Atlantic City to Default on Bridge Loan

By Michael Hill

It could be more tarnish on Atlantic City’s battered and bruised image:

“It’s crystal clear we’re going to wind up in default,” said Atlantic City Council President Mary Small.

The Christie Administration had given Atlantic City — with its shuttered casinos and shrinking gaming revenues — a bridge loan of $73 million with several conditions. Among them, at least temporarily dissolving the Municipal Utilities Authority — the city’s water supplier — as collateral by Sept. 15. But, a majority of the city council failed to do that last month despite Small’s self-described tirade pleading with colleagues.

“Without that, if we don’t do certain things, we’re going to gift wrap city to the state before Christmas,” Small said.

When asked how they can you afford to pay back the loan if the state is going to grant AC any leniency he said, “I’m not going to compromise details, discussion with the state. That wouldn’t be professional. I think it was smart on our part to open up a dialogue.”

In a statement, the mayor said, “Although the September 15th deadline will pass tomorrow without a City Council resolution dissolving the MUA or designating it as collateral in case of default, we have asked the State for a reprieve on this because we believe that the MUA will actually be a better part of the overall financial solution if it is kept whole.”

With Atlantic City saying it’s going to default on this bridge loan of $73 million to the state it raises the questions: how will it do this, where will the money come from and what kind of cuts are coming for Atlantic City?

“Our main focus is saving the city of Atlantic City from the state of New Jersey,” Small said.

If the deputy of community affairs and the governor say no leniency where does it leave Atlantic City? “We get what we deserve, and for the residents that could potentially hurt any employees, the council people that didn’t take this measure serious enough, I want to look them in the eye,” Small said.

Rutgers local government analyst Marc Pfieffer says Atlantic City has some options.

“Even if the state wanted to move ahead, there’s still time for delays, there’s time for appeals, there will be likely be mitigation along the way, either from the city itself or from folks affiliated with the city would would be affected by this,” Pfieffer said.

Is the city one step closer to the state coming in and taking over finances? “I would say that we’re trying to stave off a state takeover to preserve home rule, to keep our residents from being disenfranchised so the people that they elected continue to make the decisions for them,” Small said.

Small says the state could grant Atlantic City some leniency because the loan agreement says the city “could” have to pay back the loan right away, not shall.

But either way…

“I have to agree with Gov. Christie and Senate President Steve Sweeney, hey we’re showing that we can’t make the tough decisions. It’s unfortunate some people aren’t taking it serious,” Small said.

The governor has shown exasperation and impatience in getting Atlanti City to right its own financial ship.

His NJ Department of Community Affairs loaned Atlantic City the money. The DCA said, “We are closely watching the situation but have not yet made a decision.”

Small says the default is less than ideal, but the bigger issue is Atlantic City drafting the required 5-year financial plan due in November. He said he’s confident its vision will impress the state and improve the city’s finances.