Atlantic City seems to be back on the road to default after its City Council failed to adopt a needed ordinance to dissolve its MUA and secure a million loan from the state to continue operating.
New Jersey is lending the city the $73 million to keep it operating while it works on a five-year plan to return the city to fiscal solvency. If that plan is not approved by the state Department of Community Affairs, the state will move to take over city finances.
However, the state required the loan to be backed by all city assets, including its valuable Municipal Utilities Authority. That required the city to take over its running and dissolve the authority’s board.
However, Council deadlocked on the move and the measure failed by a 4-4-1 vote. The city has until September 15 to make the move and secure the loan, but under Council rules, it will be difficult to bring the measure back up for a second vote in less than six months.
Failure to meet the September 15 deadline means the city would have to repay the loan immediately, said City Council President Marty Small.
“When the city shuts down and people lose their jobs because we have to pay the state $73 million we don’t have, you can go to the council people that didn’t support it,” Small, who voted for the ordinance, told NJ Advance Media.
City Councilman Frank Gilliam, who voted against the ordinance, told the Press of Atlantic City he was concerned by a lack of transparency leading up to the vote and said he was “never in favor of the loan.”
Governor Chris Christie, who has been a vocal critic of how the city negotiated the loan agreement did not comment, but he has often taken a hard line when negotiating with the city’s government.
The state legislature has signed a rescue bill for the city that required the city to devise the five-year plan by November as it grapples with more than $500 million in debt it can’t pay back. The loan was meant to bridge the time between the passage and when the plan was submitted.
Moody’s Investors Service, a Wall Street credit rating agency, has already issued a report saying that the bridge the loan would give the city enough time to come up with a plan. But without it, the agency said, there was “a high probability” the city would default on its debt within the next few months.
Small told NJ Advance Media that he and other council members “explained for over an hour how important and how critical it was” to approve the MUA ordinance.
“The rescue bill stunk. But it was our only shot. We have to make the best of it,” Small said. “The loan stinks. But we have to make the best of it. This is the time to step up for residents of Atlantic City.”
In some other bad news for the city, the city tried to auction off another valuable asset—its former municipal airport Bader Field—but received only two bids with the highest at $50 million. The city turned down an offer of $800 million for the property less than a decade ago.
Atlantic City Mayor Donald Guardian did not immediately reject the bids.
“When considering bids of such important sites for the city, monetary considerations are not the sole deciding factor,” he said in a press release. “The proposed use of the land must account for the planning goals and long term economic viability of the city.”
But Small told the Press, that the bids were too low for the city to approve.
“I just heard the amount, and I don’t think we should even entertain that,” he said. “Based on the numbers, we can’t accept that.”
