Atlantic City Mayor Donald Guardian is eyeing bankruptcy after Gov. Chris Christie rejected a financial rescue package.
Guardian said in a statement late Tuesday that the bankruptcy option is "now back on the table" following Christie's veto of a package of bills that would have enabled the city's eight remaining casinos enter into a payment-in-lieu of taxes (PILOT) program for 15 years and aggregately pay $120 million annually over 15 years instead of a traditional property tax. Atlantic City's 2015 budget adopted in September relied on $33.5 million in anticipated revenues from redirected casino taxes included in the rescue bills to address a $101 million deficit. Emergency Manager Kevin Lavin said in a Jan. 15 report that the city's cash flow will run out by April 1 if a rescue package is not implemented.
"If the State is not able to come up with the funding we need within the next few weeks, we will have no choice but to declare bankruptcy," said Guardian. "The signing of the PILOT bill would have saved us from looking at that, but unfortunately, the Governor did not sign the bill so we have to think realistically. The next few weeks will be very interesting."
The proposed rescue package would have also reallocated the state's casino alternative tax to pay debt service on Atlantic City-issued municipal bonds. Atlantic City would have also had a chance to receive $60 million in funding directed to the city's marketing arm, the Atlantic City Alliance for 2015 and 2016 had the legislation been signed by Tuesday's noon deadline. The amended rescue bills were approved in the New Jersey Legislature on Jan. 8 after Christie conditionally vetoed a previous version in November.
Guardian also criticized a proposed state takeover of Atlantic City operations proposed by Senate President Steve Sweeney, D-Gloucester, on Jan. 12. Sweeney said in a statement Tuesday that the failure of the recovery bills reinforces the need for state management of Atlantic City's finances.
"We will not tolerate the stripping of our God-given civil rights and right to self-governance," Guardian said. "Atlantic City has worked too hard and has come too far to let that happen. "
Sweeney said in a statement Wednesday morning that bankruptcy is not the right course for Atlantic City and pointed to how it owes bondholders over $500 million as well as more than $150 million for tax appeals. He said only the state has power to declare bankruptcy and that doing so would have "disastrous results" and hurt the financial standing of other New Jersey municipalities.
"My goal is to save Atlantic City and to avoid bankruptcy," said Sweeney. "That is why state intervention is the best way to bring the city's finances under control and why swift action is needed."
Atlantic City suffered four casino closures in 2014 and has around $356 million in debt outstanding, according to Moody's Investors Service. The longtime Jersey Shore gambling hub is rated Caa1 by Moody's and B by Standard & Poor's.
The Casino Association of New Jersey released a statement expressing concern about the uncertainty of whether a rescue package will be approved in time to save Atlantic City from its deep fiscal hole. The city's eight casinos saw a 5.5% revenue drop in 2015, according to New Jersey's Division of Gaming Enforcement.
"Time is not on our side, and we need to move forward one way or another," the division's statement said. "The city's financial crisis continues to deepen every day, and the longer this legislation remains in limbo, the greater the stress on the casino industry and the people it supports, as well the city and region."