New Jersey’s legislature has finally reached an agreement on aiding financially strapped Atlantic City and approved a rescue plan, sending it to Governor Chris Christie for approval.
Christie signed the bill the next day.
The plan comes after months of political infighting, which Christie says may have doomed any chance that voters will approve the construction of new casinos in the state in a November referendum.
The rescue plan approved gives the city 150 days to create a five-year plan to balance city budgets and restore fiscal stability to the municipality. The plan will have to be approved by the commissioner of the state Department of Community Affairs.
To balance the budget for 2017, the city will have to close an about $100 million deficit. The city also has more than $550 million in debt it can’t currently pay back.
If the city cannot meet the deadline for a plan, the state would take over the city’s finances including the right to sell city assets and cancel or change the city’s union contracts.
In the meantime, the state will provide Atlantic City a bridge loan to help it meet expenses. Atlantic City will get temporary loans of $30 million for the remainder of this year; $30 million to be applied to leftover 2015 debt, and another $15 million for 2017.
Casino-funded marketing monies would also be directed to the city. The city has been expecting those funds since last year, leaving an about $60 million hole in the budget.
“This plan gives Atlantic City the opportunity to do the job itself to prevent bankruptcy and make desperately-needed financial reforms,” said state Senate president Stephen Sweeney, sponsor of the Senate version of the plan. “Along with the reforms, this plan will provide financial resources and the ability to access the financial markets, which is critically-important for long-term fiscal health. We must have a workable plan that is implemented and followed that will reduce spending, reform government operations so that city services are maintained and the taxpayers of Atlantic City and New Jersey are better protected. If the city fails, the state will assume the responsibilities.”
The plan also sets a payment in lieu of taxes plan for city casinos to shore up the city’s casino tax payments, which have been subject to numerous costly tax appeals.
One late change to the plan would allow the city government to offer early retirement to its workers. The city’s fiscal plan would also have to include debt reduction—allowing for the renegotiation of the city’s outstanding debt and municipal contracts—and enable the city to regain access to the bond market.
City assets could also be leveraged to gain needed revenue, according to the bill, giving the city the ability to make use of its municipal water authority to generate revenue, including the ability to keep the agency in public control by transferring it to Atlantic County’s control, according to politckerNJ.com.
Christie, speaking during his monthly call-in radio program, said before the votes that he will evaluate the bills since several amendments have been added, but said he believes they contain everything he has been seeking.
“Let me see what comes to my desk,” Christie said. “But I’ll make a decision very quickly.”
The legislature had previously passed a similar plan last year, but Christie conditionally vetoed it, and then vetoed it again after the legislature made the conditional changes he requested.
Casino Pilot Bill
The bills also tie the casino payment in lieu of taxes plan—called PILOT—to the rescue effort. Casinos would pay annual payments of $120 million the first year increasing two percent annually during the following nine years. The amount would further increase if gross gaming revenue is higher than expected.
In addition to the PILOT payments, the legislation would have the casinos make further payments totaling $30 million annually for the first three years, $15 million the following year, $10 million the next year, then $5 million annually for five years. The individual amount for each casino would be based on the casino’s share of total gaming revenue.
These payments would be used to pay down Atlantic City’s debt through a reallocation of the casinos’ redevelopment obligations paid to the state Casino Redevelopment Authority from the casino investment alternative tax, according to politickerNJ.
A portion of the PILOT payments would be allocated to Atlantic County and to the city’s schools. The county payment would be determined by a three-year average, which is expected to be 13.5 percent.
The “opt-out” provision that would have allowed casinos to choose to withdraw from the PILOT program and pay property taxes if a casino opens in North Jersey has been removed.
The removal is a direct link to a voter referendum to be held in November to allow two new casinos to be built in the northern part of the state. Though the referendum does not name locations, proposed projects in Jersey City and at the New Jersey Meadowlands are considered the leading contenders.
Proponents of the plan say the construction will bring jobs and revenue to the state and draw from thee New York casino market. They also point to a provision in the plan to redirect tax revenue from the casinos to help Atlantic City.
Opponents of the plan say in-state competition will only further depress the Atlantic City market and lead to more casino closings there.
However, after the long—and often viciously bitter—battle over the plan between Christie, Sweeney and Assembly Speaker Vincent Prieto, many wonder if the referendum can pass voter approval.
In his radio address, Christie faulted Prieto and Jersey City Mayor Steven Fulop—who Christie blames for engineering the delay on the Atlantic City plan.
“I think the speaker and the mayor of Jersey City have effectively put North Jersey casinos at almost complete flatline,” Christie said. “They did it. Because what they did was they scared off all the people who thought New Jersey would be a hospitable place to engage in gaming in the northern part of the state when they saw the way they treated people in Atlantic City and conducted themselves.’
Many officials also feel that the constant headlines about Atlantic City’s potential bankruptcy will dissuade voters from approving the new construction. Recent polls had shown voters split evenly for and against the plan, but that was before the Atlantic City bankruptcy issue exploded.
Prieto has taken a lot of heat in the state for refusing to back Sweeney’s plan for the rescue, saying he objected to the state being able to break union contracts. Instead, he proposed a plan that would have given the city two years to right its finances before a state takeover and protected union bargaining rights.
Though the plan ultimately adopted resembles Sweeney’s plan much more than his, Prieto rejected the Governor’s criticism.
“I don’t have anything to say about the governor’s comments, other than I look forward to him signing my bill that gives Atlantic City an opportunity to succeed and North Jersey gaming—as has always been the case—will succeed or fail on its own merits with the voters,” he told NorthJersey.com.
Prieto also said he felt the new compromise plan achieved what he had looked for with his proposed plan.
“It actually is what the Assembly was looking for—something that would give Atlantic City the ability to be able to reach a state of healthiness,” the State Assembly speaker, Vincent Prieto, a Democrat, said in a statement. “It doesn’t trample on collective bargaining on day one. It keeps the self-governance.”
City officials applauded the deal, but acknowledged the city will have to work hard to meet its requirements.
“We have a shot,” Marty Small, president of City Council, told the New York Times. “All you can ask for in life is an opportunity, and we take the opportunity seriously. It’s going to be brutal for the work force, and there’s going to be cuts. There’s no other way to put it. It’s going to be tough, but that’s what we were elected to do. We have to right the ship.”
