Atlantic City avoids default, makes $1.8M bond payment

ByWAYNE PARRY Associated Press AP logo
Monday, May 2, 2016
VIDEO: Atlantic City avoids default
Financially strapped Atlantic City scraped together enough money to make a $1.8 million bond payment Monday morning.

ATLANTIC CITY, N.J. -- Financially strapped Atlantic City scraped together enough money to make a $1.8 million bond payment Monday morning, narrowly avoiding becoming the first New Jersey municipality to default on its debt in 78 years.

Mayor Don Guardian likened the city's desperate state to rummaging around the sofa cushions in search of stray cash and said the payment was made at 10 a.m. That was an hour before a news conference at which the mayor came out swinging against a proposed state takeover of Atlantic City's finances.

"Financially, we're running on fumes," Guardian said. "We really are teetering on the edge."

An example: The city has about $6 million to $7 million in cash on hand; on May 15th it has to pay its school system $8.5 million. The city and the state are tangled in a lawsuit that seeks to guarantee the schools are paid on time.

The city is suing the state, trying to get $33 million in aid it says it was promised, but that the state has, thus far, withheld.

The bond payment technically was supposed to be made on Sunday, but the city gets an extra day because the payment date fell on a weekend. Guardian said he does not know if the city will be able to make a June bond payment.

The city is expected to receive its next tax payments on Monday.

The city's finances are reeling from the contraction of its largest taxpayer, the casino industry, which saw four of its 12 casinos shut down in 2014. But many state officials also say generations of Atlantic City governments spent lavishly while casino revenues were rolling in. That level of spending has now become unsustainable, as casino revenue has fallen from $5.2 billion in 2006 to $2.56 billion last year.

Guardian's announcement came as state leaders continue to argue over plans to help the struggling city avoid bankruptcy. The state Senate has passed a takeover plan supported by Republican Gov. Chris Christie and Democratic Senate President Steve Sweeney, but Democratic Assembly Speaker Vincent Prieto has refused to put it up for a vote in that chamber, partly because it would allow the state to break union contracts.

Prieto instead has introduced his own plan that would give the city two years to fix its issues before the takeover takes effect. A vote on that bill could be held on Thursday.

Guardian, a Republican, called the takeover unconstitutional, saying it would strip residents of their rights.

"Today it's Atlantic City, but tomorrow it could be Paterson, Trenton or Newark," he said. "Cities could fall like dominoes. It could even one day be Toms River, Cherry Hill or Middle Township.

Had Atlantic City not made the payment, it would have become the first New Jersey municipality to do so since Fort Lee in 1938. That borough went bankrupt later that year.