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Christie's 'aggressive action': Emergency managers for A.C.

Gov. Christie on Thursday installed an emergency management team in Atlantic City, asserting that outside assistance was needed to curtail the city's financial free fall.

New Jersey Gov. Chris Christie announces an emergency management team during the Atlantic City Summit on Thursday, Jan. 22, 2015. (AP Photo/The Press of Atlantic City, Michael Ein)
New Jersey Gov. Chris Christie announces an emergency management team during the Atlantic City Summit on Thursday, Jan. 22, 2015. (AP Photo/The Press of Atlantic City, Michael Ein)Read more

Gov. Christie on Thursday installed an emergency management team in Atlantic City, asserting that outside assistance was needed to curtail the city's financial free fall.

"I can't wait any longer," Christie said, addressing legislative leaders, Atlantic City and Atlantic County officials, casino executives, and union leaders at a third summit on the future of the Shore resort, where casino closures have decimated the tax base and deepened debt.

While he said the move was not intended to undermine local officials, Christie said, "We need to take more aggressive action, and that's the action that I'm taking today."

Kevin Lavin, a corporate finance consultant, will serve as the city's emergency manager. Kevyn Orr, the former emergency manager in Detroit during its bankruptcy, will serve as a special consultant to Lavin.

The Republican governor issued an executive order Thursday directing the manager to prepare within 60 days "a plan to place the finances of Atlantic City in stable condition on a long-term basis by any and all lawful means, including the restructuring of municipal operations and the adjustment of the debts of Atlantic City pursuant to law."

The order gives the manager authority to negotiate "with parties affected by the recommended plan" and consult with stakeholders.

It also seems to indicate that Christie, not the manager, would have the final say. Based on recommendations from the emergency manager, "I reserve the right to take . . . additional actions," Christie said in the order.

The governor said New Jersey's constitution and statutes gave him authority to appoint a manager. The order cites a statute that authorizes the Local Finance Board to supervise municipalities, as well as to delegate its powers.

Fiscal oversight over Atlantic City has been in place by the Department of Community Affairs since 2010, when the state became concerned about the city's worsening finances because of casino tax appeals. A staffer for the mayor said he was not sure what would happen to current state monitor, Ed Sasdelli.

Concern grew this last year, as four of the city's 12 casinos folded. Multiple plans have since been put forward to help the city, including a tax-relief package that legislative Democrats indicated Thursday they were still committed to passing.

In installing an emergency manager, Christie said Thursday that he was not rejecting other recommendations but that it was "essential to begin with what will have the highest impact." A commission led by Jon Hanson, an adviser to Christie on Atlantic City, had recommended the emergency manager in a report issued in November.

The manager is "not meant to marginalize or minimize" the role of Mayor Don Guardian or the City Council, Christie said. Guardian, a Republican who took office last January, "inherited an awful mess," he said, and has been working to improve the city.

"What we are doing is giving to the mayor through the emergency manager enhanced tools to be able to bring this to a successful resolution," Christie said.

Guardian, who previously opposed the idea of an emergency manager, said after the summit that "we certainly know we need all the tools possible to move Atlantic City forward."

He said his biggest concern was passage of the Democratic-supported legislative package, including a bill to exempt the city's eight remaining casinos from paying property taxes for 15 years as part of a deal requiring a payment in lieu of taxes.

The Casino Association of New Jersey, which represents the eight casinos, on Thursday urged passage of the bills while expressing support for "any initiative from the administration that will help secure the city's financial future."

Assemblyman Vince Mazzeo (D., Atlantic) said he and Sen. James Whelan (D., Atlantic) plan to bring the tax-relief bills before both legislative chambers for a vote next month. Republican Assemblyman Chris A. Brown of Atlantic County has a rival proposal.

The Democrats' package would exempt casinos from taxes under a PILOT program. The eight casinos would collectively pay $150 million a year for the first two years, then $120 million a year for the next 13. A casino's share would be based on gaming revenue, number of hotel rooms, and footprint.

The plan also would redirect $25 million in investment alternative taxes from the casinos and the $30 million annual marketing budget of the Atlantic City Alliance toward paying down the city's debt service.

While the emergency management team can make recommendations, "they're our bills," Mazzeo said. "If they recommend changes that are doable, we will take a look."

Mazzeo, who was present during the closed-door portion of the summit, said Christie emphasized that work must move quickly because paperwork regarding Atlantic City's proposed budget has to be submitted as the state budget process begins in the next couple of months.

As Christie outlined his vision for the management team, Mazzeo said participants in the summit sat silently, including Guardian.

"You live for the moment," Guardian told reporters. "And there's crisis in every moment in this job I've taken on."

Of whether he and Council President Frank Gilliam would have any authority to stop changes desired by the management team, Guardian said, "We can't really comment." Gilliam said he didn't think an outside manager was needed.

In a statement issued later Thursday, Guardian said he had been "expecting the worst." But when he met with Lavin and Orr, he said, he "found them to be very professional and deferential to us."

Lavin and Orr, who also addressed reporters Thursday, offered few details on actions they might consider. Their budgets and salaries are still being finalized, Orr said.

Asked whether the plan for Atlantic City could mirror actions taken in Michigan - where emergency managers could slash budgets, sell assets, privatize departments, and in some cases essentially sideline elected officials - Orr said he would be "very, very careful" in trying to "analogize" different communities.

"There's not one template," said Orr, who was the emergency manager in Detroit as the city entered bankruptcy proceedings in 2013.

Since 2010, Atlantic City has incurred $345 million of new bond debt to cover tax appeals and municipal deficits, with about 15 percent of the city's budget going to debt service, according to Christie's executive order. Most of the new bond debt was to pay off successful casino tax appeals.

With Detroit, "you have a lot more latitude as far as being able to go before a bankruptcy judge and telling him or her we need X, Y, and Z," said Whelan.

In Atlantic City, which isn't in bankruptcy, "you don't have that," Whelan said. "There are more questions than answers as far as how this will work."