The city will violate terms of a million state loan by not dissolving its Municipal Utilities Authority, Mayor Donald Guardian said, but the city has asked the state for a “reprieve” on the matter.
Guardian said the city is at the mercy of the state, which could seek an immediate repayment of the loan.
Dissolving the MUA was required by the state, which used it and other city assets to secure a bridge loan to help the city stay solvent while it works on a long-term financial plan. If that plan is not approved by the state, then the state will move to take over city finances.
However, the city’s Council voted down attempts to dissolve the independent authority and make the water utility a city department, which could then be used as collateral for the loan. The city had until Sept. 15 to make the move.
“Although the Sept. 15 deadline will pass without a City Council resolution dissolving the MUA or designating it as collateral in case of default, we have asked the state for a reprieve on this because we believe that the MUA will actually be a better part of the overall financial solution if it is kept whole,” Guardian said in the statement.
According to the Press of Atlantic City, the city’s failure to adopt the authority-related measures could trigger an “event of default” if the state notifies the city of the violation and the failure is not “cured” in 10 days, according to the loan terms. If the violation is not cured, the state can demand immediate repayment of the loan and—if the city can’t pay—each item of collateral, according to the terms. The state could also withhold state aid.
