Atlantic City, N.J. has enough cash to meet its August general obligation debt service payments and expects to have sufficient liquidity through October, according to city officials.
Revenue & Finance Department Director Michael Stinson said the financially distressed city has roughly $30 million in cash, which will enable it to cover debt service payments of $3.5 million on Aug. 1 and $2.5 million on Aug. 15. A $12.3 million short-term maturity due Aug. 4 will be covered by proceeds from a May sale of state-enhanced bonds. Stinson said Atlantic City has enough cash to meet its needs until Nov. 1 if third-quarter property taxes are collected on schedule, which he expects.
"We are moving in a positive direction," said Stinson.
Moody's Investors Service issued a July 20 report saying that Atlantic City's ability to meet August payments is a credit positive since it has been able to raise sufficient cash for debt service while continuing to seek long-term solutions for confronting financial challenges. Moody's downgraded the city six notches to Caa1 in January after New Jersey Gov. Chris Christie placed it under emergency manager control.
Moody's analyst Josellyn Yousef said factors that will determine the future of Atlantic City's financial stability include whether Christie signs legislation adopting a rescue package for the city, a timely adoption of a balanced 2015 budget and manageable settlements on casino tax appeal refunds. The shuttered Revel casino, delinquent on $32 million of 2014 property taxes, is current on its bills so far in 2015 adding stability to Atlantic City's 2015 cash flow, according to Moody's.
Yousef noted that the future of tax-appeal refunds to casinos will play an especially important role in Atlantic City's turnaround efforts and a solution must be found soon. The rescue package awaiting Gov. Christie's signature, would create a payment in lieu of taxes program for casinos which would eliminate the risk of future tax appeals.
"A lengthy, expensive litigation battle with casinos would significantly strain city finances, conceivably driving the city into bankruptcy," said Yousef in the July 20 report. "The city needs the casinos' cooperation to work out a solution for the nearly $200 million of tax appeal refunds it owes them, $153 million of which must be paid to the Borgata casino alone. The liability to casinos approaches the city's $270 million of GO debt."
Atlantic City is facing a $101 million budget gap and suffered four casino closures last year. Yousef said the city must mail fourth-quarter tax bills by the end of September to allow sufficient time for an accelerated tax lien sale before the end of 2015, which allow the city to collect unpaid property taxes. She said a delay past October would likely postpone property tax collections and "strain liquidity" when an $11 million debt service is due in December.