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State Intervention -- Not Bankruptcy -- in Cards for Cash-Strapped Atlantic City

Christie, Sweeney, and Mayor Guardian seal deal, look to extend city revenue beyond just gambling

Sweeney, Christie and Atlantic City Mayor Don Guardian
Gov. Chris Christie, flanked by state Senate President Stephen Sweeney (D-Gloucester), left, and Mayor Don Guardian, right.

The state’s vision for Atlantic City is one that leaders hope will enable the resort to attract diversified business investment, creating a destination that extends beyond gambling. The deal was announced yesterday by Gov. Chris Christie, state Senate President Stephen Sweeney (D-Gloucester), and Mayor Don Guardian.

Assembly Speaker Vincent Prieto (D-Hudson) said the proposed framework needed further study, given that it would give the state broad powers over Atlantic City’s finances, including the ability to restructure debt and cancel union contracts.

The agreement announced during a State House news conference resolves weeks of bickering between leaders in Trenton and Guardian, who threatened to file for bankruptcy after Christie vetoed a financial-rescue package last week. But much hard work still needs to be done for the city to come out in good shape.

The first big task will be drafting and swiftly adopting a bill that can put into law the parameters of the state-intervention process that were announced yesterday.

Among other powers, the state would be able to restructure city debt and dissolve or transfer control of city departments and agencies, including its water utility, to county government or private operators.

The proposed intervention would also give the state the authority to require the city council and mayor to pass ordinances related to improving the resort’s finances. And the intervention could last as long as five years under the new agreement.

Christie said he wants to see the legislation on his desk by the end of February.

“The time to act is now,” Christie told reporters during a news conference held in his outer office.

Another big task looks to be getting Prieto to also sign off on the terms. In a statement released after the news conference, he suggested he could have problems with the part of the proposed intervention that would give the state the authority to amend or even scrap collective-bargaining agreements with city workers.

“That’s something that would certainly raise questions on my end,” Prieto said, before adding “if the Assembly is not involved, then there is no agreement.”

And city officials, meanwhile, are still concerned about another deal that was announced by Christie in the State House earlier this month, an agreement that paves the way for legislative approval of a proposed constitutional amendment that would ask voters as soon as this November to allow an expansion of casino gambling into northern New Jersey. Prieto has already backed that proposal.

Still, the agreement reached by Christie, Guardian, and Sweeney on the state intervention in Atlantic City puts an end to weeks of posturing that saw Guardian, a first-term Republican, threaten that going to bankruptcy was becoming a leading option for the city. That came after Christie last week vetoed legislation that was intended to prop up the city’s finances.

Sweeney, meanwhile, had also been pushing for big change in Atlantic City and he drafted legislation earlier this month that would have resulted in a full-scale state takeover of the city’s budget and other functions.

Although Sweeney backed away from that proposal yesterday, saying a scheduled hearing on his earlier bill has now been canceled, the new version will still contain much of what Sweeney first laid out as his goals. But he stopped short yesterday of saying the state would still be involved in a “takeover,” calling the new agreement instead “an intervention or a partnership.”

“We have to fix this government,” said Sweeney, who is expected to run for governor next year as Christie reaches the end of his second and final term in office.

Another key part of the agreement is a revival of a payment-in-lieu-of-taxes (PILOT) program that was part of the original bill package that Christie rejected last week over concerns that the city hadn’t done enough over the past year to address its fiscal challenges. That program, which could have set up a stable stream of millions of dollars in revenue for the city from outstanding tax appeals, will now be incorporated into the new legislation, the three leaders said.

“We looked at all the options,” Guardian said of his decision to now embrace an enhanced state role in Atlantic City’s administration. “It’s not hard to figure out what you want to do, and what’s best for Atlantic City and for the state of New Jersey.”

Christie has tried to make Atlantic City and its recovery a top priority since taking office in early 2010 amid a recession, including launching a takeover of the city’s tourism district. And his efforts picked up last year after four of the resort’s 12 casinos closed, with Christie holding several emergency meetings in Atlantic City and appointing a special emergency manager to scrutinize the resort’s finances.

Still, the city’s remaining casinos have been successfully challenging their tax assessments, helping to reduce a ratable base that once totaled more than $20 billion to just over $7 billion.

The city’s struggles had also become an issue for Christie as he seeks the GOP’s 2016 presidential nomination, with The Washington Post publishing a front-page story yesterday detailing his administration’s numerous attempts to intervene there with little success.

And the challenges posed by tax appeals and other fiscal problems the city is facing were mentioned in a weekly report issued on Monday by Moody’s Investors Service, which warned “time is running out and the city’s cash position is dangerously low.”

That warning came on the heels of a report issued earlier this month by Kevin Lavin, the emergency manager Christie brought on last year, that said the city is facing a $300 million deficit over the next five years and only has enough cash this year to get through April.

Lavin’s report also recommended the resort find ways to leverage several assets it owns, including privatizing or regionalizing the city’s municipal utilities authority and letting the county government take over the city’s health and tax-assessment departments.

Neither Christie, Guardian, nor Sweeney wanted to talk in detail yesterday about what specific steps will be taken now that they’ve reached an agreement on state intervention, including the exact fate of the city police department, utilities authority, or other assets. But they all agreed that getting the city’s finances in order would be a major step toward seeing the resort reborn as a destination rooted in more diverse attractions than just casino gambling.

“The bottom line now is, the only thing that is really holding Atlantic City back is its governmental structure and the debt and the cost of its government,” Christie said.

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