With Clock Ticking, Atlantic City Avoids Default -- But How Much Time Did It Buy?
City officials say there’s enough cash to get through the month; Christie and Sweeney continue to press for complete takeover
It went down to the wire, but Atlantic City made a scheduled debt payment on time yesterday, avoiding what would have been the state’s first municipal default in nearly 80 years. Still, the city government remains on borrowed time thanks to its severe financial problems, with only enough money on hand to get through the rest of this month.
All eyes now turn to Trenton, where a much-anticipated vote on a measure that would help ease the city through its fiscal challenges is scheduled for Thursday in the Assembly. But the vote comes while there’s still no consensus among lawmakers and Gov. Chris Christie on the best way to intervene in Atlantic City. That’s opened the door to intense lobbying, with the collective-bargaining rights of public workers and the city’s right to self-determination still the key sticking points.
But the more immediate problem for the Atlantic City government was figuring out how to make a $1.8 million debt payment by the end of the day yesterday. Local officials had made it through the month of April by only a narrow margin, and property owners in the seaside resort have until next week to make their quarterly property tax payments without penalty.
Faced with that crunch, some in the city had called for the government to skip the payment, arguing Wall Street could absorb the hit more than the city could. But Atlantic City Mayor Don Guardian announced during a news conference in city hall yesterday that enough property tax revenue had come in to allow the city to make the full debt payment by 10 a.m.
“We think it was the right decision,” Guardian told reporters gathered for a news conference about an hour later.
He said missing the payment could have impacted the broader region and it also would have sent the wrong signal going forward about the city’s willingness to be responsible. That point was echoed by Council President Marty Small, who also attended the news conference. He said making the debt payment was “the responsible thing to do.”
Had Atlantic City had been unable or decided not to make the debt payment it would have marked the first municipal default in New Jersey since Fort Lee went bankrupt in 1938.
But Guardian said he’s now confident the city would be able to cover its payroll for the month of May and should also have the ability to transfer another $8.5 million to the local school district later this month. He said Atlantic City had roughly $7 million in its accounts before making the payment, and more property-tax revenue is now expected to come in over the next week. “We’re doing it tight, but we understand how important these payments are to make,” said Guardian, a first-term Republican.
Still, Guardian and Small made no attempt to gloss over the city’s larger financial problems -- including having roughly $240 million in additional debt -- saying the next big move is now Trenton’s. The city should have enough money to get “into June,” Guardian said, before adding “not a lot beyond that.”
Atlantic City’s fiscal problems stem largely from the past recession and increasing competition from new casinos that have opened in neighboring states. In all, four of the resort’s 12 casinos have closed in recent years, costing the city thousands of jobs. The remaining casinos, meanwhile, have also successfully challenged their tax assessments, helping to reduce a ratable base that once totaled more than $20 billion to just over $7 billion.
Areleased earlier this year by an emergency manager appointed by Christie predicted the city faces a budget deficit that could be as large as $300 million over the next five years. The emergency manager’s recommendations included privatizing or regionalizing the city’s municipal utilities authority and letting the county government take over the city’s health and tax assessment departments.
But Small, a Democrat, said it was now up to lawmakers in Trenton to pass legislation to help Atlantic City, including authorizing a long-delayed payment-in-lieu-of-taxes arrangement with the resort’s remaining casinos to help stabilize the city’s revenue stream. Local officials are also asking for Atlantic City’s state municipal-aid allocation to be brought up to date to account for the plummeting ratable base and the fact that the casino industry is no longer as a lucrative a source of cash for the city as it once was.
But there remains considerable debate in Trenton as to whether the city simply needs a helping hand or a full takeover. Christie, a second-term Republican, and Senate President Stephen Sweeney (D-Gloucester) remain unconvinced that local officials have the will to make the significant spending cuts that they believe are necessary to bring the city’s budget in line with its reduced revenue stream.
Christie wants an immediate state takeover of the city that would allow him to renegotiate debt and rip up current labor deals. Agranting him that authority has already cleared the state Senate with support from Sweeney, but it has yet to come for a vote in the Assembly.
Instead, Assembly Speaker Vince Prieto (D-Hudson) is sponsoring, which would give the city up to two years to right its finances, providing local leaders more time to work out their own agreements with city workers. Prieto’s measure, which Guardian and Small say they support, also calls for the setting of financial goals or benchmarks that, if the city could meet them within 24 months, would stave off a full takeover.
Prieto is expected to post his own bill for a vote in the Assembly on Thursday.
But Christie pressed again yesterday for a vote on the takeover legislation that he’s supporting. Asked about Atlantic City following a news conference in the State House that was held yesterday to announce a new plan to test for lead contamination in local schools, Christie described the city’s ability to make its debt payment as only temporary relief.
He also said local governments throughout the state are making their own bond payments without any fanfare or press conferences, and he joked that Guardian must think he deserves a “gold medal” for doing so yesterday.
“They won’t be able to do the same in June,” Christie said.
The governor also confirmed a Politico New Jerseyfrom over the weekend that said he plans to call Republicans in the Assembly to the governor’s mansion in Princeton on Thursday for a breakfast meeting. The meeting will come just a few hours before the vote on Prieto’s Atlantic City intervention legislation is scheduled to be held, though Christie described it a routine get-together. Still, it’s unlikely Prieto would not have posted his bill for a vote if he didn’t think it would pass, so intense 11th-hour lobbying against it by the governor and others is expected this week.
The Record newspaper based in Woodland Park alsothat South Jersey Democratic power broker George Norcross has approached at least one North Jersey political leader about supplanting Prieto as the leader in the Assembly.
But Prieto issued a statement later yesterday that said he has no plans to delay a vote on his bill while also reminding that it received votes from both Republicans and Democrats when the measure passed in committee last month. “I’m prepared to move forward with the bipartisan Assembly bill that would represent an effective response to helping Atlantic City while protecting civil liberties and worker rights,” Prieto said.