New Jersey has filed a lawsuit against Atlantic City seeking to recover more than $30 million it the city government owes its school district, Gov. Chris Christie announced Monday.
Christie said during a news conference that Atlantic City has used property tax collections earmarked for the public school system to fund city operations. The Republican governor noted that the city owes the school district nearly $34 million from now until June 30 and does not have the funds to pay it due to "irresponsibility of the city government." He said the city has yet to pay the school district $8.4 million owed on April 1 and has only around $10 million in cash flow left.
"Today at my direction Education Commissioner [David] Hespe has filed a lawsuit to protect the property tax collections that rightfully belong to the Atlantic City School District," said Christie. "The action won't fix the city's own financial problems, but it will prevent them from making Atlantic City students and their families collateral damage to their reckless financial gains."
The Atlantic City Board of Education had its bond rating lowered two notches to BB-minus by Standard & Poor's in January due to liquidity concerns. A call to Atlantic City School District Superintendent Paul Spaventa for comment on the lawsuit was not immediately returned.
Atlantic City Mayor Donald Guardian and City Council President Mary Small blasted Christie's claims at a press conference saying that payments have been made on time under state law and that the city's schools are underfunded. Guardian said the $34 million will be paid to the schools and will take priority over other payments.
"They will be paid first," said Guardian. "They are certainly more important than other payments that we have to make."
Guardian was planning to close "non-essential" government services for three weeks starting at 4:30 p.m. Friday to avoid a default, but said during Monday's press conference that the shutdown is now not necessary thanks to unions agreeing to a 28-day pay cycle. The Mayor said this will keep Atlantic City's cash flow running until June, but that it will run out of money after this without help from the state.
Christie has been urging Assembly Speaker Vincent Prieto, D-Secaucus, to bring a state intervention bill to the floor opposed by Guardian that would empower New Jersey's Local Finance Board to renegotiate outstanding debt and municipal contracts for up to five years. The governor said he met Monday morning with Prieto, but said no progress was reached.