Atlantic City turnaround team bets on cuts not bankruptcy
A turnaround team tasked with reviving Atlantic City says New Jersey's struggling gambling hub must consider cost cuts, layoffs and longer bond maturities, but bankruptcy is not in the cards - yet.
"Bankruptcy is not something that we are contemplating," said emergency manager Kevin Lavin on a conference call on Tuesday. "We think that this process can be done without that necessity."
Atlantic City's tax base has been gutted, to just $7.35 billion in 2015 from $20.5 billion in 2010, as its casino industry suffered from competition in neighboring states.
Lavin's report on the city comes about 60 days after his appointment by Governor Chris Christie. Many had feared his team, which has strong ties to the professionals that oversaw Detroit's record municipal bankruptcy, would prioritize bondholder losses and bankruptcy.
Critics said the intervention by Christie was not necessary, since the city was already cutting costs. Christie's move also prompted Wall Street credit rating agencies to downgrade the city deeper into junk territory on concerns about a potential bankruptcy and debt restructuring.
Instead, Lavin's report proposes to negotiate with stakeholders until the end of June and foresees fiscal sustainability at some point after that.
His first priority: Closing the city's current projected budget deficit of $101 million. Without significant change, the cumulative deficit will be $393 million over five years, the report said.
New Jersey Senate President Steve Sweeney, a Democrat who is spearheading legislation to help Atlantic City, scoffed at Lavin's report.
"This report does nothing more than dramatize the fiscal crisis in Atlantic City that could have been stabilized five months ago if the administration had committed to support the recovery plan I offered," he said in a statement.
New Jersey Assemblyman Vince Mazzeo, who represents the area, said the city's problems were already known and he had expected more details.
"I want more specific ideas in the weeks ahead, and details on how exactly any layoffs would impact public safety and vital services," he said.