Atlantic City reveals how it will pay off its choking casino tax debt
ATLANTIC CITY - Mayor Don Guardian released a plan Thursday to pay off the crushing casino tax-appeal debt that has all but strangled his city, but it was unclear what terms it may have reached with its largest taxpayer, Borgata Hotel Casino.
ATLANTIC CITY - Mayor Don Guardian released a plan Thursday to pay off the crushing casino tax-appeal debt that has all but strangled his city, but it was unclear what terms it may have reached with its largest taxpayer, Borgata Hotel Casino.
Guardian has been touting a settlement with Borgata - which stopped paying property taxes with a judge's approval because the city already owes it more than $150 million from successful property-tax appeals - but the release Thursday did not specifically mention Borgata.
Guardian said in a news release that city taxpayers have been "taking credits against their annual tax bill to offset these obligations to the tune of almost $33 million."
Resolving the city's debt from its tax settlements with Borgata and other casinos, which has grown to more than $500 million, is seen as a crucial part of the city's fiscal recovery strategy. The city is set to release the plan to the public at 5 p.m. Monday in an effort to stave off a threatened state takeover.
The debts, Guardian said, have left the city "helpless to face the challenges ahead. Now is the time to clean the slate of these past debts so we can move forward."
The strategy announced in the news release includes using $110 million in proceeds from the sale of Bader Field to the Atlantic City Municipal Utilities Authority "to resolve a majority of our liabilities." The City Council approved the sale of the defunct municipal airport Wednesday.
In addition, Guardian said, the city will issue tax-exempt bonds secured by the state's Municipal Qualified Bond Act that will result in "an investment grade credit rating" and likely interest rates of less than 4 percent.
The city estimated that debt service on these bonds will be $4 million a year for each of the next five years and $7 million per year for the remaining 20 years. Chris Filiciello, the mayor's chief of staff, said the size of the bond issue was yet to be determined.
The city issued bonds in 2012 to fund a portion of the tax-appeal settlements but then was shut out of the bond market to address $250 million in "settled but unfunded appeals as well as threatened appeals."
"Most importantly, debt service will be fully covered by the cost savings initiatives included in our recovery plan while we also restore the $33 million in lost revenues from taxpayer credits currently choking the city's budget," Guardian said.
The mayor said the city was hit with the unprecedented amount of tax appeals because of the sharp decline of the casino industry and property values. The city's property-tax base has declined from $20 billion in 2010 to $6 billion.
New state law has transitioned the casinos from the volatile property-tax system to a payment in lieu of tax (PILOT) agreement that requires the casinos to pay $120 million a year.
The same law required the city to produce an acceptable five-year fiscal plan by Nov. 3 or face a state takeover of city assets and government functions.
City Finance Director Michael P. Stinson declined to give further details of the bond plan or any possible settlement with Borgata, now owned by MGM.
"I think it is best to wait until the plan is released," Stinson said in an email.
Filiciello said additional details would be released next week.
Officials at Borgata, which has battled the city to recover millions in back taxes, had no comment.
A judge has reduced the casino's assessed value to $850 million, from $2.3 billion in 2010. However, Boyd Gaming, former owner of half of the market-leading property, recently sold its share to MGM Resorts International for $900 million, renewing concerns about the judge's ruling, especially considering the impact the debt has had on the city's fiscal health.
The mayor's statement ended on a hopeful note.
He said the city's actions would allow it to reestablish a capital improvement program of $4 million per year.
"In summary, once our fiscal recovery plan is fully executed, Atlantic City will no longer struggle to pay its bills or address its capital improvement needs," Guardian said in the statement.
"No longer will our residents, or employees, have to watch and worry as the city moves from one crisis to the next in a constant state of uncertainty and instability."
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