Atlantic City, close to violating one of the terms in a $73 million state loan agreement, is asking for a reprieve from New Jersey's Division of Local Government Services.
One of the terms in the July 29 bridge loan agreement called for the city to dissolve Atlantic Municipal Utilities Authority by Sept. 15 or use the water authority as collateral in the case of a default.
The city council has been unwilling to support the ACMUA measure, which effective Thursday would result in a default under the loan terms, meaning the state could demand immediate repayment of the monies.
"Although the September 15 deadline will pass tomorrow without a city council resolution dissolving the MUA or designating it as collateral in case of default, we have asked the state for a reprieve on this because we believe that the MUA will actually be a better part of the overall financial solution if it is kept whole," Atlantic City Mayor Donald Guardian said in a statement Wednesday.
“A decision has not been made and the Division is awaiting legal guidance as to its options,” said Local Finance Board spokeswoman Emike Omogbai.
Moody's Investors Service slashed the MUA to B2 from B3 in early April citing the authority's governance relationship with Atlantic City, even though it is financially independent from the financially distressed gambling hub. New Jersey Senate President Steve Sweeney, D-Gloucester, estimated earlier this year that the MUA is valued at around $100 million. Guardian has said he would like to bring the MUA under city control and opposes privatization or a public-private partnership.
Atlantic City nearly averted a default in late May when state lawmakers approved a rescue package giving the city 150 days to deliver an acceptable five-year financial turnaround plan. If the plan is not approved by the early November deadline, state intervention kicks in with New Jersey's Local Finance Board then empowered to alter debt and municipal contracts.
"Our 150-day plan is moving forward quickly, as we have some of the best in brightest minds in the country working on our behalf to solve this problem," said Guardian in his statement. "We just need the time to finish the plan and to present it publicly. In the end, we think this will be the best plan to move Atlantic City forward while at the same time maintaining our sovereignty and decision making rights now held by locally elected leaders."
Atlantic City is rated CC by S&P Global Ratings and Caa3 by Moody's. The city is saddled with $240 million in bond debt and owes $170 million in tax refunds to the Borgata Casino Hotel & Spa. It owes $9.4 million in debt service payments on Nov. 1 and $7.3 million for December.
