Atlantic City Bonds Rise as New Jersey Extends Its Control

  • Legislature approves changes to casino payments, eye takeover
  • Solution seen beyond the reach of city, investor says

Atlantic City bonds are rising as New Jersey lawmakers, which have already acted to shelter the city’s finances from the sliding value of its casinos, weigh whether to wield more power over the distressed seaside resort.

A tax-exempt bond due Dec. 2023 traded Tuesday at an average price of 82 cents to yield 8.2 percent, according to data compiled by Bloomberg. That’s up from 78 cents on Friday. The debt saw the most volume since September. Securities maturing in November 2021 traded at 86 cents to yield 8 percent, an increase from 82 cents last month, according to data compiled by Bloomberg.

New Jersey lawmakers on Tuesday finalized measures that would establish fixed payments from casinos instead of levies based on real estate values, which would prevent tax appeals that have strained the city’s finances.

That would “take some of the uncertainty out of the revenue stream,” said Jason Diefenthaler, who runs a high-yield muni fund at Wasmer Schroeder & Co. in Naples, Florida that holds some city water securities.

Lawmakers are now considering a proposal that would reduce Atlantic City’s elected officials to figureheads and expand the state’s powers over the city, said state Senator Jim Whelan, a Democrat who represents the community. Such a bill will be introduced Tuesday, Senate President Steve Sweeney, a Democrat, told reporters.

“If they’re not going to fix their house then they might as well let the governor,” Sweeney said. “Only someone who has their head buried in the sand wouldn’t see that something has to be done.”

Atlantic City has been battered by the shuttering of four of 12 casinos in 2014. It closed a $101 million deficit in 2015 in part by deferring pension payments and relying on state lawmakers to divert some gambling proceeds slated for marketing.

“It’s not as though the city is necessarily going to be able to put the changes in place that they need on their own. They certainly haven’t shown the ability to do that yet,” Diefenthaler said. “The magnitude of the problems are beyond the city’s reach at this point.”

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