Atlantic City officials went to Trenton last week to tout a proposed five-year fiscal plan it hopes will block a New Jersey state takeover of the resort’s finances.
The plan calls for job reductions, a settlement of a major tax debt the city owes to the Borgata casino hotel and the sale of the city’s former municipal airport Bader Field. City Mayor Donald Guardian says the plan would cut $55 million off the city’s budget by 2021, but the plan does not call for a tax increase on residents.
However, the plan must be approved by the state Department of Community Affairs to stave off the state takeover and there are important sticking points the DCA would have to sign off on. The biggest is the sale of Bader Field to the resort’s independent Municipal Utilities Authority for $110 million. The MUA would have to borrow to make the purchase and the city would use the funds to pay down its about $500 million debt.
The DCA has also already taken issue with the city’s proposed $242 million budget for this year for not including tax increases, despite the fact the city has proposed at least a 40 percent increase in property taxes for city homeowners and small businesses.
The tax deal with Borgata, which is now wholly owned by MGM Resorts, also is not final. The city announced a $103 million settlement with the casino to which it owes more than $150 million in back taxes. The city acknowledged that no formal agreement has been reached with the casino and Borgata officials also quickly released a statement saying the casino had not reached an agreement with the city, but hoped to continue negotiations if the state approves the fiscal plan.
The statement says that the casino “has not agreed to accept any offer to settle its tax refund judgments and pending tax appeals.”
“Borgata has had an ongoing dialogue with city and state representatives this year in an attempt to reach a fair and equitable settlement,” the statement said. “In those meetings we have repeatedly expressed our willingness to compromise the amount due to Borgata. Once the city submits its fiscal plan and reaches consensus with the state, we look forward to resuming our settlement negotiations and putting this matter behind us.”
City officials, however, downplayed the Borgata’s statement saying they feel confident the deal will be finalized if the state approves the fiscal plan. One of the city’s financial advisors, Ed McManimon also told the Philadelphia Inquirer that he had assurances from an unnamed key executive at Boyd Gaming in Las Vegas that the deal was solid.
Boyd had owned half of Borgata until recently, when it sold its share to MGM Resorts International. That deal, however, gives Boyd a portion of the back taxes owed the casino.
The deal calls for Borgata to be repaid within 90 days, McManimon has said, and would allow Borgata to skip another $8.5 million quarterly credit from property taxes in the fourth quarter of this year. The casino had been allowed by a court ruling to stop paying its quarterly taxes earlier this year when the city missed deadlines to repay the back taxes. So far the casino has withheld about $23 million, according to the Inquirer.
The city prepared the plan under legislation approved in Trenton earlier this year to rescue the beleaguered city from bankruptcy. The city had 150 days to prepare the plan, but announced it about a week early. If the state DCA does not approve the plan, the state could move to take over the city’s finances.
Now city officials have to sell the plan in Trenton and to Governor Chris Christie, who has been sharply critical of the city’s handling of its finances. A public hearing on the plan was held last week in front of the state Assembly’s judiciary committee. City officials also met privately with DCA officials.
City officials speaking for the plan said that if the state does not approve it, city residents would face major tax increases after already seeing their tax rate double in the last six years.
“With $500 million of debt and $100 million of shortfall in the current budget, if we could have solved this ourselves, we wouldn’t be coming before you,” Guardia told the committee. “We’re not asking for a bailout.”
The plan itself was barely supported by Atlantic City’s Council, which voted 5-3-1 at a special meeting to approve it.
Aside from the tax settlement and Bader Field sale, the plan includes 100 job cuts, an early retirement plan for municipal workers and renegotiated contracts with the city’s unions to cut health care and overtime costs. Also built into the plan is the payment of about $43 million in pension costs the city has deferred.
The plan also counts on state aid, but aims to decrease the city’s reliance on state funds and projects balanced budgets through 2021. The budget plan even projects small surpluses for coming budgets.
The city also hopes to gain renewed access to bond markets with the city planning to issue about $105 million in bonds to also pay down the city’s debt. City officials say that without a clear plan for the city’s finances, the resort has been shut out of bond markets. With an approved plan in place, they say, the city would again be able to issue bonds.
The job cuts would reduce the city’s fulltime workforce from 965 to 865 by transferring some jobs to Atlantic County, bidding out some services, and offering early retirement packages. It is unclear if layoffs would be needed, but the city has been working to avoid layoffs. The city has already cut 358 full-time and part-time jobs since 2013.
The plan notes that property-tax receipts for the city fell $651 million—from $182.1 million in 2010 to about $117 million in 2016—despite tax increases. At the same time, the city faced “a series of extraordinary tax appeals that created over $500 million in one-time liabilities.”
The plan does not include tax increases for city residents. Under the rescue package, city casinos are locked into a set payment in lieu of taxes for 15 years.
“There is no doubt that this is the way forward for Atlantic City’s future,” Guardian said at a press conference announcing the plan. “Not only did we find a way not to raise taxes on the residents of Atlantic City, but we also outline how we will steadily decrease our dependence on state aid over the coming years.”
Despite the provision for the plan in the Atlantic City rescue plan legislation, however, many in the city felt it was unlikely that the state will accept any city fiscal plan and is determined to take over the resort.
Tammori Petty, a spokeswoman for the state Department of Community Affairs denied that.
“We emphatically and categorically reject any implication that a decision regarding the city’s plan has been predetermined,” Petty said in a statement. “The department is prepared to review the plan in its entirety and full context before any decision is made.”
Guardian told the Press of Atlantic City that he felt the meetings with DCA officials went well.
“I think they understood and asked questions about each part of the plan,” Guardian said. “I can’t say that they accepted any part of the plan. They told us that they were completely open-minded.”
The DCA has until November 1 to decide on accepting or rejecting the plan.
