New Jersey Governor Chris Christie made a big move to help turn struggling Atlantic City around by appointing an emergency management team to develop a financial plan for the resort, which is reeling from the closure of four casinos and a steadily shrinking casino ratable base.
“I can’t wait any longer,” Christie said “We need more aggressive action. We are digging out of an enormous hole. It’s time to confront the dire circumstances with which we are confronted.”
Christie made the announcement at the third summit he has held with casino executives, business leaders, union leaders, and state and local officials to find strategies to help the resort.
Christie named Kevin Lavin, a corporate finance attorney who specializes in helping troubled companies, to reconstruct the daily operations and finances of the city. Christie also named Kevin Orr, a former corporate bankruptcy lawyer who led Detroit through its municipal bankruptcy, as a special counsel to Lavin.
Christie made the appointments under an executive order using laws put in place when the state moved to takeover operations of Camden about 13 years ago. But officials stopped short of calling the Atlantic City move a state takeover of the city.
Under the executive order, the management team is to produce a turnaround plan within 60 days “to place the finances of Atlantic City in stable condition on a long-term basis by any and all lawful means.” Officials expect it will take about 90 days to implement the plan and then 90 days to see results.
“What we’re doing right now is getting information,” said Lavin at a press conference on the announcement. “That’s all we’re doing. Getting an understanding of the situation we’re in. We need to delve into the details to see what’s going on.”
Lavin said his biggest task will be getting all of the different interests in the city to agree on necessary solutions.
Details such as a salary for the two men and where they will have offices were not disclosed
A report by a special advisory commission appointed to study the city’s problems predicts that Atlantic City’s property tax base is projected to fall from $11.3 billion this year to $8 billion by 2016. The commission recommended the appointment of an emergency manager.
“This is urgent,” Orr said at the news conference, “The trend lines for the city both on the revenue side and the cost side are not good.”
Orr handled Detroit’s management for most of last year, resigning as that city’s Bankruptcy ended in December. Under Orr’s oversight, Detroit shed $7 billion of its $18 billion debt and attracted new development.
Atlantic City has seen four of its 12 casinos close last year and three others are in bankruptcy. More than 8,000 jobs have been lost. Christie said the city’s 40,000 residents are struggling to pay taxes needed to support its $260 million budget, and the local tax rate has doubled since 2010.
But both Orr and Lavin said it was premature to say Atlantic City will declare bankruptcy. The wording of the governor’s order, however, does allow the team to declare a bankruptcy.
“We are going to be very candid with that discussion,” Orr said of a possible bankruptcy. “That will be something we will decide in due course.”
Local Reaction
Atlantic City’s Mayor Donald Guardian had opposed the move saying it was unneeded as the city has been cooperating with the state and already moved to cut spending and its workforce. The city’s finances are also already overseen by a state monitor.
But Guardian said the Governor’s move wasn’t the drastic takeover he expected.
“It’s cooperation that we need,” Guardian said. “It’s working together. It’s necessary for us to rethink how we are doing business in Atlantic City.”
Other Atlantic City officials, however, were opposed to the move.
“I don’t believe it’s necessary,” Atlantic City Council president Frank Gilliam told NJ.com. “I find it very imposing that we will basically have outsiders come into the city and dictate the direction of the city without sitting down with the city fathers and getting their input. We’re open to working with them. But at the same time, any time that they usurp our power, we will definitely have problems with that.”
The move also brought out opposition from several state unions and organizations, but that seemed to soften as details of the plan were released.
Christie stressed that the team will work with the mayor and council.
“He has inherited an awful mess,” Christie said of the mayor. “What we are doing is giving the mayor enhanced tools to be able to bring this to a successful resolution. This is not a move in any way to supplant the mayor’s role here in the city.”
The city is also waiting on state legislation to help solidify its remaining casino tax base, but action has been delayed due to competing plans.
A plan proposed by state Senate President Stephen Sweeney would have the city’s remaining casinos make set payments in lieu of taxes for 15 years to help stabilize the city’s budget, which has seen a series of casino appeals of their tax assessments. The payments would be tied to overall casino revenue
Another plan spearheaded by state Assemblyman Chris Brown would give all Atlantic County property owners a five-year property tax freeze instead.
