'Running on fumes,' Atlantic City avoids default
Though he said Atlantic City is financially "running on fumes," Mayor Don Guardian said the city managed to make a $1.8 million interest payment due Monday on 2012 municipal bonds and avoid becoming the first New Jersey town to default since the 1930s.
Though he said Atlantic City is financially "running on fumes," Mayor Don Guardian said the city managed to make a $1.8 million interest payment due Monday 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 bonds sold for funding to pay back casinos that successfully appealed their taxes.
Guardian said the city has about $7 million on hand, but is getting about $1.5 million daily as May quarterly taxes come in. Residents and businesses have until next Tuesday to pay before penalties kick in, and Guardian said 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 to give the city flexibility. And he said the city would make its $8.5 million school payment due in May.
Asked at a Statehouse news conference after Guardian's if the payment gave him more confidence in Atlantic City, Gov. Christie 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 news release," he said.
"What next, does he want a gold medal for that?"
Christie said he was "confident" the city would not be able to make its June debt payment.
Guardian, however, said the city would "do everything we can to try to make that payment." The amount due June 1 is $1,541,175, according to Atlantic City Finance Director Michael P. Stinson.
Guardian warned last week that, like Puerto Rico, the city might default on the payment due May 1. Unlike Puerto Rico, Atlantic City made its payment.
He said finding the money for the payment could be likened to rummaging around the sofa cushions for spare change. "We're on the brink," he said.
Guardian attributed the city's financial crisis to a "perfect storm of oversaturation 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."
He said that the negative effects of missing the bond payment on the city, Atlantic County, and other cities in the state argued against default. "We really are teetering on the edge," he said.
Guardian said he is expecting about $53 million from May taxes. Several residents were paying their taxes just before his news conference.
The total expected would have been $60 million, but the Borgata, the city's largest taxpayer, notified the city it will not make its $7 million payment because of a court dispute about tax appeal settlements. Borgata is owed $150 million from appeals.
By making the payment, the city avoided the first default by a New Jersey municipality since Fort Lee. The Wall Street Journal has named Atlantic City as the "worst-rated town" in the country for its Caa3 credit rating from Moody's.
New Jersey has always intervened to prevent distressed cities from missing debt payments or going bankrupt, but Christie has twice vetoed aid packages that would redirect casino funds, now assigned to marketing, to help Atlantic City with its debt. He has also refused the city a bridge loan.
At the news conference, Guardian, City Council President Marty Small Sr., Councilman Kaleem Shabazz, and county Freeholder Ernest Coursey urged legislators to pass a compromise aid and intervention plan, and resist pressure to support what they called a "draconian" takeover.
Guardian invoked John F. Kennedy's Profiles in Courage to praise some legislators and criticize others, including Christie, who has insisted on a state takeover that takes away collective-bargaining rights and most of the city's autonomy.
Guardian predicted that the ACLU and NAACP would file lawsuits if such a takeover became law.
Assembly Speaker Vincent Prieto (D., Hudson), who has forged an alliance with city officials, has scheduled a vote for Thursday on his compromise bill.
Christie, meanwhile, 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 labor contracts, restructure debts, sell assets, dissolve agencies, and fire employees.
Prieto's bill would give the 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," Prieto said Monday.
Christie has invited Assembly Republicans to meet with him at the governor's mansion on Thursday, according to a report by Politico and 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. "That doesn't sound like a very Republican idea to me."
Guardian said the opposition to Prieto's bill "is scheming and has grown more desperate." Reports last weekend had Christie and South Jersey Democratic power broker George E. Norcross III lobbying assemblymen to vote against Prieto's bill.
As Guardian made his comments on the seventh floor of City Hall, a trickle of residents went to the first-floor tax office to pay quarterly taxes.
Bonnie Edwards, a retired schoolteacher who owns a home in the Venice Park neighborhood, a quiet, middle-class area bisected by canals, said she was paying about $1,000 after a portion of her usual payment was deducted due to a successful appeal.
She said she supports Guardian and urged Christie to give him more time. "If you give him more time, he could put things back in order," she said.
Guardian took office in January 2014 after an upset of Mayor Lorenzo Langford. Edwards noted that voters had already acted 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."
609-823-0453
@amysrosenberg