It has been 10 years since Gov. Chris Christie took over Atlantic City’s casino district, and four years since a more complete takeover of the city’s finances.
City council members have blanched at the oversight, but the city’s budget picture collapsed in the wake of five casino closings in the mid-2010s, so there seemed to be little alternative.
Supporters of city autonomy were encouraged when Phil Murphy campaigned on a pledge to turn the keys back over to city officials. But Gov. Murphy backed away from that vow after taking office in January 2018.
That raised the stakes for last week’s virtual meeting between Lt. Gov. Sheila Oliver and Mayor Marty Small as well as all nine city council members.
Casino operators have a vested interest in the talks, since the city’s financial well-being could impact their own bottom lines as well. State Senate President Stephen Sweeney, a Democrat unlike Christie, has been supportive of a continuing state oversight role.
Several of those in virtual attendance implied that the call was in effect an “airing of grievances” — a first step in addressing complaints of council members that decisions affecting their city are being made by state officials without any local input.
The state takeover is scheduled to sunset next fall, but so far there is little indication of a political appetite to end the arrangement.
So much debt in Atlantic City
By 2016, the city was more than $200 million in debt as the shuttering of the casinos removed crucial ratables from a city whose fate is dominated by a single industry. There have been multiple months when Atlantic County had the highest foreclosure rate in the U.S.
The 2018 reinventions of Revel into Ocean Casino Resort and Trump Taj Mahal into Hard Rock have brought the total number of casinos back up to nine.
The city’s gross gaming revenue figures have bounced back, from bottoming out at $2.56 billion in 2015 (the lowest figure since 1987) to reaching $3.47 billion in 2019.
Months-long casino closings due to the pandemic this year, however, have led to more than a 20% decrease in revenue in the first 10 months of 2020 compared to last year — in spite of a boost in revenue from both sports betting and NJ online casino gaming, each of which operates under control of the casino operators.
Under the current arrangement, state officials can restructure city debt, alter — or even void — municipal contracts, and sell services owned by the city if the state chooses to do so.
Municipal payrolls in Atlantic City traditionally have been far higher than in similar-sized cities in the state — even after adjusting for the city’s unique tourism industry that requires additional manpower. Several former mayors have wound up as convicted felons.
The city owed Borgata more than $160 million at one point. But with the city potentially teetering toward bankruptcy, the casino settled in 2017 for $72 million — not that city officials had such funds handy.
The turmoil has led to consistently low bond ratings over the years.
Good news on the bond front
That trend has improved in 2020. Last week, Moody’s Research upgraded its city bond outlook from “stable” to “positive.”
“The Ba3 long-term issuer rating reflects the city’s continued, albeit reduced, financial and economic stress,” the Moody’s statement read. “It incorporates the settling of long-term, open-ended liabilities and the concomitant improvement in city finances, the successful implementation of the casino PILOT [payments in lieu of taxes] program, the recent health (pre-pandemic) and instability of the casino industry, and the ongoing efforts to diversify. The rating is also informed by the continued, strong oversight by the State of New Jersey.
“The rating is heavily influenced by the city’s exposure to governance and social risk. Income inequality is starkly evident in the city’s juxtaposition of high unemployment and poverty and opulent casinos.
“We view the continued oversight by the State of New Jersey as critical to the city’s continued well-being and progress but the extraordinary oversight expires approximately in one year though the State Supervision Act will remain in effect. This act grants the state certain oversight powers over all New Jersey municipalities and additional supervisory powers over distressed municipalities such as Atlantic City. The state’s future oversight role remains to be determined and will be of critical importance to the city’s future credit quality.”
Translation: State officials aren’t walking away anytime soon — and like it or not, city residents and leaders seem better off for it.
The best that they can hope for, it seems, is more meetings like the one last week with the lieutenant governor.