Avoiding possible bankruptcy and a hostile state takeover of a once-glittering gambling resort town, top New Jersey political leaders and the Atlantic City mayor Tuesday announced a five-year compact to repair the city’s finances. Lawmakers said the arrangement stops short of the kind of intervention the Democratic state Senate president was seeking and the bankruptcy Mayor Don Guardian threatened to pull the city out of financial crisis. “Last Thursday, I placed a telephone call to the mayor, and I told him my view was the city needed help, and I wanted to help the city and we needed to work together,” Gov. Chris Christie said at a Statehouse news conference Tuesday afternoon, flanked by Senate President Stephen Sweeney (D-Gloucester) and Guardian.
Under the agreement, the state would take expanded responsibility and decision-making authority over Atlantic City’s finances, including the power to restructure municipal debt, alter or terminate municipal contracts and collective bargaining agreements, strike shared service agreements with the county, and sell or lease city-owned services, Christie said. The state also would have assumed these functions under Sweeney’s takeover bill (S970) but Guardian classified the new plan as cooperation and not a takeover. Ultimately, whether it’s a takeover depends on nuances of the legislation, said Mark Pfeiffer, a former deputy director with the state Division of Local Government Services. “The devil in this case is in the details,” said Pfeiffer, an assistant director at Rutgers’ Bloustein School of Planning and Public Policy.
Lawmakers will swiftly develop and pass legislation in February, Christie said. The state’s expanded role will expire within five years. “The city’s finances are now the greatest threat to its well-being,” the governor said, adding that a bankruptcy is “clearly not my preference.” But previous efforts haven’t included the comprehensive solutions necessary to address the city’s complex financial straits, he said. Atlantic City holds about $240 million in debt and owes another $160 million in tax appeals to Borgata Hotel Casino alone. Last week, Standard and Poor’s described those financial commitments as “unsustainable in the long term.” Those remarks accompanied a “super-downgrade” of Atlantic City’s credit rating, which was already in junk bond territory, by four notches. S&P suggested that without intervention, the city would default within six months.
The mayor was scheduled to hold an emergency city council meeting Tuesday night in preparation for asking the state’s permission to file for bankruptcy. Guardian said it would be premature to speculate what some of the cost-cutting measure for Atlantic City might be, such as selling the $100 million water utility, or seeking givebacks from labor contracts. Atlantic City, long the East Coast’s gambling destination, has faced growing competition from neighboring states. In 2014, four of the city’s 12 casinos closed, taking a bite out of the city’s tax revenue and leaving 10,000 casino workers unemployed. Lawmakers last year introduced a rescue aid package, which Christie twice rejected, even after the Legislature agreed to his recommended changes. That veto leaves a $33.5 million gap in the city’s municipal budget, and officials have said the city could run out of cash by April.