Clock Winds Down On Atlantic City’s Efforts to Deliver Five-Year Plan

Chase Brush | October 19, 2016 | Politics
City misses deadline to submit revised FY2016 budget to state’s Local Finance Board, sparks off exchange of letters between mayor and DCA

Credit: NJTV News Online
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Only two-and-a-half weeks away from a November 3 deadline to come up with a five-year plan to shore up its finances and avoid a state takeover, Atlantic City and its representatives are still struggling to meet the demands of state officials in Trenton, who say the beleaguered seaside city isn’t doing enough to balance its budget in the face of declining tax revenues.

The most recent divergence between city and state officials came this week, when the former failed to submit a revised annual budget to the state’s Local Finance Board in time to meet a Monday deadline. In a letter sent to Atlantic City Mayor Don Guardian last week, the state requested that the city rework its fiscal year 2016 budget by that day so that the finance board could adopt it at a November 9 meeting.

Tim Cunningham, director of the Department of Community Affairs’ Local Government Services, said that the state had received a “draft budget” from the city back in August, but that he took issue with the fiscal plan because it relied on too much state aid on not enough planned tax hikes. In the letter obtained by NJ Spotlight, he called those aspects of the budget “very troubling given the City’s precarious financial condition.”

Cunningham, in his letter, acknowledged that while “no elected official desires to increase taxes, it is irresponsible not to maintain the current levy let alone not increase the rate in a way that brings in additional revenue.” He also said that per the department’s requirements, the $37 million in new transitional aid that the city requested in its budget must come with “a tax increase of no less than the maximum permitted by the levy cap workbook or 6%, whichever is less.”

But Guardian, in a response letter on Friday, countered that such increases would be “devastating” for the city, which in an effort to offset a sharp decline in ratables has already hiked taxes significantly over the past several years. He said there had been a “disconnect” between the city and state over the budget sent to the DCA back in August, which he said was not a draft but the final version introduced by the Atlantic City council, and that city officials were asked to attend a meeting with state representatives last week to go over the budget “line by line.”

After an initial June draft, council members formally introduced that budget on August 17, according to city records. The $242 million plan 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 for the prior year’s budget, which brought in $128 million.

The “lingering disconnect,” as Cunningham also called it, is the latest development in an ongoing saga for the struggling seaside gaming mecca, one that has been marked by regular tension and disagreement between the state and city. In May, amid full-blown fiscal crisis, lawmakers in Trenton gave Atlantic City officials 150 days to present them with a five-year strategy to stabilize its finances and plug a $44 million budget hole or accept a state takeover of its government. Guardian and other city leaders have spent the past several months crafting that plan, but they haven’t always diligently followed the state’s wishes.

Last month, the city missed a crucial deadline to dissolve its Municipal Utilities Authority and set aside its assets as collateral, one of the terms of the $73 million bridge loan the state gave it back in May to avoid bankruptcy while officials worked to come up with the longer-term financial plan. City council members had twice failed to vote on the move, which had come under fire from residents and activists who warned against compromising the sovereignty of the authority.

Instead, Guardian announced that the MUA would purchase Bader Field, a 140-acre plot of land near downtown that the city has long ranked as one of its most valuable assets, for $100 million. The money would be put toward a debt load of nearly five times as much, Guardian said, that the city has picked up through the decline of its casino market and collapse of its ratable base over the past several years. Some hailed the move as a necessary gambit to keep the authority out of state hands, but others blasted it as a shell game, as it would almost definitely require the independent MUA to borrow money for the purchase.

City council members are expected to vote on that proposal tonight, though it’s unclear whether it will be approved. Council President Marty Smalls, who joined the Guardian at a press conference last month to announce the plan, did not return a call to his cellphone yesterday.

Now, the city is coming under fire from the state once again. In his letter, Cunningham said that the $37 million in transitional aid the city requested in the budget is “far more than the division has available to provide to the city or ever indicated that the city should expect to receive.” He said there is room for city to make additional cuts if it does not receive the full amount, and recommended that the city specify all those areas of potential savings. In 2015, the city received just $13 million in aid.

Cunningham also said that the city’s obligation to present a satisfactory 2016 budget “exists independent” of its task to come up with a longer-term funding plan. 

But Guardian contends that the city has followed the state’s directives, including the requirement that it raise taxes to qualify for state aid. In his letter, he asked the state “consider the major tax increases that the city has already borne,” which include a 50 percent hike over 2013 and 2014. He cited hiring reductions, construction and mercantile fee increases, and land sales as examples of changes to the city’s budget that will “set the City on a course to recovery without tax increases.”

Appearing on WPG Talk Radio 1450 AM with Harry Hurley last night, Guardian reiterated that argument, saying that the city’s previous tax hikes should count toward the 6 percent increase required by the state for transitional aid applicants. He also described confusion over the department’s demand that it receive the draft budget before being introduced by city council, acknowledging the two have “not had the best relationship” but maintaining the state has all along been “fully aware of what we’re doing.”

[related]“We’ve done it all ahead,” he said. “So we have eight years where we cannot raise taxes and would have met what would have been required.”

Guardian said that the city is nearly done putting together its five-year Fiscal Recovery Plan, which he said would clock in at 125 pages and will be “very, very comprehensive.” The Republican’s administration has revealed parts of the plan over the past few weeks as the city approaches the November 3 deadline, but on Monday announced a litany of new actions Guardian said it has implemented or is pursuing.

In a lengthy release, Guardian listed 26 different cost-saving and revenue-generating measures the city has undertaken to address its finances, including downsizing city government staff by around 400 full-time employees, renegotiating police and civilian labor agreements to reduce healthcare costs, and competitively bidding out city functions such as parking meter operations, payroll services, emergency dispatch, and solid waste and recycling. The letter also listed Bader Field among its revenue generates, the sale of which Guardian said would help address “the large, legacy liabilities now clouding the City’s fiscal future.”

Overall, Guardian said the city 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.

“This comprehensive recovery plan will include increasing revenue, reducing costs, maximizing redirected funds from casinos, receiving State aid, restructuring of debt payments, early retirement incentives, realizing the value of City owned properties and the MUA, and much more, all while maintaining Atlantic City’s sovereign right to local self-governance,” he said.

Despite Guardian’s assurances, however, not all city officials are happy with the way recovery efforts have been handled. In a bit of unexpected drama, city councilman Frank Gilliam called into Hurley’s show last night and questioned Guardian about the city’s financial recovery plan, accusing him of being less than transparent in his handling of the process. He said the council has not so far been briefed by Guardian’s office on the five-year plan, nor has it held any public hearings on the budget.

Gilliam has long been a critic of the Republican’s administration, having repeatedly voted against budget drafts and other proposed recovery measures, such as dissolving the MUA.

“You’re making those decisions without doing any due diligence,” Gilliam said to Guardian. “I hope this won’t be a kamikaze mission where we’re informed the day of these infamous ideas that are going to save us.”

Guardian responded by saying that he’s called for a council meeting to be held today, during which he said his administration will present members with the proposal. He said the plan aims to satisfy all constituents and help “bring the city back to life.”