- Legislators had been at loggerheads as city runs out of cash
- S&P Global Ratings sees default as a virtual certainty
After months of political gridlock, New Jersey lawmakers reached agreement on an Atlantic City rescue plan that would give the troubled gambling hub until the end of the year to fix its finances and avoid a state takeover.
An assembly committee Monday approved a measure to extend bridge loans and grants to Atlantic City, which would have to come up with an acceptable five-year plan or be put under state control. Mayor Don Guardian said he supports the bill. The full Assembly and the Senate may vote on the legislation Thursday.
"Atlantic City will now have time to take care of their own house," Assembly Speaker Vincent Prieto said before the Judiciary committee voted to move the bills forward. He said he’s confident Republican Governor Chris Christie will support the package.
Christie and the Democrat-led legislature this year have been at loggerheads over how to prevent the financial collapse of the 39,000-resident seaside town, whose gambling industry has been battered by competition from neighboring states. Christie has refused to extend aid to the city unless lawmakers approve giving the state unprecedented control over its operations and the ability to change labor contracts.
Senate President Stephen Sweeney, who has been working with Christie on Atlantic City, supports the legislation, said Rich McGrath, his spokesman. Christie’s office didn’t return a request for comment.
Atlantic City, which once had a monopoly on gambling on the East Coast, has been veering toward insolvency since a third of its 12 betting parlors closed in 2014. Other casinos have successfully challenged the size of their tax bills, causing the property-tax base to tumble by more than two thirds since 2010, according to Moody’s Investors Service.
State intervention may not prevent bond losses, said S&P Global Ratings this month. It cut Atlantic City deeper into junk and warned that a default or debt restructuring was a “virtual certainty.”
No municipality in New Jersey has defaulted or entered bankruptcy protection since the Great Depression, which has given the state a reputation for standing behind distressed local governments.
Prieto had earlier pushed a measure that provides for a weaker level of state power over city operations than legislation that passed the state senate and was supported by Christie. The new legislative package still permits the voiding of labor contracts if the city falls under state control.
Guardian said he will meet with unions to come up with a plan to avoid takeover.
”We will be resilient," he told lawmakers. "We will be healthy again."