Islandia to eliminate village property taxes once Jake's 58 expansion is complete, mayor says

The Village of Islandia plans to eliminate property taxes once the Jake’s 58 casino expansion is complete, saving village residents hundreds of dollars per year, Mayor Allan Dorman said. 

The village will get an additional boost of $2 million a year under an amended 2021 taxpayer relief agreement with Suffolk OTB, which owns the casino, according to documents obtained by Newsday. The influx of cash is expected to save residents between $400 and $500 on their annual property tax bill at least until the agreement expires in 2041.

OTB plans to complete a $210 million expansion of Jake’s 58, anticipated to take at least two years, including doubling video lottery terminals to 2,000, adding new pubs and restaurants and refurbishing hotel rooms, officials said.

Ray Fell, a former mayor of Bellport and past president of the Suffolk County Village Officials Association, an advocacy group, said he doesn’t know of any other Long Island villages that have eliminated property taxes, a move that’s “tremendous” for Islandia residents. 

“I don’t know enough about the agreement with Jake’s and the municipality to determine if that would create some kind of problem if Jake’s wanted to expand and the village had to give them the permits they needed,” he said.

But, he added, “I know the mayor well enough to know that if he didn’t think it was good for the village, he wouldn’t do it.”

Elected officials are basically delegating their control of the village to an unelected OTB board... 

—Paul Sabatino, a Huntington Station-based attorney

Paul Sabatino, a Huntington Station-based attorney who has represented casino opponents in the past, said "the legal effect" of the village budget relying on OTB contributions is that Islandia could become a "subsidiary of OTB."

"The impact is that the elected officials are basically delegating their control of the village to an unelected OTB board, because if they surrender control of the budget ... to OTB, what's the point of having a village board?"

Dorman said he is not concerned about the higher OTB payments creating a conflict of interest for the village board should the casino need approvals for future expansions, and emphasized that the village is "protected by home rule."

"We are a separate entity" from OTB, he said. "We control our destiny ... This is a contract with the state.

"Any way you look at it, we're a tax-free zone."

“Mayor Dorman and the Village Board negotiated an extraordinary deal on behalf of their constituents,” OTB president Phil Boyle said last month. “As the casino expands and revenue increases, Islandia residents will continue to benefit.”

The payments to the village will nearly double, to $4.25 million, as part of a deal negotiated with Suffolk OTB in 2021. OTB currently pays Islandia about $2.25 million per year as part of a 20-year, $47 million agreement adopted when the village approved the casino in August 2016, Newsday has reported.

Payments will increase once the 2,000 machines are operational, OTB officials said.

Boyle said OTB estimates show gross casino revenue could grow 42%, from $273 million last year to $388 million in the first full year after construction is completed.

Before the casino agreement, Islandia in 2010 eliminated garbage taxes, saving the average resident about $500 per year, Dorman said. A taxpayer relief program reached in 2016 with Delaware North, the previous owner of Jake's 58, further reduced property taxes by up to 50% for village residents. Property owners typically paid between $800 and $1,000 in yearly taxes to the village, depending on assessed value, according to Dorman. 

The casino helped Suffolk OTB escape bankruptcy in 2020, after the corporation partnered with Delaware North in 2017 to run the casino hotel. OTB later purchased Jake's 58 in 2021.

If you don’t want to pay taxes, this is the place to be.

—Mayor Allan Dorman

“This is another step to make our village more desirable,” Dorman said. “If you don’t want to pay taxes, this is the place to be.”

Village residents will still pay school, town, fire and library district taxes. 

Off-Track Betting corporations were authorized in 1970 when the state updated its racing and pari-mutuel wagering law, which was enacted in 1939. OTBs were created as a public benefit corporation to stem rampant illegal betting and provide revenue for public schools and state and local governments.

Suffolk and Nassau have two of the state's five Off-Track Betting operations.

Suffolk OTB earlier this year filed a State Supreme Court lawsuit challenging Islip Town's decision to assess 75% of Jake's 58 for property taxes. OTB says the casino and hotel should be tax-exempt as government property; Islip says the hotel should be taxed as a commercial entity.

Jake's 58 is located off the Long Island Expressway, between the former Computer Associates campus and a small residential neighborhood. It has become one of the most profitable betting operations in the state since it opened in February 2017. In fiscal 2023-24, the casino raked in $277,328,056 in net revenue after bettors received their winnings, according to figures posted on the state Gaming Commission website.

According to the 2021 amended agreement obtained by Newsday, the taxpayer relief agreement will expire on Feb. 28, 2041. The agreement stipulates that the village and OTB meet two years before that date to negotiate either an extension or a new agreement.

Read the agreement

Jake’s 58 has proved a boon to the village, which, before the casino, faced critically low cash reserves in some years and was under significant fiscal stress as recently as 2018, according to the state Comptroller’s Office. 

Islandia is not the only New York municipality to benefit from a local casino.

The town of Tyre in Seneca County, home to the del Lago Resort and Casino, eliminated town property taxes for 2024, a spokesman for the Comptroller’s Office said. 

In a recent report, the Comptroller’s Office said the town also had been close to eliminating property taxes in 2023. But in 2021, Tyre temporarily increased property taxes to previous levels — a 243% jump — to make up for a shortfall in gaming tax revenue during the pandemic. 

Sabatino said casino revenue is "subject to the whims of the economy," and Jake's 58 could become more vulnerable if other nearby casino proposals, such as Las Vegas Sands in Nassau County, are built and create more competition.

Islandia, a 2.2-square mile village with a population over 3,500, has so far used the casino money to not only reduce the tax burden on residents, but to also maintain infrastructure, purchase buildings for storage, and expand the village public safety department with new vehicles and more staff, Dorman said.

Excess funds, typically around $600,000 per year, go into village reserves, Dorman said.

Islandia residents shopping at a local center when asked for their opinion on the future tax savings declined to comment. The village does not have local civic groups.

In 2022, village spending totaled around $4 million, most of the $4.5 million in revenue Islandia took in that year, according to data the village filed with the state Comptroller’s Office.

As of Dec. 31, 2022, the village owed around $435,000 in bonds, according to data the village filed with the state Comptroller’s Office.

With Carl MacGowan

By Brianne Ledda

brianne.ledda@newsday.com

Brianne Ledda covers the Town of Islip for Newsday. She previously covered Southold and Greenport for The Suffolk Times and is a graduate of Stony Brook University.