ATLANTIC CITY, N.J. -- Emergency managers appointed by New Jersey Gov. Chris Christie recommend spending cuts and layoffs as a starting point toward getting Atlantic City's troubled finance under control.
But their initial report - which does not envision a bankruptcy filing - leaves many unanswered questions as the city and state grapple with Atlantic City's municipal and school budget deficits of nearly $150 million. Here's a look at what's been proposed, and what still needs to be resolved on the resort's road to recovery:
Kevin Lavin, a corporate turnaround expert, and Kevyn Orr, who shepherded Detroit through its municipal bankruptcy, were hired by Christie in January to recommend ways to get Atlantic City back on its feet. Their immediate goal is to cut Atlantic City's municipal budget by $10 million on top of the $30 million in cuts already made by Mayor Don Guardian.
It also considers additional state and federal aid, spending cuts and suggests delaying pension and health insurance payments the city must make to reduce the budget by about $130 million this year. The city has a projected $101 million budget shortfall and the school system an additional $47.1 million shortfall.
Lavin said the city may have to lay off 20 percent to 30 percent of its municipal workforce of 1,100 people.
The city has $397 million in debt and a $260 million annual budget for a city of just 40,000 residents. Over the past five years, the worth of Atlantic City's taxable property has plunged from $20.5 billion to $7.3 billion, and declined by 35 percent in the last year alone. Four of its 12 casinos shut down last year, putting 8,000 workers on the street, and three of the survivors are bankrupt. Its casino revenue has fallen by nearly half in the last eight years, from $5.2 billion in 2006 to $2.74 billion last year. With the casino industry shrinking, the city is not taking in enough tax money to support the level of spending it currently has.
Wall Street fears Atlantic City might default on its municipal debt, and warns it may run out of money to pay its bills by fall. Ratings agencies have already lowered their assessments of Atlantic City's creditworthiness, and say other New Jersey cities now make them nervous as well because the state seems to leave the door open for a default. Keeping the city afloat depends heavily on the casinos all making their tax payments on time and not falling behind like several did last year before shutting down. Negotiations with employee unions are likely to be difficult, and the managers face a stiff challenge in renegotiating the terms of Atlantic City's debt.
A package of bills proposed by state Senate President Steve Sweeney and Sen. Jim Whelan, a former Atlantic City mayor, remains stalled in the state Legislature. They cornerstone of the package is a Payment In Lieu of Taxes (PILOT) plan that would let Atlantic City's casinos make specified payments to the city each year. Other bills would redirect certain taxes and fees toward reducing the city's debt. But the package was yanked right before an expected vote in December and has yet to be posted again. Sweeney says that's because he is waiting for an indication of support or opposition from Christie. Christie spokesman Kevin Roberts on Friday called on the Legislature to pass the bills and send them to the governor for consideration. Roberts said the legislation must be considered in tandem with the recommendations of the emergency managers.