Opinion
DOCKET NO. 007568-2008 DOCKET NO. 004012-2009 DOCKET NO. 003178-2010 DOCKET NO. 008024-2011
10-09-2012
ADAMAR OF NEW JERSEY, INC., Plaintiff, v. CITY OF ATLANTIC CITY, Defendant. TROPICANA ATLANTIC CITY CORP., Plaintiff, v. CITY OF ATLANTIC CITY, Defendant.
Michael D. Sklar, Esq., for plaintiffs (Levine, Staller, Sklar, Chan, Brown & Donnelly, P.A., attorneys) James L. Esposito, Esq., for defendant (DeCotiis, Fitzpatrick & Cole, LLP, attorneys, Megan E. Sassaman, Esq., on the briefs) Richard M. Conley, Esq. for defendant (Law Office of Richard M. Conley, attorneys)
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF
THE TAX COURT COMMITTEE ON OPINIONS
MEMORANDUM OPINION
Michael D. Sklar, Esq., for plaintiffs (Levine, Staller, Sklar, Chan, Brown & Donnelly, P.A., attorneys)
James L. Esposito, Esq., for defendant (DeCotiis, Fitzpatrick & Cole, LLP, attorneys, Megan E. Sassaman, Esq., on the briefs)
Richard M. Conley, Esq. for defendant (Law Office of Richard M. Conley, attorneys) DeALMEIDA, P.J.T.C.
This opinion sets forth the court's findings of fact and conclusions of law on the parties' pretrial motions in the above-captioned matters, which have been consolidated for trial beginning October 15, 2012. R 1:6-2(f). The court's findings of fact are based on the certifications and exhibits submitted by the parties on the motions.
I. Findings of Fact
Plaintiffs are related or successor companies that own and operate the Tropicana Casino and Entertainment Resort (the "Tropicana"), a casino hotel in Atlantic City. They challenge the assessments placed on the real property that constitutes the casino hotel by the municipal tax assessor for tax years 2008, 2009, 2010 and 2011. The amount of the assessments under review and a precise identification of the parcels at issue is not necessary for a determination the parties' motions.
The motions concern the presumption of competent management applicable to the valuation of real property under the income approach. That presumption was established by judicial precedents and has been applied to the rental income earned at apartment houses and hotels. As will be discussed more fully below, the court is not convinced that the income approach is the preferable method for determining the value of property on which the owner operates a casino hotel. The court concludes, however, that in the event the income approach is used to determine the value of a casino hotel, the presumption of competent management would apply, at least with respect to the rental income earned at the hotel component of the facility.
Defendant, City of Atlantic City, moves for an Order declaring that plaintiffs' casino hotel was not competently managed as of the valuation dates for tax years 2008, 2009 and 2010. In addition, the city requests that the court declare that plaintiffs are not entitled to the presumption of competent management for tax year 2011 and that plaintiffs be required to show, by clear and convincing evidence, that the casino hotel was competently managed with respect to that tax year. Plaintiffs oppose the city's motion and cross-move for an Order establishing the presumption of competent management for all tax years under appeal.
Defendant's motion is predicated largely on licensing decisions of the Casino Control Commission ("CCC" or the "Commission") issued in 2007. Those decisions, which were affirmed by the Appellate Division and the Supreme Court, rejected the casino operating license application of the then-new owner of the subject property and its principal based primarily on the poor operation of the casino hotel during 2007. As a result of the licensing decisions, the then-new owner and its principal were precluded from continued ownership or control of the Tropicana. Exercising its statutory authority in such circumstances, the CCC appointed a former Supreme Court Justice as Trustee and Conservator to find a purchaser for the subject property and to operate the facility until its transfer to a new owner. The casino hotel ultimately was sold in 2010, after more than two years of operation under the supervision of the Trustee and Conservator.
The city contends that these facts establish, as a matter of law, that the casino hotel was not competently managed during 2007. Thus, defendant argues, the presumption of competent management with respect to tax year 2008 has been overcome. In addition, defendant argues that the presumption should not apply for the subsequent two tax years because the harm caused by incompetent management during 2007 could not have been corrected until the facility was transferred from the Trustee and Conservator to a new owner in 2010. Finally, defendant argues that in light of the management history at the casino hotel, the court should require plaintiffs to produce clear and convincing evidence that the property was competently managed during 2010 before the presumption of competent management could be applied for tax year 2011.
Plaintiffs, on the other hand, contend that the CCC decision concerns only the suitability of the then owner and its principal for casino licensure and did not constitute a finding that the casino hotel was not competently managed in 2007. In addition, plaintiffs argue that the record contains no evidence with respect to the management of the casino hotel in 2008, 2009 and 2010, precluding a finding that the presumption of competent management would not apply for tax years 2009, 2010 and 2011.
In order to evaluate the parties' arguments, it is necessary to examine in detail the circumstances surrounding the CCC's 2007 licensing decisions. The CCC is vested with broad regulatory powers to carry out the expansive regulation of casinos pursuant to the Casino Control Act, N.J.S.A. 5:12-1 to -152. Boardwalk Regency Corp. v. Casino Control Comm'n, 352 N.J. Super. 285, 302 (App. Div.), certif. denied, 174 N.J. 366 (2002). Those powers include authority to issue licenses to operate casino hotels. A casino hotel, its holding company, and key personnel must be licensed by the CCC. All licenses require periodic renewal subject to review and approval by the Commission.
At the times relevant to these matters, licensing and renewal criteria included, among other factors, a demonstration by clear and convincing evidence of: (1) financial stability, integrity and responsibility, N.J.S.A. 5:12-84a; (2) integrity of all financial backers, N.J.S.A. 5:12-84b; (3) good character, honesty and integrity, N.J.S.A. 5:12-84c; (4) sufficient business ability and casino experience as to establish the likelihood of creation and maintenance of a successful, efficient casino operation, N.J.S.A. 5:12-84d; (5) the suitability of the casino and related facilities, N.J.S.A. 5:12-83i; and (6) the fact that a proposed casino hotel location will not adversely affect existing casino operations, N.J.S.A. 5:12-84e.
As the CCC has explained,
the broad scope of [the specific statutory licensing standards] reveals that no precise, mechanical formulation is possible or even desirable. In deciding whether [an] Applicant should receive a license, the overall sense and purpose of the [Casino Control] Act
must be brought to bear on the particular facts as found. Careful evaluation of the evidence must be combined with a conscientious effort to achieve the true intent of the law.
[In re: Resorts Casino Application, 10 N.J.A.R. 244, 257 (CCC 1979).]
On May 19, 2006, the then-owner of the Tropicana agreed to a merger which would result in ownership of the facility being transferred to Tropicana Casinos and Resorts, Inc., ("TCR") a private company wholly owned by William Yung, III. At the time, TCR owned and operated fourteen casinos and resorts in the United States and the Caribbean. Mr. Yung, along with family trusts for his children, also owned a separate corporation which owned and operated 70 hotels and resorts throughout North America and the Caribbean.
In order to effectuate the merger, on June 6, 2006, TCR filed with the CCC a petition seeking, among other things, Interim Casino Authorization pursuant to N.J.S.A. 5:12-95.12, and, ultimately, plenary authorization to operate the Tropicana as its holding company. As the owner of the company, Mr. Yung also required a license to operate the casino hotel.
On November 2, 2006, the CCC granted Interim Casino Authorization to TCR effective January 3, 2007, the date of the closing of the merger.
On August 7, 2007, the then-owner of the casino hotel filed a petition with the CCC to renew the facility's casino and alcoholic beverage licenses for a five-year term. The then-existing licenses for operation of the casino hotel expired on November 30, 2007 (although the CCC later determined that the licenses did not lapse until the Commission issued its decision on the renewal application on December 12, 2007).
In addition, on October 11, 2007, the Division of Gaming Enforcement filed with the CCC a two-count Complaint against TCR and the casino hotel, alleging violations of the Casino Control Act and CCC regulations for failing to institute a properly constituted and functioning independent audit committee for the facility.
The Commission held four pre-hearing conferences regarding the applications and Complaint, followed by eight days of hearings. Its decision was issued on December 12, 2007.
The CCC decision focused primarily on three issues arising from the operation of the casino hotel during 2007: (1) the negative impact of layoffs implemented after TCR's acquisition of the property, including the cleanliness of the facility and staffing levels in the security and slots departments; (2) the absence of a properly constituted and functioning independent audit committee for part of 2007; and (3) changes in high level personnel with experience in the operation of casino hotels.
With respect to the layoffs, the Commission determined that in its first month of ownership of the Tropicana, TCR, at the direction of Mr. Yung, lowered the overall workforce at the facility through layoffs, terminations and voluntary departures by 206 employees. This pattern continued in each of the ensuing months. By August 21, 2007, the workforce at the casino hotel had been reduced by 678 employees. By October 31, 2007, the casino hotel workforce had been reduced by 897 employees. This represented an approximately 20% reduction in workforce during a ten-month period.
According to the CCC's findings, "[t]he ramifications of those reductions manifested themselves in many ways." In re: Amended Petitions of Adamar of New Jersey, Inc. for Renewal of its Casino and Casino Hotel Alcoholic Beverages Licenses and Other Matters, Order No. 07-12-12-27, Casino Control Comm'n (December 12, 2007)("CCC Order") at p. 13. Following the reduction in cleaning staff that serviced public areas of the facility, the casino hotel faced "what its witnesses described as a 'cleanliness crisis' in March 2007." Ibid. Although disputed by TCR, the Commission determined that "there were persistent cleanliness issues in June, some of which directly affected Tropicana's convention trade." Ibid. The casino hotel's President and Chief Operation Officer conceded that "the layoffs [were] too many, too soon." Ibid. The Commission concluded that the situation "never should have been allowed to reach the crisis stage" and that a "more effective and timely response should have been able to eradicate this problem or, at the very least, limit its duration." Id. at 14.
The Commission also determined that reductions in staff adversely affected the casino hotel's security department, resulting in inadequate security personnel during the graveyard shift. To compensate, TCR "impermissibly removed personnel assigned to mandatory posts to perform the drops and pickups [of cash, gaming vouchers and coupons], leaving the mandatory posts unattended." Id. at 16. On at least one occasion, TCR used an unlicensed hotel security officer to staff a casino entrance during a shift change. Id. at 17.
In its decision, the Commission suggested that TCR's director of security, risk management and surveillance provided perjured testimony regarding his recommendations on security staffing levels at the casino hotel. The CCC intimated that Mr. Yung had pressured the security official to transform his opinion that additional security staff was needed at the facility to a recommendation that security staff be reduced in accord with Mr. Yung's plans for a reduction in staff. Id. at 17-20.
According to the Commission's findings, staff reductions in slot attendant staff "increased slot payout times with a consequent diminution in customer service." Id. at 45. The Commission concluded that the staffing reductions were based on experiences at other casinos that were not comparable to the subject property and could have been prevented by a proper business analysis.
The Commission found that TCR offered an "elusive" explanation of its failure to appoint an independent audit committee required by N.J.A.C. 19:45-1.1(c)2 until June 14, 2007, more than six months after TCR took control of the facility. Id. at 25. The supervisors of two mandatory departments - internal audit and surveillance - generally are required to report directly for matters of policy, purpose, responsibility and authority to an independent audit committee. The hiring, firing and salary of the supervisors of internal audit and surveillance are directly or indirectly within the exclusive province of the independent audit committee. The Commission described the independent audit committee as a "critical component of the regulatory apparatus," id. at 38, the breakdown of which "could readily lead to calamitous results, both for the licensee directly and in terms of the public's overall 'confidence and trust in the credibility and integrity of the regulatory process and of casino operations.'" Id. at 37-38. The CCC characterized TCR's actions with respect to the independent audit committee as an attempt "to provide deniability for the company's intransigent desire to retain management dominance on the committee." Id. at 38. The Commission concluded that "Tropicana's regulatory performance since the TCR acquisition has been abysmal, and there is no more glaring example of that than what transpired with the attempts to establish an independent audit committee." Id. at 36-37.
The Commission also took issue with management contracts executed by TCR without CCC approval, as well as significant changeover in high-level management personnel with experience in operating a casino hotel during 2007. The Commission noted that "[t]hese officer changes, in some of the most sensitive areas for regulatory purposes, inevitably raise questions about the ability of TCR and, through it, Tropicana, to make the necessary choices to assemble and retain a competent team to operate in the highly regulated Atlantic City casino environment." Id. at 51.
With respect to Mr. Yung, the Commission found that he either lacked sufficient knowledge of the regulatory compliance of the casinos he operated in other jurisdictions or intentionally withheld information about such compliance during his testimony before the CCC. In addition, the Commission found that Mr. Yung's failure to prepare for the CCC hearing did "not bode well for a company that is attempting to convince this body that it has the acumen to operate in this marketplace." Id. at 50.
The Commission concluded that "Tropicana's 2007 monthly casino revenues, through as most recently November of this year, consistently have trailed those of its competitors, and by a significant margin compared to the industry average. Although the Philadelphia area slot operations and the Atlantic City partial ban on smoking have affected Tropicana, nothing in this record even remotely establishes that Tropicana is disproportionately suffering from those effects, so its precipitous decline necessarily must have a uniquely Tropicana cause." Id. at 52-53.
The Commission concluded that TCR and Mr. Yung failed to satisfy the requirements for licensure because of (1) a demonstrated failure to establish an ability to operate successfully a casino hotel in Atlantic City; (2) a lack of good character, honesty and integrity; and (3) a contumacious defiance of the regulatory process. In addition, the CCC concluded that the Division of Gaming Enforcement had proven the allegations in its Complaint and assessed a $750,000 fine for TCR's regulatory violations. Notably, the Commission made no determination with respect to the individual licenses of any of the key employees of the casino hotel other than Mr. Yung.
The CCC's decision was affirmed by the Appellate Division, In re: Petition of Adamar of New Jersey, Inc., 401 N.J. Super. 247 (2008), and the Supreme Court. 197 N.J. 179 (2008).
To prevent a lapse of Tropicana's casino and casino hotel alcoholic beverages licenses, the CCC immediately activated the Interim Casino Authorization Trust and instituted a conservatorship over the subject property. The Commission appointed retired New Jersey Supreme Court Justice Gary S. Stein as Trustee and Conservator. He was charged with operating the casino hotel and ensuring an orderly disposition of the property. The Trustee and Conservator, who reported directly to the Commission, did not seek to have any of the key employees of the casino hotel removed during his stewardship of the facility. Mr. Yung had no involvement in the operation of the casino hotel after the Commission's decision.
TCR ultimately filed for bankruptcy to facilitate the transfer of the casino hotel to a lender consortium led by Carl Icahn. The sale was approved by the Bankruptcy Court on June 12, 2009 and formally took place on March 8, 2010. A temporary license to operate the facility was granted to the new owners on March 3, 2010.
II. Conclusions of Law
A. The Income Approach and the Presumption of Good Management.
The parties' motions have their origin in the Supreme Court's holding in Parkview Village Assocs. v. Borough of Collingwood, 62 N.J. 21 (1972). In that case, the taxpayers challenged the assessments on four apartment buildings. All experts agreed that the income approach to valuation was the appropriate method for determining the true market value of the properties. The parties' experts offered competing views of the fair rental value, or economic rent, for the properties and whether actual rents at the properties represented economic rents. After consideration of the competing evidence, the court established a general rule for determining economic rent:
In the absence of convincing evidence to the contrary the current ongoing income scale of a large, well-managed apartment project like this, functioning as customary with leases of relatively short length, should be deemed prima facie to represent its fair rental value for purposes of the capitalized income method of property valuation. A court or taxing agency should be most hesitant to find that the tenants of a residential property being operated commercially are being charged inadequate rent. That approach, we believe, conduces to the objective of relative stability of assessments which we have heretofore held to be basic to sound tax assessment policy. Readily to be distinguished is the case of a taxpayer owning commercial property tied to a long term lease made long before the current assessing date, where the present rent may well be out of line with current fair rental value.
[62 N.J. at 34-35 (citations omitted).]
The Parkview presumption was reaffirmed by the Supreme Court in Parkway Village Apartments Co. v. Township of Cranford, 108 N.J. 266 (1987). In that case, the owner of a large, well-managed apartment complex with one-year leases challenged the assessment on the property. The income approach was used to determine true market value. The taxpayer's expert, relying in the holding in Parkview testified that the actual rent charged for the apartments should be accepted as economic rent. The municipality's expert imputed to all apartments on the property the most recent rent charged for an apartment of that type. The most recent rent for each apartment type was higher than the actual rent for some apartments. Id. at 269.
The Court explained that its holding in Parkview "was based on the belief that landlords of well-managed apartment complexes maximize their profits and minimize their expenses." Id. at 271. The court also noted that the holding in Parkview had "been consistently followed." Ibid. (citing Glen Wall Assocs. v. Township of Wall, 99 N.J. 265, 275-76 (1985)). After reviewing several opinions in which the Parkview holding had been applied, the Court held that "[w]e reaffirm the Parkview rule that in the absence of convincing evidence to the contrary, the actual rent of a well-managed apartment complex functioning with customary leases of relatively short length is prima facie representative of economic rent for the purpose of capitalized income of property valuation." Id. at 276.
The Parkview rule was extended to hotel properties in Glen Pointe Assocs. v. Township of Teaneck, 10 N.J. Tax 380 (1989), aff'd, 12 N.J. Tax 118 (App. Div.), certif. denied, 122 NJ. 391 (1990). In that case, the owner of a full-service, luxury hotel challenged the assessment on its property. This court took the income approach to determine true market value. The taxpayer's expert relied on the hotel's actual income as economic income, without making a comparison to the income derived from other hotel properties. The township urged the court to reject the expert's opinion because the "the labor-intensive retail business aspects of a hotel and the degree of management expertise required in a hotel operation make the presumption of Parkview Village inapposite" when valuing a hotel and a determination of economic income from the market was necessary. 10 N.J Tax at 390.
Judge Crabtree rejected the township's argument. Noting that the hotel at issue was "managed pursuant to an arms'-length management contract, the provision of which provided incentives to management to maximize revenues" and that the manager of the hotel was experienced, the court held that the "principles of Parkview Village are thus applicable to the tax valuation of a hotel." Id. at 390-391. He continued, "I conclude that the operating revenues of the subject hotel, as stabilized by plaintiff's expert for all tax years under revenue (sic), are prima facie of economic rent, subject to adjustments for business value and the value of personal property." Ibid.
In City of Atlantic City v. Ace Gaming, LLC, 23 N.J. Tax 70 (Tax 2006), the only published opinion in New Jersey in which the true market value of a casino hotel was determined for local property tax purposes, Judge Bianco addressed the applicability of the presumption of good management, and thus economic income, to casino hotels. In that case, the parties stipulated that they would not rely on the cost approach to determine the value of the casino hotel, a decision that did not secure judicial sanction. As Judge Bianco stated "the court cannot and will not accept by stipulation of otherwise, that the cost approach to value is inapplicable in this case or any other tax appeal involving casino hotel property." Id. at 97-98. Judge Bianco observed that, given the nature of the casino hotels, the lack of precedents in New Jersey and the existence of published opinions in other states using the cost approach to value casino hotels, "this court is not certain why counsel would agree not to use the cost approach to value in this matter, and why both expert appraisers would acquiesce in that agreement." Id. at 99. "With respect to the cost approach to value in the present matters, this court is only willing to accept that neither party ultimately opted to utilize that approach." Id. at 98.
It is not at all clear if the income approach, which is generally limited to properties that generate rental income, including hotel properties, is the best approach to determining the value of an Atlantic City casino hotel. While plaintiffs operated a hotel as well as a casino at the subject property during the relevant periods, it may well be true that casino hotels are not operated in the same manner as conventional hotels. Room rentals, occupancy and other factors associated with a casino hotel are closely associated with gaming operations at the facility. For example, one significant difference between casino hotels and conventional hotels is that casino hotel operators frequently offer gaming patrons free rooms in order to encourage continued gaming, the revenue from which will likely cover the cost of the room. Conventional hotels have little incentive to give customers free rooms. In addition, casino hotels generate significant amounts of gaming income and, perhaps, income from other business activities. The income approach generally does not apply to properties that generate income from commercial activity other than rental income.
It appears that the parties' appraisal experts in the present matter will offer opinions of value based on the income approach and other approaches. Thus, it is not certain that the presumption of good management, which is relevant only to the income approach, will even factor into the court's ultimate determination of value. The parties, however, request guidance from the court at the outset of the trial to assist in determining the evidence they will produce.
The decision in Ace Gaming does not resolve the question of whether the presumption of good management applies to hotel casinos. In that case, the casino owner "simply assume[d] the presumption applies to casino hotels but fail[ed] to establish that it does, or offer an argument why it should." Id. at 117. The court also noted that "neither party provided the court with enough of a basis to conclude whether or not the presumption applies to casino hotels. Accordingly, the court declines to make that determination here . . . ." Id. at 118. Judge Bianco nevertheless assumed arguendo that the presumption applied and concluded that the trial record contained "convincing evidence that the presumption had been overcome" in that case. Id. at 125.
Several factors support the proposition that a presumption of good management should apply in the event the income approach is used to value a casino hotel. Casino hotels are regulated by the CCC, which, as explained above, must make licensing determination based on its findings by clear and convincing evidence of whether a casino hotel operator possesses sufficient integrity, responsibility, financial stability, experience, and business ability to establish the likelihood of creation and maintenance of a successful, efficient casino operation. See N.J.S.A. 5:12-84. In addition, the owners of casino hotels, like the owners of apartment buildings and hotels, have a natural incentive to maximize income and minimize expenses and no meaningful basis exists to distinguish among those property owners with respect to the presumption of good management. The court perceives no principled reason to distinguish casino hotels from apartment buildings or conventional hotels with respect to the application of the presumption of good management under the income approach. B. Tax Year 2008
As noted above, the presumption of competent management applies only "in the absence of convincing evidence to the contrary." Parkview, supra, 62 N.J. at 21. The court finds that the CCC's determination, which is subject to judicial notice, N.J.R.E. 201(a), and has been upheld by both the Appellate Division and Supreme Court, constitutes convincing evidence overcoming the presumption of competent management of the subject property with respect to tax year 2008.
The Commission set forth detailed findings of fact that relate to the competence of the management of the casino hotel during 2007. The Commission's decision notes the "lack of business ability" of Mr. Yung, the "demonstrated failure" of TCR and Mr. Yung to "appreciate the workings of the Atlantic City casino marketplace," and their "lack of good character, honesty and integrity," evidenced by what the Commission characterized as untruthful testimony from TCR officials. In particular, the Commission recognized that cleanliness issues at the facility had a negative affect on the casino hotel's convention trade, that reductions in staffing extended payout times at slot machines, and that the failure to institute an independent audit committee risked a disastrous threat to public confidence in gaming at the facility. The CCC characterized TCR's operation of the facility during 2007 as a "contumacious defiance of the regulatory process" and upheld a regulatory complaint from the Division of Gaming Enforcement, imposing a quarter million dollar fine.
While the court is cognizant of the fact that the CCC's findings do not specify in detail how the violations reduced income from the rental of hotel rooms at the Tropicana during 2007, the Commission's findings and its decision to deny licensure, according to defendant only the second time in State history that the CCC made such a decision, constitute sufficient evidence to overcome the presumption that the facility was competently managed in 2007.
The CCC has considerable expertise and experience in the regulation and oversight of casino hotels. The harsh language in Commission's decision, which was upheld by the State Supreme Court, underscores the agency's view of the management shortcomings at the facility during 2007. The record surely is sufficient to overcome the presumption of competent management of the Tropicana casino hotel for tax year 2009.
Having overcome the presumption, defendant will have the opportunity to introduce evidence that the income generated by the hotel operations at the facility during 2007 was below market - i.e. that competent management of the facility would have generated increased hotel room income during 2007. C. Tax Years 2009 and 2010.
The record contains insufficient evidence for a determination by this court that the presumption of good management has been overcome with respect to tax years 2009 or 2010. The Commission's determination concerns only events that took place in 2007. A Trustee and Receiver was appointed by the CCC to oversee operation of the facility immediately after the Commission's decision. TCR and Mr. Yung were divested of control of the casino hotel at that time. The Trustee and Receiver reported directly to the Commission with respect to the operation of the facility. Nothing in the record suggest that any of the management problems present at the casino hotel during 2007 continued under the supervision and control of the Trustee and Receiver.
Indeed, defendant has not provided the court with evidence concerning operations at the casino hotel during 2008 and 2009. Defendant argues that the management problems that resulted in the Commission's December 12, 2007 decision could not have been rectified until control of the casino hotel passed to new ownership. This argument, however, is not supported by evidence in the record. The court is not prepared to assume that the Trustee and Conservator failed to operate the facility in a competent fashion or that the CCC, to whom he reported directly, would permit the casino hotel to be managed incompetently.
The Commission's December 2007 decision was based on management decisions of TCR under the direction of Mr. Yung. Both TCR and Mr. Yung were excluded from control of the casino hotel immediately after the CCC's denial of their license applications. In light of the Commission's findings, it is reasonable to assume that the Trustee and Conservator made whatever management changes were necessary to ameliorate or eliminate the shortcomings found by the CCC. Defendant has produced no evidence to the contrary.
The fact that the Trustee and Conservator retained high-level management personnel in place at the facility in 2007 does not change this court's conclusion. As noted above, the CCC took no action with respect to the licenses of any key management employees at the Tropicana, limiting its decision to the applications of casino, TCR and Mr. Yung. In fact, in many instances in which the Commission was critical of upper level managers it noted the probable influence of Mr. Yung on their decisions. Without evidence of incompetent business decisions during the period in which the Trustee and Conservator operated the facility, the court cannot conclude that the presumption of good management does not apply to tax years 2009 and 2010.
D. Tax Year 2011.
After ownership of the Tropicana was transferred by the Trustee and Conservator, the CCC granted a temporary license to the new owners on March 3, 2010. Defendant contends that the "stigma and negative press" stemming from the Commission's December 2007 decision and subsequent conservatorship extended past the date of the issuance of the new temporary license and through 2010. Even if such stigma and negative press attention extended through 2010, a proposition that is not supported by evidence in the motion record, those facts are not consequential to the existence of the presumption of good management for tax year 2011.
The presumption concerns whether the hotel aspects of the facility were well managed during the period in question, not whether the public and press had a negative perception of the Tropicana at any particular time. The Trustee and Conservator operated the facility during the first months of 2010 and the new owners operated the facility for the remainder of that year. Nothing in the record supports the conclusion that the casino hotel was not competently managed during any part of 2010. There is, therefore, no basis in the record for a determination that the presumption of good management should not apply for tax year 2011 or that the burden should be shifted to the taxpayer to prove by clear and convincing evidence that the property was competently managed during 2010.
N.J.S.A. 5:12-84b was deleted by amendment in 2011. See L. 2011, c. 19.