New Jersey Governor Chris Christie has stepped in with a compromise plan for a state takeover of Atlantic City’s finances for five years in a move to keep the city from declaring bankruptcy.
Christie announced the plan at a news conference attended by state Senate President Stephen Sweeney and Atlantic City Mayor Donald Guardian. Christie said the takeover was needed because the resort is incapable of solving its current fiscal mess after years of overspending.
“Atlantic City’s finances are now the greatest threat to the city’s well-being,” Christie said. “The urgency of the city’s current financial predicament cannot be overstated.”
Sweeney has already introduced a bill in the state legislature to have the state take over the city’s finances and said that bill would be amended to the new deal.
The new proposal includes elements of a financial assistance package Christie recently vetoed including a provision to let the city’s eight casinos make payments in lieu of taxes—or PILOT payments—and prohibit them from appealing their taxes, according to the Associated Press. The plan would also restore the redirecting of some casino funds to offset the city’s debt outlined in the previous plan.
The plan also gives the state the power to restructure municipal debt, cancel collective bargaining agreements, and the ability to sell off city assets and land. The original bill also called for a 15-year takeover while the new plan is only for five years.
The state will also be able to dissolve municipal boards, departments and commissions, share services with the county or other towns and privatize municipal services.
“What we’ve been trying to do all along is come up with private sector solutions to these problems, by empowering people in Atlantic City to invest in Atlantic City, to help Atlantic City grow,” Christie said. “But you cannot have a nongovernmental solution to a governmental problem. This is a governmental problem.”
The sale of the city’s assets has become a sticking point between the city and the state, especially where it concerns the sale of the resort’s Municipal Utilities Authority. City officials want to maintain control of the authority—which has been valued at about $100 million—to keep water rate low in the city. Sweeney has been vocal about selling the authority.
That has led to accusations that sale is seen as a gift to influential southern New Jersey Democratic power broker George Norcross, who has ties to the New Jersey American Water Company.
Guardian, however, attended the announcement and said he has decided to accept the takeover after initially opposing it.
“From the looks on your faces, you don’t like ‘Kumbaya’ moments,” he told reporters at a State House press conference. “I’m sorry for that. It’s time for some tough decisions and some pain as we move forward.”
Guardian called the plan a “partnership” rather than a state takeover.
Christie says he hopes the plan can be approved in the legislature by the end of February and promised to sign the bill. That promise comes out of his recent vetoing of a package of bills designed to rescue the city and pump millions into the city’s budget. The plan included the PILOT payments for the city’s casinos.
However, notably absent from the announcement was state Assembly Speaker Vincent Prieto, who later said he had problems with some elements of the plan.
“The fact is that no one speaks for the Assembly except for the Assembly.” Prieto told the Asbury Park Press. “If the Assembly is not involved, then there is no agreement.”
Prieto said he is concerned, for example, that the proposal would allow union contracts to be altered unilaterally.
“That’s something that would certainly raise questions on my end,” Prieto told the newspaper.
Prior to the sudden emergence of this new plan, the city had been seriously considering declaring bankruptcy. Without the planned monies form the vetoed rescue plan, the city was expected to run out of money by April.
The resort’s city council held a previously scheduled emergency meeting to discuss bankruptcy options, but afterwards, the council seemed to favor accepting the new state plan.
Council President Marty Small said at the meeting that he was assured that the council and mayor would be represented in the negotiations over the state plan.
“We will not let them disenfranchise your vote,” Small told residents, according to Bloomberg News.
In response to Christie’s veto, Wall Street rating agency Standard & Poor’s lowered Atlantic City’s credit rating by four notches, from B to CCC, and Moody’s Investors Service warned that the city was moving toward bankruptcy.
Both groups warned that without an influx of state cash the city would likely need to declare bankruptcy, but the new plan would reinstate much of the money in the plan Christie vetoed.
Moody’s also warned that the state’s continuing efforts to have voters approve new casino construction in the northern part of the state would further cripple Atlantic City’s casino industry, which has already lost more than half its one-time gaming revenues to competing casinos in other states.
“While there’s been much rumored about bankruptcy that is clearly not my preference. It’s not the senate president’s preference. And it’s not the mayor’s goal,” Christie said. “We’re committed to using every tool that will now be available to us to restructure the city’s debt as well as re-engineer city services to be delivered at an affordable cost to the taxpayers.”
There was also bitter opposition among residents to any state takeover plan. Several local bars in the city, for example, were offering $1 shots to anyone signing a petition against the state taking over the city.
