State v. TRUMP HOTEL & CASINO RESORTS, INC.

• Decision Date: 02 August 1999
• Citation: 734 A.2d 1160,160 N.J. 505
• Parties: The STATE of New Jersey, and The Casino Reinvestment Development Authority, Plaintiffs-Respondents, v. TRUMP HOTELS & CASINO RESORTS, INC., Defendant-Appellant.
• Court: New Jersey Supreme Court

734 A.2d 1160

160 N.J. 505

The STATE of New Jersey, and The Casino Reinvestment Development Authority, Plaintiffs-Respondents, v. TRUMP HOTELS & CASINO RESORTS, INC., Defendant-Appellant.

Supreme Court of New Jersey.

Argued January 21, 1999.

Decided August 2, 1999.

John J. Barry, Lawrence, for defendant-appellant (Tompkins, McGuire, Wachenfeld & Barry, Newark, attorneys; Mr. Barry, Herbert J. Stern, Roseland, Adam N. Saravay, Thomas F. Doherty and Tal S. Benschar, Newark, on the briefs).

Michael R. Cole, for plaintiff-respondent Casino Reinvestment Development Authority (DeCotiis, Fitzpatrick & Gluck and Connell Foley & Geiser, Roseland, attorneys; Mr. Cole and Theodore W. Geiser, Roseland, 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 plaintiff-respondent The State of New Jersey (Peter Verniero, Attorney General of New Jersey, attorney).

Jan Alan Brody, Roseland, 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, Roseland, 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.

I

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 524-26, 734 A.2d at 1173-74. 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 ...