November 18, 2015. Share on Twitter
Rolling the Odds for Atlantic City’s Fiscal Future: Will Gov. Christie’s Long Delayed Actions Help or Harm the Odds of Atlantic City’s Risk of Insolvency? Moody’s analysts Josellyn Yousef and Orlie Prince provided comments and insights with regard to the so-called “rescue package” of the five bills adopted by the New Jersey legislature, but conditionally vetoed by New Jersey Governor Chris Christie. The bills, aimed at helping Atlantic City not to be forced into municipal bankruptcy, would provide fiscal assistance to help Mayor Don Guardian and the Council to stabilize the city’s finances and restore a fiscal path to sustainability. The long-delayed action by the Governor has, however, instead not only led to a long and costly delay in the restoration of critical revenues and fiscal certainty, but also opened up a proverbial can of worms within the region. Gov. Christie, taking a brief break from his Presidential campaign, signed one bill, vetoed another, and conditionally vetoed the remaining three—conditionally meaning he would sign them were his amendments or changes to be made.
Gov. Christie signed the bill to grant additional state aid to Atlantic City’s school district; he vetoed the legislation which would have mandated Atlantic City’s casinos to provide health benefits to employees. The two analysts note there “is a reasonable chance the (remaining) three conditionally vetoed bills will be passed by the end of the year, because the Governor’s recommended changes do not seem onerous and the Governor intends on collaborating with the Senate President to iron out the differences,” noting that enactment of these three bills would be invaluable to Atlantic City in terms of enhancing its fiscal liquidity and enhancing the city’s ability to avoid being forced into municipal bankruptcy. The dynamic, if moody, duo, however, further wrote that “passing the bills would not cure the city’s long-term structural deficit. If the bills fail, the city’s liquidity will remain dangerously narrow, and it is likely the city would be insolvent without some other form of financial support.” Mayor Guardian and city staff are confident Atlantic City has enough cash to meet its mid-December debt service obligations of nearly $12 billion—and that even if the disputed, conditionally vetoed bills are not signed into law this year.
State-Local Tension. A key issue, unsurprisingly, involves authority. Thus, the question with regard to whom Atlantic City’s casinos should remit their payments in lieu or PILOT taxes has stirred not just a regional tempest, but also a state-local confrontation: Gov. Christie insists that $30 million of the $150 million in PILOT revenues go directly to the state: they may not pass go, but rather would bypass Atlantic City and go directly to the state—where they would be confined unless and until the city—a city already under quasi-state control under a gubernatorially appointed Emergency Manager—could demonstrate it had a sound fiscal plan. The decidedly moody analysts, however, warn: “Even if Atlantic City received the full funding available under the complete rescue package within the next two years, once the $30 million of additional PILOT revenues and the $30 million of ACA revenues sunset, the City’s expenditures will surpass revenues by $34 million. The gap will widen further if the city is required to pay on the approximately $150 million of tax appeals it is currently negotiating.” Or, as the dynamic duo write, failure to act on the legislation mean that Atlantic City’s “liquidity will remain dangerously narrow and it is likely the city would be insolvent without some other form of financial support.” The long-delayed actions taken this week by Gov. Christie have created another adverse fiscal impact: they will almost surely force Atlantic City’s state appointed Emergency Manager Kevin Lavin, who had been set to release an update to his fiscal recovery last June, to delay again in order to reflect the latest, long-delayed actions by the Governor. Suffice it to write that it has been hard enough for Mayor Guardian and the Council to seek to govern—or co-govern—with the awkward presence of a Governor-appointed Emergency Manager as sort of a co-Mayor, but now to have still a further, long delayed series of fiscal steps taken by the Governor.