New Jersey officials considered a state takeover of Atlantic City’s assets and proposed punishing the struggling New Jersey gambling hub if it did not agree, according to a draft document reviewed by Reuters.
Atlantic City’s finances have been slowly coming under more and more state oversight, including the appointment of an emergency manager by Governor Chris Christie. The memo shows state officials contemplated the takeover to help pay down the city’s about $400 million of debt.
The state’s Department of Community Affairs would be given the authority to value all the city’s assets and sell, transfer or lease them to help the city meet its financial obligations. If the city refused to go along, the state would withhold half of the city’s transitional aid, the memo said.
“That was absolutely unacceptable to me, and to our council president and city council,” Atlantic City Mayor Donald Guardian told Reuters. “It basically is saying sell the farm, and that’s just not what we want to do.”
The state, however, has said that the memo was a draft and should not have been released. Guardian said Timothy Cunningham, director of the division that sent the memo apologized for its release.
The memo looked at all the city’s assets, but targeted specifically the Atlantic City Municipal Utilities Authority, which provides the city’s drinking water, even though it is an independent authority not owned by the city. It would have to first be dissolved under statute before any sale or transfer could occur, according to Reuters.
In another matter, a Moody’s Investors Service report said Atlantic City’s ability to make two August debt payments is “credit positive,” adding that the city has enough cash to cover its expenses through November, so long as third-quarter property taxes come in on time.
The service did not upgrade the subprime credit rating it gave the city in January, but the assessment is an upgrade from April when the rating agency determined Emergency Manager Kevin Lavin’s report on the municipality’s finances to be “credit negative.”
Lavin’s findings, Moody’s wrote at the time, suggested the city could run out of money within months.