Atlantic City's Credit Rating Lowered Three Levels Due to Revenue Worries
Atlantic City, the biggest East Coast gambling center, had its credit rating cut three levels by Moody’s Investors Service out of concern tax appeals by casinos and out-of-state competition for bettors will hurt revenue.
The downgrade to Baa1 from A1, three levels above speculative grade, affects $151 million of general-obligation debt, according to Moody’s, which changed its outlook to negative. It follows a Nov. 3 decision by Standard & Poor’s to put a negative outlook on the city’s A rating, sixth-highest.
Atlantic City, a community of about 40,000, finished its 2009 fiscal year Dec. 31 with an $8.1 million deficit, Moody’s said.
“The city’s negative fund balance position, outstanding tax casino credits and the significant number of remaining unsettled casino tax appeals will continue to pressure the city’s financial position,” Moody’s said in a report dated yesterday.
Casinos, which Moody’s said account for 74 percent of the city’s tax base, are owed $17 million in property-tax credits over the next three years, according to the report. Six of Atlantic City’s 11 casinos have been through bankruptcy or have restructured debt in the past year.
The ratings company’s action follows a plan for New Jersey to assume oversight of the city’s budget and finances for at least a year under an arrangement between Republican Governor Chris Christie and the city’s mayor. State officials will get a direct hand in developing the budget and tax rate, according to an agreement signed Oct. 4.
In return, city officials got permission to raise property taxes $2.2 million above the limit state law allows. The city has an annual budget of about $200 million.
The city, on the Atlantic Ocean 62 miles (103 kilometers) east of Philadelphia, has lost 5,000 casino jobs since 2007 and has an unemployment rate of 14.3 percent in August, according to Moody’s. Through September, casino revenue was down 8.7 percent from the first nine months of 2009, according to the state Casino Control Commission.
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