Atlantic City Risks Default After Another Missed Deadlineby
City had until Monday to comply with breached loan terms
State would need to approve proposed sale of close airfield
Atlantic City is on the verge of another missed deadline that risks pushing the troubled New Jersey resort town into default and closer to a state takeover.
The distressed gambling hub has until the end of Monday to comply with the terms of a $73 million state loan that required the city council to disband the local water utility that serves as collateral for the agreement. Instead, city officials announced their own plan last week that would have the utility buy a closed airfield from the city for about $100 million and asked state officials to wave the terms of the loan.
Moody’s Investor Service is not as optimistic. The credit-ratings company said in a report last week that Atlantic City’s "impending technical default" is credit negative, and indicates "a disconnection between the city, mayor, and state." The political gridlock puts the city’s next bond payment at risk -- $9.4 million due Nov. 4.
"Even if the city were to have market access, borrowing $100 million would increase debt by a factor of seven, raising the question of how the authority would pay for this debt -- assuming the plan went through, which is far from certain," wrote Moody’s analyst Doug Goldmacher. He wasn’t immediately available for an interview Monday.
Atlantic City originally missed a Sept. 15 deadline to adopt a resolution to dissolve the Municipal Utilities Authority. The state gave the city until Oct 3. to comply or risk default, in which the state could demand immediate repayment of the $62 million already advanced.
The plan needs approval from the city council and the New Jersey Department of Community Affairs. DCA spokeswoman Tammori Petty declined Monday to comment on the state’s plans. The state hasn’t been in touch yet Monday with Atlantic City, according to Chris Filiciello, chief of staff for Mayor Don Guardian.
Should the state reject the Bader Field sale, the mayor’s office hopes the DCA will grant Atlantic City the "reprieve" on terms Guardian asked for prior to the Sept. 15 deadline.
"We’re not necessarily going to default on Oct. 3," said Filiciello in a phone interview last week. Filiciello said Monday the city remains hopeful.
The deadline comes a month before Atlantic City is scheduled to submit a satisfactory five-year fiscal stability plan to the state, or risk state takeover. New Jersey could sell its assets and void or change labor contracts through expansive powers awarded by the legislation and signed by Governor Chris Christie when the state provided the loan.