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Advisor to Christie pushing emergency manager for Atlantic City

ATLANTIC CITY - This town has always had its bosses. Its political Nuckys, Haps, and Sonnys, its corporate Steves and Donalds, its gangster Nickys and Joeys.

ATLANTIC CITY - This town has always had its bosses. Its political Nuckys, Haps, and Sonnys, its corporate Steves and Donalds, its gangster Nickys and Joeys.

But is the Boardwalk Empire ready for a new emperor? One with unilateral power to sideline the city's Republican mayor and Democratic council, throw out municipal labor contracts, sell off assets, slash spending, and privatize city departments?

Jon F. Hanson, powerful two-time author of how-to-save-Atlantic-City reports delivered to Gov. Christie, is proposing exactly that - an emergency manager with "extraordinary supervisory powers" to stabilize a cratering city where casinos have closed and debt and taxes have skyrocketed.

Modeled after Michigan laws in 2011 and 2012 that took power (and salaries) away from mayors and councils in nine towns, the emergency manager Hanson envisions goes far beyond current state supervision in Atlantic City and elsewhere.

Hanson sees it as less political coup, more techno-corporate savior.

"Let's put it this way," Hanson said in an interview last week from his office at Hampshire Real Estate in Morristown. "[Racketeer and power broker Nucky Johnson] was involved in politics. I would hope the emergency manager would be more a corporate manager than Nucky."

Mayor Don Guardian, a Republican elected last year to replace entrenched Democratic Christie foe Lorenzo Langford, is resisting.

He argues the city is already under a monitor, Ed Sasdelli, appointed in January, when the city accepted state transitional aid, who has that power. Sasdelli, of the state Department of Community Affairs, did not respond to a call seeking comment.

"My monitor can veto anything I do," Guardian said. "Every hire, every fire, every contract, any payroll changes. I have cooperated."

The former mayor of Pontiac, Mich. - Hanson said he modeled his plan after the emergency management there - tells a much more drastic story of intervention.

"I was, for my entire term, essentially a figurehead," said Leon Jukowski. In Pontiac, the municipal payroll went from 600 to two dozen under emergency-manager directives, with contracted workers replacing municipal labor.

"The second emergency manager actually eliminated my pay for a year," Jukowski said. "I kept showing up just to [annoy him]."

Pontiac plugged a $60 million debt, slashed its budget in half, auctioned its fleet of cars, sold off the Superdome for $588,000, and laid off everyone from city attorneys to custodians to scorekeepers. The police force was regionalized; the fire department was taken over by a neighboring town.

Now, 334 emergency-manager executive orders later, Pontiac is under the governance of a "transition board" designed to return it to home rule.

Jukowski was defeated in the last election, he said, because he was ultimately seen as collaborating with the third emergency manager, who restored his salary.

Ultimately, Jukowski said, despite his distaste for the law, he decided the best course of action was to work with the emergency manager to expedite the fiscal surgery and end the reign. He said that cost him the election.

"You can either go with your philosophical gut, or you can throw the switch that's going to fix the problem," he said.

Those who have fought the law in Michigan say a lot is at stake for Atlantic City's elected officials.

"[Mayor Guardian] should resist," said John Philo of the Sugar Law Center in Detroit, which is challenging the law.

"Essentially what it does is appoint one person who becomes the entire government of the city," he said. "Like a czar. What is so offensive about it is it really looks at the democratic nature of your government as the problem."

The Michigan law is the subject of a lawsuit alleging it unfairly targeted black communities.

In Michigan, 52 percent of black residents live in cities controlled by emergency managers, the lawsuit contends, compared to just 2 percent of white residents.

Other complaints about the law's constitutionality were dismissed last week by a federal judge in Michigan.

Hanson's report to Christie sees emergency management as the only alternative to the city's declaring Chapter 9 bankruptcy. Christie has yet to endorse any of the recommendations in the report.

In Atlantic City, casino tax appeals have led the city to issue $345 million in bonds since 2010, and city appropriations now top $244 million.

Atlantic City Councilman Moisse Delgado spent several days last week rallying legislators in town for the League of Municipalities against drastic intervention. (The emergency manager in Pontiac allowed council to call a meeting to order, but it could do little else.)

"Our existence as residents is just a 'temporary obstacle' to them unless we as a community prove them wrong by fighting for sovereignty," Delgado wrote on Facebook. (He did not return messages from The Inquirer).

The first version of the law was repealed by Michigan voters after an emergency manager tried to set school curriculum. The state legislature quickly adopted a second version. The law remains deeply unpopular. If Christie supports a New Jersey version of the law, "he'll lose Michigan," Philo said of Christie's national ambitions.

Although unpopular with residents, "Banks really love this law," said Alec Gibb, an attorney who fought for retirees who lost health benefits in Pontiac. "It doesn't threaten their interests the way bankruptcy does."

Hanson says the emergency manager is the only way to stabilize outsize city and school finances. He said that he was glad Guardian and School Superintendent Donna Haye were busy slashing budgets, but that an emergency manager free of political concerns would be more effective. It was not clear whether the proposal would require legislation or an order from the governor.

"I'm not criticizing the mayor," Hanson said. "We want someone who is a professional who comes in and makes the hard decisions."

Hanson's also in favor of outsourcing city services, having the county take over some departments, and the state take over planning, code enforcement, and zoning for the entire city.

But County Executive Dennis Levinson demurred. "I would like to assure Atlantic County taxpayers that county funds are not going to go into the bailout of Atlantic City," he said.

The emergency manger, though devoted to austerity, can arrive with its own outsize expenses.

Detroit's emergency manager, Kevyn Orr, commands a $275,000 salary, plus a car, driver, and bodyguard, and has taken up residence in a $4,000-a-month suite at the Book Cadillac Hotel. All paid for by taxpayers.

"What you're doing is adding a whole layer of consultants," Philo said. "The bills to the city of Detroit for consultants makes you blush. There's a whole 'disaster capitalism' industry. They fly in, they fly out."

But Stephen Fehr, co-author of a Pew Charitable Trusts report on "The State Role in Local Government Financial Distress," said Orr - a law school friend of Michigan's just-reelected Republican governor, Gov. Rick Snyder - and the Orr-hired chief financial officer, John Hill, deftly steered Detroit through, and out of, bankruptcy.

Fehr said the key to success was a credible manager (some in Michigan had ties to local industries), a strict timetable, and inclusion of stakeholders (even while cutting salaries).

Meanwhile, New Jersey State Senate President Stephen Sweeney - whose own rescue plan for Atlantic City is on the table and who seemed to tentatively support an emergency manager idea - appeared surprised last week to learn Michigan emergency managers went after union contracts and privatized city departments.

"I don't believe in privatization," he said while walking from an urban mayors' meeting at the League of Municipalities. "I need to talk to Jon Hanson."