Wednesday, January 27, 2016

Atlantic City dependent on Gambling Revenues threatened Bankruptcy. Christie Announces Plan for State Control

JAN. 26, 2016, New York Times

ATLANTIC CITY — The elected officials of this struggling seaside gambling resort will yield control of the city’s finances to the state government in a deal announced on Tuesday by Gov. Chris Christie that is intended to stave off bankruptcy.

Mayor Don Guardian had threatened to seek protection from the city’s creditors in bankruptcy court, a prospect that could have embarrassed Mr. Christie, who is campaigning for the Republican presidential nomination as a prudent financial steward. The governor detoured from stumping in New Hampshire to stand with Mr. Guardian, a fellow Republican, in Trenton and reveal their plans.

The agreement falls short of an outright takeover by the state of the city’s government, but it would leave state officials to make all of the important decisions about how to reduce its crushing debt of $240 million and slash the size and cost of its civil services. A report this month from an emergency manager Mr. Christie appointed concluded that the city could run out of money by the spring.

“The urgency of the city’s current financial predicament cannot be understated,” Mr. Christie said, adding that he hoped the intervention would stave off the “last resort” of a bankruptcy filing.

Stephen M. Sweeney, the president of the State Senate, had pressed for a full state takeover, and he said bills would be drafted to allow for the handover of financial controls.

“We have to fix this government,” Senator Sweeney, a South Jersey Democrat, said at a news conference, flanked by the governor and the mayor. “It’s not Atlantic City’s fault, but they’re spending three dollars and taking one in.”

Mr. Sweeney and Mr. Christie balked at offering details of how the state would bring the city’s spending in line with its shrunken revenue. But the senator said, “We have to do some things that are very, very dramatic.”

Mr. Guardian said that city officials “were certainly against a takeover” but that they “need the force that the state brings with it” to redo contracts with Civil Service unions and to renegotiate debts.

Having to capitulate to the state government was the latest in a series of indignities suffered by Atlantic City, once seen as the glittering jewel of the Jersey Shore. Four of the resort’s 12 casinos shut down in 2014, throwing thousands of employees out of work and shrinking the city’s tax base. On Friday, Standard & Poor’s Rating Service cut the city’s debt four levels to CCC–, a rating it reserves for borrowers that are “currently vulnerable to nonpayment.”

The decline was evident on Tuesday along the city’s boardwalk. The sun shone as waves crashed on the beach, but stores and restaurants were either closed or largely empty at midday.

Denise Petrino and her friend Jean Grace marveled at the quiet as the wandered around the shops on a pier near Caesars casino. “You could shoot a cannon through these places,” Ms. Petrino said.

A retired casino marketing executive from nearby Egg Harbor Township, Ms. Grace recalled how crowded the casinos were when superstars like Frank Sinatra regularly performed on their stages. “To see what it was and to see what it is, for me is very sad,” she said.

Ms. Petrino said she blamed the local government for the high rate of crime and the lack of attractions beyond gambling. “You can’t come at nighttime because it’s too scary,” she said.

[SG's approach of ensuring that there are other attractions in our Integrated Resorts is a prudent one.]

Mr. Christie and state lawmakers have tried various methods to turn around the city’s fortunes, including allowing online gambling and developing new attractions. Still, the expansion of casino gambling in neighboring states has continued to draw people from Atlantic City.

Casino revenue has been cut in half in a decade, to $2.56 billion last year from $5.2 billion in 2006. And now lawmakers are contemplating ending the city’s monopoly on gambling by opening the door to casinos in North Jersey, close to New York City.

Tourism officials, though, have not conceded defeat. They gathered in Boardwalk Hall on Tuesday, sporting boots and Stetsons, to announce that a rodeo would be held there in November. Chris Kelley, a 30-year-old bullfighter who is vice president of the American Professional Rodeo Association, said he was excited to bring a rodeo to a place that “has a lot of similarities to Las Vegas, though it’s smaller.”

[A rodeo? Well, that solves the problem now, doesn't it? How many new tourist will that bring in? How many more do they need?]

For Mr. Christie, saving Atlantic City is a delicate issue, both because of the negotiations yet to come with local leaders and the broader political context.

He has campaigned on limiting the power of government, and his move expands the power of the state in critical areas. At the same time, it highlights the governor’s ability to work across party lines to find a solution to a problem that until now has seemed intractable.

The announcement also comes at a crucial moment in Mr. Christie’s presidential campaign, just days before the Iowa caucuses. Mr. Christie has sought to present himself in the race as a responsible executive, tested by crisis and capable of extracting major compromises from his Democratic adversaries.

But he has faced criticism for his management in the wake of a blizzard that swept through the state over the weekend. Mr. Christie first resisted leaving the campaign trail to handle the fallout from the storm, before briefly returning to New Jersey only to head right back out of state to campaign.

His high-spirited appearance in Trenton, when he was joined by supportive lawmakers from both parties, could help blunt criticism that he has allowed the needs of his political ambition to outweigh the needs of his state.

The agreement will probably prove more of a challenge for Mayor Guardian, who faces restive city and county officials adamantly opposed to giving up control to Trenton.

Ernest D. Coursey, an Atlantic County freeholder who is a Democrat, said the mayor should say no to a takeover, especially if it would lead to the sale of the Municipal Utilities Authority, which provides water to residents. But he said he thought the threat of a bankruptcy filing had spurred a worthwhile discussion about how best to solve the city’s financial problems.

“That was just a bargaining tool,” Mr. Coursey said of the talk of bankruptcy. “Bankruptcy doesn’t help anybody. It doesn’t help the city, doesn’t help the county and certainly doesn’t help the state.”

He said that after years of sending taxes collected from casinos to the rest of the state, the time had come for the state to repay Atlantic City with financial aid.

Mr. Guardian alluded to the city’s longtime role as a giver rather than a taker. “We like being a cash cow,” he said. “We like being an A.T.M. for the rest of the state.”

Signaling his hope for an eventual revival, Mr. Guardian said, “We’re not dead, we’re just wounded.”

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