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
[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
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
The Law Division rejected the constitutional challenges asserted by Trump. Id. at 678-79, 715 A.2d 1052. The Appellate Division affirmed, 314 N.J.Super. 536, 715 A.2d 994 (1998), substantially for the reasons expressed by Judge Williams in the Law Division. Id. at 539, 715 A.2d 1052. 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
[Pierre Hollingsworth, Commissioner, City of Atlantic City. Id. at 35.]
[Assemblyman Howard Kupperman, Second Prime Sponsor of ACR-126. Id. at 7.]
[Senator Joseph McGahn. Id. at 12.]
[Charles Worthington, County Executive of Atlantic County. Id. at 17.]
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
Legislative action immediately after passage of the referendum is consistent in reaffirming and reinforcing the prereferendum 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
[Id. (emphasis added).]
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.
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.
[Id. at 3-5 (emphasis added).]
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
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:
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
As noted by Judge Williams, supra at 518-19, 734 A.2d at 1169-70, 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:
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
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:
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 twofor-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, 292 A.2d 545 (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 challenged enactment represents the considered action of a body composed of popularly elected representatives." Ibid. Consistent with that policy of restraint, we have emphasized that "a legislative act will not be declared void unless its repugnancy to the Constitution is clear beyond a reasonable doubt." Harvey v. Essex County Bd. of Freeholders, 30 N.J. 381, 388, 153 A.2d 10 (1959); Gangemi v. Berry, 25 N.J. 1, 10, 134 A.2d 1 (1957).
The presumption that a statute is constitutional is enhanced when that statute has been in effect and implemented without challenge over an extended period. As this Court observed in In re Loch Arbour, 25 N.J. 258, 264-65, 135 A.2d 663 (1957):
In addition to the strong presumption of validity that attaches to legislative enactments challenged on constitutional grounds, we also are guided by the principle that the constitutional provision in question must be interpreted and applied in a manner "that serves to effectuate fully and fairly its overriding purpose." Dickinson v. Fund for Support of Free Pub. Sch., 95 N.J. 65, 95, 469 A.2d 1 (1983) (Handler, J., dissenting in part). "The polestar of constitutional construction is always the intent and purpose of the particular provision." State v. Apportionment Comm'n, 125 N.J. 375, 382, 593 A.2d 710 (1991).
In ascertaining the intent of a constitutional provision, a court must first look to the precise language used by the drafters. If the language is clear and unambiguous, the words used must be given their plain meaning. Gangemi, supra, 25 N.J. at 10, 134 A.2d 1.
On the other hand, if the language of the constitutional provision is unclear or is susceptible to more than one interpretation, courts may consider sources beyond the instrument itself to ascertain its intent and purpose. As Justice Jacobs observed in Lloyd v. Vermeulen, 22 N.J. 200, 206, 125 A.2d 393 (1956): "[S]ince words are inexact tools at best, resort may freely be had to the pertinent constitutional and legislative history for aid in ascertaining the true sense and meaning of the language used." A statute adopted contemporaneously with the constitutional enactment in dispute may also constitute a valuable resource in determining the intent of the constitutional provision. Atlantic City Racing Ass'n v. Attorney
A. Defendant's Contention That the Casino Amendment's Dedication to Senior Citizens and the Disabled of "State Revenues Derived  From the Establishment and Operation of [Casino] Gambling Establishments" is not Limited to Revenues from a Direct Tax on Gambling
We address the foregoing contention, essentially as framed by defendant Trump, even though its resolution does not resolve the question whether the proceeds of the 1984 investment alternative tax constitute "State revenues."
Read literally, the Casino Amendment dedicates to eligible senior and disabled citizens "the State revenues derived" from the "establishment and operation of ... gambling establishments." Defendant acknowledges that that reading is too broad, conceding that the Amendment "does not dedicate the proceeds of corporate taxes, property taxes, sales taxes, or other generally applicable State revenue-raising measures." Defendant asserts that the constitutional dedication encompasses only revenues specifically related to the operation of casinos as distinguished from generally applicable revenue sources such as corporate and sales taxes. Defendant's interpretation of the Amendment also would exclude fees reasonably related to regulatory costs, but would include revenues from the investment alternative tax program and the casino parking tax.
In our view, defendant's interpretation of the Casino Amendment is pragmatic rather than literal and derives scant support from the language of the Amendment. Read literally, all State revenues derived from the operation of gambling establishments are dedicated to eligible senior and disabled citizens, including corporate and sales taxes and licensing fees. The recognition that that literal reading of the Amendment could not possibly constitute the intended meaning obviously impels defendant to favor a narrower and more practical construction.
We agree that the literal language of the Amendment supports an understanding of the term "State revenues" that is significantly broader than its intended meaning. We are persuaded, however, that the Amendment should not be read literally and that resort to its legislative history and to the history of the Act is appropriate and essential. That history plainly demonstrates that the legislative design, both for the Amendment and the Act, was that the dedicated revenue was to be derived solely from a direct tax on the casino's "take." As noted, supra at 522-24, 724 A.2d at 1172-73, the uncontradicted testimony at the public hearings antecedent to the adoption of the Casino Amendment and the Act demonstrate beyond question a legislative understanding that the "State revenue" to be dedicated to senior and disabled citizens was to be the proceeds of a tax, initially imposed at the rate of eight percent, on the annual gross winnings of casinos and that the proceeds of other taxes, such as corporate, sales and property taxes, were not to be considered as "State revenues." Without question, more precise drafting of the Casino Amendment to convey that purpose would have been preferable, but we entertain no doubt that we accurately have characterized the essential legislative intent.
Equally clear from the legislative history, and made explicit by the language of the Act (the proposed provisions of which had been made public prior to the vote on the Amendment) (supra at 521-22, 734 A.2d at 1172), was that the dedication authorized by the Casino Amendment was intended to coexist with provisions of the Act that were designed to compel investment in Atlantic City and elsewhere in the State by levying on those casinos that failed to make such investments an additional two percent tax on gross winnings from gambling. Accordingly, we reject defendant's contention that the term "State revenues" as used in the Amendment was intended to encompass the proceeds of investments by casinos pursuant to the Act
B. Defendant's Contention That a Tax Credit Against a Dedicated Tax is Unconstitutional
Defendant Trump asserts that even if the proceeds of the investment alternative tax constitute "investments" by the casino licensees, the mechanism used by the Legislature to encourage those investments is unconstitutional because it constitutes the impermissible grant of a tax credit against a constitutionally dedicated tax. In simple terms, defendant contends that any use of a tax credit mechanism against a constitutionally dedicated tax results in an unconstitutional diversion of funds from the dedicated revenue stream.
In support of its argument, defendant relies on a group of cases decided in other states that involved challenges to the expenditure of dedicated funds for non-dedicated purposes. See, e.g., Opinion of the Justices, 665 So.2d 1389, 1391 (Ala.1995) (holding that appropriation to other departments of state government of funds derived from motor vehicle fees, excises or licenses obviously would violate constitutional dedication of those funds to highway purposes); V-1 Oil Co. v. Idaho Petroleum Clean Water Trust Fund, 128 Idaho 890, 920 P.2d 909, 912-13 (holding unconstitutional one-cent-per-gallon transfer fee on petroleum products committed by statute to Petroleum Clean Water Trust Fund because statute violated constitutional dedication of gasoline taxes to maintenance of public highways), cert. denied, 519 U.S. 1009, 117 S.Ct. 514, 136 L.Ed.2d 403 (1996); In re Opinion of the Justices, 324 Mass. 746, 85 N.E.2d 761, 764 (1949) (holding that fees paid in connection with registration, operation, and use of motor vehicles and constitutionally dedicated to State Highway Fund cannot be diverted to maintenance of subways, tunnels, and other structures owned and operated by Metropolitan Transit Authority); Cory v. King, 209 Minn. 431, 296 N.W. 506, 507-08 (1941) (holding unconstitutional statute that attempted to impose five percent charge on registration and gasoline taxes constitutionally dedicated to state highway fund for purpose of funding operations of other departments of state government); Automobile Club of Oregon v. State, 314 Or. 479, 840 P.2d 674, 683 (1992) (holding unconstitutional statutes imposing tax on underground oil storage and fee on motor vehicle emissions and assigning proceeds to specified environmentally constructive purposes because of conflict with constitutional dedication of such revenues for highway purposes); Rogers v. Lane County, 307 Or. 534, 771 P.2d 254, 259 (1989) (holding unconstitutional agreement between County and City of Eugene providing for transfer to city of state funds constitutionally dedicated for highway purposes to be used by city for airport parking lot and covered walkway); In re Northwest Natural Gas Co. v. Frank, 293 Or. 374, 648 P.2d 1284, 1288 (1982) (holding unconstitutional statute authorizing Oregon Department of Energy to fund operations by tax on sale of energy resources because of conflict with Oregon's constitutional dedication of oil or gas taxes to state school fund); Associated Gen. Contractors of South Dakota, Inc. v. Schreiner, 492 N.W.2d 916, 922 (S.D.1992) (holding unconstitutional annual tax credits to ethanol producers of twenty cents per gallon and aggregating $1,000,000 per year because of conflict with constitutional dedication of motor vehicle fuel tax proceeds to state highway purposes); Automobile Club of Washington v. City of Seattle, 55 Wn.2d 161, 346 P.2d 695, 701 (1959) (holding unconstitutional payment of tort judgment out of "city street fund" constitutionally dedicated to highway purposes).
In general, we find unpersuasive and inapposite the cases relied on by defendant. For the most part, they concern attempts by state legislatures to authorize funds actually collected from motor vehicle taxes and constitutionally dedicated to highway or other purposes to be improperly used for non-dedicated public
As the legislative history of the 1984 amendments to the Act reveals, the overarching intent and purpose of the Legislature was to assure that the casino licensees would immediately begin to make investments in Atlantic City and, eventually, in other parts of the State in accordance with the allocation schedule set forth in the Act. See N.J.S.A. 5:12-144.1(f) (allocating one hundred percent of investment funds to Atlantic City during first three years, ninety percent in years four and five, eighty percent in years six through ten, and lesser amounts thereafter, with increasing amounts allocated to South Jersey and North Jersey). Although the 1984 amendment imposed a 2.5 percent investment alternative tax on casino winnings, that tax for all practical purposes was enacted only to induce casinos to elect the investment alternative and the Legislature never contemplated that its collection would occur. As the amendment was structured, the additional 2.5 percent tax would be avoided by any casino that elected instead to purchase CRDA bonds, or make authorized investments or donations in an amount equal to 1.25 percent of annual casino winnings. Obviously, all casinos have elected to invest annually 1.25 percent of their "take," and none have elected to pay the alternative 2.5 percent tax. Although statutorily denominated a "credit," in reality the 1.25 percent investment option was an alternative to the added tax, an alternative so clearly more attractive that the Legislature understood that no casino would elect to pay the additional tax.
In that context, we find highly theoretical the assertion that the 1.25 percent investment alternative improperly diverted funds dedicated by the Casino Amendment when, in reality, the Legislature never intended to collect additional revenue from the tax on casino winnings. Obviously, an entirely different and much more formidable constitutional challenge would be presented if the investment alternative authorized by the 1984 legislation were available as a credit against the eight percent tax on gross revenue already being collected under the Act. In that event, the diversion of constitutionally dedicated funds would be clear and compelling. But given the background of the 1984 amendments to the Act, there is little doubt that the Legislature intended that no increase in the amount of funds dedicated to seniors and the disabled would result from those amendments, and the Legislature's primary and overriding goal was to stimulate casino investments in Atlantic City and throughout the State. Accordingly, we reject defendant's contention that the investment alternative mechanism in the 1984 amendments unconstitutionally diverted dedicated funds in violation of the Casino Amendment.
The CRDA also argues persuasively that the credit mechanism enacted in 1984 by the Legislature was a reasonable and appropriate means for encouraging investment in Atlantic City and elsewhere that could have been mandated as a condition of casino licensure. The CRDA relies on this Court's opinion in Holmdel Builders Ass'n v. Township of Holmdel, 121 N.J. 550, 572, 576, 583 A.2d 277 (1990), for our holding that the Fair Housing Act, L. 1985, c. 222, provided a statutory basis for the imposition by municipalities, as a condition of development approval, of development
C. Irrespective of their Characterization, the Proceeds of the Investment Alternative Tax Program Constitutes State Revenues Derived from Casino Gambling Establishments and Constitutionally Cannot be Used for Non-Dedicated Purposes
Defendants combine numerous specific contentions to support their general assertion that, however denominated, the proceeds of the investment alternative tax program are "taxes," that they have been coerced for the purpose of supporting State programs, and that consequently such proceeds must constitute "State revenue" that can be used only for dedicated purposes.
We already have rejected defendant's contentions that the term "State revenues" as used in the Casino Amendment was intended to encompass the proceeds of investments by casino licensees pursuant to the Act in its original form or pursuant to the 1984 amendments, supra at 527-28, 734 A.2d at 1175-76, and that any tax credit against a dedicated tax is necessarily unconstitutional, supra at 529-34, 734 A.2d at 1176-79. The contention we now address focuses on the character of the proceeds of casino "investments" pursuant to the 1984 amendments and whether such proceeds actually constitute "State revenues" within the meaning of the Casino Amendment. Because the record before us provides only limited information concerning the amounts and characteristics of the casino investments in issue, we have requested counsel to supplement the record in certain respects.
Initially, we note again the Legislature's clearly expressed intention that approved investments pursuant to the 1984 amendments are to be deemed investments and are not to be regarded as State revenue. N.J.S.A. 5:12-144.1(i) provides in part:
That same understanding of the 1984 amendments was conveyed to Governor Thomas H. Kean in the Passed Bill memo from his Chief Counsel:
To defendant's contention that the proceeds of the casinos' investments nevertheless constitute "State revenues," the CRDA responds that both the Legislature's intent and the actual characteristics of the uses to which the proceeds are put demonstrate that those proceeds are not "State revenues." Conceptually, we generally understand the term "State revenue" to mean the money received by the State from taxes, fees and other levies that may thereafter be used by the State for public purposes. Black's Law Dictionary defines "public revenues" in a manner consistent with that understanding:
[Black's Law Dictionary 1319 (6th ed.1990) (citations omitted).]
The character of the proceeds of investments made by casinos pursuant to the 1984 amendment stands in sharp contrast to that generalized understanding of the concept of State or public revenue. The primary investment options for casino licensees under the 1984 amendments are CRDA bonds or CRDA approved investments, which for the ten years immediately following the amendments constituted the only permitted investment options. See N.J.S.A. 5:12-144.1(b). Thereafter at least fifty percent of annual licensee investments must be in CRDA bonds or approved investments, and the balance may consist of direct investments or donations in approved projects. Ibid. The CRDA's 1998 annual report describes the outstanding CRDA bonds as carrying maturities ranging from thirty-five to fifty years and bearing interest at rates ranging between four and seven percent. The Act requires that CRDA bonds bear interest at rates no lower than two-thirds of market rates. N.J.S.A. 5:12-162(d).
Defendant maintains that the bonds, because of their lower-than-market interest rates and extended maturities, are unattractive investments. Defendant clearly is correct, but the unattractiveness of CRDA bonds by market standards does not transform the funds used to acquire them into "State revenues." On the CRDA's balance sheet, the bond proceeds represent borrowed funds subject to an obligation to repay the principal in full and pay interest at the stated rate. As such, the bond proceeds scarcely resemble "State revenue" from the perspective of the CRDA, and from the casino licensees' perspective the bonds constitute an interest bearing obligation requiring repayment in full at maturity. We fully acknowledge that, with a free choice, casino licensees would be unlikely to buy CRDA bonds. But those bonds unmistakably constitute investments of the casino licensees, and hence cannot be characterized as "State revenues" for purposes of the Casino Amendment.
A similar analysis applies to CRDA projects approved for investment by licensees. The CRDA's regulations define projects eligible for CRDA approval as those undertaken to satisfy the purposes of the CRDA. N.J.A.C. 19:65-1.2. Among the approval criteria for CRDA-approved projects is a requirement
Because the CRDA-approved projects are required to meet the same investment grade standards as the Act requires for CRDA bonds, see N.J.S.A. 5:12-144.1(i), we conclude that licensee investments in CRDA-approved projects also must be characterized as investments, and that their proceeds cannot constitute "State revenues" when received by the CRDA.
As noted, supra, at 525-26, 734 A.2d at 1174, after the ten-year period subsequent to the 1984 amendments, see N.J.S.A. 5:12-144.1(b), casino licensees also may receive a two-for-one credit against the additional 2.5 percent tax on gross revenues by making direct investments in or donations to projects approved by the CRDA on application by individual casino licensees. See N.J.S.A. 5:12-173 and -177. Projects approved for direct investment or for donation must be undertaken for purposes consistent with the statutory mission of the CRDA. See N.J.A.C. 19:65-1.2, -2.8 and -2.9. The application process for projects for direct investment or donation is essentially the same process as is required for CRDA-approved projects, see N.J.A.C. 19:65-2.8 and -2.9, and we are informed that the CRDA's review is guided by the same approval criteria and priorities that apply to CRDA-approval projects. N.J.A.C. 19:65-2.5 and -2.6. (Letter from Michael Cole, counsel to CRDA, to Stephen Townsend, Clerk, New Jersey Supreme Court (May 27, 1999) (CRDA letter)). Although the CRDA letter includes descriptions of projects funded with direct investments approved by the CRDA, the record does not inform us adequately about the general characteristics of direct investments made by casino licensees. Because such direct investments are elective, as a statutory alternative to CRDA bonds or investments in CRDAapproved projects, we infer that sophisticated casino licensees would not voluntarily make direct investments in projects that would yield a significantly lower return than the CRDA bonds or CRDA-approved projects. Moreover, no statutory or regulatory provision mandates that the CRDA participate directly or indirectly in projects approved as direct investments, and therefore the CRDA need not obtain any access to the proceeds of such investments. Accordingly, we conclude on this record that the casino licensees' direct investments in projects approved by the CRDA qualify as "investments" under the Act, and that accordingly their proceeds cannot constitute "State revenues" under the Casino Amendment.
Finally, the CRDA letter includes examples of approved projects funded at least in part by donations, but informs the Court that "the types of projects the Authority approves involving donations generally are projects or programs that cannot be financially structured in a manner that would reasonably support an expectation of a return on investment." The examples provided by the CRDA letter include a donation of funds by licensees to assist in the construction of a new facility for the Boys and Girls Club of Atlantic City, a donation of funds toward the construction of a Jewish Older Adult Services Facility, a donation of funds toward an affordable housing project in Atlantic City, and a donation of funds to acquire property to be leased by the CRDA to a developer of a new supermarket and other retail uses. The Act specifically authorizes the CRDA to permit a licensee "to obtain an investment tax credit by making a donation of money or realty to an eligible project, facility or program," and provides that any such "donation shall be deemed to be an investment." N.J.S.A. 5:12-177. The CRDA's 1998 Annual Report states that the amount of donations by licensees through December 31, 1998 equaled $141,985,518, but the record before us does not adequately reflect the nature and variety of projects that have been financed wholly or in part by donations. Nevertheless, because donations are a statutory alternative to
The parking fees authorized by L. 1993, c. 159, clearly constitute State revenue. That legislation imposed a fee of $1.50 per day on casino parking spaces payable by the licensee to CRDA for its use on eligible projects in the corridor region of Atlantic City. The lower courts concluded, however, that that revenue was not revenue derived from the "operation of... gambling establishments" within the meaning of the Casino Amendment. "The fee bears no relationship to a licensee's gambling operations and is derived from gamblers and non-gamblers alike who use a casino parking facility and park in Atlantic City." 314 N.J.Super. at 677, 715 A.2d 1052. We agree with that conclusion.
We note that N.J.S.A. 5:12-19, as amended in 1996, sets forth the following definition of "establishment" and "casino hotel facility":
5:12-19. "Establishment", "casino hotel" or "casino hotel facility"
That definition excludes parking spaces from the configuration of a casino hotel facility. More to the point, the parking fees plainly are not revenues derived from casino gambling, nor are they the type of casino-related revenue that the Legislature intended to be dedicated to eligible senior and disabled citizens. Accordingly, we sustain the constitutionality of the parking fee legislation.
Our resolution of the various legal issues raised by defendant also is informed by our understanding, enhanced by this record, that in fact the Legislature has kept faith with the Casino Amendment's dedication of the tax on licensees' gross revenue to eligible senior and disabled citizens. As noted, in excess of $3.5 billion dollars has been made available for those dedicated purposes since the inception of casino gambling. We are convinced that the salutary purpose of the 1984 amendments was to stimulate investment by licensees in Atlantic City and elsewhere, and that those amendments were not intended, nor was it their effect, to deprive seniors and disabled citizens of the benefit of dedicated State revenues.
We affirm the judgment of the Appellate Division.
O'HERN, J., concurring.
When two widely respected members of the Court dissent on a constitutional issue of such profound significance, it gives me pause.
However, in this instance I believe that the contemporary news accounts quoted in the dissent better portrayed the meaning of the amendment than does the opinion.
That was the promise, made to the people in 1976, with which the Legislature and the Court have kept faith.
If "the State's revenues" from gambling casinos meant "all the State's revenues," as the dissent suggests, post at 546-55, 734 A.2d at 1186-92, then the dissent should require the State also to turn over the Corporation Business Tax and Sales Tax revenues derived from "gambling casinos" to seniors and the disabled.
I do not find that suggestion in the dissenting opinion, leading one to conclude that, despite its high-sounding tone, the dissent is internally inconsistent.
HANDLER and POLLOCK, JJ., dissenting.
The issue is whether the Casino Reinvestment Act (CRA), N.J.S.A. 5:12-144.1, violates Article IV, § 7, ¶ 2 of the New Jersey Constitution (the "Casino Amendment" or "Amendment"), which requires that all State revenues from casino gambling benefit senior citizens and disabled residents. Resolution of that issue depends on whether the CRA authorizes the expenditure of designated revenues for other purposes. We believe that the CRA dedicates revenues to such other purposes. Consequently, we respectfully dissent.
In 1976, the State presented New Jersey voters with this question:
CASINOS IN ATLANTIC CITY FOR THE BENEFIT OF SENIOR CITIZENS AND DISABLED RESIDENTS OF THE STATE
Following voter approval at the general election, the New Jersey Constitution was amended to read:
Simply stated, the Casino Amendment requires revenues derived from the operation of casinos to be applied solely for the purpose of providing services or benefits for eligible senior citizens and disabled residents. The CRA, however, permits revenues paid by casinos to the State to be spent on miscellaneous purposes unrelated to senior citizens and the disabled. Although many of these purposes may be worthwhile, the Constitution does not permit the expenditure of State revenues derived from casinos for unauthorized purposes, commendable or not. The plain language of the Casino Amendment precludes the use of State revenues for purposes authorized by the CRA. Nothing more is needed to sustain the conclusion that the CRA is unconstitutional.
Although unnecessary to resolve this appeal, a fuller appreciation of the issue starts with the general prohibition on gambling in the New Jersey Constitution. N.J. Const. art. IV, § 7, ¶ 2. Only by means of a constitutional amendment, approved by a majority of voters, could the Legislature surmount that constitutional prohibition.
In 1974, the public rejected a referendum that would have permitted Stateowned and -operated casinos throughout New Jersey. In commenting on the defeat of the 1974 proposal, Assemblyman (now Senator) Robert Littell stated that the public
[Public Hearing on Assembly Concurrent Resolution 126 (Apr. 14, 1976) (statement of Assemblyman Littell).]
In 1976, the Legislature again sought public approval of casino gambling. Article IX, ¶ 7 of the State Constitution stipulates that once voters have rejected a proposed amendment, the Legislature must wait until the third general election following the rejection before submitting a substantially similar amendment to the electorate. Here, the Legislature did not want to wait. Consequently, in 1976 it introduced concurrent resolutions in the Assembly and Senate for a modified proposal on casino gambling. The identical resolutions, Assembly Concurrent Resolution 126 (ACR 126) and Senate Concurrent Resolution 103 (SCR 103) differed from the 1976 proposal in several material respects. See Young v. Byrne, 144 N.J.Super. 10, 364 A.2d 47 (Law Div.1976) (1976 referendum sufficiently different from 1974 referendum that Constitution did not impose waiting period between proposals). First, the casinos were to be privately owned and operated. Second, they were to be confined to Atlantic City. Finally, and of critical importance to this appeal, the State revenues generated from casino gambling were to be used exclusively to benefit senior citizens and disabled residents.
Statements made at the public hearing on ACR 126 confirm that the revenues were to be used solely for senior citizens and disabled residents. Assemblyman Howard Kupperman, one of the sponsors of ACR 126, stated:
Senator Joseph McGahn, who sponsored SCR 103, emphasized the importance of the dedication of casino revenues for the benefit of senior citizens:
[Id. (statement of Senator McGahn.)]
Comments of several concerned citizens confirm the public's understanding that the purpose of the 1976 Amendment was to consign all State revenue from gambling to senior citizens and disabled residents: "ACR-26 must be looked upon with favor, since the revenue derived from legalized gambling will be dedicated to our senior citizens." Id. (statement of Charles Davis). "It seems to me [ ] that dedicating the revenues to help senior citizens is misleading. Everybody wants to help senior citizens, and many will vote for this amendment without realizing its implications." Id. (statement of Mary Tanner).
Finally, pre-election newspaper editorials, both those opposed to approval of the referendum and those in favor of approval, substantiate that the public understood that the State's revenues from gambling were to be dedicated to assisting senior citizens and disabled residents: "The referendum itself is slightly different this time too. It calls for casino gaming restricted to Atlantic City, run by private interests, with revenues dedicated to senior citizens' needs." Fred Hillman, Casinos Getting Better Odds This Time Around, Star-Ledger, Oct. 10, 1976, at 4. "Atlantic City might get a quick fix—some new hotels, some new ancillary businesses. The state treasury would get a modest amount of tax revenue, earmarked for senior citizens (a cynical ploy to milk votes if there ever was one)." Still No Dice, Trenton Times, Oct. 29, 1976, at A14.
[Statewide Referenda: Seven Questions, Trentonian, Oct. 31, 1976, at 36.]
[Atlantic City's Future: Casinos Yes, Press, Oct. 29, 1976, at 1.]
[Risks of Casino Gambling, Asbury Park Press, Oct. 29, 1976, at A22.]
In concluding that the proposed constitutional amendment contemplated the expenditure of State revenues for purposes other than assisting senior citizens and disabled residents, the majority commits three analytical errors. First, it ignores the plain language of the Casino Amendment as an ordinary person would understand it. Second, despite the lack of ambiguity in the Amendment's language, the majority revisits the Amendment's legislative history. In doing so, it conflates legislative statements made after the voters approved the constitutional Amendment with those made prior to obtaining that approval. It even uses the legislative history of the statute at issue to support its interpretation of a constitutional amendment adopted eight years before that statute. Finally, the majority confuses the anticipation of indirect economic benefit to Atlantic City from the arrival of casinos with an expectation of direct benefit from State revenues derived from the tax on those casinos.
Under standard rules of constitutional interpretation, the Casino Amendment must be strictly construed. In State v. Apportionment Commission, 125 N.J. 375, 382, 593 A.2d 710 (1991), the Court explained the proper means of assessing the language of a constitutional amendment, relying on the approach used to assess the validity of an interpretive statement. That approach inquires whether the interpretive statement "suffer[s] from an ambiguity so fundamental that a voter could not intelligently understand [its] effect." Kimmelman v. Burgio, 204 N.J.Super. 44, 52, 497 A.2d 890 (App.Div.1985) (citations omitted); cf. New Jersey Ass'n on Correction v. Lan, 80 N.J. 199, 208, 403 A.2d 437 (1979) (rejecting challenge to validity of interpretive statement because "[c]onsidering the question and Interpretive Statement on the ballot as to this bond issue, [ ] one would wonder how any literate voter could be misled or fail to have `an understanding appraisement of the project' "). In Apportionment Commission, the Court wrote that the critical question in interpreting the language of a constitutional amendment is: "[D]oes the public question `tell the ordinary voter what is involved'?" 125 N.J. at 382, 593 A.2d 710 (citing Gormley v. Lan, 88 N.J. 26, 37, 438 A.2d 519 (1981)). The Court explained:
[Ibid. (citations omitted).]
Several years earlier, in Atlantic City Racing Ass'n v. New Jersey, 98 N.J. 535, 489 A.2d 165 (1985), the Court gave even more explicit instructions concerning the strict construction that is involved in the interpretation of an amendment:
As previously indicated, the Casino Amendment must be read literally and restrictively. That Amendment provides for State revenues derived from casino operations to
[N.J. Const. art. IV, § 7, ¶ 2.]
Accepted standards of constitutional interpretation do not support the inference that one of the Casino Amendment's articulated purposes was to improve Atlantic City or any other area of the State. By the Amendment's express terms, the State's revenue was to be applied to the needs of senior citizens and the disabled.
Moreover, the constitutional language precisely delineates how casino revenues are to be used for senior citizens and disabled residents. The Amendment directed the Legislature to exercise a narrow discretion in determining how casino revenues may be spent in respect of senior
Despite the lack of ambiguity in the Casino Amendment, the majority interprets it by examining the legislative history of both the Amendment and the Casino Control Act (CCA), N.J.S.A. 5:12-1 to 5:12-194. The Court engages in this analysis despite its acknowledgment of the
Even when an examination of legislative history is appropriate, statements made by supporters of a constitutional amendment during the course of its enactment and adoption must be scrutinized carefully. Statements that are part of the official legislative history of the amendment should be distinguished from those that are merely partisan and unofficial in nature. For example, in Dickinson v. Fund for the Support of Free Public Schools, 95 N.J. 65, 81-84, 469 A.2d 1 (1983), the dissent criticized the majority's citation of statements attributed to various individuals in the course of the enactment and adoption of the Tidelands Amendment because the statements were reflective of a "partisan position based upon one possible interpretation of the amendment" and hence did "not define either the purpose of the constitutional amendment or the intent of the people in adopting it." Id. at 94, 469 A.2d 1 (Handler, J., dissenting). Although the statements were made by administration officials, the dissent observed that they
[Id. at 94-95 n. 2, 469 A.2d 1 (Handler, J., dissenting).]
In the present case, the majority oscillates between examining statements made in the Legislature before the election and statements made afterward. Pre-election, the legislators spoke extensively about aid to senior citizens and about revitalizing Atlantic City. They never spoke of using tax revenues to revitalize Atlantic City nor of using tax revenues to revitalize the rest of the State.
Similarly, before the election, the people were told that all of the money generated from casino gambling would go to senior citizens. Only after the election was a specific proportion of revenues, namely 8%, mentioned for use in the dedicated programs. Four months after approval of the referendum, during a public hearing on the CCA, Senator McGahn said:
Many other statements cited by the majority as demonstrating a public and legislative understanding similarly were not uttered until after the election. See, e.g., ante at 518, 734 A.2d at 1169 (quoting 314 N.J.Super. 651, 668, 715 A.2d 1052 (Law Div.1997) (quoting N.J.S.A. 5:12-1(b)(4)(CCA))); Ibid. 734 A.2d at 1169 (quoting 314 N.J.Super. at 668, 715 A.2d 1052 (quoting N.J.S.A. 5:12-1(b)(5)(CCA))); id. at 520-21, 734 A.2d at 1171 (quoting 314 N.J.Super. at 671-72, 715 A.2d 1052 (quoting R. Benjamin Cohen, Casino Gambling: The Elements of Effective Control, 6 Seton Hall Legis. J. 55 (1982))). Briefly stated, statements made after the 1976 general election are not part of the legislative "history" of the Casino Amendment.
Lastly, the majority uses the legislative intent behind and the words of the CRA to establish its constitutionality. The majority notes that N.J.S.A. 5:12-144.1(i) states that any purchases of bonds pursuant to the act "are to be considered investments and not taxes owed or grants to the State or any political subdivision thereof." Ante at 525, 734 A.2d at 1174 (quoting N.J.S.A. 5:12-144.1(i)); see also id. at 533-34, 734 A.2d at 1178-79 (interpreting history of 1984 statutory amendment). As helpful as legislative history may be when interpreting a statute, that history cannot usurp the judicial obligation to determine the statute's constitutionality.
Even after the 1976 election, the Legislature recognized that the rehabilitation of Atlantic City was to occur through the investment of private funds. The statement accompanying Senate Bill 1780, which became the CCA, provides:
[Statement Accompanying Senate Bill 1780 (1977).]
Atlantic City would enjoy both a direct benefit and a "ripple effect." As a leading text on the Casino Amendment states:
It was called the "ripple effect," and it was supposed to work something like this: The tourists come to the casino hotels, bringing in the dollars by the
Senator McGahn testified to the same effect at a hearing on the CCA:
A leading scholar writes:
The centerpiece of the 1976 proposal was the use of casino gambling as a tool for the redevelopment of Atlantic City. Casino advocates argued that the legalization of casinos would be a major ingredient in the economic revitalization of the city, and they claimed that casino development would create between twenty and thirty thousand new jobs.
[Richard Lehne, Casino Policy 35 (1986).]
[Id. at 153.]
Consistent with these analyses, the Casino Amendment never mentioned the use of State revenues for the redevelopment of Atlantic City. Indeed, the majority acknowledges that redevelopment, although a "primary objective" of the Amendment, was to be generated by the casinos' direct investment in Atlantic City and from the resulting ripple effect.
[Ante at 521, 734 A.2d at 1171-72 (emphasis added).]
In 1977, the public understood that State revenues derived from casinos were to be used solely for senior citizens and the disabled. For example, at a legislative hearing on the CCA, Mrs. Charles Fischer, an advocate for the Atlantic City Performing Arts Center, now the Stockton Performing Arts Center, stated:
Senator McGahn recognized that at some time, casinos might be obligated to contribute to Atlantic City's recovery. He also recognized, however, that the source of the contribution could not be casino revenues:
[Id. (statement of Senator McGahn).]
To fulfill the promise made to obtain the public approval of casino gambling in Atlantic City, the CCA set the tax on casinos' gross revenues at the annual rate of 8%, with all revenues to be used for the benefit of senior citizens and disabled residents. The proceeds of the tax were to be paid to a dedicated account known as the Casino Revenue Fund (CRF). As explained by Assemblyman Steven Perskie, 8% seemed like a "realistic figure" given the need to balance a requirement by the intended recipients of substantial sums with the higher overall tax structure in New Jersey versus Nevada. Public Hearing on A2366 (Dec. 15, 1976) (CCA) (statement of Assemblyman Perskie). Nothing in the constitutional Amendment or its history intimated that the seniors were due just 8% of the gambling take and that the State was free to use for other purposes any amount it collected beyond 8%. As Assemblyman Kupperman explained when introducing the resolution proposing the Casino Amendment:
In brief, the State's commitment to use the revenues from casino gambling extended beyond its promise to the recipients
To stimulate casino investment in Atlantic City, the CCA required casinos with gross revenues in excess of the value of their cumulative investment in the State to invest 2% of their gross revenues in improved real estate. In the alternative, the casinos could pay the required 2% as a tax. Significantly, if remitted as a tax, the proceeds were to be paid to the CRF and dedicated to the seniors and disabled. N.J.S.A. 5:12-144(b), (e). The effective date of this provision was delayed for five years; as a practical matter, it never took effect.
Frustrated at the slow pace of Atlantic City's economic recovery and at its inability to persuade the casinos to make sufficient voluntary investments in Atlantic City, the Legislature in 1984 enacted the CRA. The CRA's investment requirements supplanted the 2% excess-profit assessment of the CCA. Under the CRA, casinos must either invest 1.25% of their gross revenues in Casino Reinvestment Development Authority (CRDA) bonds or in investments approved by the CRDA, or pay 2.5% of their gross revenues as a tax. If the casinos elect to pay the tax, the revenues are paid to the CRF and used for the constitutionally approved purposes of aid to senior citizens and disabled residents. In contrast, the proceeds from the sale of CRDA bonds are spent on a variety of projects throughout the State.
Those projects include a "Miss America Rosewalk, a 20-foot-wide sidewalk lined with dozens of rose lights and with bronze plaques for every Miss America through the year 2000," as well as minor league baseball stadiums, theaters, performing arts centers, improvements to streets leading to casinos, and, the project that produced this appeal, a tunnel leading to another casino. Mary Jo Patterson et al., CRDA Rolls the Dice—Casinos Cash In: Atlantic City Shell Game, Star-Ledger, May 4, 1997, at 1. In 1998, CRDA funding provided more than $341 million for new construction, urban renewal, transportation networks, and cultural projects within Atlantic City. Of that amount, over $127 million was used for the expansion of the casinos' own facilities. 1998 funding also included more than $3.5 million for projects in South Jersey outside of Atlantic City and more than $20 million for projects in North Jersey. Casino Reinvestment Development Authority, Financial Statements & Supplemental Information with Report of Independent Auditors 21-23 (1999) (1998 Annual Report).
To circumvent the Casino Amendment, the majority characterizes the proceeds from the sale of CRDA bonds as something other than revenues. Until today, the judiciary interpreted the term "revenue" in the 1977 constitutional Amendment broadly. See Matthews v. State, 187 N.J.Super. 1, 7-8, 453 A.2d 543 (App.Div.), appeal dismissed, 93 N.J. 298, 460 A.2d 694 (1983). Matthews held that the State could not use the interest on the 8% gambling revenue tax, earned while the CRF funds were held in the State Treasury, for projects unrelated to senior citizens and disabled residents. In so holding, the Appellate Division interpreted "State," "revenues," and "derived" to determine that the interest could be spent for only dedicated purposes. The resolution of that case supports the proposition that the State's constitutional obligation to senior citizens and the disabled is not limited to 8% of casino revenues. Significantly, interest earned on the 1.25% of casino gross revenues deposited quarterly with the Treasury does go to the CRF and is spent for dedicated purposes despite the fact that the principal is used to buy CRDA bonds.
Under the Matthews interpretation, the bond proceeds are revenue within the meaning of the constitutional Amendment. To hold, as the majority does, that the proceeds from the purchase of bonds do not constitute State revenue is to deny reality. The CRDA is a State agency. Like tax revenues, the proceeds from the
The majority admits that the State neither expected nor intended that any casino would pay a 2.5% tax in lieu of making a 1.25% CRDA bond "investment": "Obviously, all casinos have elected to invest annually 1.25 percent of their `take,' and none have elected to pay the alternative 2.5 percent tax." Ante at 532, 734 A.2d at 1178. Curiously, the majority adds: "In that context [that the State never intended to collect the tax], we find highly theoretical the assertion that the 1.25 percent investment alternative improperly diverted funds dedicated by the Casino Amendment when, in reality, the Legislature never intended to collect additional revenue from the tax on casino winnings." Id. at 533, 734 A.2d at 1178.
The original CCA requirement that the casinos invest 2% of excess profits in real estate mandated "coerced payments," but did not generate "State revenues." Under the CCA, the casinos, not the Casino Control Commission, made the investment decisions. The casinos were not required to pay the money to the State Treasury; the money never came under State control.
Under the Casino Amendment, funds dedicated for senior citizens and disabled residents are limited to State revenues derived from the "establishment and operation of gambling establishments." Like the majority, ante at 524, 734 A.2d at 1173, we conclude that taxes unrelated to casinos as casinos, for example corporate business, property, and sales taxes, do not constitute State revenues from gambling operations within the meaning of the Amendment. We do not agree, however, that excluding corporate and sales tax revenue from the purview of the Casino Amendment suggests that the Amendment is ambiguous. Corporate and sales taxes are not taxes on the "establishment and operation of gambling establishments." They are not taxes on gambling and they are not peculiar to gambling establishments. By contrast, the 2.5% tax imposed by the CRA, and its alter ego, the 1.25% paid for CRDA bonds, derive from the establishment and operation of casinos.
We also agree with the majority that the $1.50 per day charge that casinos must pay to CRDA for each vehicle parked in a casino-operated parking facility does not constitute revenue that must be dedicated. Ante at 539-40, 734 A.2d at 1182. As the majority explains, the parking fees do not derive from the operation of an "establishment," "casino hotel," or "casino hotel facility," as those terms are defined in N.J.S.A. 5:12-19. See Garden State Racing Ass'n v. Cherry Hill Township, 42 N.J. 454, 201 A.2d 554 (1964) (holding that parking lots are not part of racetracks for purpose of statute exempting racetracks from municipal taxation).
Ten years after adoption of the CCA, the State Commission of Investigation recognized the Legislature's temptation to break faith with the public on the casino revenue issue:
Perhaps the State should not have promised to use the revenues from casino gambling for the benefit of senior citizens and disabled residents. Maybe another promise would have made better public policy. Doubtless, the State has received greater revenues than it anticipated in 1976. Some might say that senior citizens and the disabled do not need all that money. Such an assertion, however, is belied by the fact that the dedicated tax proceeds, which go into the CRF, currently are insufficient to support the programs that were supposed to be sustained by gambling revenues. Those programs now are being funded from the State's general operating budget. New Jersey's fiscal year 2000 budget reveals:
If the Legislature wishes to divert revenues to purposes other than those benefiting senior citizens and disabled residents, it should do again what it did in 1976; submit a referendum to the public.
Another possible alternative is legislative in nature. The Legislature could allow a deduction from "gross revenues," as defined by the CCA, N.J.S.A. 5:12-24, for State capital improvement investments. Policy-based income exclusions, tax exemptions, and tax deductions are appropriate tools for government to use in encouraging socially desirable behavior. "By allowing deductions ... for certain activities, or by granting a specific statutory exclusion to gross income, [the legislature] is able to encourage certain activities and discourage others." Christopher W. Schoen, The Family Savings Account: A Practical Tax Incentive To Stimulate Personal Savings Rates, 4 Hofstra Prop. L.J. 103, 106 (1991).
The Casino Amendment promised only that revenue would be dedicated to specific purposes; it did not promise to collect a certain percentage of the casinos' gross revenues. Accordingly, the Legislature may amend the CCA to allow the casinos to take deductions from gross revenues prior to calculating the amount of tax due.
Tax policy can serve and augment other governmental policies. For example, public policy goals are effectuated through the definition of "gross income" in the Gross Income Tax Act. Compensation for injuries or sickness and scholarship and grant money are excluded from gross income. N.J.S.A. 54A:6-6, 6-8. Also excluded is the interest on obligations issued by the State or its subdivisions, N.J.S.A. 54A:6-14. Exemptions and deductions from gross income also are utilized to advance policy goals. For example, an exemption from gross income is allowed for some dependents under the age of twenty-two. N.J.S.A. 54A:3-1.1. A deduction is allowed for qualifying medical expenses. N.J.S.A. 54A:3-3.
The Legislature could similarly encourage the policy objective of investment in capital improvement projects by making the cost of those investments deductible. The Legislature already has carved some exclusions from the definition of casinos' "gross revenues":
The suggested approach provides an incentive for casinos to invest in capital development but does not constitute an unconstitutional supplanting of a tax with a tax credit. This suggestion merely illustrates the availability of legitimate ways to create incentives for community investment in Atlantic City.
The most disturbing feature of the CRA is that it breaks faith with the people of New Jersey. Great states, like great people, should keep their word. Federal Power Comm'n v. Tuscarora Indian Nation, 362 U.S. 99, 142, 80 S.Ct. 543, 567, 4 L.Ed.2d 584, 611 (1960) (Black, J., dissenting). By diverting revenues from senior citizens and disabled residents, the State has broken its promise to them and to the general public.
One might question the amount of fuss about a statutory scheme, such as the CRA. After all, the CRA spreads a lot of money around the State. The point, however, is not whether the CRA represents an acceptable public policy or a better one than that submitted to the people in 1976. Rather, the point is that the CRA breaks the promise that the State made to the people of New Jersey in 1976. That promise embodied a moral imperative, not a commitment to be honored only when convenient.
For affirmance—Chief Justice PORITZ and Justices O'HERN, GARABALDI, STEIN and COLEMAN—5.
For reversal—Justices HANDLER and POLLOCK—2.