Atlantic City is now one step closer to bankruptcy – or at least a state takeover that many in Trenton are beginning to see as inevitable – as Gov. Chris Christie yesterday rejected several bills designed to help ease the city’s worsening fiscal crisis.
Had Christie approved the package of bills he had already conditionally vetoed once before, Atlantic City would have received millions of dollars in immediate budget relief from a payment-in-lieu-of-taxes arrangement with casino operators and a proposed diversion of casino revenue into the city budget.
But with the legislation now shot down by Christie, the city faces a sizable budget gap – with little time to fix it.
A special emergency manager appointed by Christie last year warned in a report issued Friday that the city only has enough cash to get to April, a clear sign that the financial problems have grown even more urgent.
The lack of action by Christie on the Atlantic City fiscal bills before a noon legislative deadline yesterday capped a busy stretch of days that saw several new developments related to the future of the seaside resort, including the introduction last week of legislation sponsored by a bipartisan group of lawmakers including Senate President Stephen Sweeney (D-Gloucester) that calls for a state takeover of the city’s finances.
State lawmakers last week also advanced a proposed constitutional amendment that would allow expansion of casino gambling outside of Atlantic City, something local leaders oppose but sponsors say will create jobs and recapture revenue currently being lost to casinos that have opened in Pennsylvania and New York.
Last week also saw the release of a report on Atlantic City’s finances that was prepared by Kevin Lavin, the emergency manager Christie hired last year to scrutinize the city’s budget and suggest ways to put its finances back in order. The report found the city faces a budget deficit of more than $300 million over the next five years and needs to make major changes, such as regionalizing or privatizing its utilities authority.
Christie did not explain his decision to reject the Atlantic City legislation, which came in the form of a pocket veto. Lawmakers sent him the amended bills earlier this month as the last legislative session was coming to a close. Under the state constitution, unless Christie decided to approve the bills by yesterday, they would die.
A spokeswoman for the governor pointed to recent comments Christie has made on the issue, including saying “if in total it makes sense I’ll do it and if I don’t think the total package makes sense, I won’t.”
Mayor Don Guardian, a Republican, said during an interview on WPG 1450 AM radio last night that bankruptcy will be “on the table.” He also pledged at the same time to fight the possible state takeover, saying local officials would be holding an emergency meeting to discuss “some drastic action.”
“It’s going to happen very shortly,” Guardian said.
Atlantic County Freeholder Ernest Coursey, a Democrat, called Christie’s failure to approve the Atlantic City bills “unacceptable.”
Sen. Jim Whelan (D-Atlantic) compared New Jersey to “Alice in Wonderland,” saying Christie chose not to endorse bills that included the very changes that the governor had recommended in November.
“Clearly, our ‘tell it like it is’ governor does not mean what he says,” said Whelan, playing on the “tell it like it is” theme that Christie has been stressing as a presidential candidate.
Atlantic City’s fiscal problems stem largely from the last recession and increasing competition from new casinos that have opened in neighboring states – resulting in the closing of four of the resort’s 12 casinos in recent years. 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.
The decline in ratables put a severe strain on the city’s budget, forcing nearly $12 million in cuts during the last fiscal year. The city also deferred payments into the public-employee pension system and received nearly $40 million in aid from the state to help it stave off bankruptcy.
In addition to warning that the city now has “available liquidity until April 2016,” Lavin’s report recommends the resort find ways to leverage several assets it owns. They include privatizing or regionalizing the city’s municipal utilities authority and letting the county government take over the city’s health and tax assessment departments.
Lavin’s report also recommended looking at forming a regional police force, similar to the one that’s been established in Camden, given the city’s expensive contract with its police union.
Though the report stopped short of recommending bankruptcy, it’s unlikely that all of the proposed corrective actions can be completed before the city is in danger of running out of money. And a bankruptcy in Atlantic City could also trigger problems elsewhere in New Jersey, including in other cities with strained finances.
After Christie last year appointed Lavin and Kevyn Orr, a lawyer who ushered the city of Detroit through bankruptcy proceedings, as consultants to work on Atlantic City’s finances, Wall Street credit-rating agencies warned investors to keep a close eye on other cities under state oversight in New Jersey to see if the state was shifting away from its long tradition of helping municipalities work through budget problems.
Even though local officials oppose it, Sweeney said it makes more sense for the city to see its finances taken over by the state for a few years than for it to go into bankruptcy, a complicated legal process that would be administered by a judge.
“We cannot afford to let Atlantic City go bankrupt,” said Sweeney, who many expect will run for governor next year. “The best way out is for the State of New Jersey to take control of Atlantic City’s finances and the best way to do it is to act quickly.”
“The sooner the state steps in, the sooner it can get the job done and get out,” he said.
Sweeney also made the case, in an op-ed published over the weekend by NJ Advance Media, that allowing casino gambling outside of Atlantic City will also be a good deal in the long run for the resort’s future.
That’s because the proposed constitutional amendment calls for a portion of the revenue that would be generated by two new casinos in north Jersey – as much as $200 million annually — be redirected back to Atlantic City to help fund its recovery and reinvention, Sweeney wrote.