Updated: Wednesday, May 24, 2017, 6:13 PM
ATLANTIC CITY — The state of New Jersey said it had successfully issued bonds on behalf of Atlantic City to fund a $72 million dollar tax appeal settlement with Borgata.
Atlantic City has been shut out of the capital markets in recent years as its ratables tanked and it teetered near bankruptcy. The state credited its oversight as part of a vast state takeover that began last November under Gov. Christie.
In a release, the state said the interest rate was "very attractive"and a better deal for the city's taxpayers than the last bond sale and reflected increasing confidence among investors in the city's future.
The full statement is as follows:
Christie Administration Announces Successful Atlantic City Bond Sale to
Finance Borgata Property Tax Appeal Settlement
Bonds Sell Rapidly and at Very Attractive Interest Rate for the City
Trenton, NJ – The Christie Administration today announced another step to stabilize the City of Atlantic City with the successful sale of bonds to finance the property tax appeal settlement the State reached earlier this year with MGM Resorts International, which owns Borgata Hotel Casino & Spa. Financial rating agencies have viewed the State’s involvement in Atlantic City finances as a positive and stabilizing influence and that viewpoint was evidenced by today’s sale of $69.8 million in tax appeal refunding bonds which sold rapidly and at a very attractive true interest cost of 4.66 percent. These bonds will fund the $72 million settlement the State negotiated with MGM in February; a settlement that was less than half of the $158 million in property tax appeal judgements and claims for the Borgata.
“Because of the State’s steady hand in managing Atlantic City finances, the City was able to obtain bond insurance and access the capital markets such that the debt was sold quickly and at a low interest rate given the City’s underlying credit. This is great news for the City because the lower the interest rate, the less the City has to pay to bondholders to finance its debt,” said former U.S. Senator Jeffrey S. Chiesa, the State Designee leading the financial recovery effort for Atlantic City. “This is a terrific day for the people who live and do business in Atlantic City because it shows people are eager to invest in the City now that it’s being responsibly managed.”
By comparison, tax-exempt bonds the City sold in 2015 under the State’s Municipal Qualified Bond Act had a true interest cost of over 6 percent despite those 2015 bonds having a lower par amount and shorter maturity schedule.
Today’s successful bond sale is the latest piece on a growing list of improvements since the State stepped in to stabilize the City’s finances in November 2016. The list includes the first municipal property tax decrease in the City in a decade, the Borgata property tax appeal settlement, reductions to city police and firefighters’ excessive salaries and benefits, and development projects such as Hard Rock’s plan to re-open the former Taj Mahal as the new Hard Rock Hotel & Casino Atlantic City.
Today’s bonds are being issued under the State’s Municipal Qualified Bond Act program and are expected to close in early June.