Atlantic City Emergency Manager Kevin Lavin urged consolidating and privatizing costly government services and massive spending cuts, but stopped short of recommending bankruptcy in his second report on the financially strapped Jersey Shore gambling hub.
The recommendations took on more urgency Tuesday when New Jersey Gov. Chris Christie rejected a package of rescue bills passed by the state legislature.
Lavin's analysis, released late Friday before the Martin Luther King Jr. Day weekend, said Atlantic City will run out of cash by April without the rescue bill package.
The governor on Tuesday let the rescue bill package lapse without his signature, effectively vetoing them.
The legislation included a bill that would allow casinos to make payments in lieu of taxes for 15 years and reallocate the state's casino alternative tax to pay debt service on Atlantic City-issued municipal bonds.
The city has about $356 million in outstanding bond debt, Moody's Investors Service reported in December.
Lavin recommends regionalizing Atlantic City's police force with neighboring municipalities and privatizing its fire department. He noted that these two departments alone comprise 69% of the city's budget for salaries and wages.
The emergency manager also suggests privatizing the Boardwalk Hall sports arena and the Atlantic City Convention Center. He noted that these two properties operate at a combined loss of $15 million to $20 million annually with $75 million currently reserved for "substantial capital expenditures."
Lavin said the city's Municipal Utilities Authority has "significant assets" that present opportunities to increase revenue. He recommends dissolving the water authority and restructuring it to better benefit Atlantic City.
Lavin credited Atlantic City officials for the way they tackled a $101 million deficit when crafting their 2015 budget, but pointed to at least $190 million of casino tax appeals and other non-bond debt the city now faces.
The city's ability to raise public funds to repay the non-bond debt is "highly unlikely" due largely to an inability to quality for adequate Qualified Bond Act financing, according to the report. Atlantic City's credit ratings are junk, at Caa1 from Moody's and B from Standard & Poor's.
"As this report shows, over the past year we have accomplished much by working together with all stakeholders, and successfully kept the City from falling into fiscal ruin, including taking on a $100 million budget deficit that ballooned by nearly 20% in the course of the year," said Lavin in a statement. "Atlantic City had been losing yardage for years, but we began to move the ball down the field. Unfortunately, our momentum has been stalled by parochial politics that continue to inhibit progress."
Christie appointed Lavin as Atlantic City emergency manager a year ago and his contract is slated to expire on Jan. 21, according to spokesman Bill Nowling.
Lavin said he supports efforts in the state legislature to help the city, but did not specify which plan would be best. State Senate President Steve Sweeney, D-Gloucester, announced on Jan. 13 he was pushing for a state takeover of Atlantic City operations.
"Many of the most critical and financially important issues need to be addressed urgently," said Lavin. "Without addressing these tough but necessary issues, Atlantic City will remain adrift from one fiscal and cash crisis to the next."
Lavin's first report released last March emphasized the need for "shared sacrifice" from stakeholders, including the possibility of extending maturities for bondholders. His Jan. 15 report said "a shared commitment by interested stakeholders" is needed for any potential solution, but did not specifically reference bondholders. Lavin estimated that the city would need to budget $118.9 million for bonded debt service over the next five years including $31.2 million for 2016.
"I know that my Administration and City Council have worked very hard over the past two years to make the tough decisions needed to stem the tide of this devastating financial tsunami," Mayor Donald Guardian said in a statement. "Only two years into my first term as Mayor, I fully recognize that much work still needs to be done to fix the problems that have accumulated over the past 30 years."
Sweeney issued a statement after the report's release emphasizing the need for state involvement to avoid bankruptcy.
"New Jersey taxpayers cannot afford to let this crisis continue and that is why our takeover bill must be acted upon promptly," said Sweeney. "We can avoid bankruptcy but only if we act now."
