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As clock ticks on rescue plan, cards still stacked against Atlantic City

ATLANTIC CITY - Tick tock, tick tock. No, this was not part of some book read to third graders by Mayor Don Guardian during career day Thursday at Pennsylvania Avenue school - students there were more interested in peppering the mayor about World War II.

Atlantic City Mayor Don Gaurdian holds a press conference at City Hall in Atlantic City, NJ, on April 6, 2016.
Atlantic City Mayor Don Gaurdian holds a press conference at City Hall in Atlantic City, NJ, on April 6, 2016.Read more(Ryan Halbe / For The Inquirer)

ATLANTIC CITY - Tick tock, tick tock.

No, this was not part of some book read to third graders by Mayor Don Guardian during career day Thursday at Pennsylvania Avenue school - students there were more interested in peppering the mayor about World War II.

This was Gov. Christie taunting his least favorite mayor since Fort Lee's Mark Sokolich just days after signing a rescue package that included tens of millions in redirected aid and gave the city 150 days to fend off a state takeover.

"Where's his plan?" Christie said June 1 at an unrelated news conference. "He says he's been prepared to do it. Where is it? It's Day 145. Where is it? Tick tock, tick tock, tick tock. Where's the plan, Mayor?"

But the governor was wrong, the clock didn't start until the following week, with an official letter from the state declaring Atlantic City a distressed city.

But the tone, post-rescue, was set. No cease-fire, no Paris Peace Treaty.

In fact, the promised bridge loan to plug a $33.5 million hole in the current budget had not been delivered to the city by late last week, as the state itself confronts its own budget gaps ahead of the new fiscal year July 1.

And the parched city was still being denied the promised infusion of redirected casino money - at least $30 million of which was collected from casinos a year ago and is just parked in a bank account somewhere.

A line was added to the state legislation that states money won't be made available until after the 150 days.

The deck is still stacked against the city.

The state declined to allow the head of its Local Finance Board to participate in the city's plan to fill a $40 million deficit and tackle its $350 million debt because, Guardian was told, it would be "a conflict of interest," in that the state has to ultimately judge the plan.

Not only that, but the financial adviser that Atlantic City sought, Henry Amoroso, who had previously done work for Atlantic City, Newark, Harrisburg, and the Vatican ("all with similar issues," Guardian said), was hired away first by the state to help it with Atlantic City. Its state monitor, Ed Sasdelli, resigned last week.

"The city has one hand tied behind the back," said Marc Pfeiffer, senior fellow at the Bloustein Local Government Research Center at Rutgers University. "The legislation did not give them any additional tools to solve their problem, except what is arguably the least appropriate response, the early retirement incentive program."

Pfeiffer said the state has not signaled any willingness to work with the city, post-political battle.

"The state may be saying in its actions that it really doesn't care that much about the planning process because they think at the end of the day they're going to take over."

Without the bridge loan, the city is now awaiting the OK to raid its capital fund to pay its bills through June.

Tammori Petty, of the state Department of Community Affairs, said in an email that "the assistance that will be provided to the City is undetermined. However all parties are committed to establishing loan terms and amounts that allow the City to maintain financial solvency." She said a new monitor would be named "soon."

Representatives for the governor's office and state Senate President Stephen Sweeney did not respond to requests for comment. Sweeney, who had pushed for a state takeover, has already predicted the city and state will end up in court.

Guardian called the governor's continued oppositional stance toward the city "disappointing."

But tick tock notwithstanding, Guardian said the city would beat the 150-day deadline - Nov. 3 - by at least a week.

The legislation requires the state to accept or reject the plan in five days.

The Nov. 3 deadline would allow that decision to be made one day after the general election, featuring, of course, Christie-endorsed Donald Trump, and also the referendum on expanding casinos to North Jersey, which some have predicted would cause five Atlantic City casinos to close. Christie has said the noise from the Atlantic City battle has hurt the chances of the referendum proposal's passing.

"We'll have it there before," Guardian said. "I think it would be very foolish for me to give him a plan that they don't have to make a determination of whether there's going to be a state takeover until the day after elections.

"I think people all over the state are going to be concerned, especially if the ACLU and NAACP decide to sue the state and the governor over unconstitutional behavior or a violation of civil rights."

If not much changed in the governor's rhetoric, the same could not be said about the casinos and businesses in town.

Not long after the bill was signed, MGM Grand bought out Boyd Gaming's 50 percent share of Borgata for $900 million.

The sale price rankled locals. Much of the current cash crisis can be traced to a tax court ruling slashing the city's $2.2 billion assessment of Borgata to $880 million, less than what MGM paid for half. The city owes Borgata a refund of $170 million.

Guardian said the timing of the sale was too late for the city to use that market valuation in court, and since the legislation also calls for a set "Payment in Lieu of Taxes" system for casinos for 10 years, the city cannot now adjust taxes paid by Borgata. He said the sale price could potentially affect tax-appeal cases involving other casinos.

Guardian said he was glad to have MGM as the full owner of Borgata. He predicted the deeper-pocketed MGM would be more willing than Boyd to allow the city to pay off debts over a longer period of time.

The city also reactivated plans to auction off the 140-acre unused municipal airport, Bader Field, in a sealed-bid auction July 14. About 100 other lots, roughly 10 percent of the city's ratables, are being auctioned off June 23. Guardian still wants City Council to make the Water Authority a city department and monetize it for $4 million a year, which would go directly to Borgata.

Developer Bart Blatstein also took Christie's signing of the legislation as a signal it was safe to proceed with plans to reopen 850 rooms at the former Showboat as a non-casino hotel in July. Glenn Straub insists he will reopen Revel on Wednesday, but details are sketchy.

Having breathing room has allowed Guardian to consider small but transformative ideas, like Philadelphia developer John Longacre's suggestion to bring Philadelphia-style pop-up parks to Atlantic City.

But there remains the basic problem of balancing the budget and paying off $350 million in debt, plus making school, bond, and payroll payments.

Some on City Council are still calling for bankruptcy. Or for a hard-line stance with bondholders to restructure. Rulings in other states regarding once-sacred general obligation bonds have made municipal bondholders anxious, said Glenn Williams of A.H. Williams Investment Advisors.

"New Jersey is not swimming in money," Williams said. "I don't see an easy way out. New Jersey is not really in a position to bail anyone out."

As for whether he would advise investing in Atlantic City bonds: "You think about the contentiousness in the state between the governor and the city - I wouldn't gamble on it."

arosenberg@phillynews.com

609-823-0453@amysrosenberg

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