Upgrade to higher junk rating reflects Atlantic City momentum
Continued fiscal progress after resolving outstanding casino tax appeals pushed Atlantic City’s bond rating up to the single-B category for the first time since early 2016.
S&P Global Ratings upgraded Atlantic City general obligation bonds two notches to B from CCC-plus late Tuesday citing a series of improvements accomplished under state oversight. The upgrade, to a rating that is still deep in speculative-grade territory, comes nearly a year to after S&P last raised the city’s debt.
The ratings boost came three weeks after the administration of New Jersey Gov. Phi Murphy recommended continuing state intervention of Atlantic City finances through at least the fall of 2021 under the Municipal Stabilization and Recovery Act that began in November 2016.
"The upgrade reflects our opinion of the city's improved operating environment and structural financial improvement following settlement of outstanding tax appeals and continuation of extensive state oversight," S&P analyst Timothy Little said in a statement.
The new S&P rating is four notches higher than Moody’s Investors Service, which rates Atlantic City Caa3. S&P maintained the stable outlook on Atlantic City debt that it assigned during its October 2017 upgrade.
"We are enthusiastic about the S&P upgrade because it demonstrates the hard work being done by Atlantic City and the State is moving the city in a positive direction," said Lisa Ryan, a spokeswoman for New Jersey’s Department of Community Affairs, which is overseeing the state takeover. "Over the last nine months, the city and state have worked collaboratively to find creative solutions to pay Atlantic City’s deferred pension and healthcare contributions and to maintain essential services without significantly increasing the city budget."
Little noted that since S&P’s last Atlantic City review, the city achieved permanent financing of its deferred 2015 state pension and healthcare contributions through a $49.2 million bond sale in April. He also credited city officials for implementing a 10-year payment-in-lieu-of-taxes program for casino gambling properties and adopting a $225.3 million 2018 fiscal year budget that contains less reliance on non-traditional state aid.
"The stable outlook reflects our opinion we expect the city to maintain and continue to improve financial performance, increase reserve levels and sustain improved liquidity, while political risk associated with payment of debt service and structural reforms has improved, further lending support to future stability,” wrote Little.
The press office for Atlantic City Mayor Frank Gilliam did not immediately respond for comment on the S&P upgrade. Lt. Gov. Sheila Oliver joined Mayor Gilliam and City Council President Mary Small Tuesday for the first meeting of the Atlantic City Executive Council, which was created after being recommended as part of the state’s September report that recommended more collaboration from Trenton.
“Atlantic City is at a turning point because we now have a robust road map for the city’s revitalization,” said Gilliam in a statement Tuesday about the meeting. “As I look around the room and see so many leaders ready to work with the city, I am optimistic for our future. This is an opportunity to try new things to move Atlantic City forward.”