Will Atlantic City skip an interest payment on bonds?
With Atlantic City teetering on the brink of insolvency, Mayor Don Guardian is considering skipping a $1.8 million interest payment on municipal bonds due May 1, chief of staff Chris Filiciello said Tuesday.
With Atlantic City teetering on the brink of insolvency, Mayor Don Guardian is considering skipping a $1.8 million interest payment on municipal bonds due May 1, chief of staff Chris Filiciello said Tuesday.
If the city missed the payment, it would be the first default by a New Jersey municipality since the Great Depression, Bloomberg News reported.
New Jersey has always intervened to prevent distressed cities from missing debt payments or going bankrupt, but Gov. Christie has twice vetoed aid packages that would redirect casino funds, now assigned to marketing, to help Atlantic City with its debt. His administration also has refused the city a bridge loan.
Bloomberg reported Tuesday that the interest payments on the bonds are insured by Assured Guaranty, which would be obligated to pay bondholders should the city default. The bonds were sold in 2012 to fund tax-appeal settlements.
Filiciello said the decision would depend in part on how much the city receives in quarterly tax payments by May 1 and other factors. "He has to take everything into consideration," Filiciello said of the mayor via text message. The city has said it would make its school payments due in May. Credit-rating agencies have warned that an Atlantic City default would have repercussions throughout the state.
The city is expecting between $40 million and $50 million in taxes, but its largest taxpayer, the Borgata, is withholding its quarterly payments because it is owed more than $150 million from tax appeals.
Atlantic City Councilman Kaleem Shabazz, meanwhile, is putting his own wallet in play, on Tuesday proposing 20 percent pay cuts for City Council, clerk, and solicitor.
Those are the positions that the council directly controls, Shabazz said in a news release.
The first-term councilman also wants the mayor and directors to take similar pay cuts.
Guardian earns $103,000 a year, less than the $143,000 paid to his predecessor, Lorenzo Langford. The nine council members earn $28,000 a year. They recently agreed to give up their city-owned cars.
"Atlantic City is in an unprecedented situation that calls for remedies and actions that match our fiscal status," Shabazz said in a statement. "It is never easy to ask people to reduce their salaries, but this is a continuing step to rightsize city government."
Shabazz noted that the council recently passed his resolution calling for the state to end lifeguard pensions, which cost the city $1 million a year. State Senate President Stephen Sweeney (D., Gloucester) introduced a bill to that effect last week.
Lifeguard pensions were brought up several times by Christie, who blamed the city before acknowledging at a news conference in Atlantic City that the pensions were required by a 1920s law. Ocean City also has petitioned the state to end the requirement.
The lifeguard pensions also were mentioned in a radio ad attacking Assemblyman Chris Brown (R., Atlantic) that has been played repeatedly on Atlantic City talk radio since late last week. Politico New Jersey traced the ad to a super PAC connected to George E. Norcross III, the South Jersey insurance businessman and power broker who has been in on discussions for a state takeover of Atlantic City, which Brown opposes.
Shabazz also noted that the city is poised to auction off numerous properties, including its defunct airport, Bader Field. "We have to lessen the tax burden in Atlantic City. Government must be less expensive," Shabazz said.
With its ratables cut in half in recent years, the city is facing a $100 million deficit and a debt of about $400 million, and is basically going month to month in staying solvent. Workers have agreed to switch to a monthly pay period from a 14-day period. In May, Atlantic City has to make payroll and pay school taxes, and has the debt service due.
The aid package that would redirect $60 million in casino payments from the marketing campaign and that has twice been vetoed by Christie is stalled due to a stalemate between Sweeney and Assembly Speaker Vincent Prieto, who is resisting a state takeover that would give the state power to terminate collective bargaining agreements.
About $30 million of those casino levies already have been collected and are available for use. The mayor has said casinos have indicated they will start spending the money on marketing, as the law still requires, if the legislation is not passed. The city council recently approved about $300,000 worth of expenditures from the marketing group, the Atlantic City Alliance, to fund this summer's Fourth of July fireworks on the beach and at the marina.
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