committee on Assembly Bill No.
2366, December 15, 1976, at 8.
The clear implication of the testimony at the public hearings
concerning both the Casino Amendment and the Casino Control Act
is that the sponsors, and in all likelihood the Legislature,
understood that the revenue contemplated for dedication to senior
and disabled citizens would be the proceeds of a tax -- initially
at an eight percent rate -- levied on the gross winnings of
casinos. In addition, the understanding was that the proceeds of
other taxes paid by the casinos -- corporate business taxes,
property taxes, sales taxes -- were not to be considered State
revenue derived from "the establishment and operation of . . .
gaming establishments" for purposes of the Casino Amendment's
dedication of State revenue to eligible senior and disabled
citizens. Informed by the legislative history, a fair reading of
the critical language of the Casino Amendment suggests that its
intended meaning is different from and narrower than the meaning
implied by the literal language of the Amendment.
Before addressing the legal issues presented by this appeal,
we shall describe in greater detail the specific "investment"
options that were made available to casino licensees pursuant to
the 1984 amendment to the Act. We acknowledge that the parties
disagree over whether the specific design of those various
investment options is material to the overriding constitutional
issue. Trump asserts that because the proceeds of those
investments have been extracted from the casinos in the form of a
credit against an additional 2.5 percent tax on gross revenues,
neither the character of the investments nor the use of their
proceeds is relevant: the credit itself renders the investment
proceeds an unconstitutional diversion of the revenues dedicated
to eligible senior and disabled citizens.
The Attorney General and the CRDA contend, however, that the
credit is a lawful mechanism to encourage investments by casino
licensees and that the character of the investments made by the
casinos pursuant to the 1984 amendment demonstrates that their
proceeds do not and could not constitute "State revenues" within
the meaning of the Casino Amendment. They also rely on N.J.S.A.
5:12-144.1(i), which provides in part:
Any purchase by a licensee of bonds
issued by or offered through the Casino
Reinvestment Development Authority pursuant
to sections 14 and 15 of this act and
subsection b. of this section and all
approved eligible investments made by a
licensee pursuant to section 25 of this act
and subsection b. of this section are to be
considered investments and not taxes owed or
grants to the State or any political
subdivision thereof.
[emphasis added.]
Among the investment options for casinos pursuant to the
1984 amendments are the purchase of CRDA bonds. See N.J.S.A.
5:12-144.1(b). The Act requires that such bonds mature in not
less than fifty years and bear interest at a rate not less than
two-thirds of market rate determined on the basis of the "average
rate of the Bond Buyer Weekly 25 Revenue Bond Index for bonds
available for purchase during the last 26 weeks preceding the
date [of issuance.]" N.J.S.A. 5:12-162(d). The CRDA's 1998
Annual Report states that as of December 31, 1998, the total
amount of casino investments in bond issues totaled $61,489,740,
and that such bonds range in maturity from thirty-five to fifty
years and bear interest rates ranging between four and seven
percent.
Casino licensees also may receive a two-for-one credit
against the additional 2.5 percent tax on gross revenues by
making investments either in projects identified as eligible by
the CRDA or by making direct investments in projects approved by
the CRDA on application by individual casino licensees. See
N.J.S.A. 5:12-173 and N.J.A.C. 19:65-2.8. The CRDA's 1998 Annual
Report states that as of December 31, 1998, the total amount of
investments by licensees, including investments in CRDA projects
and direct investments, was $174,040,257.
The Act also permits licensees to obtain two-for-one
investment tax credits by making a "donation of money or realty
to an eligible project, facility or program." N.J.S.A. 5:12-177.
Approval for such authorized donations requires an application to
the CRDA and demonstration that the project to which the donation
is made satisfies the CRDA's approval criteria. See N.J.A.C.
19:65-2.5 and -2.9. The CRDA's 1998 Annual Report states that as
of December 31, 1998, the aggregate amount of approved donations
by licensees totals $141,985,518.
Of the total amount of funds, $547,537,039, paid by casino
licensees to the CRDA pursuant to the investment tax credit
authorized by the 1984 amendments to the Act, $170,021,524 had
not been allocated by licensees as of December 31, 1998 to bonds,
investments or donations.
Before a casino licensee is permitted to purchase CRDA bonds
or to make investments or donations for purposes of the
investment tax credit, the licensee is required to enter into a
contract with the CRDA committing to the future purchase of the
CRDA bonds or to the alternative of approved investments or
donations. Such contracts provide that two-thirds of the
interest earned by the CRDA on funds paid by licensees pursuant
to the investment tax credit provisions of the 1984 amendments
during the period between payment to the CRDA and the investment
of the funds by the licensees shall be repaid to the licensees
and the balance retained by the CRDA.
We begin our analysis of the challenge to the constitutionality of the 1984 amendments to the Casino Control Act with the recognition that Trump must sustain a heavy burden in order to succeed in its assertion of the invalidity of the challenged legislation. Our courts have demonstrated a steadfast adherence to the principle "that every possible presumption favors the validity of an act of the Legislature." New Jersey Sports & Exposition Auth. v. McCrane, 61 N.J. 1, 8 (1972). Accordingly, the exercise of the judicial power to invalidate a legislative act "has always been exercised with extreme self restraint, and with a deep awareness that the challen