New Jersey's long track record of "strong state oversight" has thus far helped avoid struggling Atlantic City from filing for bankruptcy, according to a new report from Pew Charitable Trusts.
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"Most states tend to react to distress when it's too late and not be proactive and that is not the case with New Jersey," said Steve Fehr, a senior officer at Pew who co-authored the report with Mary Murphy. 'It has a strong commitment to state oversight."
New Jersey Gov. Chris Christie placed Atlantic City under emergency manager control in January after the gambling hub had operated under the supervision of the state's Local Finance Board for the previous four years. This marked the first time an emergency manager was appointed to lead a distressed locality in New Jersey and Pew noted that Christie's "more aggressive approach" came after a panel he appointed that examined Atlantic City's finances recommended "urgent action."
Atlantic City also has benefited this year, according to Pew, from New Jersey's Municipal Qualified Bond Act, which allowed it to issue $43 million in general obligation bonds to cover repayment of a state loan for refinancing $12.8 million in bond anticipation notes. In addition, the city received a $10 million increase in state funds this year under the state's transitional aid program designed to assist distressed local governments.
Pew cautioned that while New Jersey has a strong record of avoiding municipal bankruptcies, no city in modern times has experienced close to the Atlantic City's 64% tax base decline, driven largely by casino closures from increased regional gambling competition. The state still may need to "bail the city out" to avoid a bankruptcy, but such a rescue may be manageable given Atlantic City's relatively small size of around 40,000 people and a $411 million budget, according to Pew.
"New Jersey has really demonstrated a commitment to stepping in when needed," said Murphy. "The state has commitment keeping cities out of the bankruptcy process."
