Gov. Chris Christie announced this week that Atlantic City is going to have its finances turned over to the state guardianship for the next 5 years. The plan was announced in conjuction with New Jersey State Senate President Stephen Sweeney and AC Mayor Don Guardian.
The three men agreed that steps had to be taken to radically change the insolvent gambling destination's financial outlook. To do that, state-level financial governance was needed. Having a state trustee take over the economic reins allows Atlantic City's stewards to draw on greater resources. With the state of New Jersey in control, it can offer those resources, while looking at the bigger picture.
Tax Base Decline of 65%
At the press conference announcing the decision, Gov. Christie said, "We all know what this was about, going from twelve casinos to eight and having the resulting decline of nearly 65% in the city's property tax base is a challenge that no other city has endured in as short a time frame. Greater state involvement makes sense and all three of us up here agree to that."
The legislation to sign the measure into law should be finalized in February 2016. A vote in both houses will need to pass, but the bill is expected to have bipartisan support. Sen. Sweeney's (D) appearance at the press conference alongside Christie (R) and Guardian (R) is a sign of that bipartisan support. If the legislature passed the bill, then Christie would sign it into law and place New Jersey under the state's financial control for the new 5 years.
Division of Local Government Services
Under the proposed law, the New Jersey Division of Local Government Services and Local Finance Board would have executive decision-making authority on finacial matters.
Outline of the Changes
The plan calls for a number of measures to be taken. First, the state is likely to restructure municipal debt. Atlantic City has been unable to get decent financing, because the city's credit rating declined as its tax base collapsed. Having the State of New Jersey involved should allow Atlantic City to get better interest rates on financing.
Municipal services are likely to be much different under state control. Those municipal services will be consolidated with the county or other nearby municipalities, which should save on payroll bills. The measure means that municipal authorities, departments, and commissions are certain to be transferred or dissolved. That means government jobs are likely to be lost at the city and county level. Also, the state is going to look at municipal contracts to see if they have unfavorable terms. If so, then those contracts are going to be amended or terminated.
Streamlining City and County Government
The sum total of those moves is to lower the payments made by Atlantic City, both to its creditors and its bureaucrats and other workers. Atlantic City is operating a city government which is meant for a city with three times the tax base it currently has. That has led to a $33.5 million budget shortfall and a $240 million in unpaid debt. A full $160 million of the debt is owed to Borgata, due to overpaid taxes -- that is, improperly assessed taxes which were paid.
Many are going to take the announcement as good news. Many have been critical, though. AC people suggested the state should have bailed out the Boardwalk with a state wide loan. In fact, fellow Republican Don Guardian had threatened to put Atlantic City in bankruptcy if the state tried to place its finances under guardianship.
Governor Christie's Intervention
Instead, Chris Christie was able to convince the Atlantic City mayor to play ball. If Atlantic City had declared bankruptcy, it could have hurt the credit rating of New Jersey itself, leading a negative economic chain reaction. Whatever Chris Christie said to Don Guardian to convince him to go the state-control route, it worked.
Gov. Christie did not give details. Instead, he focused on the future and stemming the financial crisis in Atlantic City. He told the reporters, "While there's been much rumored about bankruptcy, that is clearly not my preference. We will move swiftly to pass this comprehensive legislation and I will sign it so we can get on with Atlantic City’s next and most important phase of the restructuring."
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