This piece first published March 10, 2016, Debtwire Municipals
Atlantic City will prioritize funding government services above debt service payments because the city’s cash is expected to dry up on 1 April, Mayor Don Guardian said in an interview with Debtwire Municipals.
“Sorry, Wall Street,” Guardian said. “I need police, fire, and public works. (We will) run out of cash…we’ll stall pension, health benefits (to the state)…You’ll feel the pain with us.”
To avoid insolvency, Guardian wants to see a short-term loan from the state, which the Department of Community Affairs provided to the city once before in 2014. The city issued debt to repay that loan in May 2015.
The mayor made the statements in Trenton, New Jersey, today where the Senate Budget and Appropriations Committee voted to send legislation allowing the state to take over Atlantic City governance to a vote on the Senate floor on Monday. The committee also approved legislation that creates payments in lieu of taxes (PILOTs) for casino properties. Guardian opposes the takeover, but supports the PILOT legislation.
The proposed state takeover will not stave off bankruptcy, Guardian said. Even though bankruptcy is “a terrible idea,” Guardian said he cannot take it off the table and blasted the state for their efforts in Atlantic City.
While the city cannot directly file for bankruptcy, the city council can vote in favor of requesting approval from the state’s Local Finance Board, which has the final authority for approving a bankruptcy petition.
Atlantic City has been under state supervision since 2010, giving the state’s Local Finance Board and a state monitor control of the city’s finances and personnel decisions. In 2015, Governor Chris Christie nominated Kevin Lavin to serve as the city’s emergency manager – a largely advisory role – and lead negotiations with casinos over outstanding property tax appeals.
The city and the Borgata Casino Hotel, which is owed USD 150m, are currently negotiating over the amount and terms of repayment, which could include ‘creative financing,’ as reported.
“The state gets an ‘F’ on their report card,” Guardian said.
The legislative package has a long history. A PILOT was first proposed in 2014 and approved by the legislature in 2015. Christie conditionally vetoed the legislation, which was approved with his changes, but abandoned in favor of a new version that incorporated recommendations from Lavin. The governor pocket-vetoed that bill.
Soon after, Senate President Steve Sweeney introduced legislation that would allow the state to completely take over the city’s government, but the city balked at that proposal and Sweeney later revised his proposal and reintroduced the PILOT, which the committee voted on today.
Sweeney said Christie made a “firm commitment” to sign both bills.
The PILOT bill includes additional aid for the city. That aid was expected to get distributed in 2015 and the Local Finance Board included those funds in the city’s budget.
Atlantic City Council President Marty Small urged senators to consider the takeover and PILOT bills separately, noting the PILOT aid was promised to the city for years. He is also in opposition of the takeover but supportive of the PILOT.
Moody’s Investors Service rates Atlantic City Caa1/negative and Standard & Poor’s rates the city at CCC-/negative.