Clock ticking for Atlantic City, as Christie signs financial rescue plan
Gov. Chris Christie today signed the Atlantic City fiscal rescue package, giving the city the money it needs to avoid a default on its debt but giving it until October to fix its finances.
"That means the 150 days will start today and they have until Oct. 24 to get their act together. If they do, great, because I have no interest in running Atlantic City," Christie said in a visit to the Point Pleasant boardwalk. "But if they don't, on Oct. 25, we will be there to do what needs to be done to bring that government into balance so that businesses don't have to worry about (the city's financial crisis) anymore."
Lawmakers passed the plan, which has snarled Statehouse proceedings for months, Thursday. It gives Atlantic City a bridge loan and other redirected taxes to help it avoid bankruptcy, and it requires city officials to put together a balanced 2017 budget and realistic five-year fiscal stability plan in five months.
If the city can’t meet those goals, the Christie administration can move to take over the operations of city government – a power Christie had sought immediately in legislation that was passed by the Senate but hit a wall in the Assembly. Assembly Speaker Vincent Prieto said he wouldn't consent to a plan that permitted the state to immediately take over and void union contracts.
Atlantic City Mayor Don Guardian said work on the financial plan will start Tuesday and will include monthly meetings to update residents and civic associations on the process.
"It will not be easy. There will be a lot of tough decisions that will be need to be made over the next 150 days, and there will a lot of sacrifices asked for by all, but I believe that by working together we will be able to accomplish this historic mission," Guardian said.
Moody's Investors Service analyst Douglas Goldmacher said the Wall Street rating agency will be watching for the details of Atlantic City's financial plan but called the new laws positive news for the city, which has a junk-bond level credit rating.
"The rescue package, which includes a $60 million bridge loan and stabilized tax payments from the city’s remaining casinos, is a credit positive development that provides short-term financial relief for Atlantic City and removes the immediate threat of a default or bankruptcy filing," Goldmacher said.
“Moody’s will continue monitoring how Atlantic City develops and implements its financial plan within the 150-day window, including the possibility of debt restructuring," he said. "The latter would be considered a default if it includes any bondholder loss or impairment. We will also analyze how the city plans to return to long-term fiscal stability as the casino industry continues to consolidate.”
The months-long fight defied party labels, pitting the Republican governor and Senate President Stephen Sweeney, a Democrat, against Prieto, a Democrat, and Guardian, a Republican.
It has ground progress on other issues to a standstill, inflamed passions and damaged political relationships. A call-to-arms by Christie urging citizens to press Prieto to give ground on the issue was still on Christie's website until midday today. The announcement of the bills' signing from the Governor's Office led with this phrase: "After 73 days of partisan obstruction by the state Assembly speaker on behalf of his public union bosses."
Today on the Point Pleasant boardwalk, Christie criticized Prieto for waiting so long to accept the terms of the state's intervention in Atlantic City.
"We offered them this deal a year ago, and he overplayed his hands for political reasons, but what he did was damage Atlantic City, damage the businesses there and the people there," Christie said. "It's awful what he did."
Christie's relationship with Guardian isn't much different. The two haven't spoken since January, when Guardian consented to the original legislation, only to change his mind, saying the terms of the deal weren't what he expected. Christie said today that the local government in Atlantic City hasn't demonstrated the competence to manage public money.
“These new laws will ultimately accomplish my mission to reform Atlantic City’s overblown municipal government, and in turn protect local and state taxpayers from being perpetually abused by the special political interests who admit to owning this city’s elected officials,” Christie said in announcing the signing of the bills.
Atlantic City's finances were plunged into crisis by the collapse of Atlantic City's casino industry. Four of the city's 12 casinos closed, others successfully appealed their property assessments, and the value of the city's ratables plunged from over $20 billion to less than $7 billion. Property taxes rose by around half, and the city is dealing with chronic, gaping deficits that have left it on the brink of bankruptcy.
The bailout package provides the city redirected casino taxes to help balance its 2015 and 2016 budgets and a predictable flow of funding going forward. But the city will still need to make deep spending cuts; Guardian estimates it was facing a $100 million deficit for 2017.
Contributing: Dino Flammia