Atlantic City gets a financial rescue blueprint
ATLANTIC CITY, N.J. - Two emergency managers appointed by New Jersey Gov. Chris Christie to turn around Atlantic City's troubled finances recommend layoffs and deep spending cuts, but don't foresee a bankruptcy filing for the struggling casino resort.
Kevin Lavin, a corporate turnaround expert, and Kevyn Orr, who shepherded Detroit through its municipal bankruptcy, were hired by Christie in January to recommend ways to get Atlantic City back on its feet. They released their report Tuesday, a day after submitting it to Christie. They cautioned that it was a preliminary recommendation and that proposed remedies could change as they gather more information or if the city's finances worsen.
"The city simply cannot stand on its own," Lavin wrote in the report. "Thus, one thing is clear: there is no reasonable likelihood that these headwinds will abate at any point in the near future. In fact, as discussed in detail herein, all reasonable forecasts confirm that these troubling factors will continue to beset the city for the foreseeable future and, absent immediate and urgent corrective action, the city's ability to function as a thriving and viable municipal enterprise is imperiled."
Atlantic City's problems are real, and writ large in partially burned-out neon letters along the Boardwalk: Four of its 12 casinos shut down last year, putting 8,000 workers on the street, and three of the survivors are bankrupt. Its casino revenue has fallen by nearly half in the last eight years, from $5.2 billion in 2006 to $2.74 billion last year.
The city itself has $397 million in debt and a $260 million annual budget for a city of just 40,000 residents. Over the past five years, the worth of Atlantic City's taxable property has plunged from $20.5 billion to $7.3 billion, and declined by 35 percent in the last year alone.
"This is the road to recovery, but the road and the timeframe is a lot longer than anyone would like," Mayor Don Guardian said.
The report calls for layoffs and spending cuts, although totals for each are not given. Lavin wrote that a short-term goal is to cut $10 million from the city's proposed 2015 budget, which Guardian has already cut by $30 million.
It also considers additional state and federal aid, spending cuts and suggests delaying pension and health insurance payments the city must make to reduce the budget by about $130 million this year. The city has a projected $101 million budget shortfall, and the school system has an additional $47.1 million shortfall.
Lavin said the city may have to lay off 20 percent to 30 percent of its municipal workforce of 1,100 people.
Taxes are soaring as revenue plunges in a city that was the only place outside Nevada to gamble legally when its first casino opened in 1978, but which has been battered by the explosion of casinos across the country, particularly in the northeastern U.S.
Last week, state Senate President Steve Sweeney criticized Christie for appointing managers with extensive bankruptcy experience, saying it spooked financial markets that have since lowered their ratings for several New Jersey cities because they fear the state is more willing to tolerate a municipal bankruptcy. Those downgrades make it more expensive for cities to borrow money.
Sweeney said the managers had in effect wasted 60 days reaching the same conclusions he put forth in November: that Atlantic City is in trouble and needs help fast. A package of bills to help the city's finances and its casinos remains stalled in the state Legislature, including one that would let casinos make payments in lieu of property taxes.
"Atlantic City and the casino industry have been struggling to survive while the administration has held three summits and issued three reports, but has taken no real action," Sweeney said.