Atlantic City is planning a new round of borrowing to pay for tax-appeal settlements with six casino properties.
The city council unanimously adopted an ordinance Wednesday enabling the city to issue bonds for as much as $80 million to cover the new tax agreements announced on Aug. 3 by Gov. Chris Christie.
Settlements were reached with Bally's Atlantic City, Caesars Atlantic City, Golden Nugget Atlantic City, Harrah's Atlantic City, Tropicana Casino & Resort, the former Taj Mahal Atlantic City and the former Trump Plaza Hotel and Casino. The Christie administration didn’t specify the amount of the casino settlements, but said the $80 million bond ordinance would cover the costs.
Atlantic City issued $69.8 million of bonds in May to fund a $72 million settlement the state reached in February with the Borgata Hotel Casino & Spa for $165 million of owed property tax appeals.
The cash-strapped city, which has been under state control since November, sold the bonds through New Jersey’s Municipal Qualified Bond Act at yields ranging from 2% in 2020 to 3.96% in 2042, according to Thomson Reuters data. The bonds were insured by Build America Mutual, which enabled an AA rating and stable outlook by S&P Global Ratings compared to its junk-level CC rating on Atlantic City general obligation debt.
"The City was overwhelmed by millions of dollars of crushing casino tax appeal debt that they hadn't unraveled when we arrived last fall,” Jeffrey Chiesa, the state designee leading the financial recovery effort, said in a statement last week. "Because of our hard work, the City has now quantified its casino tax appeal debt and has a plan in place to finance this debt that responsibly fits within its budget."
Atlantic City officials did not immediately respond for comment on the planned new borrowing and when the bonds will be sold. The city has $224 million in bonded debt and paid $36.7 million toward debt service in 2016, according to an audit report released in May. The city has sizable debt service payments owed at the end of 2017 including $6.4 million due Nov. 1, according to S&P.
When announcing the tax settlements, the Christie administration touted achievements by the New Jersey Department of Community Affairs and Chiesa to bolster Atlantic City finances including adoption of a $206.3 million budget that is $56 million less than 2015. Savings were achieved through public safety staff adjustments along with outsourcing municipal services such as trash pickup and vehicle towing to private vendors, according to Christie.