Atlantic City Asks State to Consider Revised Recovery Plan, Three Days Late

The City of Atlantic City, N.J., submitted a revised five-year fiscal recovery plan urging the state Department of Community Affairs, the agency in charge of reviewing it, to reverse its rejection of it.

On Thursday, Nov. 3, Atlantic City Mayor Don Guardian, a Republican, issued a statement saying the city reviewed Department of Community Affairs Commissioner Charles Richman's concerns about the plan and addressed them accordingly.

"The city is requesting that the commissioner reconsider (his) determination in view of the information provided herein that addresses the issues raised in the review," City officials said in a supplement to the revised plan said. "We believe this submittal will ensure that the commissioner has the information desired to complete a thorough and accurate review. Our goal is to assist the commissioner in more fully understanding how the plan is, in fact, likely to achieve financial stability."

The City argued in its supplement that a rejection of the plan will "thrust Atlantic City deeper into fiscal crisis."

"The only remaining solution for the state in 2017 would be to raise taxes over 125% or layoff 700 employees assuming the state is not interested in providing the city with an additional $65 million plus in transitional aid (above and beyond the $13 million included in the review)," the City said.

In a Tuesday ruling, Richman said he rejected the recovery plan because it did not offer any details on how the city will increase operational savings, explain the interest rates used to calculate its new bond offering, overstated tax revenues and lacked "basic details" related to its proposed plan to sell its Bader Field lot, the former site of the Atlantic City municipal airport, which it also said may not even be legal.

Under the proposed recovery plan, which had to be approved by N.J. officials by Nov. 1 to prevent a state takeover, the city said it would implement cost cuts, settlements with casinos owed tax refunds, a new $105 million bond offering secured under the State Municipal Qualified Bond Act and a $110 million sale of the Bader lot to the Municipal Utilities Authority, the agency that provides water to Atlantic City.

It isn't clear whether the city's revised plan will be considered because it was submitted after the deadline. Richman's office did not immediately respond to a request for comment.

Atlantic City argued in its supplement against Richman's assessment that the city had overstated tax revenues by $20.5 million, based on a "flawed assumption" that its property tax base would remain constant over the next five years.

The city said, based on its advisers' research, the property tax base is forecasted to not change in 2017, then decline by 5% in 2018, 4% in 2019, 3% in 2020 and 2% in 2021.

Atlantic City said in its supplement that the plan does not assume the tax base changes in the next four years but rather conservatively "assumes a flat tax levy in each year of the next five years."

As Atlantic City's casinos have lost customers and properties continue to close, the city's largest revenue source, property tax revenue, dropped to $116 million in 2016 from $182.1 million in 2010.

When addressing Richman's question about interest rates on its $105 million financing, Atlantic City referred the commissioner to "Exhibit D" of its plan, which lists the bond facility accruing at a 4.5% interest rate.

The city also assured in its supplement that its plan to sell the Bader lot is legal.

In conclusion, Atlantic City took aim at Richman's comment in his rejection that it has done nothing "meaningful" to improve its financial position.

"The review accurately notes that the city has significantly reduced its workforce, reached an agreement with the county for shared services, pursued privatization and asset monetization, reduced multiple areas of operational cost and maximized non-tax revenues," Atlantic City said in its supplement.

The city's plan called for 100 part-time jobs to be cut in addition to the 358 full-time positions it already eliminated.

The city is on the hook for about $500 million in debt and other obligations. It is taking advice from Roseland, N.J., law firm McManimon, Scotland & Baumann LLC's Edward J. McManimon III and Joseph P. Baumann Jr., Philadelphia-based advisory firm Public Financial Management Inc. and Hoboken, N.J.-based NW Financial Group LLC.

More from Politics

3 Things Investors Must Know for Monday

3 Things Investors Must Know for Monday

It's Dumb to Think Legalizing Weed Is Still a Political Issue

It's Dumb to Think Legalizing Weed Is Still a Political Issue

Street Stats: The Mid-Term Elections May Be a Rollercoaster Ride for Investors

Street Stats: The Mid-Term Elections May Be a Rollercoaster Ride for Investors

Trump's Oil Tweets Ruining the Stock Market's Rebound?

Trump's Oil Tweets Ruining the Stock Market's Rebound?

Former First Lady Barbara Bush Dies at 92 Years Old

Former First Lady Barbara Bush Dies at 92 Years Old