How Are the Fiscal Chips Falling in Atlantic City?

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eBlog, 2/01/17

Good Morning! In this a.m.’s eBlog, we consider how the fiscal chips are falling in Atlantic City—and the consequent impacts on the state-taken over city.

How the Chips Are Falling. New Jersey State Senator Jim Whalen (D-Atlantic City), a member of the Casino Revenue Fund Advisory Commission, reports: “The money is not coming in like it used to…I don’t know if there is a solution. I know that some groups have picked up some things, but they can’t pick up them all.” Indeed, the state-taken over city, the gaming market has significantly diminished over the past decade, as has, consequently, the casino-generated tax revenue which funds programs helping some of the Garden State’s low income residents: today the revenues are less than 50 percent of what they were as recently as 2005, according to data from the state Division of Gaming Enforcement. The city has dedicated casino tax revenues (gaming revenue, parking fees, hotel room taxes) to finance prescription drug subsidies, housing assistance, and transportation programs. In 2015, casino-industry revenue totaled more than $3.6 billion, while casino taxes totaled more than $210 million, according to state figures. But gambling on a straight flush in perpetuity has not worked out: the spread of casinos along the East Coast has undercut the seeming Mecca-like appeal of Atlantic City, so that by FY2015, casino revenues to the city had dropped by more than $200 million in less than a decade—and, no one knows what the odds are that the decline is slowing. Yet, even as the key source of municipal revenues is in decline, and the city is confronted by a significant deficit; its costs foisted on it by the state takeover are about to increase: notwithstanding the city’s outstanding debt, the State of New Jersey has given the green light to a pay increase for the firm under contract as part of the state takeover of the city: it has granted Ernst and Young both a contract extension and about a 3 percent increase in its permitted hourly billing fee—so that Ernst and Young will, effective March 1st, be permitted to charge the city a blended rate of $485 an hour—a tidy fee on top of the $1.56 million the firm has billed since September. No doubt coincidentally, New Jersey Gov. Chris Christie’s brother, Todd, is a director at the firm. Ernst & Young’s initial contract with the state provided for gradual rate increases, according to Department of Community Affairs spokesperson; however, Atlantic City Council President Marty Small criticized the raise: as a time when the city’s employees are threatened with layoffs, “the only raise the city’s residents are getting are raised taxes…Once again this takeover seems to be about politically connected attorneys reaping the benefits from the taxpayers when we’re supposed to be reining in spending and returning Atlantic City to fiscal prudence.” (The firm was hired two years ago in an effort to help former Emergency Manager Kevin Lavin, who consulted with stakeholders and wrote two reports on how to turn the city around.) That is, of course, not the only state mandated cost: former U.S. Sen. Jeffrey Chiesa, who was named last November by Gov. Christie to oversee the state takeover for five years—and given vast power in the city, including the ability to break union contracts, hire and fire workers, sell city assets and more, and authorized to bill $400 an hour for his work. His new assistant, former city Business Administrator Jason Holt, earns a $140,000 salary.

Gambling on Public Safety. Meanwhile, Atlantic City’s Casino Reinvestment Development Authority (CRDA), a private, non-profit agency created through a merger between the Atlantic City Convention Center Authority and the Greater Atlantic City Convention & Visitors Bureau, yesterday convened an emergency board meeting to pass a resolution opposing a proposed $2 fee on city hotel rooms to pay for public safety—the proposed $2 daily surcharge for each occupied room in the city would last two years, and all revenue would go toward the city’s police and fire departments, which are bracing for deep cuts under the state takeover. The industry is apprehensive the proposed fee would be damaging to not only the Atlantic City tourism industry, but also the meetings and convention industry—an industry which last year commissioned a study which found that taxes already make up 19 percent of casino rooms renting at $100, which was higher than rooms in cities such as Philadelphia, Boston, and Baltimore. However, proponents, including the city’s public-safety unions, say the fee would raise $8 million annually and help avoid police and firefighter layoffs, testifying Monday at a state Assembly panel hearing in response to state pressure for $14 million in givebacks from the public-safety unions by today.

On the winning side, the New Jersey Assembly Appropriations Committee Monday approved a bill to extend a state tax-credit program designed to revitalize areas of distressed cities to include Atlantic City: the bill, the Neighborhood Revitalization State Tax Credit Program, would offer tax credits to businesses which invest in projects in low- and moderate-income neighborhoods. Entities receiving the credits would be required to use 60 percent of the tax-credit funds on projects related to housing and economic activity; the remainder must assist small businesses. The Tax Credit program currently covers New Jersey municipalities which receive special state aid, have poor school districts, or are areas adjacent to those cities and have similar socioeconomic characteristics. Atlantic City is not currently included. Projects which have qualified under the program include rehabilitation of abandoned properties, job training and neighborhood beautification, according to a project list on the Department of Community Affairs website. The measure, sponsored by Assemblyman Vince Mazzeo (D-Atlantic), the Neighborhood Revitalization State Tax Credit Program, offers tax credits to businesses which invest in projects in low- and moderate-income neighborhoods. Entities receiving the credits must use 60 percent of the tax-credit funds on projects related to housing and economic activity. The rest must assist small businesses. In a statement, the Assemblyman noted: “While building upon the unique recreational experience Atlantic City provides, we can also combat poverty and unemployment by encouraging economic development in the city’s low- and moderate-income neighborhoods…We need to use everything in our arsenal when it comes to reinvigorating Atlantic City’s economy, helping the middle class and bringing tax relief and job creation throughout Atlantic County.”

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