Atlantic City Mayor Guardian: Gov. Christie to blame for shutdown

Atlantic City Mayor Don Guardian, left, and Council President Marty Small discuss the looming shutdown.

UPDATE (from Atlantic City): Mayor Don Guardian placed the blame for a looming shutdown and cash crunch on Gov. Christie's shoulders, but assured citizens and tourists Thursday that the city would be "business as usual" when if shuts itself down April 8 for three weeks.

Nearly all his 900 employees have indicated they would come to work between April 8 and May 2 without paychecks, he said, and essential workers will be given an "IOU" for their paychecks.

"He's absolutely shutting us down," Guardian said, to a room full of cameras and reporters, flanked by City Council President Marty Small, three council man, Fire Chief Scott Evans, Police Chief Henry White and others.

"We will run out of money April 8 because the governor has withheld $33.5 million," Guardian said. "There's no one else to blame here. The money is coming from the casinos. Yet the governor has decided he's not going to help us."

Guardian was referring to casino tax money the state promised to redirect to Atlantic City to plug its current budget, that was previously being used to fund a citywide marketing effort known as the Atlantic City Alliance. Christie has twice vetoed the aid. The casinos have said they will start spending the money on marketing May 1.

Guardian said Christie was "dead wrong" on pushing for a state takeover bill, which Small said was the state's backhanded way of adopting Emergency Manager legislation similar to that adopted by Michigan.

Guardian said that volunteers and faith based groups would step in to provide services like Meals on Wheels and transportation and recreation, and that police, fire, trash and other essential services would continue to be provided by employees who would be paid at a later date.

"It's not going to look any different than today, except that 20,000 people will be in town for the largest beer festival on the East Coast (AC Beerfest), 20,000 people will be in town for a film festival, another 100,000 will come to the casinos and clubs, and another 100,000 will come because it's April and it's cool to come to the shore."

He said the state flatly refused to provide an $8 million bridge loan to avoid a shut down, even when Guardian suggested it could go directly to the school district. He noted that the city still receives far less in state aid than comparable cities.

He said the three week shut down was the only way to solve the cash crisis and still fund schools and make debt payments. He said he was not prepared to stop making the city's payments on $240 million in debt because of the fallout it would cause to other municipalities throughout the state.

He said in the end, if there's no legislative agreement, no aid, the city will run out of cash permanently and the state will have to step in and pay for all the services anyway. 

"There's no reason to shut down Atlantic City," he said. "It's bad for the poor guy over there who owns Ducktown Tavern, because people are going to be afraid of coming in for a beer and some shots."

He was referring to owner Johnny Exadaktilos, who employs 42 people at the neighborhood institution, one of the few places that remained open throughout Hurricane Sandy. 

Guardian stood firm about resisting anything more than a fiscal takeover, and said the civil and civil service rights and collective bargaining rights of employees and residents was at stake.

Small, the council president, warned that without compromise and the promised aid, the city will face a similar cash crunch throughout the summer, and "the bottom will fall out."

"We'll fall off the cliff," he said. "It'll be time for some for some bankruptcy problems in Altantic City."

Guardian said: "If we go bankrupt, it's because the governor will drive us into bankruptcy. It will not be an Atlantic City bankruptcy, it will be a Christie bankruptcy."

UPDATE (from Trenton): With Atlantic City nearing default on its debt payments, Assembly Speaker Vincent Prieto on Thursday said the state already had the authority to stave off a financial disaster there and disputed Gov. Christie’s assertion that new legislation was needed.

“For anybody to say that Atlantic City is being held hostage -– I would quite say the opposite,” Prieto (D., Hudson) said at a Statehouse news conference.

Citing a decades-old law, Prieto said, “If some municipality was going to default on their bonds, the state has an obligation and has the mechanism to actually step in.”

“Saying that, the governor has the tools that he needs to actually make Atlantic City come out of the woods on this problem that they have,” Prieto said.

Christie supports legislation that passed the Senate that would give the state broad control of Atlantic City’s government, including the ability to amend or terminate collective bargaining agreements.

Prieto has rejected that approach, describing it as unfair to police and fire unions he says have already made significant concessions.

Mayor Don Guardian has said he will close City Hall in early April because the city won’t be able to pay its employees.

Prieto called on Christie to negotiate in good faith, dismissing the governor’s remarks earlier this week that he would only sign the legislation in its current form.

“To tell me and dictate to me that you’re not going to change one word, I say that’s preposterous,” he told reporters. “You need to ask why he’s not using his authority,” he added, questioning Christie’s motivations.

Even as Prieto sought to take on Christie, he faced a new fight in his own caucus. Assembly Majority Leader Louis Greenwald (D., Camden) told Politico Thursday that the Senate takeover bill would pass the lower chamber with bipartisan support.

Prieto said that wasn’t true.

Christie spokesman Kevin Roberts said: “With confirmation from Assembly Majority Leader Lou Greenwald this morning that the Atlantic City takeover bill has the votes to pass the Assembly, we urge the Speaker to post it for a vote. If he does not, it will be clear that there is only one person standing in the way of saving Atlantic City's finances: Speaker Vincent Prieto.”

PRIOR REPORT: Christie continued to stress that he would not pass the aid bills without a full takeover, and would not sign any bill if it was changed in any way. But that stance was beginning to attract some opposition within the assembly, where Speaker Vincent Prieto has refused to post the bill in its current form.

Assemblyman John McKeon, D-Essex/Morris, issued a statement saying Christie's comment that he is "not going to negotiate with two sets of Democrats" displays "a complete and utter lack of respect for the General Assembly. 

"Every member of the Assembly should stand behind Speaker Prieto to send a message to the Governor that we will not be marginalized because he cannot be bothered to come to the table like and adult.

"The governor's intransigence ignores the fact that the PILOT bill, alone, would give Atlantic City more than adequate resources to continue to allow Mayor Guardian to do the job he needs to do."

PRIOR REPORT: Awaiting stalled state takeover legislation, Gov. Christie played an opening hand in future negotiations with the people and banks who hold $240 million in Atlantic City bonds: be prepared to sacrifice.

Speaking on local radio Thursday morning, Gov. Christie warned bondholders, who hold $240 million in debt to near-broke Atlantic City, to be prepared to renegotiate those debts. The city has said it will not make payroll and essentially shut down City Hall for three weeks on April 8. It will continue to send taxes to the schools and will make an April 1 debt payment, the mayor has said.

"Bondholders who hold debt to the city are going to have to make sacrifices as well, as is the casino industry," Christie said in a morning telephone interview aired on WPG talk radio in Atlantic City.

Bondholders have counted on New Jersey historically not allowing cities to go bankrupt to forestall renegotiating or losing their investment in the municipal bonds issued by cities throughout the state. Christie's words signaled that the renegotiating would happen regardless.

Christie did not address why his appointed emergency managers, Kevin Lavin and, for a time, Detroit emergency manager Kevyn Orr, did not attempt to renegotiate those debts in the year they were in power, except to say they did not have explicit authority to tell the city what to do. State overseers have been in place in Atlantic City in one form or another for five years, and Lavin and Orr said part of their role was to renegotiate the city's debt.

UPDATE: Mayor Don Guardian said later Thursday on the same station that city negotiators were told to stand down while the state negotiated with Borgata and bondholders, but that the state failed to do so.

"The governor - when he spent $2.6 million for the emergency manager - was supposed to restructure our debt of $240 million, and the money we owe Borgata," Guardian said. "We were told to walk away and the state was going to bring in high powered professionals. One year late, they walked away and said we didn’t do that and it's back in your hands."

Guardian went on to say that the state has failed at its prior attempts at takeovers.

"You can see when the state gets operational control of a city or a school district or a tourism district, they drive it into the ground," Guardian said. "They increase costs, deficits, find no long term solution."

The previous emergency managers, while modeled after Michigan law, were put in place by executive order and not takeover legislation. The governor is seeking takeover legislation which would give the state vast powers over city government. It is opposed by Mayor Guardian and council. Christie repeated that he would not sign or send any aid package to the city without the takeover. 

Christie said the casino industry, including Borgata, which is owed more than $150 million in back tax appeals and withheld its last quarterly tax payment of $7.2 million, and public sector unions, would also be expected to renegotiate debts and contracts if the state took over.

"Borgata has not paid its property taxes because it's owed $150 million and the city does not have the money to pay it. Borgata is withholding its property taxes as credit for the money its owed," Christie said.

"When you have a city in that position, you have to come in and take aggressive steps," the governor told host Harry Hurley. "You have to say to mayor and council: you've failed."

The legislation has passed the state Senate but is being held up by Assembly Speaker Vincent Prieto, who objects to the power given to rip up collective bargaining agreements. Prieto has a news conference scheduled at 1 p.m. Thursday. Guardian has a 2 p.m. news conference to discuss the looming shut down.

Christie added:  "I'm ready to sit down and have my representatives sit down: with the casino industry, public sector union workers, other businesses owed money, bond holders who are owned debt, and try and negotiate fair and reasonable agreements with all of them. If we’re able to do that, then people will notice no significant difference. We’ll shed hundreds of millions of dollars of debt and employment obligations."

Of Guardian's threats to shut down the city government, and have police, fire and public works employees working without pay, Christie said: "The mayor just doesn’t understand the ramifications of the things he’s threatening." 

Guardian responded that "almost the entire workforce" has indicated they will work without pay, and that the state had reneged on a promise of $33.5 million aid to plug a budget hole. He said Christie exagerated the amount of money the city spends in its budget, and does not take into account the 300,000 visitors every weekend.

He accused the state of New Jersey of "starving Atlantic City" by denying them aid freely given to other cities under state supervision.

He said if the city shuts its government down April 8, the town will still be open for business and noted that it is the weekend of the Garden State Film Festival and the AC Beer Festival.