New Jersey Governor Seeks Control of Atlantic City Finances to Avert Fiscal Disaster

Governor Christie Supports State Intervention in Atlantic City’s Fiscal Crisis

In a pivotal moment for the economic outlook of Atlantic City, New Jersey Governor Chris Christie has endorsed a strategy that would give the state control over the financially troubled city’s finances for a period of five years.

This recent proposition, which essentially permits the state to manage the city’s financial affairs, received approval from the Atlantic City council earlier this week. It also has the endorsement of New Jersey Senate President Steve Sweeney and Atlantic City Mayor Don Guardian.

Although the state currently possesses some oversight over the city’s budget, personnel decisions, and other financial matters, this new accord would considerably broaden those powers. Governor Christie intends to finalize this agreement by February. The agreement would grant the state extensive new authority to restructure the city’s substantial debt, renegotiate or cancel existing city contracts, potentially dismantle city departments, and even facilitate the sale of city property—all of which are being presented as radical measures to address the city’s increasingly serious debt emergency.

Atlantic City’s economic difficulties are largely attributed to the steep decline of its casino sector. In the past ten years, revenue from gambling has plummeted from a peak of $5.2 billion to a mere $2.6 billion. Worsening the situation, the permanent closure of four casinos in 2014 alone resulted in a loss of hundreds of millions of dollars in tax revenue for the city. At present, Atlantic City is contending with a staggering $240 million debt and faces an additional $160 million tax appeal owed to the Borgata casino resulting from an ongoing lawsuit. Projections for the next five years present a grim outlook, with anticipated deficits exceeding $300 million.

Although increasing rivalry from nearby states has continuously reduced Atlantic City’s funds, declaring insolvency is still a significant possibility, albeit one that Governor Christie, specifically, has strongly rejected.

Those against bankruptcy are fast to highlight the lasting harm such an action would have on the city’s capacity to draw in capital, though with credit agencies already having lowered the city’s bonds to non-investment grade (CCC-), the effect could be slight.