Atlantic City has reached an agreement with its water utility to purchase its old municipal airport property in a deal that officials of the city hope will help it avoid a state takeover.
The Municipal Utilities Authority, which provides Atlantic City's drinking water and is financially independent from the city, plans to buy the 143-acres of the former Bader Field for at least $100 million through bonding, officials announced at a Monday morning press conference.
Mayor Donald Guardian touted the partnership as a way of maintaining both the city and utility's "sovereignty" while also helping the city dig out of more than $500 million of total debt. Guardian said he hopes the deal, which still needs city council and state approval, prevents New Jersey's Local Finance Board from taking action against the state after it violated the terms of a $73 million bridge loan that called for dissolving the MUA.
"It's a good day for Atlantic City," said Guardian at the press conference held outside MUA headquarters. "We are happy to be able to come together as partners."
New Jersey's Department of Community Affairs declined to comment on whether the Local Finance Board would accept the Atlantic City MUA plan. The city received a $50 million bid for Bader Field in August after putting the property up for auction.
The Local Finance Board informed the city last Thursday that it had until Oct. 3 to fix a breach of a condition on its $73 million bridge loan or it faces a possible default where the state could seek full repayment and withhold state aid.
The late July loan agreement stated that the city needed to dissolve the MUA by Sept. 15, but the city council failed to agree on this term by the deadline. The state can demand full repayment of the $73 million loan and withhold state aid if the city is unable to avert a default by the Oct. 3 deadline.
Atlantic City agreed to the bridge loan terms as it risked defaulting on a $3.4 million debt payment owed on Aug. 1. The city nearly averted a default on its June debt service when state lawmakers approved a rescue package granting it 150 days to deliver an acceptable five-year turnaround plan and plug a massive budget gap. If a plan is approved by the early November deadline, the state's Local Finance Board would be empowered to alter the city's debt and municipal contracts.
MUA executive director Bruce Ward said the authority will get an agreement with the city before deciding how to proceed with the property. Guardian mentioned that Stockton University, which is planning to open an Atlantic City satellite campus, may want to someday utilize the land for athletic facilities or dorms. In the near-term, Ward said the authority would look to expand special events on the parcel.
Ward added that floating a bond for the Bader Field purchase is attainable and said the authority has advisors who will help strategize the borrowing. The MUA has $15.7 million in annual revenues with $16.6 million of net water revenue debt outstanding, according to Moody's Investors Service. Moody's slashed the authority to B2 from B3 in early April citing the authority's governance relationship with Atlantic City and noted that a further downgrade could occur if plans to dissolve, sell, or lease MUA assets fail to fully protect water revenue bondholders.
Atlantic City declined an $800 million offer from Penn National Gaming for the Bader Field site in 2008 with hopes of receiving better offers that never materialized. Bader, which opened in 1910 as the nation's first municipal airport, permanently closed in 2006. A portion of the property was utilized to build a minor league baseball stadium for the Atlantic City Surf, which discontinued operations in 2009.