Though Atlantic City has violated a term in a $73 million state bridge loan, New Jersey's Local Finance Board won't require the struggling city to immediately repay the debt.
The Atlantic City Council missed an Oct. 3 deadline to pass a resolution dissolving the city's Municipal Utilities Authority, which under terms of the bridge loan gave the state authority to seek immediate repayment or seize city-owned assets as collateral. The Division of Local Government Services, an arm of the state's Department of Community Affairs, gave the city a reprieve despite the breach, but emphasized that no additional aid would be granted.
"Due to our continued working relationship with the City, the Division has elected not to accelerate the repayment terms and declare the recovery loan immediately due and payable," DCA spokeswoman Tammori Petty said in a statement. "We will not, however, provide any additional advances under the loan and state aid will be withheld as necessary to ensure that the loan is fully collateralized."
Atlantic City agreed to the bridge loan terms in July to avert defaulting on a $3.4 million debt payment owed on Aug. 1. The distressed city also faced a June default before state lawmakers approved a rescue package on May 27 that gave it 150 days to adopt an acceptable five-year turnaround plan and plug a deep budget shortfall.
If the plan is not accepted, the Local Finance Board can step in to alert the city's debt and municipal contracts.
"I want to thank the DCA for giving us a much-needed reprieve regarding the MUA and for giving us the necessary time to put together our 150-day plan," said Atlantic City Mayor Donald Guardian in a statement. "Once we submit the plan and begin implementing it, we believe we will start on the path of economic revitalization of Atlantic City for many years to come."
Guardian announced in late September a plan to pay off outstanding debt through the MUA purchasing the city's former airport property, Bader Field, for more than $100 million. The state has not commented yet on the Bader Field proposal.
Atlantic City is rated CC by S&P Global Ratings and Caa3 by Moody's. The Jersey Shore gambling hub is burdened with $240 million of bonded debt and also owes $170 million in tax refunds to the Borgata Casino Hotel & Spa. The city faces debt service payments of $9.4 million on Nov. 1 and $7.3 million for December.