The New Jersey Casino Reinvestment Development Authority has approved .5 million to form a non-profit economic development corporation in Atlantic City.
The corporation will be modeled on a similar non-profit formed in New Brunswick New Jersey that brought $1.8 million in projects to that city. The new corporation would be called the Atlantic City Development Corp., or AC Devco.
Atlantic City Mayor Donald Guardian, who sits on the authority said, said the corporation would explore building a medical school in the resort in partnership with local health-care provider AtlantiCare and Rowan University, as well as a corporate office building for South Jersey Industries, the parent company of South Jersey Gas.
Guardian said preliminary plans for the medical college will look at authority-owned property near the city’s AtlantiCare Regional Medical Center.
Guardian said the corporation would not have the government power of eminent domain to seize private property. But as a private entity, the company could move faster than the city can as it is not required to adhere to state bidding regulations and other red tape.
Still, such corporations need time to work. The corporation in New Brunswick was created in the 1970s, for example, and has been steadily working since then.
The authority’s initial loan would be repaid after a permanent source of funding for the corporation is identified, officials said.
Also last week, Atlantic City is turning to a state-sponsored bond program to help it pay a previous $40 million loan it received from New Jersey.
The city has begun marketing $40 million of bonds under a state program for distressed municipalities. The resort is offering its first sale of long-term debt since Governor Chris Christie’s appointment of an emergency manager in January to help run the city’s troubled finances.
That appointment left many analysts feeling the city would declare bankruptcy—which caused its credit rating to drop to junk status—but instead the city seems to be trying to work out from under its problems without taking that step.
The $40 million sale will help the city repay a $40 million loan from the state that is due next month and hopefully re-establish its ability to borrow from investors. The state made the loan in December after the city was unable to issue bonds late last year.
As the city faces more tax appeals from its remaining casinos, that ability to borrow is seen as crucial.
“They’ll need to access the market in the future for capital investments, to grow the economy and to possibly repay more settlements with the casinos that are still pending,” Lindsay Wilhelm, an analyst with Standard & Poor’s in New York told Bloomberg News.
The resort is selling the taxable securities through a New Jersey program that diverts state aid to debt payments, which gives bondholders more protection against default. S&P rates the debt A-, the fourth-lowest investment grade. That’s five steps higher than Atlantic City’s general obligations, according to Bloomberg.
Tax-exempt Atlantic City bonds due in December 2025 traded May 12 for an average yield of 8.6 percent, up from 4.9 percent in January before Christie named Kevin Lavin emergency manager.
Though Lavin has not moved to have the city declare bankruptcy, he has not ruled it out.
The city faces a $101 million deficit this year—due mostly to four casino closings in the resort last year and several successful tax appeals from its remaining casinos—which its new debt issues “do nothing to address,” said Moody’s Investors Service in a note Monday.
“Debt service payments still remain highly susceptible to default” without more revenue this year and for the future, the company said.
New Jersey lawmakers have proposed legislation to offer more aid to the city—including a plan to allow casinos to pay fixed payments in lieu of taxes—but the bills have stalled in the state Legislature.
