Murphy in no hurry to end state takeover of Atlantic City

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The almost two-year-old state takeover of Atlantic City's finances is likely to last a full five years due to “longstanding challenges” facing the debt-ridden gambling hub, according to New Jersey officials.

Gov. Phil Murphy's administration released a 64-page report Thursday recommending continued state intervention in the junk-rated city under the 2016 Municipal Stabilization and Recovery Act.

The state's intervention began in November 2016 under Murphy's predecessor, Chris Christie.

Attorney Jim Johnson, who Murphy appointed to review Atlantic City’s transition to local control, said the MSRA should last another three years unless the city's reliance on state aid has been "substantially reduced or eliminated" and that its municipal workforce is on “solid footing.”

The act, which was enacted shortly after Atlantic City nearly defaulted on bond debt, empowered the state to alter outstanding debt and municipal contracts.

“Atlantic City has a set of fiscal, operational, economic and social challenges that will only be resolved with significant direction from, and partnership with the State,” Johnson wrote in the report.

Marc Pfeiffer, assistant director of Rutgers University’s Bloustein Local Government Research Center, said it is important for New Jersey and Atlantic City to focus on long-term challenges beyond the state takeover period. He said the continued state oversight will be a positive for Atlantic City bondholders since it assures more fiscal discipline will be in place.

“You are going to have ongoing stability while the state is involved,” said Pfeiffer. “The city will have to show that it can stand on its own.”

The report outlined a series of recommendations such as the importance of diversifying Atlantic City’s economy beyond casinos, providing increased training for senior municipal workers and purchasing data that can better track city services. Johnson also urged Atlantic City to redirect Casino Reinvestment Development Authority funds into new development projects and toward providing increased financial support for youth programming.

“The citizens of Atlantic City deserve to have their local elected officials control their destiny,” Atlantic City Mayor Frank Gilliam said in a statement. “I am very optimistic that this is a huge step in the right direction for Atlantic City and its future.”

Johnson was a Democratic primary opponent of Murphy in 2016. Murphy tapped Johnson in February as a special counsel to review the state’s oversight of Atlantic City.

Johnson, an undersecretary for enforcement at Treasury under President Bill Clinton, said during the primary campaign that he would end the state takeover if elected. Murphy was critical of the state takeover during his gubernatorial campaign and at a press conference Thursday Murphy criticized the Christie administration for implementing it without support from former Mayor Donald Guardian.

"This is a community that needs the state's help as a partner, not as a big-footing jamming down, taking away — you know, taxation without representation," said Murphy at the press conference. “That doesn’t mean that Atlantic City doesn’t need the state, that the state isn’t going to stay the course and be a partner.”

Soon after taking office Murphy removed Christie appointee Jeffrey Chiesa as state designee overseeing New Jersey's efforts in Atlantic City. Chiesa forged settlements on owed casino property tax appeals and slashed the city’s 2017 budget by $56 million. Atlantic City had $223.6 million of bonded debt outstanding, according to the city’s latest budget documents.

The city’s debt is still rated in deep in junk territory at CCC-plus from S&P Global Ratings and Caa3 from Moody’s Investors Service.

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