Christie Wanted to Know the Results of Lavin and Orr’s Report before Deciding on the PILOT Bill
The preliminary report on Atlantic City’s economic future has been filed by the city’s state-appointed emergency managers. The report by Kevin Lavin and Kevyn Orr did not provide many answers, though a few suggestions were made.
The initial report’s upshot is the oceanfront city “cannot stand on its own” without significant support from the state. At present, Mayor Don Guardian is trying to move Atlantic City from a gaming-based economy to a more balanced non-gaming tourism industry. For that to succeed, the state needs to invest additional resources.
Suggested AC Cut Budget a Further $10 Million
One key suggestion is to cut the city’s municipal budget by $10 million a year. That reduction is on top of the $30 million in cuts made last year by Mayor Don Guardian.
The reports also suggests delays in pension and health insurance payments by the city. Additional federal and state aid was suggested by the emergency managers, as well. If the suggestions are taken in the form presented, it is estimated that about 20% to 30% of the city’s municipal workforce is going to face layoffs. That would amount to about 1,100 people.
If the various recommendations are taken, then the city would be able to reduce its budget by about $130 million, compared to last year. At present, Atlantic City is facing a $101 million budget shortfall, though that figure does not take into account the local school system. The Atlantic City school system faces a $47.1 million shortfall.
Atlantic City Faces Spiraling Debts
The layoffs and other forms of austerity are to deal with a spiraling debt situation. Atlantic City has an annual budget of $260 million. The city also has $397 million in debt.
For a city of 40,000 citizens, a $400 million debt is crippling. In years past, the economy seemed to be strong enough, due to the gambling industry which represented the Boardwalk’s biggest revenue producer.
Property Tax Base Fell by 65%
In the past 5 years, though, Atlantic City’s taxable property from the gambling industry has fallen by nearly 65%. In 2010, the taxable property was $20.5 billion. In 2015, that number has fallen to $7.3 billion. In 2014 alone, the amount of taxable property from the gaming industry declined by 35%.
Meanwhile, the revenues generated by the casino industry has fallen by more than 50% in the past 9 years. From $5.4 billion in the peak year of 2006, Atlantic City’s revenues from the gambling industry dropped to $2.4 billion in 2014.
Dangers of Default
Wall Street financial institutions are concerned about Atlantic City defaulting on its municipal debts. In fact, one financial institution warned that Atlantic City might run out of money by the fall of 2015. Based on those concerns, Atlantic City’s creditworthiness has been lowered on a couple of occasions.
City leaders face a difficult challenge in renegotiating term son the city’s debt. One key factor of maintaining the payments is for the casinos to stay on-time with their payments, because they have a history of falling behind. That’s one reason the state lawmakers are trying write a PILOT bill, which would take legal appeals by the AC casinos out of the process and maintain a single, well-known payment plan.
Vincent Mazzeo a Key Figure
Vincent Mazzeo, one of the key supporters of the bill, said, “Tax appeals will really cripple the finances of Atlantic City if we don’t get these bills passed.”
The PILOT or “Payment in Lieu of Taxes” plan remains stalled in the state legislature. Senate Presidnet Steve Sweeney and Sen. Jim Whelan continue to push the PILOT bill, but Mazzeo refused to allow a vote when it was near completion in December 2014, presumably because he did not want Carl Icahn to profit from such a plan. Now that Icahn is the controlling owner of Trump Taj Mahal, it remains to be seen if the PILOT is going to be approved.
Uncertainty on Christie’s Stance
Steve Sweeney says that delay at the moment is concern about whether Governor Chris Christie will sign the PILOT bill into law. He says that he has yet to receive a firm avowal from Christie, so some legislators may not be willing to vote “Yes” under those circumstances. Kevin Roberts, a spokesman for Christie, called on lawmakers to pass the bills and send them to the governor. He said that the governor must consider the legislation in tandem with the emergency managers’ recommendations.
While those deliberations are still ongoing, a city official announced to Reuters that Atlantic City would be receiving a two-month extension on loan payments to the state of New Jersey. In December 2014, the state loaned Atlantic City $40 million to keep from defaulting on loans or borrow at extortionate rates from private financial institutions.
Michael Stinson, Atlantic City’s Revenue Direction, said on Monday, “We have been working with the state, and the due date will be extended.“
