A Gamble that Failed?

January 22, 2014
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A Gamble that Failed? New Jersey Governor Chris Christie is bringing in an emergency manager to take over the day-to-day operations and troubled finances of Atlantic City, marking an unprecedented expansion of state control over a New Jersey municipality. The move came after former Detroit emergency manager Kevin Orr opted not to accept Gov. Christie’s offer of the position—but did say he would try and help. The appointment, with somewhat unclear legal authority, was based upon an earlier advisory commission by last November’s Governor’s Advisory Commission on New Jersey Gaming, Sports and Entertainment, where one of the recommendations was the creation and appointment of an emergency manager. The Governor is expected to make the formal announcement today during the third summit he has held in an effort pull the city from economic hardship—when he is expected to name Kevin Lavin, a lawyer who worked for FTI Consulting Inc. in New York—with Mr. Orr to serve as a consultant to work with Mr. Lavin—and the dynamic duo expected to get down to work immediately, assuming—and preempting–the powers now held by the mayor and council, and with authority to consider a range of solutions — including renegotiating public-employee contracts. In the Motor City, Orr spokesman Bill Nowling said Mr. Orr has no plans of becoming emergency manager of Atlantic City, just over a month after finishing his work managing Detroit’s bankruptcy, but has been advising Gov. Christie on how to handle a state takeover: “He met with (Christie) over the holidays to give him some advice, but he’s not going to be the emergency manager.” The New Jersey Local Government Supervision Act; the Municipal Rehabilitation and Economic Recovery Act of 2002 and the Special Municipal Aid Act provide provisional authority for Atlantic City to file for federal chapter 9 municipal bankruptcy protection; however, there have been no discussions as yet with regard to such a step—albeit reports are that all options are on the table, even including renegotiating labor contracts. The flurry of announcements came as a spokesman for Atlantic City Mayor Don Guardian, a Republican, said Mayor Guardian would oppose any sort of outside control, including an emergency manager, because he had already cut the city’s budget and more than 140 employees, working closely with state officials, with his spokesperson stating: “I don’t think the residents will be very happy…They elected the mayor to represent them. He has been fulfilling his duties to the best of his ability and we’d like to know what an emergency manager would do that the mayor hasn’t done already.” For his part, Gov. Christie has said he respected the Mayor’s efforts; however, he remained committed to having the state take a leading role: “The fact is we are going to do the things we need to do to try and make sure Atlantic City gets it act together.” With the casino closures, the city’s assessed property value has plunged from $18 billion in 2012 to an expected $9 billion at the end of this year, according to Moody’s Investors Service. Last November, a panel convened by the Governor had suggested the state impose an emergency manager for Atlantic City, along with restructuring the city’s school, tax and pension systems. At today’s summit, the Gov. and members of his panel are expected to only address the appointment and authority of the emergency-management team; the rest of the related issues are still under consideration with more steps to be announced, the senior administration official said.

Social Media, Municipal Fiscal Distress, & Contagion. Detroit neighbor Wayne County expects to receive more concrete numbers about its increasingly difficult financial situation in the coming weeks, according to County Executive Warren Evans, who, yesterday, at a meeting of the Detroit Economic Club, said that an ongoing financial review “to figure out how deep the (budget) hole is” likely will show that its depth “will be a little surprising…I expect it will be deeper than we thought.” The County Executive, who was on stage with Detroit Mayor Mike Duggan, Oakland County Executive L. Brooks Patterson, and Macomb County Executive Mark Hackel in the club’s sixth meeting of regional leaders (aka The Big Four) said: “Hopefully (the review) sends the message to people that we are going to fix the problem. We have a number of things outstanding, and it will be maybe 7-10 days from now when we can be more definitive about how deep the hole is. We are going to try to get a real grip on the problem.” Borders, in regions, after all, are permeable: distress can spread, as can economic growth. What seems important is that in the wake of Detroit’s bankruptcy and ongoing post-bankruptcy recovery, there appear to be increasing signs of a recognition that all the municipalities in the region are in this together. The meeting, which was attended by about 800 at Detroit’s Cobo Center, also included discussions about regional issues such as the new Great Lakes Water Authority and regional transit, as well as the May ballot proposal to hike the state sales tax to fund road construction—marking County Executive Evans’ first Big Four meeting hosted by the Economic Club since his November election.

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