Atlantic City officials and Trenton lawmakers may be running out of time -- if not ideas -- given that budget analysts expect the city to default on its loans or run out of cash by April.
But the looming threat of insolvency is only part of the problem. Many of the same municipal leaders and political representatives are becoming increasingly frustrated and desperate, claiming that top-ranked State House players are reversing positions and making important financial decisions that some contend are driven by politics.
They say, for example, that after years of using state agencies and financial managers to prop up the city and months of stalling on critical decisions, Gov. Chris Christie is now blaming irresponsible fiscal management and foot-dragging on the part of city leaders for his veto of three Atlantic City rescue bills.
Meanwhile, as the city teeters between bankruptcy and state takeover, municipal leaders say that a nationally campaigning Christie and likely gubernatorial contender Senate President Stephen Sweeney (D-Gloucester) have reneged on their promises to keep gaming exclusive to Atlantic City though 2016.
It’s understandably difficult to find good news in Atlantic City these days, but there are a few exceptions: shuttered Showboat Atlantic City casino has finally been taken off Stockton University’s ledger after a disastrous move to turn it into an academic annex, and some real estate transactions appear to be moving in a positive direction.
What’s ahead for the beleaguered resort city? Here’s a list of 10 critical issues -- not all of them bad news -- that face Atlantic City:
New Jersey voters will probably get a chance to vote on whether to allow casinos outside of Atlantic City for the first time. On January 11, Christie, Sweeney, and Assembly Speaker Vincent Prieto (D-Secaucus) held a press conference to announce an agreement on legislation to put a constitutional amendment on the ballot this November.
After weeks of disagreement between Sweeney and Prieto over the specifics of the bill, the two chamber leaders compromised on a version that allows for two casinos to be built in different counties at least 75 miles outside of Atlantic City. Existing Atlantic City operators get first dibs on the new licenses, and winners must invest at least $1 billion in each property. Elected Atlantic City officials are furious despite supporters’ assurances that the city will benefit from 49 percent of public revenues generated by the casinos for the first 15 years. Both chambers must pass the bill by a three-fifths majority in order for the referendum to go forward this November.
On January 19, Christie surprised a lot of people when he pocket vetoed a package of bills designed to infuse a steady stream of revenue into Atlantic City’s coffers by stabilizing precipitously declining casino property taxes and diverting tens of millions of dollars from two state agencies. It was the second time the bills had crossed his desk. City leaders had been waiting for Christie to sign the pivotal bills since lawmakers passed them a year ago; instead, Christie waited until a September deadline to conditionally veto them. This fall, both chambers quickly concurred with the changes that would have required state oversight of the revenue streams, but instead of accepting his own recommendations, Christie let them die by taking no action. This pleased Republican County Executive Dennis Levinson and the county’s mostly Republican mayors, who didn’t like the formula that was to be used to calculate the amount casinos would have to pay in static payments in lieu of taxes (PILOTs).
Though the governor didn’t immediately explain his inaction, his spokesperson, Kevin Roberts, later lambasted the city’s leadership for wasting time and money and constantly seeking handouts from the state.
“Atlantic City government has been given over five years and two city administrations to deal with its structural budget issues and excessive spending. It has not. The Governor is not going to ask the taxpayers to continue to be enablers in this waste and abuse,” he wrote in a statement.
Mayor Don Guardian protested that he’d been working diligently with a monitor appointed by the state in 2010 and an emergency manager appointed by the state last year. Further, his 2015 budget relied on the $33 million the city would have received this year if Christie had signed the bill.
Atlantic City’s largest single debt is owed to the Borgata for overpaid taxes. With casinos losing so much of their value, Borgata successfully appealed its assessment and is trying to collect $160 million from the city in overcharges -- a predicament that caused the city’s administration to seek future relief from the PILOT bill. The city’s credit rating is so low that it can’t in any practical sense issue bonds to cover its debt, and after missing the city’s last scheduled payment of $62.5 million, Guardian pleaded with Borgata last week to draw out a longer payment plan. Borgata refused, leaving Guardian with what he perceives as just one choice: bankruptcy. Further, Standard & Poor's dropped the city’s bond rating four notches to "CCC-" on Friday, saying the city will almost inevitably default within six months.
As Borgata executives, state officials, and credit-rating agencies leave him fewer and fewer options for filling a $101 million hole in his budget, repaying his creditors and bond-debt obligations, and avoiding a predicted insolvency in three months, Guardian is talking increasingly about bankruptcy. He said recently that he and emergency manager Kevin Lavin had successfully restructured enough of the city’s debt and renegotiated public workers’ contracts to the point that the only remaining reason to file for bankruptcy is the debt to Borgata. Christie and Sweeney have come out vociferously against it, saying that a declaration of bankruptcy would further cripple the state’s already precarious bond rating, as well as those of struggling cities statewide. City council will vote Tuesday on whether to seek bankruptcy but the state must approve the declaration.
After a year of public criticism over his fees and perceived lack of progress, at 5 p.m. on Friday, January 15, Lavin submitted his final recommendations for the city’s financial future to the governor. In it, he expressed hope that the city would not declare bankruptcy and hope that state lawmakers would enact the PILOT bill, which he said would cut the city’s tax refunds in half. He suggested consolidating police and other services with Atlantic County and privatizing state-held assets like the money-losing convention center and Boardwalk Hall.
A few days before Lavin submitted his report and a few days after Christie vetoed the PILOT bill, Sweeney let it be known that he was thinking about introducing legislation for the state to take over Atlantic City, much as it did to Camden in 2002. Echoing Christie’s attacks on city leadership’s fiscal mismanagement and expectations of handouts, Sweeney did introduce a bill that called for state oversight for exactly five years.
“The city government has blithely refused to make the difficult political decisions needed to balance its budget — even with the governor making his intentions clear by appointing a bankruptcy lawyer as emergency manager a year ago,” he wrote in a statement.
He cited the city’s high per-person spending compared with other cities and its highest-in-the-nation foreclosure rate. Although the local newspaper endorsed the plan, Guardian and locally elected state officials naturally reacted with shock and fury to the plan.
Critics suggest the move is part of a plan to take control of city assets in order to sell them. They point specifically to the independent water authority, which Guardian doesn’t want to sell but has been an object of interest for New Jersey American Water, whose lobbyist, Philip Norcross, is the younger brother of Christie and Sweeney ally George Norcross. Although Sweeney is calling the PILOT veto “disappointing,” Guardian has suggested that the veto and subsequent takeover plan were set-ups for the sale of the utility to influential buyers.
Amid all the fighting between the city and the state, the New Jersey Economic Development Authority (EDA) approved incentives for two major development projects last Tuesday. The authority voted to award private development firm AC Devco $68 million in incentives to build a five-story dormitory building, an academic building with retail space, and a seven-story parking garage for Stockton and other tenants of the future campus. School administrators say they’ll run a shuttle from the main campus in Galloway. The EDA also approved $24 million for New Brunswick’s Boraie Development to erect three mixed-use buildings in the South Inlet.
Finally ridding itself of what must be one of the most ill-fated real estate purchases in Atlantic City history, Stockton closed on the sale of Showboat casino to Philadelphia real estate mogul Bart Blatstein on January 15. In what appears to be an amicable partnership, Blatstein paid $23 million for the building, which was $1 million more than originally agreed but $3 million less than what Revel owner Glenn Straub was going to pay for the building last year before a court nullified the sale. It’s unclear whether Blatstein will attempt to return the building to a casino or whether competing deed restrictions on the property will force or prevent him from doing so.
In a move that may mean the difference between Trump Taj Mahal staying open or becoming the fifth Atlantic City casino to close since 2014, the Third Circuit Court of Appeals ruled that Taj owner Carl Icahn does not have to honor the expired contracts of members of the UNITE Here Local 54 workers union. The ruling dealt a second blow to the union, which appealed the same decision issued by the judge handling the casino’s bankruptcy and terms of the property’s transfer from Trump Entertainment Resorts to Icahn.
After promising uses for the Revel that ranged from a college for geniuses to a family entertainment center, Straub announced on January 19 that he intends to reopen the shuttered property as a casino, albeit a much smaller one than before. The real estate billionaire who bought Revel out of bankruptcy for pennies on the dollar says the casino will occupy half the space it did under its original owners, and that an indoor water park to be constructed as early as April will fill up some of the room. Straub still needs to obtain a gambling license, something that will likely prevent him from opening the casino by this summer as he hopes.