In a surprising and creative bit of maneuvering, Atlantic City has proposed away to gain 0 million in needed cash and keep from having to sell its independent water utility, all while trying to develop a plan for fiscal solvency that will stave off a state takeover of the city.
The plan revolves around the city’s two largest assets, its semi-independent Municipal Utilities Authority and the 143 acres of land from its former municipal airport, Bader Field.
The city would sell Bader Field to the MUA—which would borrow to make the purchase—for $100 million. That could cover the city even if it is forced to pay back a $73 million loan from the state. The city faces a default on that state loan because its city council has refused to dissolve the MUA as an independent authority to secure the water utility as collateral.
City officials say they would use the money to help pay down the city’s about $500 million in debt.
The state’s department of Community Affairs has already notified the city it must move quickly to rectify the terms of the loan or be held in default.
City Mayor Donald Guardian, however, said the city has the funds to return the $73 million.
It’s a complicated scenario brought about by the state’s passage of a rescue plan for the city. The state Legislature approved the plan, which freed up some casino-funded marketing money for the city and put in place a set payment in lieu of taxes plan for the city’s casinos. The city, meanwhile had to devise a five-year plan to restore the city to fiscal solvency, or the state would move to take over the city’s finances.
The $73 million loan from the state was supposed to help the city continue functioning rather than declare bankruptcy, but the state insisted that both Bader Field and the MUA be used as collateral for the loan.
The city’s MUA has been a political football in the negotiations, as many Trenton officials—including Governor Chris Christie—want the city to sell the MUA to a private water company. The city wants to retain public control of the utility and water rates for residents. The MUA is financially independent of the city and derives all of its revenue from water rates.
“Our concern has always been that the MUA not be sold and not be leased, that the MUA remains in the hands of the people of Atlantic City,” Guardian said at a press conference. “The plan will guarantee the sovereignty of the MUA as well as the sovereignty of Atlantic City.”
The DCA has given the city until October 3 to rectify its position on the MUA, or the state could demand immediate repayment of the loan, seize collateral or withhold state aid if the city misses the deadline, according to the Press of Atlantic City.
The Atlantic City Council and the state must approve the sale of Bader Field, but whether that will happen is not certain.
The MUA also takes in about $16 million a year in water rates, according to an analysis by the Press of Atlantic City, raising concerns about the authority’s ability to take on so much debt. The authority has a bond rating of B3, which while better than the city’s, is still considered “junk” status, the Press said.
The sale is part of the city’s five-year fiscal recovery plan, officials said, which they plan to announce in October.
