Atlantic City makes $1.8m bond payment, avoids default. Gov. Christie unimpressed.
Atlantic City Mayor Don Guardian will announce at 11 a.m. Monday whether the city will make a $1.8 million interest payment due on 2012 municipal bonds being used to pay back casinos who successfully appealed their taxes.
Despite a city he said is "financially .. .running on fumes," Atlantic City Mayor Don Guardian said Monday the city managed to make a $1.8 million interest payment due on 2012 municipal bonds and avoid becoming the first New Jersey town to default since the 1930s.
The payment was wired at 10 a.m., Guardian said at a news conference shortly thereafter, and covers interest on 2012 municipal bonds sold to raise money to pay back casinos who successfully appealed their taxes. He said he made the decision to make the payment after considering the bond ratings for Atlantic County and othe New Jersey municipalities "as well as the effects for my city."
Guardian said the city has about $7 million on hand, but is getting about $1.5 million in daily as May quarterly taxes come in. Residents and businesses have until May 10 to pay before penalties kick in, and he expected many businesses including casinos to wait until then.
He said he would be able to make the $7 million monthly payroll due Friday. Unions agreed to switch from a 14-day payroll schedule to allow the city flexibility. And he said he was committed to making the $8.5 million May school payment next due May 15.
He attributed the city's financial crisis a "perfect storm of over saturation of casinos in the Northeast ... massive inherited legacy debt from years of bad decisions by all levels of government and lack of a compromise bill that would infuse much needed revenue into Atlantic City."
"We really are teetering on the edge," he said.
Guardian said he is expecting about $53 million in total. Several residents could be seen paying their taxes just prior to the news conference Monday.
The total expected would have been $60 million, but Borgata Hotel and Casino has notified the city it will not be making its $7 million tax payment because of an ongoing court dispute about tax appeal settlements. Borgata is owed $150 million, and earlier this year got permission from a judge to withhold its taxes.
With Atlantic City teetering on the brink of insolvency, Guardian had said last week he was considering, like Puerto Rico in fact did, defaulting on the bond payment due May 1. Unlike Puerto Rico, Atlantic City made its payment.
Guardian said finding the money for the bond payment could be likened to rummaging around the sofa cushions for some spare change.
"We're on the brink," he said. But making the payment, he said, was "good government and good business."
Gov. Christie, asked at a press conference at the Statehouse following Guardian's in Atlantic City if the payment gave him more confidence in Atlantic City's finances, said he was not impressed.
"Nobody should be taking any bows for making a $1.8 million debt payment that municipalities across New Jersey do without the need for a press release," he said. "What next, does he want a gold medal for that?"
Christie said he was "confident" the city would not have the money to make their June debt payment.
Guardian said the city would "do everything we can to try to make that payment" as well. The city's next bond payment will be $1,541,175 due on June 1, said Finance Director Michael P. Stinson.
By making the payment, the city avoids becoming the first default by a New Jersey municipality since the Great Depression, according to the state's Department of Community Affairs. That could have triggered reverberations on Wall Street and with credit ratings throughout the state, Guardian noted, though the city's credit rating is already at rock bottom.
The Wall Street Journal named Atlantic City as the "worst rated town" in the country for its credit worthiness, currently given a Caa3 "negative outlook" status by Moody's Investor Service.
Atlantic City also has a $7 million payroll to make on Friday, delayed two weeks by agreement with its municipal unions. A school payment of about $8 million is due May 15, though the city has recently been splitting that in half throughout the month. The city also will owe the county and library their share of taxes.
New Jersey has always intervened to prevent distressed cities from missing debt payments or going bankrupt, but Gov. Christie has twice vetoed aid packages that would redirect casino funds, now assigned to marketing, to help Atlantic City with its debt. His administration also has refused the city a bridge loan.
Guardian, City Council President Marty Small Sr., Councilman Kaleem Shabazz, and Atlantic County Freeholder Ernest Coursey urged legislators to pass a compromise aid and intervention plan being voted on Thursday.
Guardian invoked John Kennedy's "Profiles in Courage" to praise some legislators and criticize others, and Gov. Christie, who have insisted on a full takeover that takes away collective bargaining rights and wipes out the city's governing rights. He predicted the ACLU and the NAACP would file lawsuits if such a takeover became law.
'We need a compromise bill out of Trenton," Guardian said, "but not at the expense of losing our civil rights."
New Jersey Assembly Speaker Vincent Prieto, a Hudson County Democrat who has forged an alliance with city elected officials resisting a full state takeover, has scheduled a vote for Thursday on a compromise bill that the city supports. But the governor and state Senate President Steve Sweeney are still urging support of Sweeney's takeover bill, which would allow the state to rip up municipal worker contracts forged through collective bargaining.
Small noted news reports over the weekend that had Christie and South Jersey Democratic power broker George E. Norcross III pressuring legislators to vote against Prieto's bill and urged legislators to resist the pressure. "At the end of the day, we're all men," Small said.
Guardian called the Prieto bipartisan group a "coalition of the courageous," and said an ad funded by Norcross-tied super PAC that targeted Assemblyman Chris Brown, an ally, was "scurrilous."
In his news conference in the Statehouse _ the third time the Mayor and Governor have held back-to-back news conferences _ Christie again called on Prieto to support legislation that passed the Senate in March that would authorize a state takeover of the city's government. The bill would allow the state to modify or terminate the city's labor contracts, restructure debts, sell assets, dissolve agencies, and fire employees, among other provisions.
Prieto has proposed an alternative bill that would give Atlantic City two years to meet certain fiscal benchmarks before the state could take more aggressive action.
"I still wait for the governor to use his existing authority or for everyone to come to the table to discuss a reasonable compromise to help Atlantic City," Prieto said in a statement Monday. "Meanwhile, I'm prepared to move forward with the bipartisan Assembly bill that would represent an effective response to helping Atlantic City while protecting civil liberties and worker rights."
Christie, a Republican, has invited Assembly Republicans to meet with him at the Governor's Mansion on Thursday, according to a report by Politico, which was confirmed by a source.
Asked about the meeting, Christie said, "I have breakfast with them all the time."
Christie said he was not concerned that GOP lawmakers would support Prieto's bill.
"Republicans cannot support a bill that sets up a special master appointed by the chief justice of the Supreme Court to determine whether benchmarks that are two years out were actually met," Christie said, referring to a provision of the legislation. "That doesn't sound like a very Republican idea to me."
But Guardian said, "The opposition to (Prieto's bill) is scheming and has grown more desperate over the past few weeks." He praised Prieto for being committed to "the democratic principles of a city's right to self-governance and protection of minority and union rights."
As Guardian made his comments in his 7th floor conference room in Atlantic City's City Hall, a steady trickle of residents went to the first floor tax office to pay their quarterly taxes.
Bonnie Edwards, a retired school teacher who owns a home in the city's Venice Park neighborhood, a quiet middle class neighborhood bisected by canals, said she was paying about $1,000, after a portion of her usual payment was deducted due to a successful tax appeal.
She said she was considering moving out of New Jersey altogether and returning to South Carolina, where she lived until after college. She came to Atlantic City to get a job to help pay off college loans.
She said she supported Guardian and urged Gov. Christie to allow him time to do his job.
" If you give him more time, he could put things back in order," she said. "He hasn't been in that long."
Guardian took office in January 2014, after an upset victory over Mayor Lorenzo Langford. Edwards noted the voters of the city had already taken action to change their government.
"The reason I voted for him was that I wanted a change in the administration," she said. "Give him more time. Worthwhile things take time."