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Atlantic City Produces Five-Year Plan, Hopes to Fend Off State Takeover

The plan calls for cuts in jobs and benefits, outsourcing of services, and the sale of Bader Field airstrip

atlantic city

The fate of Atlantic City and its beleaguered economy were moved squarely into the hands of the state on Monday, as city officials formally delivered on their obligation to come up with a five-year strategy to shore up finances and set the city on a track toward fiscal recovery.

With a 5-3-1 vote at a special meeting last night, Mayor Don Guardian and city council members introduced and passed the plan, which relies on a combination of cost-saving measures and revenue generators they said they’re confident will help right the city’s sinking economy and fend off a potential state takeover. The burden is now on Gov. Chris Christie and state officials to decide whether to accept or reject the plan, as per a rescue package passed by lawmakers to address the city's fiscal problems earlier this year.

As its authors put it, half of the plan concerns itself with addressing the over $500 million in outstanding debt the city currently faces, while the other takes aim at the city’s budget deficit, which has bloomed to almost $100 million over the last several years in the face of plummeting tax revenues.The plan calls for cuts in services, privatizations, and the previously announced sale of Bader Field, but does not include tax increases, which could make it less likely to receive the state's stamp of approval.

The city’s fiscal woes stem mainly from a decline in revenues, which in turn have been spurred by the crumbling of Atlantic City’s economic core: its casino industry. Five of the seaside gaming mecca’s 12 casinos have shuttered their doors in recent years, costing the city thousands of jobs. And the ones that still stand have successfully challenged their tax assessments, helping to reduce a ratable base that in 2008 totaled $20 billion to just over $7 billion in 2015.

“That kind of economic shock to the system has caused the challenges we now face and that we now hope to resolve,” said Michael Nadol, managing director at the financial advisory group PFM, which helped Guardian and city officials craft the plan and present it at last night’s meeting.

The 125-page report calls for cutting local spending, which officials hope will help deal with the city’s deficit-ridden operating budget measures The city previously had undertaken measures to balance its spreadsheets, including eliminating more than 27 percent of the municipal workforce and restructuring employee prescription and dental programs to save over $1 million.

Those actions will be followed up with further cuts, including downsizing city staff by another 100 through early retirement incentives, renegotiating police and civilian labor agreements to reduce healthcare costs, and competitively bidding out city functions such as payroll services, emergency dispatch, and solid waste and recycling.

The plan also calls for several revenue-generating measures, such as modernizing the city’s parking system through outside contracts and receiving voluntary contributions from tax-exempt entities, including $1.4 million expected annually from Stockton University and South Jersey Gas.

On the debt-reduction side, officials say they will use the proceeds from the sale of Bader Field, a 143-acre former airstrip long touted as one of the city’s greatest assets, to help cover outstanding liabilities the city has accrued through recent tax appeals from Atlantic City casinos. Both the Borgata, which won more than $170 million in tax appeals by challenging its property’s assessed value over the years, and MGM, which won $33 million in a similar settlement, are on that list — though officials last night said if the debt to the Borgata is paid in a timely manner it could drop closer to $103 million.

Although critics have slammed the move as a “shell game,” the plan calls for selling Bader Field to the city’s independent Municipal Utilities Authority for $110 million, which, when combined with $105 million raised through the issuance of tax-exempt bonds secured by the state's Municipal Qualified Bond Act, would pay down the debts to Borgata, MGM, and other unresolved tax appeals. It would also cover $43 million owed to the state for deferred employee benefit costs, officials last night said.

Guardian announced details of the debt servicing portion of the plan last week, saying now is the time to “clean the slate of these past debts so we can move forward.”

“Once our Fiscal Recovery Plan is fully executed, Atlantic City will no longer struggle to pay its bills or address its capital improvement needs. No longer will our residents, or employees, have to watch and worry as the City moves from one crisis to the next in a constant state of uncertainty and instability,” Guardian said. “Instead we will return normalcy to City government through a sound financial foundation which will, in turn, provide the platform for private investment and a growing economy.”

Notably, the recovery plan does not include any tax increases over the next five years. City officials contend that residents have already shouldered enough of the city’s economic burden, having seen their tax increase by 50 percent between 2014 and 2015. The city’s proposed $242 million operating budget for 2016 would depend, among other things, on $106 million in state aid, $1,160,000 in revenue through shared services, and $114 million in local tax revenues — an 11 percent decrease from the prior year’s budget, which brought in $128 million.

That decision has already drawn the ire of state officials, who earlier this month rejected the city’s 2016 budget plan on the grounds that it did not include any tax increases, which the state said are required if the city wishes to qualify for the $37 million in transitional aid it requested.

The city said it anticipates millions of dollars in savings over the next several years, including $7.4 million in 2017, $12.7 million in 2018, $17 million in 2019, $17.3 million in 2020, and $18.5 million in 2021.

Last night was the first time the plan was presented in its entirety, representing the culmination of efforts by city officials over the last 150 days to meet the state’s November 3 deadline. That timeframe was part of the rescue package that lawmakers, led by Gov. Chris Christie, passed back in May to address Atlantic City’s ongoing fiscal crisis.

It also included a $73 bridge loan and authorization of payments-in-lieu-of-taxes worth up to $120 million for the 2017 calendar year, intended to prevent casinos like Borgata from filing further property tax appeals.

The state has until next week to decide whether it will approve the plan, or else proceed with a takeover of Atlantic City government, where it would be free to sell city assets and break union contracts. Guardian last night said he’s hopeful that won’t happen, calling the plan “actually achievable” and adding he expects the state, and specifically the Department of Community Affairs and Local Finance Board, to “embrace” it.

“If not for this plan, you’ll be clearly looking at Mayor Christie in this city,” said Council President Marty Smalls, who presided over some contentious back-and-forths between council members early in the meeting.

Tammori Petty, director of communications at the state Department of Community Affairs, said the state “emphatically and categorically reject(s) any implication that a decision regarding the city's plan has been predetermined.”

On Wednesday, the plan will be considered by lawmakers in Trenton, where Guardian and others are expected to testify in front of members of the Assembly Judiciary Committee.

Chase Brush is a former PolitickerNJ reporter and NJ Spotlight editorial intern from North Jersey.

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