Gov. Chris Christie said he is suing Atlantic City in order to pay the city's teachers. The New Jersey governor said that was the reason the state is in the unusual position of suing a city whose finances it already controls.
Gov. Christie said the New Jersey Education Commissioner, David Hespe, sued Atlantic City "at my direction". Christie's stated goal was to "protect the property tax collections that rightfully belong to the Atlantic City school district and the children and families that they serve."
AC School District Owed $34 Million
Hespe's legal filings show the city owes the Atlantic City Independent School District nearly $34 million. That total includes $8.5 million the city owes the school district on April 15.
The lawsuit alleges that the city also owes municipal workers a payment of $3.5 million on April 8, but it only had $8 million in spending cash on April 1. Christie says the lawsuit is designed to keep Atlantic City from paying municipal workers, but instead pay for teachers' salaries.
Student Won't Be "Collateral Damage"
Chris Christie told reporters, "Now this action won't fix the city's own financial problems, but it will prevent them from making Atlantic City students and their families collateral damage to their reckless financial gains."
Atlantic City's financial situation is dire. The city lost 9,000 jobs in 2014, out of a population of 40,000. Four casinos closed that year, in a city which draws 70% of its property taxes from gaming complexes. The resulting erosion of the tax base has left the city on the verge of bankruptcy.
To keep that from happening, the State of New Jersey made a loan to the Boardwalk city and appointed financial overseers. Earlier this year, Gov. Christie announced the state would control Atlantic City's finances for the next 5 years. That control includes which city workers remain on the payroll and which ones lose their jobs. Job losses in the city government are certain.
4-Week Government Shutdown
This week's lawsuit is a clear indication of which workers come first. While the lawsuit saves the salaries of teachers and administrators for the time being, it does little for those working in government services and city services. To borrow Chris Christie's phrase, municipal workers and their families are going to become "financial collateral damage".
A spokesman for Mayor Don Guardian did not answer questions about the lawsuit. Earlier this month, the mayor announced Atlantic City would have a shutdown of government between April 8 to May 2. During those four weeks, city workers will not report to work. Infrastructure workers and bureaucrats will not work.
Police and Firemen to Work without Pay
Meanwhile, police officers, firefighters, and other city workers deemed essential will continue to work -- without pay. The Press of Atlantic City said those workers likely would receive back pay, though CNN said it could not confirm whether that was the case.
Many believe Atlantic City is heading for default and bankruptcy. In January 2016, Moody's once again lowered Atlantic City's ratings and predicted it would default on payments in the next year. Specifically, a Moody's report said the economic data "reflects the greater likelihood of default within the next year."
Significant Bondholder Impairment
Moody's blamed state officials for the lowering of its rating. It described "significant bondholder impairment", due to the inability of lawmakers and executive officials to agree on how to handle the crisis.
The report said it it blamed "an ongoing political stalemate over an Atlantic City fiscal rescue package."
Politicians have been quick to point fingers. At the time of the new Moody's rating, Gov. Chris Christie said Atlantic City now had the same credit rating as Puerto Rico, which is famously in a debt crisis.
Not Fit for Trump's Name
Before his run for president, Donald Trump sued Trump Plaza, hoping to have his name removed from the establishment. Eventually, Trump Plaza closed, removing the problem. Donald Trump also tweeted about removing his name from Trump Taj Mahal, but eventually relented when family friend Carl Icahn bought the casino.
Trying to distance from the economic debacle, Donald Trump said at the time he had not visited Atlantic City "in years". He was removed by the board of directors of Trump Entertainment Resorts in February 2009, at the start of the last of his four bankruptcies. The casino company went bankrupt in the months following the collapse of the real estate and banking market, and the onset of the Global Recession.
Donald Trump seems to have recovered, while Trump Entertainment could recover under Carl Icahn's direction. Whether Atlantic City can recover from the same recession is left to be seen.
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