A new state legislative document showing that New Jersey can take control of Atlantic City finances under existing law highlights a plan that would prove more beneficial than a proposed state takeover pending in the legislature, Mayor Donald Guardian said late Thursday.
Guardian responded to an Office of Legislative Services memo first obtained by the Press of Atlantic City detailing how the Local Government Supervision Act of 1947 empowers the Garden State with "sufficient authority over the city's finances to prevent a financial catastrophe" even if no takeover bill is approved in the legislature.
The memo, which city officials provided to The Bond Buyer, states that the Local Government Services director can raise taxes and force liquidation or refinancing of debt under this law. Guardian said the process explained in the memo under this law has "checks and balances" and said that if the state chooses to exercise this option, it could prevent his city from filing for bankruptcy by providing 0% or a low-interest short-term loan with the option of having it forgiven long-term.
"This would be a sensible approach to take while all parties come back to the table to work on a practical and reasonable long-term solution," said Guardian in a statement released Thursday evening. "It is nowhere near as draconian as the proposed takeover bill."
Atlantic City has more than $400 million in debt outstanding and also owes roughly $170 million in tax refunds to the Borgata casino with cash flow expected to run out by early April absent state assistance, according to former emergency manager Kevin Lavin. With limited borrowing ability due to junk-level bond ratings of Caa1 by Moody's Investor Service and CCC-minus from Standard & Poor's, an intervention bill was proposed in the New Jersey Senate that if approved would empower the state to renegotiate outstanding debt and municipal contracts for up to five years, leverage city assets and make staff cuts.
"The draconian takeover bill is unacceptable because it puts all the power into one person and has no checks and balances," said Guardian. "Very shortly we will be presenting a bill that would allow Atlantic City to keep its right to self-govern but also will outline a framework to hold us accountable for a strong financial recovery in a partnership with the State. We look forward to seeing if any progress can be made within the next few weeks."
