Murphy Rows in With Continuing State Oversight of Atlantic City

John Reitmeyer | September 21, 2018 | Politics
Takeover won’t end any time soon, as new report points to ongoing ‘fiscal, operational, economic and social challenges’

Gov. Phil Murphy, right, discusses a new casino job-training program in Atlantic City yesterday.
The state’s nearly two-year-old takeover of the local government in Atlantic City is going to continue, even though Gov. Phil Murphy suggested when he was running for office that it should be ended.

The recommendation to keep the state in charge of the cash-strapped resort for the foreseeable future was one of many that were included in a report the Murphy administration released yesterday after five months of independent review.

“The Review has made clear that Atlantic City has a set of fiscal, operational, economic and social challenges that will only be resolved with significant direction from, and partnership with, the State,” according to the report, which was written by former U.S. Treasury official Jim Johnson.

Among the other recommendations in the report are for better training for the heads of city-government departments, more emphasis on building out and diversifying the local economy, and making sure neighborhoods and their residents are lifted up in the ongoing efforts to revitalize Atlantic City’s economy.

Murphy, a first-term Democrat, said during a news conference in the city yesterday that, even as the takeover is continuing, his administration will be working closely with city officials, marking a significant break from what he called the “big-footing” that occurred when former Republican Gov. Chris Christie was in office.

Closed casinos, jobs lost, tax revenue decimated

“We’re not going anywhere, and I say that in the very best sense of the word,” Murphy said. “We’ve got Atlantic City’s back.”

atlantic city
Atlantic City’s fiscal problems became widespread during the Great Recession, when five casinos closed, costing the city thousands of jobs and billions of dollars’ worth of tax ratables. The city also faced an estimated $500 million in upaid debts in the wake of the downturn, as well as a projected $100 million budget deficit. In fact, just weeks before bipartisan legislation for the takeover was enacted in 2016, Atlantic City narrowly avoided defaulting on a debt payment.

The takeover legislation gave the state wide powers that include control over city labor contracts for up to five years. The intervention started under the Christie administration in late 2016, with the takeover led by former chief counsel Jeffrey Chiesa, a close Christie ally who had served under Christie when he was U.S. Attorney for New Jersey.

Among other actions, Chiesa cut pay for police officers and firefighters and moved to resolve outstanding tax appeals with several casinos. Eventually, the city earned a credit-rating upgrade and, with the help of lucrative state incentives, is seeing an economic revival.

But Chiesa also drew heavy criticism after billing the state nearly $5 million for his law firm’s services, and he was eventually dismissed by Murphy earlier this year.

Development outside tourist areas

The governor tasked Johnson, his former Democratic primary opponent, with conducting a lengthy review of the city that culminated in the report that was released yesterday. Johnson was paid a salary of $1 during his review.

Credit: AP Photo/Julio Cortez, Pool
Jim Johnson
The former undersecretary for enforcement at the U.S. Treasury under former President Bill Clinton, Johnson, a Montclair resident, was widely praised yesterday for taking a holistic look at the city that went beyond just the troubled balance sheet. “Jim has done an extraordinary job,” Murphy said.

Johnson’s report calls for the rebuilding of neighborhoods outside the main tourist areas, saying government should get involved in rehabilitating vacant homes and other underutilized properties. Improving public health and addressing high infant-mortality rates were also listed as public-policy goals by Johnson, who brought in researchers from Rutgers University to conduct a citywide needs assessment.

The report also calls for private industry to get more involved in city affairs, including by participating in a proposed “executive council” of local elected officials, casino representatives, and labor officials. The creation of a “coordinating council” of state department leaders was also recommended to better utilize state resources to help the city’s recovery.

“This report is an invitation to all of us,” Johnson said. “Come on in, the water is fine.”

Needs to get on stronger footing

While the city’s finances have improved, the report recommends full state oversight be continued until Atlantic City is on a “strong footing and the City’s reliance on State transitional aid has been substantially reduced if not eliminated.”

Murphy’s embrace of a prolonged state takeover that could last the full five-year term spelled out in the 2016 legislation marks a reversal of sorts from the position he took while running for office against Republican Kim Guadagno, Christie’s lieutenant governor. As a candidate, Murphy called on officials to find “a better solution” during an appearance in the city in late 2016, according to a report in The Press of Atlantic City. In the same report, he also questioned the effectiveness of prior state takeovers, at least when it came to improving the lives of the residents in the places where the interventions had occurred.

Murphy focused on that part of his prior criticism during yesterday’s announcement, saying he was always committed to bringing a spirit of partnership to the state’s interactions with the city. He also highlighted several recent accomplishments for the city, including the opening of two new casinos and a Stockton University campus in the resort.

“When I ran for this office I said that I wanted my administration to be a partner in Atlantic City’s renewal. I said I wanted to walk side by side and shoulder to shoulder with elected officials, civic leaders and this entire community,” Murphy said. “Today we are living up to our word with a strong, actionable and visionary strategic plan,” he said.

Atlantic City Mayor Frank Gilliam also attended the event, praising Murphy for creating “open dialogue” between the city and the state. “My relationship with the state of New Jersey has been fruitful,” Gilliam said.