Sweeney: Atlantic County should buy A.C. water utility

New Jersey Senate President Stephen Sweeney told the Inquirer Editorial Board on Tuesday that he now wants Atlantic

County

to buy Atlantic City's much-coveted water utility, and to use its good credit to help the cash-strapped city pay off $160 million in tax refunds owed the Borgata Hotel & Casino.

Sweeney noted that unlike downgraded Atlantic City and the State of New Jersey, the county's credit rating is solid. "They have access to markets," he said.

"The county could do all that stuff," Sweeney said during a one-hour meeting, part of a tour of newspaper editorial boards to promote his plans for North Jersey casinos and Atlantic City intervention. "If this was Gloucester County, we would try to refinance, to try to help finance to end the fight with Borgata. They can't borrow, but the county can."

He added, "There's no reason the county couldn't buy the water company."

Not so fast, responded Atlantic County Executive Dennis Levinson in an interview.

"What benefit is that to the county?" Levinson said. "We're in very good shape as a county because we have been frugal. Our borrowing power is substantial. Now we have to bail out a state that has p- money away for frivolity and a city run also incompetently?"

Levinson said he believes bankruptcy for Atlantic City is the better option, and the only way to get bond holders and Borgata to the table.

A high-powered negotiator hired by former Christie-appointed emergency manager Kevin Lavin was unable to reach a deal with Borgata after months of mediation. Borgata and Atlantic City are also in court about a portion of the debt that the city is paying back in $150,000 monthly increments. Borgata has said it remains "open to good-faith discussions to resolve" the debts.

The city's Municipal Utilities Authority is valued at about $100 million. It has been eyed by privately owned water companies, including New Jersey American Water, whose lobbyist is Philip Norcross, brother of South Jersey power broker George E. Norcross III.

Mayor Don Guardian argued that the city - in a position backed by Lavin in his final report - should take over the authority as a department. He projects that the city could generate $5 million annually, which could be used to pay back Borgata while maintaining the asset.

"We could keep our water department, assure quality and rates, and also use the income to get rid of the debt," Guardian said. "That's one of the ways that makes the most sense utilizing the water department. It assures our residents that we didn't sell it, and there's no danger of a Flint," referring to the lead poisoning scandal in Michigan.

During the Editorial Board session, Sweeney pitched for drastic state intervention, sometimes called a takeover and sometimes not, though his original 15-year time frame has been cut to five, with, he said, a possible early release from increased oversight of three, or even two, years.

Sweeney said he believed the state had given Atlantic City enough time to get its house in order. He and aides brought along a copy of a memo of understanding he said the city rejected this summer, which asked the city to make $80 million in operating-cost cuts to avoid a state takeover. His aides acknowledged that a second memo of understanding that asked the city to review assets for sale - "with special attention paid to the Municipal Utility Authority" - was also rejected by the city.

Guardian said he was familiar with the assets memo but not the $80 million memo. "If we could get $80 million, we don't need the state," Guardian said. The city cut $25 million last year, and plans another $25 million in cuts this year. Guardian said that if legacy costs such as pensions, and other costs controlled by the state, were removed, the city's operating budget would drop to $140 million.

Guardian has resisted a state takeover and threatened bankruptcy, but last week he agreed to put off talk of bankruptcy and negotiate a less onerous plan of state intervention.

Sweeney said he had met with the city to begin drafting the new intervention plan. He said Feb. 11 was the last date to introduce the bill and still be able to get Atlantic City state aid by April 1, when the city is estimated to run out of cash.

The city has a $33.5 million gap in its budget that was supposed to be filled with redirected casino tax revenue in an aid bill vetoed by Christie. Christie has said he would sign the aid if it was included in a general takeover package.

As for the water utility, Sweeney said having the county take it over would consolidate administrative functions, and relieve any pressure for rate increases.

Sweeney acknowledged that Guardian had made cuts to his budget, and had taken steps to "rightsize" the police and fire departments, including cutting the number of police captains from 12 to four. But he said only a legislative-backed state intervention would have the power to make the drastic cuts to city payroll and departments required for solvency and to get the city budget in line with other cities of similar population, 40,000. The city's current $252 million budget includes no tax increase.

But Guardian noted the city's responsibility for all its tourists, and said its police department made 126,000 calls and 5,000 arrests in 2015, far above cities with comparable populations.

Sweeney noted that Atlantic City's water supply is excellent, and sometimes credited with the excellence of its famous bread. But he also said it could be the solution to the city's financial crisis, not just its subs.

And while Sweeney acknowledged that years of state intervention in Atlantic City had not improved matters much, he said he was not yet willing to change the law to allow Atlantic City to keep a portion or all of its luxury, hotel and room taxes, about $73 million annually, which now go to the state and are used to pay back bonds that financed the city's Convention Center. (Guardian hopes the luxury and related taxes can revert back to the city in 2025 and 2044, when those bonds are paid off.)

"I blame the State of New Jersey for the state of gaming in New Jersey," Sweeney said. "The State of New Jersey has a lot of blame on its hands."

arosenberg@phillynews.com

609-823-0453 @amysrosenberg

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