Atlantic City, N.J. was kept on credit watch negative by Standard & Poor's Wednesday in advance of an updated emergency manager report and an expected decision on a financial assistance package approved by the New Jersey State Legislature.
S&P analysts Timothy Little and Lisa Schroeer noted in a Nov. 4 report that while the state's Local Finance Board approved a balanced Atlantic City 2015 budget in late September, it relies on anticipated revenues of $33.5 million in redirected casino taxes and $38.9 million in deferred pension and health care expenses. An Atlantic City rescue package of five bills approved by the legislature in late June would allow the redirection of casino taxes to pay debt service, but Gov. Chris Christie has not indicated yet whether he will approve the legislation.
The Atlantic City budget was adopted nine months late, but came in time to mail fourth quarter tax bills and also fully funds its annual requirements for settled tax appeals. S&P said the city reported it will be able to make an $11 million December 2015 debt service payment even the anticipated redirected casino tax revenue is not received.
Atlantic City Revenue Director Michael Stinson said he expects resolution on the fate of the legislature-approved rescue package by next week before the state Assembly and Senate return to session. If Christie takes no action before the new session, the five bills automatically become law, according to Stinson.
"If the bills are passed than we are going to get revenue," said Stinson. "The uncertainty of the bills should be resolved by next week."
Atlantic City was slashed three notches by S&P in August to B because of uncertainty over whether it could meet its 2015 fiscal obligations. Corporate restructuring attorney Kevin Lavin was tapped Atlantic City emergency manager by Christie in January and he released a March 22 report urging "shared sacrifice" for all stakeholders including suggestions of extending maturities for bondholders and rearranging the amortization schedule of bonds to delay principal repayments. A second report from Lavin is scheduled to be released this fall.
Atlantic City suffered four casino closures in 2014 and was facing a $101 million budget gap prior to the approval of a 2015 fiscal plan in September. The city is rated Caa1 by Moody's Investors Service.