By Brenda Flanagan
“This is the worst of the worst, what just happened here,” said Senate President Steve Sweeney.
Sweeney concedes Atlantic City’s casino industry tanked and its tax base shrank long before Gov. Chris Christie showed up. But Sweeney says the governor’s move to fix the beleaguered city’s finances by bringing in what he called two “bankruptcy experts” only made matters worse.
“He is causing the problem now — he is. His administration is causing this problem,” Sweeney said. “Appointing bankruptcy experts sends obviously the wrong message, and if he thinks he’s gonna let them go broke, he’s got another thing coming.”
With casinos closing, Atlantic City’s starved for revenue and facing $400 million in total debt — including a $40 million emergency bridge loan issued by the state. The governor convened a special summit to rescue Atlantic City and last week appointed the “Two Kevins” — finance attorney Kevin Lavin and Kevyn Orr, the former corporate lawyer who guided Detroit out of bankruptcy — and seemingly relegated Mayor Don Guardian to backbench status.
Wall Street immediately turned thumbs down.
“I don’t think it bodes particularly well for a bondholders that the state hired restructuring and bankruptcy experts to assist Atlantic City with its financial difficulties,” said Fitch Ratings Inc. Senior Director Marcy Block.
“The very next day, the bond ratings dropped in Atlantic City to junk bond status. And other communities, other communities that get state aid had their bond ratings dropped or looked at as a negative because of this,” Sweeney said.
In S&P’s opinion, “the state does not view the city as capable of resolving its challenges without outside intervention.” Analyst Lindsay Wilhelm says, “In our view, third-party intervention is often more draconian than the actions taken to date and has a greater likelihood of being detrimental to bondholders.” Moody’s called it “a paradigm shift in the state’s tradition of support for its municipalities.”
“Because what Wall Street is saying is, look: as a government you’re telling us you’re not gonna stand behind your municipalities that’s having problems fiscally, etc. But we thought you’re supposed to share the risk, OK?,” said Sen. Ron Rice.
“We cannot have credit rating agencies begin to downgrade all of our major cities. We just can’t have that. That’s problematic for us,” said Sen. Paul Sarlo.
Not everyone disagrees with the governor’s approach in Atlantic City.
“Are some of the short-term items gonna be incredibly painful? Yes, but if we didn’t do the short-term painful things, the long-term financial picture would’ve been far worse,” said Assemblywoman Holly Schepisi.
After four of Atlantic City’s 12 casinos closed, lawmakers put together a five-bill, bipartisan package that would let the remaining gaming halls make reliable payments in lieu of taxes. It’d help stabilize the city’s finances, says Sweeney — who claims Atlantic City hit a wall when it tried to borrow money yesterday.
“Obviously they can’t right now because no one will lend them money because we have bankruptcy experts in the city,” Sweeney said.
No comment from the governor’s office — if Atlantic City’s two new managers push it toward bankruptcy, Sen. Sweeney says he will go to court to block it.