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Christie Administration Moves to Take over Atlantic City

State has broad powers to cancel union contracts, sell city assets, and restructure its debt, but officials have not said how far they will go

Atlantic City

Gov. Chris Christie’s administration moved yesterday to officially take over control of Atlantic City’s struggling local government, exercising broad powers the governor and lawmakers authorized earlier this year when the resort was on the verge of bankruptcy.

But just how aggressively Christie’s administration decides to utilize its new powers — which include the ability to restructure debt, sell off city assets, and rip up labor deals with municipal workers — remains to be seen.

City leaders, meanwhile, also declined to say yesterday whether they will eventually sue the state in a bid to block the takeover effort or to at least delay it from taking hold.

Also unclear right now is whether Christie himself will be sticking around to oversee the state’s key decisions on Atlantic City. Christie, though wildly unpopular at home as his second term draws to a close, is leading the transition effort for President-elect Donald Trump, and could very well be joining the new Republican administration as the real-estate mogul heads to Washington, DC, early next year following Tuesday’s win over Hillary Clinton.

The state’s formal takeover of Atlantic City’s local government was authorized yesterday by a vote taken in Trenton by the state Local Finance Board, an agency that oversees municipal and county government finances in New Jersey. The board’s action followed last week’s rejection by the commissioner of the state Department of Community Affairs of a five-year fiscal-recovery plan that was submitted by Atlantic City officials under the terms of state takeover legislation signed into law by Christie in late May.

Tim Cunningham
Tim Cunningham, director of the Local Finance Board

While the takeover law didn’t initiate the immediate intervention that Christie had originally asked lawmakers to grant him, it gave his administration the sole power to determine the viability of the city’s recovery plan, which it was given only a few months to produce.

Tim Cunningham, the director of the Local Finance Board, told reporters after the vote was held yesterday that his next step will be to meet directly with city officials. He acknowledged his powers under the takeover law now include having the authority to tear up collective-bargaining agreements and take direct control over personnel decisions.

“It’s an incredible responsibility, and it’s one that I’ve lost sleep over the last couple weeks,” Cunningham said.

The takeover law also allows him to sell off assets like Bader Field, the city’s former airport, and its water utility, which has become a major source of controversy in the wake of a decision by officials in Michigan to seek cost savings through the public-water system in Flint, leading to mass lead poisoning

But the board also stopped short of granting Cunningham the authority to take the city into bankruptcy, something that hasn’t happened to a municipality in New Jersey in roughly 80 years.

Don Guardian
Mayor Don Guardian got news of the state takeover of Atlantic City from the Local Finance Board on Wednesday.

Still, local leaders who attended the meeting had urged the board to delay the full takeover of city control and instead work more closely with them. Afterward, Council President Marty Small said it was a “sad day in the history of Atlantic City.”

“We have to sit down with the commissioner and see what powers we still have to continue to represent the people who elected us,” Small said. “We just look forward to further clarity.”

Atlantic City Mayor Don Guardian said in a statement that the city had followed “every step of the process” that was required under the takeover law.

“We will continue to work with the state of New Jersey on behalf of our residents while continuing to keep all of our options on the table,” Guardian said.

Atlantic City’s fiscal problems stem largely from the past recession and increasing competition from new casinos that have opened in neighboring states like Pennsylvania and New York. Five of the resort’s 12 casinos have closed in recent years, costing the city thousands of jobs. The remaining casinos, meanwhile, have successfully challenged their tax assessments, helping to reduce a ratable base that once totaled more than $20 billion to just over $7 billion.

The city itself also faces an estimated $500 million of outstanding debt and a projected $100 million budget deficit. Weeks before the takeover legislation was enacted, Atlantic City narrowly avoided defaulting on a debt payment.

But the city also received some good news this week after New Jersey voters on Tuesday decided to reject a ballot question that would have allowed two new casinos to open in northern New Jersey. Local officials vehemently opposed the ballot question and said its passage could have led to more casino closures in Atlantic City.

The five-year recovery plan that was submitted to the state by city officials late last month called for local spending to be significantly reduced, the workforce to be cut, and employee prescription and dental benefits to be revised. It also called for renegotiating police and civilian labor deals and for competitive bidding of key city functions such as payroll services, emergency dispatch, and solid waste and recycling.

The recovery plan also incorporated a proposal to sell Bader Field, a 143-acre former airstrip, to the city’s independent Municipal Utility Authority. That move was intended to generate $110 million that, combined with $105 million to be raised through the issuance of tax-exempt bonds secured by the state's Municipal Qualified Bond Act, would have been used to cover outstanding liabilities the city has accrued through the recent tax appeals from casinos.

The city’s recovery plan, meanwhile, did not call for any local tax increases, which had been a key point of conflict with the Christie administration.

In his rejection of the recovery plan last week, Department of Community Affairs Commissioner Charles Richman said he decided the five-year vision put forward by city officials was unlikely to provide real stability to the city and its finances. Richman also criticized the planned sale of Bader Field and questioned its viability.

In response to the Local Finance Board’s actions yesterday, Moody’s Investors Service, a major Wall Street credit-rating agency, called the move a “credit positive,” saying the state will have the ability to help the city cover debt payments looming on December 1 and December 15.

But Lena Smith, an organizer in New Jersey for the group Food & Water Watch, said the board’s takeover vote effectively denies residents of Atlantic City their right to self-governance.

“The takeover grants the state the power to trample on workers’ rights, close down city departments, and sell off Atlantic City’s assets,” she said.

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