Sweeney: Christie wants A.C. to declare bankruptcy

TRENTON - New Jersey Senate President Stephen Sweeney accused Gov. Christie on Thursday of trying to "force" Atlantic City into bankruptcy, and said he would sue to block such a move.

Sweeney (D., Gloucester) criticized Christie's hiring of an emergency manager and a consultant to take charge of the embattled resort.

Christie, a Republican considering a run for president in 2016, issued an executive order last week installing Kevin Lavin as emergency manager and tapping Kevyn Orr as a consultant. Orr led Detroit through the largest municipal bankruptcy in U.S. history. Christie's move provoked an immediate downgrade of Atlantic City's credit rating, which interfered with its plans to sell short-term notes.

"We need to take more aggressive action, and that's the action that I'm taking today," Christie said last week at a summit in Atlantic City.

Sweeney, addressing a conference of mayors Thursday, said the hiring of two bankruptcy experts indicated Christie's intentions.

"This administration is trying to force a bankruptcy," he said. That would set a dangerous precedent for other New Jersey cities struggling financially, such as Newark, Camden, and Paterson, he said.

"We might have to get in a big fight here," Sweeney said. As Senate president, Sweeney said, he would sue to block a bankruptcy filing.

He cited a report by Moody's Investors Service, a Wall Street ratings agency, that labeled Christie's move credit-negative. Moody's also warned that the actions signaled to it a paradigm shift that could affect all distressed towns in the state.

"It signals a limit to the state's willingness to provide the financial support necessary to prevent a municipality from defaulting or declaring bankruptcy," Moody's wrote Monday.

Sweeney also criticized Christie's move as politically driven. "It's popular in Republican politics - blow up union contracts, destroy the unions - that's a positive in his party," he said.

The dispute over how to help Atlantic City comes after four casinos closed in 2014, resulting in about 8,000 layoffs.

About 15 percent of the city's budget goes to debt service, according to Christie's executive order. The city has incurred $345 million in new bond debt since 2010 to cover tax appeals and deficits.

Christie's office didn't respond to a request for comment.

A top adviser to Christie dismissed the idea that hiring an emergency management team with bankruptcy experience meant a certain path to Chapter 9 or that Christie had decided that was necessary. He said Moody's "misread" the governor's actions.

"The governor gave them a short window," the adviser said Thursday. "Go in there and come back and tell me in 60 days, can you negotiate, is it possible to do this, what is the game plan?"

The original recommendation to bring in an emergency manager - contained in a report by the Governor's Advisory Commission - was framed, in fact, as an alternative to Chapter 9 bankruptcy, which was dismissed in an appendix to the report.

The model was Pontiac, Mich., where managers made drastic budget cuts, tore up union contracts, and privatized city departments. But Christie's executive order did not give the emergency manager any powers beyond what were already contained in state law.

Under New Jersey law, the five-member Local Finance Board, which is part of the Division of Local Government Services in the Department of Community Affairs, must approve a bankruptcy filing by a municipality, said Marc H. Pfeiffer, who worked for 26 years for the division.

"They have the authority to act on this. Nobody else does. It rests with the board, though the governor has some influence over the board," said Pfeiffer, now senior policy fellow and assistant director at Rutgers University's Bloustein Local Government Research Center.

Sweeney has proposed legislation that would require casinos to pay $150 million annually in payments in lieu of taxes (PILOT) for two years, then $120 million a year for the next 13.

He said Christie had stated his opposition to that plan. "He basically signaled he won't sign it, so what's the sense in moving forward?" Sweeney said.

Assemblyman Vince Mazzeo (D., Atlantic), however, said he intended to push ahead with the legislation, which casinos and the city have said is necessary to avoid more debilitating tax appeals. Atlantic County and other legislators no longer oppose the idea. Similar proposals were made in the report to the governor.

"The clock's ticking," Mazzeo said. "We have to make decisions."

Mayor Don Guardian said that he opposed filing for bankruptcy but that the city's inability to sell bonds this week suggested the market was preparing for that possibility.

He also said the state did not have the authority to orchestrate a bankruptcy without the city's consent.

"I've got to be open to all different ideas, realize these guys have expertise in bankruptcy and in refinancing, to see if we're missing something," Guardian, a Republican, told reporters after the mayors conference.

He said he was not sure whether Sweeney was right in thinking Christie is pushing for bankruptcy.

"Because of the market's reaction to having the two Kevins come down here, they see that as an automatic bankruptcy," he said. "On the other side, no [New Jersey] city since 1932 . . . has gone into bankruptcy. The state has always secured support for them. The message is not clear yet."

The "two Kevins," meanwhile, who had cautioned that bankruptcy talk was premature, were holed up in an office set aside for them - behind at least two locked doors - in the Casino Control Commission Building in Atlantic City. On Thursday morning, Ed Sasdelli, the state monitor for the city, was signed in to meet with them.