Atlantic City’s faltering casino industry has resulted in a sharp drop in property tax revenues, which has forced the city to borrow hundreds of millions of dollars and is threatening its ability to pay its bills.

A big problem is that the drop in gambling revenue prompted a number of casinos to appeal their property tax assessments, resulting in lower tax bills. In order to pay property-tax refunds, Atlantic City has borrowed $270 million since 2007.

“In a few years, we will be broke under the way the city is doing business, and the [casino tax] appeals is just one part of it,” Mayor Don Guardian told The Inquirer in an interview before he was sworn in. “Detroit continued to bond until [it] couldn’t bond anymore. It increased taxes and lost population. Some of those same things are happening in Atlantic City, and we have to take steps to avert bankruptcy.”

In Detroit, a continued drop in casino revenues is hampering the city’s ability to restructure its debt. Meanwhile, there does not appear to be any end in sight to Atlantic City’s financial woes.

The Atlantic Club Casino (formerly Steve Wynn’s Golden Nugget) is closing its doors later this month, reducing the number of casinos in Atlantic City to 11.The Borgata will be in court this spring fighting to maintain a $48.8 million refund awarded by a state tax court in October. The city appealed the ruling. If the Borgata wins, many expect Atlantic City will have to raise taxes on residents and businesses.

Moody’s downgraded Atlantic City’s credit rating last month to Baa2, citing the shrinking tax base. In New Jersey, casino property valuations are based on the income generated. Casino revenues in Atlantic City have dropped from a high of $5.2 billion in 2006 to just over $3 billion in 2012. The final figures for 2013 are expected to be below $3 billion, which would be the lowest in 22 years. That is without adjusting for inflation.

Atlantic City’s financial woes offer a cautionary tale for other cities and states that try to use casinos to fund budget operations. Research by the Rockefeller Institute shows that gambling revenue is often unsustainable and unreliable.

The nearly two dozen states that get revenue from casinos struggled financially in recent years, according to an analysis by the Lexington Herald-Leader. “All of the states cut spending; half raised taxes. Some fired thousands of their public workers, including educators and police, and gutted their basic classroom funding,” the paper reported.