Atlantic City's city council agreed to a plan for steep budget cuts over the next four years, but also refused to follow the ideas of a state-appointed emergency manager. The city council met on Wednesday of last week to discuss the gambling destination city's recovery plan, after it was learned to be $70 million under budget.
The city council's plan is to trim the $260 million budget by more than 15%. The plan is to cut about $40 million a year off the current budget, which would mean significantly less money for discretionary spending and municipal programs.
Reduction in Municipal Workforce
Much of the plan involves reductions in the municipal workforce, meaning more job losses for the city in general. One major area set for cuts will be the city's police force, which already was hard-pressed.
The city also plans to ask permission from the state to divert pension payments to debt reduction, instead. Also, the city council plans to ask the state for an aid package of about $20 million.
Tax Base in Decline
Atlantic City has seen a steep decline in its tax base over the past year. Since 1975, the city has relied heavily on a domestic casino gambling industry. That business model worked for decades, when New Jersey was the only state besides Nevada to host legal gambling. When more and more states began to offer gambling venues of their own, gambling tourism took a major hit. Combined with a bad economic and the aftermath of Hurricane Sandy, Atlantic City has seen half of its gaming revenues lost over the past 8 years.
Lost Property Taxes
According to Atlantic City's own numbers, roughly 75% of the city's property taxes in the past were paid by the casino industry. Four of the city's twelves casinos closed in 2014, which has drastically reduced the property taxes. It is thought the residents of the city will see their own property taxes increase, to compensate.
Any raising of taxes comes at a bad time for the people of Atlantic City. Property values have plummeted 45% since 2008, while property taxes already have doubled in that time. Just last year, the city lost 9,000 jobs, further eroding the tax base. Of those, 8,000 were gaming-related jobs. The Trump Taj Mahal narrowly missed closing, which would have cost 3,000 more jobs. Activist investor Carl Icahn offered $20 million at the last minute to save the jobs, and he might keep the casino operating throughout 2015. Unless major restructuring occurs, Trump Taj Mahal is likely to eventually close.
Caesars Entertainment Bankruptcy
Meanwhile, Caesars Entertainment, which owns three of the remaining seven casinos, announced last month that its operations division will declare bankruptcy in mid-January. Caesars Operations agreed to a plan with major investors on its reorganization and bankruptcy, which should reduce its debt by about $9 billion. Caesars Entertainment is said to have about $23 billion in debt, all totaled.
Governor Chris Christie and the state legislature's Democratic leadership have held summits to discuss how best to husband Atlantic City through its current crisis. Though Mayor Don Guardian and the city council declined to follow the state-appointed emergency manager's specific plan, the council did endorse a plan quite similar to the ones proposed during the summit.
Economic Transition
Currently, Atlantic City is transitioning from a casino-focused economy to more of a non-gambling tourism economy. To successful lure tourists to the city, though, the skyline needs to be filled with lit-up buildings. That's why it was important to see new residents at the old Showboat Casino, and why the status of the Revel Casino remains such an area of concern.
Don Guardian is still resisting the influence of a state-appointed manager, though he is working closely with a state fiscal monitor. One drastic plan that's been discussed is to cut budget by dissolving the Atlantic City police force and turning the law enforcement over to a regional department. Such a plan might have grave consequences in trying to lure tourists to the city, since tourists want police protection. At present, the police force will face significant cuts, though the force will remain in operation.
