There was high drama in the State House yesterday, fueled by a political standoff that now only increases the odds that Atlantic City, which stands on the precipice of bankruptcy, will not be rescued. A much-hyped state Assembly bill intended to give the city more time to get its finances in order was pulled back at the last minute because of a lack of support among lawmakers.
With no immediate consensus on a Plan B, pressure is mounting on Democrats who control the Legislature to overcome what right now are bitter disagreements over the best and fairest way for the state to intervene as the seaside resort nears a cash crisis.
Adding to the drama is the fact that the standoff is viewed by many as a proxy battle for the upcoming gubernatorial race, with Senate President Stephen Sweeney expected to run to replace Gov. Chris Christie next year in a primary contest that will likely include Jersey City Mayor Steven Fulop, a fellow Democrat.
The stakes are high since Christie — who once said he would block a bankruptcy declaration — is now predicting the city has enough money to make it through only another 10 days. He also told reporters yesterday that if lawmakers can’t work out their differences a bankruptcy may eventually be the last option available for Atlantic City, something that hasn’t occurred in New Jersey in decades.
Assembly Speaker Vince Prieto (D-Hudson) also talked of bankruptcy during his own news conference, though he said if one occurs it will be Christie who should get the blame for not doing more to help the city get through its fiscal problems.
But it was Prieto who scored the biggest loss of the day when it became clear around 3:30 p.m. that he would not be able to get the 41 votes needed to move his own Atlantic City intervention bill out of the lower chamber, which is controlled by Democrats. Several members that he was counting on to vote for the measure were missing from the State House, forcing Prieto to admit that he couldn’t get his bill passed. He’s now rescheduled the voting session for Wednesday.
“Obviously, when I put up the bill I had 41 votes to get it (passed), but there were some members who could not make it,” Prieto conceded during his news conference.
Prieto’s bill was proposed as an alternative to one backed by Christie and Sweeney (D-Gloucester) that calls for an immediate state takeover of the city and its finances. That bill would also give Christie’s administration the authority to renegotiate debt and rip up union deals.
Prieto’s measure would instead have created benchmarks for the city to meet over a period of up to two years before the full state takeover could go into effect. That built-in delay was something the Assembly leader said would respect the civil rights of city residents and the collective-bargaining rights of its public workers. The bill was backed by several labor unions and local officials in Atlantic City as well as it went through committee hearings last month.
Prieto is close to Fulop, also an expected gubernatorial candidate. And Fulop has already publicly weighed in on the issue, accusing Sweeney of doing the bidding of Christie and Democratic power broker George Norcross, who also supports a takeover.
Prieto said Sweeney’s original bill had zero support from his own Democratic caucus, and that he would now direct his focus to hammering out a compromise with the Senate leader.
“I’m still looking to pass a bill that is the bill that can get to the governor’s desk,” Prieto said.
But after realizing Prieto’s bill would not be able to clear the Assembly, Sweeney pounced, calling his own news conference to say that the Assembly leader should instead be posting his legislation for a vote. And Sweeney said since he’s already offered to amend his bill to delay the more aggressive components of a state takeover until the end of the year, Prieto should take that deal immediately so it could be put before the governor.
“Leadership means leading,” Sweeney said. “The speaker proved today he could not pass his own bill.”
Christie, meanwhile, also criticized Prieto during yet another news conference held yesterday, accusing the Assembly leader of putting political goals ahead of doing what’s best for the city and its residents. Christie said he suspects the city government now has only enough money to last about 10 days. The last municipal bankruptcy in New Jersey occurred in 1938.
“Let’s let them get to work,” Christie said of lawmakers. “If they come up with something, great; if they do not then you know bankruptcy will be the only option.”
“While I would regret having to go down that road, it is a road that I will have no choice but to go down,” he went on to say.
Atlantic City’s fiscal problems stem largely from the past recession and increasing competition from new casinos that have opened in neighboring states. 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.
A report released 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 local officials have faulted the state for not enacting a proposed payment-in-lieu-of-taxes arrangement that was set up with the city’s remaining casinos to help stabilize the resort’s revenue stream and built into this year’s budget. They’ve also asked to be treated more fairly when it comes to receiving aid from the state, saying the current formula is outdated and doesn’t recognize the reduced 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.
At the beginning of the week the city government made a $1.8 million debt payment after there was some concern that the city would not have the revenue available to cover it. But Atlantic City Mayor Don Guardian conceded that the city remains on borrowed time, and even after the payment was made Standard & Poor’s, the Wall Street credit-rating agency, moved the city’s debt grade further into “junk” status.
Guardian, a first-term Republican, went to the State House yesterday anticipating a vote on Prieto’s bill. While taking questions from reporters as that vote stalled, Guardian emphasized he is also open to compromising and said some of the more dramatic changes sought by Christie and Sweeney, like moving city employees into a less generous healthcare plan, were already in the works.
But he said some other proposed budget cuts were “physically impossible” and that city officials needed to be involved in the next round of discussions.
“At some point, the compromise has to include Atlantic City,” he said.
Patrick Murray, director of the Monmouth University Poll, said his scorecard for the day gave wins to Sweeney and Christie.
But Murray said the Assembly leader still has some leverage even though Prieto suffered the embarrassment of not getting his bill through his own house — something rarely seen in the State House. That’s because any Atlantic City intervention measure will still need to pass the Assembly to go into effect.
“He’s sending the message here that he has to be at the table,” Murray said of Prieto.
Christie, meanwhile, could end up having a lot to lose going forward if the impasse does result in bankruptcy, Murray said. The governor is supporting likely GOP presidential nominee Donald Trump and has even been discussed as a potential running mate, so the appearance of an Atlantic City bankruptcy in the glare of a presidential election would be bad since Trump is a former casino owner.
“That’s a problem for Christie,” Murray said.