The New Jersey Legislature on Thursday sent Gov. Chris Christie a pair of bills that would give Atlantic City until late October to develop a five-year financial plan that likely would necessitate deep budget cuts even with state aid.
If city officials failed to submit a plan to the state within five months, or if the commissioner of the Department of Community Affairs determined it was insufficient, the Christie administration would gain the authority to take over the city's governing powers.
In that scenario, the state would be able to terminate labor contracts, restructure debts, dissolve agencies, sell most city assets and fire employees.
The state would be able to intervene at any point over the next five years if the city failed to submit a balanced budget or otherwise breached its recovery plan.
Christie is expected to sign the legislation, passed by both houses Thursday, which is the result of a compromise between Senate President Stephen Sweeney, D-Gloucester, and Assembly Speaker Vincent Prieto, D-Hudson.
In January, Christie and Sweeney had initially pushed for an immediate state takeover. Prieto resisted, saying that plan was unfair to public workers and would disenfranchise voters by disempowering local elected officials.
The speaker proposed an alternative bill, which failed to muster enough support to pass in his house. His proposal would have given the city two years to meet certain fiscal benchmarks before the state could fully intervene.
After months of nasty infighting within the state Democratic Party _ and warnings from Wall Street ratings agencies that inaction could force the city to restructure debts with bondholders _ lawmakers introduced new legislation this week.
In addition to giving the city more time to craft its own financial plan, lawmakers voted to authorize a bridge loan and establish a payment-in-lieu-of-taxes (PILOT) system for the eight casinos in the city.
Under the PILOT system, the casinos would have to pay the city about $120 million collectively each year for a decade. That provision is intended to stabilize the city's property tax base, which decreased from $20.5 billion in 2010 to $6.5 billion this year, according to the state.
Four casinos closed in 2014, accelerating the financial crisis.
Atlantic City is running a budget deficit of about $100 million and has lurched from month to month to pay its workers and cover bond payments. Its budget is $250 million, according to the state.
The state says Atlantic City carries about $550 million in debt. Under the legislation, a tax on casinos' gross gaming revenues that currently sends money to an investment authority would be redirected to the city to help pay its debt service.
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