The state takeover of Atlantic City finances will be tested in court after a New Jersey judge temporarily blocked the state's effort to cut 100 Atlantic City firefighter jobs.
Superior Court Judge Julio Mendez issued an order Thursday that momentarily halts the state from imposing any layoffs or unilateral contract changes to Atlantic City's 225-member fire department. Mendez initially scheduled a Feb. 13 hearing, but the state successfully fought to get the case removed to federal court at an undetermined date.
The International Association of Fire Fighters, Local 198 and the AFL-CIO filed a lawsuit arguing that the state's action under the Municipal Stabilization and Recovery Act is unconstitutional. This legislation, approved by state lawmakers last May and implemented in November, empowers the state's Local Finance Board to alter outstanding Atlantic City debt and municipal contracts.
Lisa Ryan, spokeswoman for New Jersey's Department of Community Affairs, said the state had already decided before the ruling to push back implementing the firefighter cuts until September with changes to pay structure, hours and overtime postponed until Feb. 19.
"The temporary restraining order signed by Judge Mendez doesn't change the State's timetable for advancing reforms of Atlantic City firefighters' contracts," said Ryan. "We decided to delay implementing the proposed contract reforms until Feb. 19 as a good faith gesture to give the fire department more time to prepare."
Moody's Investors Service affirmed Atlantic City's deep-junk level Caa3 bond rating Thursday and kept a negative outlook citing an ongoing "liquidity crisis" and likely default in the next year despite state intervention. S&P Global Ratings rates Atlantic City debt at CC.
Atlantic City is facing a structural deficit of more than $100 million and has suffered five casino closures since 2014. The gambling hub has $240 million in bond debt and more than $500 million in total debt when factoring in casino tax refunds and other obligations.