New Jersey Lawmakers Reach a Deal to Save Atlantic City from Financial Collapse

Last Monday, 23rd of May 2016, Atlantic City received two pieces of great news – firstly, the financial reports for the first quarter of 2016 saw a 31% year-over-year increase in revenue and secondly, perhaps more importantly, officials representing both the city and the state had finally reached an agreement to implement a rescue plan to prevent the threat of bankruptcy that has been looming over the seaside resort for a while now. New Jersey lawmakers took their first steps towards compromise legislation in a bid to save Atlantic City from financial collapse. After months of squabbling over the correct approach to the financial crisis, many have said that this is a step in the right direction and it will keep the iconic, east coast gambling resort from becoming New Jersey’s first borough from going bankrupt, in the last eight decades.

Local officials are pleased with the timing of the decisions. The two bill package arrives at a crucial time, days before the Memorial Day weekend, just in time to kick-starts this year’s beach season across the Jersey Shore. The rescue plan essentially has two parts – firstly, the arrangements behind a takeover by the state government and secondly, a PILOT bill, which will guarantee a steady flow of taxes for the city.

State Takeover

The deal will look to amend the bills, S1711 / A2569– AN ACT concerning certain municipalities confronted by severe fiscal distress; the bills, which are backed by Gov. Chris Christie and the President of the State Senate, Stephen Sweeney prescribe and authorised an immediate takeover of the local government by the state of New Jersey.

However, it has been decided that the city will be given 150 days, approximately five months, to come up with a plan to balance its municipal budget for the next five years. However, if the city is unable to act on this and come up with a feasible fiscal plan over the autumn months, it will trigger the takeover by the state government.

PILOT Bill

The PILOT or Pay In Lieu of Taxes bill is the second measure that is to be implemented as part of the rescue plan. It is a 10 year plan that will see casinos pay around an additional $120 million to the local government between 2016 and 2024; $30 million for 2015 and 2016, $15 million in 2017, $10 million in 2018 and $5 million each year between 2019 till 2023; the state will review how well the plan in working in 2024. The measure will make sure casino owners pay regular property taxes for any expansions they undertake and repeal certain tax breaks casinos have been enjoying thus far. This will generate tens of millions for the city each year propagating its recovery

Additional Loans

In addition to the takeover and PILOT scheme, the state will also be giving the city a temporary loan; over the course of the next five months of 2016, a loan of $60 million will be paid to the city, to help it erase its $80 million plus deficit in its 2017 budget, essentially allowing it to stay afloat. A further sum of $15 million will also be granted as a loan next year, in 2017.

Everybody is in Agreement

Monday saw the state Assembly’s judiciary committee vote to approve the agreement.

Assembly Speaker, Vincent Prieto, who was instrumental in blocking Christie and Sweeney’s takeover plan till now, claimed that this deal will give the city ‘time to take care of its own house’.

Prieto also had the following to say, ‘We have given them, to the best of our ability, a fighting chance’.

The battle between Prieto and the cross-party alliance of Christie, Sweeney and south Jersey power broker, George Norcross is nearly costing Prieto his position as Assembly Speaker according to experts.

According to Christie and Sweeney, Prieto has been opposing the takeover because of an alliance he has formed with the Mayor of Jersey City, Steve Fulop. Mayor Fulop is expected go head to head against Sweeney, next year, for the Democratic nomination for Governor. However, both camps have vehemently denied that.

Many have called for Prieto to resign including the head of Atlantic City's casino main workers union.

President of Local 54, Bob McDevitt, had the following to say ‘He’s destroying the future of my city’. However Prieto has replied positively when quizzed if the fight had been worth it. He replied with ‘Absolutely’ and said, ‘I have not taken any heat. You guys may write about a lot of heat, but I'm trying to do my job.”

This Thursday, 26th May 2016, will see both the full Senate and Assembly vote on the legislation.

Christie and Sweeney had pushed for an immediate takeover, characterized by the selling of city assets, renegotiated union contracts and more. They felt this would the best option as the city had failed to solve its problems so far. Whilst the Senate had approved the takeover, Prieto retaliated by saying that it would trample unions’ right to collective bargaining and introduced a bill that would give the city two years to reach certain benchmarks.

In recent weeks, however, Christie has softened his stance on the takeover but his office was unable to return a message seeking comments on Monday, after the details of the rescue plan were announced.

Sweeney does expect the Republican governor to sign the package but had adopted a more cautious tone than Prieto on Monday, saying that he was not assuming anything until the Assembly voted on Thursday.

Sweeney when speaking to NJ Advance Media said, “I want to see this end. I'm not happy that we wasted all this time. But we need to move on.”

Mayor Don Guardian who had labelled the original takeover plan a ‘fascist dictatorship’ said the compromise is ‘very fair’ and hopes that it will show potential visitors that Atlantic City is on the road to recovery. The mayor would like to see Atlantic City return to being a ‘cash cow’ for the state of New Jersey and he further claimed that he would have a more ‘blessed Memorial Day weekend’

Guardian also added “It's up to us now to keep our sovereignty. The hope of partnering with the state helping us but holding our feet to the fire is the way to move forward.”

Even the though the city will get more time to fix the pending issues under this legislation, the state will  still be required to approve the city’s budget plan. If the deal is rejected, the state will have the power to intervene, take over large portions of the local government including the ability to sell city assets, break union contracts and more.

The state will also be given the rights to step in at any point in the next five years if the city is found mismanaging its budget. Atlantic City officials, however, could appeal the state's decision through the courts.

The argument on how to save Atlantic City is crucial as the tax base has plummeted 70 per cent, crippled by the closure of no less than four casinos in a city with $50 million in debt and close to running out of money.

Thomas

Thomas is one of the contributors at PlayingLegal.com. He has a keen interest in the US gambling market, with 10 years industry experience. As a keen gambler, I can be found watching, writing or talking about a range of gambling products like casino, sports and DFS.

We will be happy to hear your thoughts

Leave a reply

PlayingLegal.com