Referendum defeat keeps Atlantic City government structure intact

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The sound defeat of a referendum that would have overhauled Atlantic City’s mayor-council system of government will prevent any major structural changes to the junk-rated municipality as it grapples with new fiscal challenges created by the COVID-19 pandemic.

The measure voters rejected Tuesday would have eliminated direct mayoral elections and created a council-manager form of government, in which a city manager hired by the city council would have been charged with running day-to-day operations. It also would have reduced the city council from nine to five members.

Voters rejected a proposed change to Atlantic City's mayor-council system of government.

“After the first night of counting the ballots it is clear that the referendum to change the government structure in Atlantic City will be defeated by a wide margin even though voting continues,” Bob McDevitt, chairman of the political action committee Atlantic City Residents for Good Government, said in a statement late Tuesday. “The people have rejected change and we accept without qualification their decision.”

Final official results of the special election won’t be known for days because all votes were cast by mail in an effort to reduce spread of the COVID-19 virus. The election was originally scheduled for March.

Atlantic City, already in trouble, faces an even more uncertain economic future with its nine casinos shut down since March 16 because of the health crisis.

Backers of a new government structure, including former Mayor Don Guardian, argued that the overhaul would improve municipal finances because of the presence of an appointed city manager with professional experience.

Referendum supporters also noted a University of North Carolina study showing that cities with a municipal manager form of government are 57% less likely to receive ethics and corruption violations.

The push toward changing Atlantic City’s government occurred following the resignation of Mayor Frank Gilliam last October.

Gilliam, who defeated Guardian in November 2017, pleaded guilty in federal court to embezzling more than $87,000 from a youth basketball club he co-founded. Former Atlantic City mayors Robert W. Levy, Michael J. Matthews and James L. Usry also faced legal trouble while in office.

“The mayor approach has had flaws but that is more people related,” said Marc Pfeiffer, assistant director of Rutgers University's Bloustein Local Government Research Center.

Pfeiffer said efforts to change Atlantic City’s governmental makeup was too rushed and should have included more research about the benefits of a city manager system. He also criticized the lack of public hearings on the proposal.

“There should have been some kind of analysis before exploring a form of government change,” Pfeiffer said. “There was no public discussion or discussion of pros and cons.”

Current Atlantic City Mayor Marty Small did not immediately respond to a call for comment on the referendum defeat. He is scheduled to face Pamela Thomas-Fields in a Democratic mayoral primary in July.

Atlantic City’s government has faced state supervision since November 2016 under the Municipal Stabilization and Recovery Act signed by previous Gov. Chris Christie following a near default of the city’s debt. The five-year state takeover, which is scheduled to last until late 2021, has been credited for improving Atlantic City’s financial standing by resolving outstanding casino tax appeals coupled with achieving budgetary savings through retirement incentives and shared services.

Moody’s Investors Service raised Atlantic City’s junk-rated general obligation bonds two notches to Ba3 from B2 in January and assigned a stable outlook, citing improved finances under state oversight. S&P Global Ratings upgraded Atlantic City debt two notches to BB-minus last November.

Moody’s analyst Douglas Goldmacher noted in a May 7 report that the COVID-19-induced recession would likely lead to reduced revenue-raising ability for Atlantic City and prompt a potential increase in property tax delinquencies.

Goldmacher stressed though that the ongoing casino closures would only have a “modest negative impact” on near-term Atlantic City finances thanks to New Jersey’s Casino Property Tax Stabilization Act of 2016 that converted casino property taxes into payments in lieu of taxes.

“Even as the casinos remain closed with no planned end date, the flow of payments from the casinos to the city is expected to continue so long as the casinos themselves stay afloat, thanks to the legal structure underpinning the payments,” Goldmacher wrote. “A far more serious threat to Atlantic City from the casino closures is the long-term impact of the economic shock and its knock-on effects. “

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