New Jersey Governor Chris Christie unexpectedly vetoed a package of bills dubbed the Atlantic City Rescue Plan, leaving a massive hole in the city’s budget and prompting city officials to consider having the resort file for bankruptcy.
Christie essentially pocket vetoed the plan by failing to sign the bills by a January 19 deadline. The governor has already conditionally vetoed the bills, but the state legislature had acted to meet his conditions and amended the bills.
Yet Christie still allowed the bills to go unsigned, leaving an about $33.5 million hole in the city’s 2015 budget, that would have been filled by some of the aid outlined in the bills.
Christie vetoed the bills because he lost faith in the city’s government, including Mayor Don Guardian, who is a fellow Republican.
“The mayor of Atlantic City should just do his job, OK? I’ve given him plenty of time to do his job—and the last mayor to do his job,” said Christie.
Christie, who has been campaigning non-stop for president outside of New Jersey, believes the state can do a better job.
“He’s just not had the guts to do his job, nor has the council, and, you know, they’re all still worried about keeping their salaries and their cars in a city that’s going down the drain from a governmental perspective,” the governor said. “I’m not really worried about what the mayor or the council of Atlantic City says.”
A spokesman for Christie also commented to the Press of Atlantic City.
“The governor did not sign the PILOT legislation for one simple reason: Atlantic City government has been given over five years and two city administrations to deal with its structural budget issues and excessive spending. It has not,” Christie spokesman Kevin Roberts said. “The governor is not going to ask the taxpayers to continue to be enablers in this waste and abuse. There is no mystery. It’s that simple.”
The fact that the governor vetoed bills that had been specifically changed to reflect his concerns, however, brought disbelief in many circles.
“New Jersey has joined ‘Alice in Wonderland.’ Governor Christie has vetoed his own bills,” said state Senator James Whelan, who represents Atlantic City. “The legislature concurred with his version of the bills, and now he is bizarrely vetoing them. Clearly, our ‘tell it like it is’ governor does not mean what he says.”
City officials now say the city must seriously consider filing for bankruptcy as the city could run out of money as early as April.
“If the state is not able to come up with the funding we need within the next few weeks, we will have no choice but to declare bankruptcy,” Guardian told the AP. “We needed a decision and anticipated an answer on this crucial bill many, many months ago. So much time was wasted.”
Guardian announced he will call for an emergency meeting of the resort’s city council to consider filing for bankruptcy—a move which would have to be approved by the state.
“We have to ask the state to declare bankruptcy,” Guardian told the Press of Atlantic City. “Then they could do what they’ve done to every other city and every other municipality since 1932. They can give us the funds that we need from the state.”
Guardian and the city’s Council President Marty Small also held a meeting with state Assembly Speaker Vincent Prieto to discuss in detail the city’s financial crisis.
“We finally got to tell the true Atlantic City side of the story,” Small told the Press. “Unfortunately people from the outside, people with special interests always want to come in and tell us how to govern our town, but today the speaker heard the truth.”
Sweeney discounted talk about bankruptcy.
“Watching their reaction just shows you they don’t know what they’re doing,” Sweeney said to the Bergen Record. “For them to come out just nonchalantly and say we’re going to have meetings to file bankruptcy, has a chain reaction.”
Prieto said at a press conference that he felt Guardian and city officials have been left out of discussions on the city’s future in Trenton and that the mayor “deserved that respect to at least have a sit-down.”
The bills Christie vetoed would have set a payment in lieu of taxes, or PILOT, for the city’s eight remaining casinos for the next 15 years. The program was meant to stop expensive appeals of the casino’s tax assessments, which has caused the city to lose millions in tax ratables as the city’s gambling revenue has declined.
The city also would have received aid from disbanding the city’s casino-funded marketing arm—about $30 million a year—and casino reinvestment development taxes that now go to the state Casino Reinvestment Development Authority.
The city had expected those revenues in its 2015 budget, creating the $33.5 million hole it must now fill.
The bills had been recently revised to have the casinos make $50 million in additional payments over seven years and would share 13.5 percent of the money collected from the casinos with Atlantic County’s government and city schools. However, after Christie’s veto, new bills would have to be created from scratch.
The Casino Association of New Jersey said the city’s casinos have again been left in the dark about the city’s future.
“At this late hour we are simply looking for the endgame,” the group said in a statement. “This process has dragged on too long, and the city and its residents and businesses are suffering as a result of lawmakers’ inability to get this done.”
In a related development, a long awaited report from the city’s emergency manager—appointed by Christie—was finally released and stopped short of recommending bankruptcy for the city. Instead the manager, Kevin Lavin, is recommending spending cuts, consolidation and privatization of some governmental functions—such as police and fire—as a way of solving the city’s budget problems.
State Takeover
Christie’s veto prompted New Jersey Senate President Stephen Sweeney to renew his call for a complete takeover of the city, while saying bankruptcy should not be an option. Sweeney has introduced a bill that would give the state power over Atlantic City, including the right to make most major decisions and sell city assets.
“Unfortunately, Governor Christie this week vetoed legislation designed to stabilize casino tax payments to the city, and the city government seems paralyzed—unwilling or unable to take the budget actions needed to keep the city afloat,” Sweeney said in an opinion piece that ran in the Philadelphia Inquirer. “Doing nothing is not an option. The choice is clear: We cannot afford to let Atlantic City go bankrupt. Anyone who believes that Atlantic City would be better off left to its own devices would be dooming the city to a slow and inescapable death spiral.”
Guardian, for his part, penned an op-ed piece for the Press of Atlantic City which outlined in detail the steps the city has already taken to meet recommendations by the emergency manager and the state Department of Community Affairs, which already overseas the city’s budget. He also alluded to an earlier Sweeney comment that there is “Atlantic City fatigue” in the statehouse.
“Our city comes to the table every morning in a cooperative spirit to work with the state and federal government leaders, as well as the public and private sector leaders.” He said. “As long as I am mayor of Atlantic City, we will continue to work with those legislators who have the strength and endurance to do what’s right for New Jersey and who want to help improve the quality of life for the citizens of Atlantic City.”
Guardian also said the city is trying to sell many of its assets, including its former municipal airport Bader Field, but the business climate in the city is preventing it from getting a fair price for the largely vacant track.
Christie says he’s ready to act on the state takeover.
“I’ve been in regular conversations with the Senate president and the Assembly speaker for the last 10 days to try to reach some accommodation on this.” Christie said. “We reached an accommodation on North Jersey gaming. I hope we can reach an accommodation on this as well.”
Sweeney has criticized the city for not selling its Municipal Utilities Authority—which he feels could bring $100 million—but Guardian has said even Lavin, Christie’s appointed emergency manager, has advised against the sale saying it would seriously raise water rates in the city and essentially be a new tax on residents.
According to the AP, Lavin’s report recommends dissolving the municipal utilities authority and having the city run it more efficiently. It also says Bader Field is a valuable piece of property but its current value is low. The city should hold onto it with an eye toward selling it in the future when things improve, Lavin said.
Sweeney however, points out that Atlantic City owes $500 million to bondholders and $150 million to property owners—mostly casinos—through tax appeals. The city’s financial problems have also wrecked its ability to issue bonds to pay these costs.
Sweeney also noted that the city spends as much as three times what other cities its size in the state spend for public services.
“Clearly Atlantic City has lost the ability to help itself,” Sweeney said. “By having the state manage the city’s finances, it could negotiate with creditors, access the bond market, monetize its assets and organize and right-size city government.”
City officials have long maintained that the comparison of the city to other cities of the same size is unfair since Atlantic City draws millions of tourists a year.
“The city government simply refuses to make meaningful cuts in an operating budget of $262 million for a city of 39,000 residents—a price tag of $6,717 per person, which is three times the average for Newark, Paterson, Camden, and Trenton, all of which have service needs at least as challenging as Atlantic City’s, and whose population swells just like Atlantic City’s when tens of thousands of people commute into those cities to work every day,” Sweeney said.
“This takeover is limited to management of the city’s finances for no more than five years,” he said. “Hopefully a lot less—just long enough to fully stabilize the city’s finances and serve as a bridge to the redevelopment of Atlantic City by the new nonprofit we will set up. If we want to restore Atlantic City as the ‘Queen of Resorts,’ we need to act now.”
Sweeny’s takeover proposal was originally reported as being for 15 years, so his comments may mark a change in the plan.
Atlantic City residents and officials vowed to fight the takeover bid for however long it lasts, even holding a Martin Luther King Jr. Day rally at a city church.
“This is going to be a national issue if Senator Sweeney doesn’t watch out,” said City Councilman Kaleem Shabazz, according to the Press. “It has overtones of being a civil rights issue. It might be David versus Goliath, but sometimes, David wins.”
The city has also launched an online petition demanding the state back off from the takeover bid.
Sweeney’s plan for a takeover has picked up the support of Local 54 of UNITE HERE, the city’s largest casino union, however. Sweeney is also vice president of the International Association of Iron Workers.
Sweeney is also beholden to New Jersey and Camden-based power broker George Norcross, whose brother represents a group that is seeking to sell Atlantic City’s Municipal Utilities Authority.
North Jersey Casinos
Through it all Sweeney continued to push for plans to build two new casinos in northern New Jersey. Sweeney has introduced a plan to allow for the new casino to be built with a significant amount of their tax revenue being slated to help Atlantic City.
The current plan is a compromise—brokered by Christie—with a competing plan that was put forth in the state Assembly.
“These casinos will provide hundreds of millions of dollars more in state revenue for programs for senior citizens and the disabled, and they will provide up to $3 billion over the next 15 years to redevelop Atlantic City as a destination resort with a diverse business sector that will anchor the Jersey Shore economy and create jobs.” Sweeney said in his op-ed piece. “Without revenue redirected from the North Jersey casinos, this reinvention would be impossible.”
For the plan to advance, it must be approved by the state’s voters since it would require a change to the state constitution to allow casino construction outside of Atlantic City.
The measure advanced in the State Senate when that Senate’s budget committee voted 9-2 to approve the proposal for a referendum.
The bill gives casino companies operating in Atlantic City first shot at the new casino sites. The original bill gave the operators six months to make a proposal, but the committee shortened that to 60 days after the bill goes into effect if approved by voters.
This was seen as a major compromise with the Assembly version, which sought to protect major proposals for casinos in Jersey City and the state’s Meadowlands Racetrack.
According to the AP, the bill would send half of the first $150 million in tax revenue generated by the new casinos to Atlantic City to help compensate for the expected loss of business to new in-state competition. Two percent would go to the horse racing industry, and 2 percent would go to local and county governments that host the casinos. The remainder would go to tax relief and programs for senior citizens and disabled residents statewide.
The bill is opposed by many Southern New Jersey politicians, however, and could face a difficult time getting approval in the state Assembly. The bill will need to pass by a three-fifths majority in both houses to be on the November ballot.
The opposition picked up some good news as well.
First, Moody investor Services wrote an opinion that casinos in northern New Jersey would hurt Atlantic City and cause more casino closures in the resort.
“This expansion comes at a time when there are eight new casinos expected to open in the Northeast U.S. by the end of 2018—including in Philadelphia, a major feeder market for Atlantic City,” Moody’s wrote. “In our view, the additional competition will likely cause more casinos to close, which would be credit negative for Atlantic City.”
A poll conducted by Farleigh Dickinson University found that New Jersey residents still oppose legalizing casino gambling in North Jersey, but the margin has shrunk since a similar poll last year.
The poll found that 50 percent of respondents are against allowing casinos outside Atlantic City, and 42 percent support expanding gambling into North Jersey.
Last June, the same poll reported that 56 percent of the state opposed legalizing casinos in other areas of the state and 37 percent favored the idea.
The public continues to be skeptical, and though opposition is down from levels measured last year, it remains at levels measured in previous years,” said Krista Jenkins, the poll director. “The increased acceptance … may be the result of receiving more clarity surrounding recent legislative efforts to allow gambling expansion in New Jersey. As the details of the legislature’s intentions become known, the public’s opinions will be affected. In addition, gambling interests will launch vigorous advertising campaigns in order to change people’s opinions.”
