TRENTON — In a blow to Atlantic City elected officials, New Jersey's Local Finance Board voted 5-0 Wednesday to grant its director, Timothy Cunningham, far-reaching governing powers over the beleaguered city.
The vote, a by-product of the state's Municipal Stabilization and Recovery Act, was the worst-case scenario for the city, which has been fighting a takeover for the last year, even as it barely escaped going broke.
The city's mayor, Don Guardian, called the decision "devastating."
Cunningham, who recused himself for the vote because of the powers the takeover gives him, seemed equally stunned by the power shift. He said he may appoint a designee to handle day-to-day operations.
"I'm still absorbing the magnitude of the responsibility that's been leveled upon me today," Cunningham, 44, told reporters after the meeting. Cunningham is also the director of Division of Local Government Services, part of the state's Department of Community Affairs.
He said Atlantic City's problems had kept him up nights, but declined to give specifics of how he would proceed, or how far he would exercise the powers the obscure state board had just granted him.
He cited his two years with the Local Finance Board and prior to that, as deputy county administrator with Passaic County.
The law gives the state up to five years to oversee Atlantic City, giving Trenton the power to hire and fire, sell off assets, veto council minutes, eliminate departments and nullify union contracts.
The Local Finance Board specifically excluded the power to declare bankruptcy from their resolution placing power into the state's hands.
Cunningham said unions should consider their contracts still in place, but did not give specifics of how he would proceed.
Prior to voting on the takeover, the Board approved Atlantic City's 2016 budget, first increasing the tax rate, which Cunningham paradoxically said would result in a decrease of about $13 per typical household. He did not explain how an increase in the tax rate would lead to a decrease in actual taxes paid.
Guardian warned that any additional tax burden on residents would result in its citizens "walking away from their homes" and facing foreclosure.
Solicitor Anthony Swan said the vote was "historic in nature" and cautioned against consolidating powers of the legislative and executive branch in one person, thereby disenfranchising the city's residents. He said city residents and employees are "frightened to death" of the state coming in and doing things like nullifying union contracts.
Board member Dominick DiRocco tried to characterize the board's actions as something less than an outright takeover.
Prior to the ruling, Activist Steve Young told the board the takeover was an example of how "the whole country will turn out under guise of Gov. Chris Christie and President-elect Donald Trump."
Others pleaded with the board to adopt a middle ground, short of a state takeover.
Guardian said he still believed the city's coveted Municipal Utility Authority was at the heart of the state's move to take power away from elected officials. At least two private companies have sought to buy the MUA.
Lena Smith, an activist with Food and Water Watch, echoed those concerns.
Cunningham said his preference would be to work with council before figuring out other methods of "operationalizaing" the state's powers.
He declined to say whether the state had a plan of action ready to go, but said, "We'll be prepared to take the mission that's assigned to us."
Earlier this month, the state of New Jersey rejected Atlantic City's recovery plan, saying it was not likely to achieve financial stability for the resort city, triggering an imminent state takeover.
The state called the plan "ambitious" but "deficient" and "speculative." It criticized the plan for failing to include a balanced budget for 2017 "that complies with all conditions of the Local Budget Law."
It also found fault with a key piece of the plan that called for the city's Municipal Utilities Authority to issue $110 million worth of bonds to purchase the city's old municipal airstrip, Bader Field. That plan would have allowed the city to pay off some of its crushing $500 million debt — much of that owed to casinos who successfully appealed tax assessments.
State officials have called for the MUA to either be run by the county or sold to a private company or otherwise monetized.
The city has promised to fight any takeover in court, which the state law allows them to do. They have also said that they would fight a takeover on civil rights grounds, and said they had the support of groups such as the ACLU, the NAACP, and the U.S. Conference of Mayors.
The city has been on the verge of default since its casino industry began to crater, with five casinos closing since 2014 and the city's ratable base collapsing from $20 billion in 2010 to $6 billion currently.
City officials say they have cut the payroll, imposed other cost saving measures and created a plan that would allow them to settle debt with Borgata, the city's largest taxpayer which is owed about $150 million from successful tax appeals.
The action Wednesday caps a nearly year-long tug of war with the state over the future of Atlantic City, during which the city teetered on the edge of bankruptcy but managed to pull back from the brink and pay its bills. City workers agreed to defer paychecks in April and then to a monthly, instead of bimonthly, pay schedule. Many of the city's taxpayers even showed up early to pay taxes.
At various times, both Gov. Christie and State Sen. President Stephen Sweeney called for an outright takeover, but Sweeney was unable to get the Assembly to embrace his Senate takeover legislation. The battle also included a January press appearance by all three men — Christie, Sweeney and Guardian — which promised a kumbaya moment but ended up being interpreted as a betrayal by Atlantic City.
Although Sweeney had assured them that the governor was agreeing to a compromise plan, Christie at the press conference read language from the stronger bill calling for a vast takeover and did not waver from that.
Eventually, after forging alliances with North Jersey legislators, including, crucially, Assembly Speaker Vincent Prieto (D., Hudson), Guardian was able to get the 150-day reprieve written into the takeover bill. At the time, most thought it would lead to an inevitable takeover, including Christie, who mocked the deadline and A.C.'s ability to meet the terms by saying, "Tick tock, tick tock."