A.C. turns to Rendell budget guru to craft recovery plan
ATLANTIC CITY Could the old Ed Rendell playbook save Atlantic City from fiscal catastrophe, not to mention a state takeover?
ATLANTIC CITY
Could the old Ed Rendell playbook save Atlantic City from fiscal catastrophe, not to mention a state takeover?
The nearly broke seaside city has hired a former Mayor Ed Rendell budget hound to create a recovery plan by Nov. 3 to stave off a takeover.
Michael Nadol, now a public finance consultant, was a 29-year-old labor specialist in the trenches of the Rendell administration's "budget police" in the 1990s that helped slim down and turn around a city of Philadelphia gasping on deficits and bloated budgets.
Fortifying a recovery plan with the success of Rendell's Philadelphia might be a more promising way to forestall state intervention than just continuing to call the governor "mean spirited" and hoping Bridgegate or some other scandal "gets him" - though those accusations continue to surface in Atlantic City.
At a public meeting on the recovery last week in Atlantic City, talk inevitably turned to Christie, who for months pushed for a state takeover.
"When's his term up?" someone shouted to Mayor Don Guardian, up in front with a microphone, as usual, like Chris Harrison on the live show after The Bachelorette finale.
"Not soon enough!" the mayor said without a pause. The crowd roared.
Atlantic City's charge is clear: Produce a path to fiscal health out of its $242 million budget and a $100 million deficit.
If the state rejects the city's plan - as some in town think it will, no matter what - recently passed legislation gives the state the right to take control of city government, sell city assets, and rip up union contracts. The legislation would allow the city to appeal the decision to Superior Court - which many also think is inevitable, along with federal civil rights lawsuits.
Enter Nadol, a policy wonk's policy wonk.
He was an analyst in the '90s on Rendell's heralded "Initiatives Compliance Committee," also known as "the Grand Inquisitor," which met weekly to bolster Rendell's taming of a $2.3 billion bureaucracy with 100-plus initiatives in a five-year plan.
Nadol, now managing director with Philadelphia-based Public Financial Management, who studied at the University of Pennsylvania's Fels Institute, said that compared with Philadelphia in the 1990s, Atlantic City's problems are more manageable.
PFM has advised many governments, including Baltimore's and Pittsburgh's - and New Jersey's Office of Public Finance.
Atlantic City's unions have displayed "a high willingness to work with the city," he said. "I'm not saying Atlantic City unions aren't fighters, but they're not posturing. They're coming at this in a pretty constructive, realistic way."
Nadol said that due to structural issues, including a tax base that has plummeted from $20 billion to about $6 billion, he foresees Atlantic City having to close $50 million deficits for years into the future.
He said he believes the problems can be solved, methodically, just as they were in Philadelphia.
Atlantic City is paying his firm $225,000 for the plan. Two other firms signed on to sort out the city's $350 million debt and the water issue.
"The scale is more manageable," Nadol said. "I think there's plenty of change in the works."
Despite a beautiful summer by the sea, residents, officials and city employees - who await the city's Requests for Proposals on privatizing city functions - are on edge.
A meeting of the state's Legislative Black Caucus last week in a midtown church included lots of talk about how to challenge a state takeover on civil rights and constitutional issues and questions about a state loan to the city. There was talk about the city being "handcuffed" and played by outside political bosses.
The state has sent the city the first installment of a $73 million bridge loan, which came with terms that more than one city official has described as essentially "booby-trapped" - designed to trip up the city.
The loan covers about the same amount of casino revenue already redirected to the city by the new law. But in the final version of the legislation, the state got the right to hold on to that redirected money until it rules on the city's recovery plan. So the state is controlling $78 million in casino revenue as collateral for a $73 million loan.
The loan's terms, negotiated by state Department of Community Affairs, additionally require City Council to dissolve its Municipal Utilities Authority to create a new water department, a move that the council has rejected or deadlocked on four separate times, putting the city in jeopardy of being declared in technical violation of the loan agreement. Representatives of two private water companies have expressed interest in the city's water.
The loan agreement also requires the city to set aside any proceeds from a sale of Bader Field, its former airport, as collateral. A recent sealed auction netted a top offer of just $50 million, which the city is likely to reject.
Tammori Petty, a spokeswoman for the DCA, which executed the loan agreement and also will rule on Nadol's plan, said the redirected casino funds are still intended to be "a stable source of loan repayment."
That revenue includes $60 million that previously went to the Atlantic City Alliance marketing group and about $18 million from an "Investment Alternate Tax" on gaming revenue that is sent to the N.J. Casino Reinvestment Development Authority.
Petty said those funds are subject to "contingencies and fluctuation due to casino market conditions and collections efforts." Further, she said in an email, even if all the funds "were confirmed to exist at the time when the $73 million must be repaid, "there are timing issues particularly with respect to the IAT money."
"At a minimum," Petty said, "the full amount of the funds would not be available during the two quarters that this loan covers. Therefore, the state solicited additional collateral."
Guardian dismissed this explanation and said the redirected money has long been in escrow and available to the state.
"If the state has created a bureaucracy that does not allow one state agency to pay another state agency, they should correct that and not blame Atlantic City," the mayor said.
City Councilman Kaleem Shabazz said the city hoped that bringing in Nadol would "fortify whatever we do with the state" and guard against "political interference."
"By any stretch of the imagination, it should be accepted," Shabazz said. "It's not like something we cooked up in the White House Sub Shop."
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