Moody's fears Atlantic City default after state report

ATLANTIC CITY, N.J. (AP) -- Wall Street is less than thrilled about what it has heard from emergency managers appointed by New Jersey Gov. Chris Christie to help turn around Atlantic City's finances.

People walk past the Revel Casino Hotel on the boardwalk in Atlantic City (AP Photo/Mel Evans)

Moody's Investors Service on Thursday called the plan credit-negative, fearing the proposals leave open the possibility of a default and rely heavily on aggressive actions in a short time frame. The managers recommend layoffs and spending cuts, but have ruled out a bankruptcy filing.

"The timeline to help the city recover relies on rapid legislative action, state aid, and timely property tax payments from struggling casinos," the firm wrote. "Long-term restructuring options will be exceedingly difficult to implement."

Moody's said the city's finances depend on casinos making timely tax payments and not falling behind -- something that is far from guaranteed.

State Senate President Steve Sweeney says the report is making things worse by spooking Wall Street.

"The latest report by the so-called emergency managers is not only a failed substitute for real action, it is now having a negative influence on Atlantic City's financial condition," he said. "The reaction by Wall Street shows that the report is making the situation worse.

"Standard & Poors reviewed the report and then said they might lower the city's credit rating below junk bond status, which would make it even harder for the city to work its way out of its dire fiscal problems," Sweeney said. "This is the same result caused by the appointment of the managers, which triggered a downgrade for the city and threatened the fiscal stability of other cities in New Jersey."

A package of bills sponsored by Sweeney to help Atlantic City and its eight casinos remains stalled in the state Legislature.

Christie's office declined comment.

The employment contract for one of the managers, Kevyn Orr, still has not been finalized two months after he started work, Christie's office says. Orr, who shepherded Detroit through its recent municipal bankruptcy, serves as special counsel to the emergency manager, Kevin Lavin.

Lavin will make $135,000 for his work on behalf of the state.