Atlantic City is suing the state of New Jersey for $33.5 million, saying the state promised a financial aid package for that amount, but did not keep its promise. Atlantic City's filing contends its financial planning was based on the promise, so the failure of New Jersey to do as it promised caused damage. The lawsuit, which was brought by the AC Commissioner of Education, maintains the city would have been able to make payments to the Atlantic City school district, if the state had kept its promise.
At the moment, Atlantic City owed $34 million in outstanding payments to area schools. The education commissioner's filing is a countersuit, because Gov. Chris Christie previously had sued Atlantic City, because he wanted to force the city to pay the school system first in the month of April, while delaying payments to city workers.
Budget Decisions for Don Guardian
Those delayed payments would have forced Atlantic City to shut down non-essential city services for four weeks. Essential service providers like police officers and firefighters would have had to work without pay for those four weeks. The judge in the case denied Gov. Christie's motion.
The case went before Judge Julio Mendez, who pointed to an April 19 payment of $4.2 million by Atlantic City to its school system. Since the city had been able to make payroll, Judge Mendez saw no need to force them to prioritize payments.
Judge Mendez's Statement
In a statement after the ruling was announced, Judge Mendez praised both sides for their contribution to a partial resolution. The judge's statement read, "So far, to everybody’s credit, the payments have been made to the satisfaction of the school board. Everybody's pleased. In some ways, the state has succeeded."
The issue is not resolved, though. With one more full month of school left before it recesses for the summer, another major payroll crisis is awaiting in the coming weeks. The Atlantic City lawsuit anticipates the next stage in its showdown with the governor.
Chris Christie's Influence
Gov. Christie continues to push for payment of the city's educators to be prioritized when payroll payments are made in May. Atlantic City is expected to receive between $40 million and $50 million in taxes in May. Christie wants Atlantic City to pay $25.5 million to teachers and administrators in the school districts first, because it will be their final pay before a new school year. Atlantic City wants to pay both education and bureaucratic employees from the money won in the lawsuit against New Jersey.
PILOT Bill
The lawsuit's references to broken promises is a direct reference to Governor Christie himself. The New Jersey legislature twice passed bills which would have allowed Atlantic City's 8 casinos to make rigid payments in lieu of normally-assessed gaming taxes, in what is called a "Payment in Lieu of Taxes" or PILOT bill. The $33.5 million is the amount the casinos would have paid in combined taxes under both PILOT bills.
In both cases, Chris Christie vetoed the bills. The vetoes caused rancor in the New Jersey legislature, which is controlled by Democrats. It also caused rancor and confusion among Atlantic City's leaders, because it undermined the city's attempts to make up budget shortfalls in the midst of a financial crisis.
Special Master of Governmental Services
In its suit, Atlantic City has asked Judge Mendez to provide a "special master" to oversee local operations of New Jersey's Division of Local Government Services, which are a part of the state's plan to run Atlantic City's finances. Local Government Services itself oversees the most of Atlantic City's finances.
The state used leverage from a $40 million loan to impose state-level overseers of the Atlantic City economy. Gov. Christie wants an even more active role in Atlantic City's attempted turnaround.
Atlantic City's Decline
The financial crisis largely stems from the collapse of Atlantic City's casino industry. In 2006, AC's casinos brought in a combined $5.4 billion. Last year, that number was reduced to a mere $2.6 billion. The casinos employs most of the cities non-governmental employees, while also paying 70% of Atlantic City's properties taxes.
In 2014 alone, Atlantic City saw the closing of 4 casinos and the lost of 9,000 workers. The lost of so many jobs in a city of 40,000 left Atlantic City in a deep financial crisis. Many have speculated bankrutpcy is coming, which is why New Jersey intervened in such a bold way.
