Atlantic City, N.J.'s mayor responded to the junk rating placed on its debt by Moody's Investors Service, saying the city is already shifting away from a casino-centered economy.
"Atlantic City's best days are still ahead of us," Atlantic City mayor Don Guardian said, after Moody's downgraded the rating to Ba1 from Baa2 on Wednesday and kept a negative outlook on the debt. "Moody's new rating today of Ba1 for Atlantic City does not come as a surprise to me simply because their reasoning for the new rating is exactly what we've said over and over again - regional competition for casino gaming is directly weakening Atlantic City's casino revenues . Talk of expanding casino gaming outside of Atlantic City in New Jersey just does not make sense to me."
Guardian said he'd been in touch with the governor's office, which affirmed its commitment to the seaside city and its residents.
"Atlantic City is taking the lead in transitioning from strictly gaming-centric tourism destination to a non-gaming tourism destination with gaming as a supplement." Guardian said. Luxury tax receipts were up 5% in the first quarter from a year earlier, and people are coming to the city for more than just gaming, he said. "We are filling our restaurants, booking our rooms, and selling-out our special events. Investors should take notice."
Howard Cure, director of municipal research at Evercore Wealth Management, was more pessimistic. "I think it is telling not that the downgrade occurred, which was anticipated, but that there is still a negative rating outlook. There is a concern over tax appeals with these large corporations [that own the casinos] contesting their tax bill based on declining revenues."
In addition, the city "has a high debt burden due, in part, to issuing debt to settle some of the appeals. There is also long-term concern about competition, with the recent casino closures happening even before the new casinos from N.Y. get built. I think the downgrade recognizes the difficulty in diversifying the tax base and making Atlantic City into a regional tourist destination."