New Jersey Lawmakers Question State's Role in Atlantic City's Downfall

by | April 12, 2016 AT 11:45 AM

By Andrew Seidman

New Jersey lawmakers raised doubts Monday about the Christie administration's efforts to rein in fiscal excess in Atlantic City since it installed a monitor in 2010 to oversee the city's finances, suggesting there was little evidence to justify a proposed takeover of the local government now.

"It seems like there hasn't been real conviction to deal with this problem in five years, or four years, or three years," Assemblyman John DiMaio (R., Somerset) told Charles A. Richman, commissioner of the state Department of Community Affairs, during a budget committee hearing.

DiMaio said he feared that if the takeover legislation passes, "will we really have the intestinal fortitude to do what we need to do . . . to make spending match the revenues that are available?"

Richman responded: "I believe the governor has made pretty clear that the administration will make those moves."

DiMaio, in an extraordinary rebuke of the Republican governor, replied, "I'm not sure about that."

Gov. Christie, speaking at a Statehouse news conference later, said, "I think Assemblyman DiMaio knows full well that if I were given the authority to do something I would do it."

Other lawmakers questioned why the Christie administration had provided transitional aid to Atlantic City, even as its government failed to cut costs, and asked why the state had approved city budgets it now deems fiscally irresponsible.

"If you want to suggest that we didn't take sufficient action earlier, maybe we didn't," Richman told the panel. But he emphasized that the city's current challenges -- it's running a $100 million deficit on a budget of roughly $250 million and carries some $550 million in debt, he said -- require a robust response by the state.

In his 30 years at the department, Richman said, "this is a municipality whose finances are the worst I've ever seen."

The hearing came after the struggling resort town essentially ran out of cash Friday when it paid its employees. It faces the prospect of defaulting on its debt payments this year or even going bankrupt. Municipal employees have agreed to a deferred wage plan to keep the city operating.

Lawmakers have proposed competing plans to prevent financial disaster. Senate President Stephen Sweeney (D., Gloucester), supported by Christie, is pushing for a five-year takeover of the city's government. Under that plan, the state would be able to restructure the city's debt, modify or terminate collective bargaining agreements, and dissolve agencies, among other powers. The Senate last month passed that legislation, as well as a bill that would establish a payment-in-lieu-of-taxes (PILOT) system for the city's eight casinos. That bill is intended to halt property-tax appeals.

Assembly Speaker Vincent Prieto (D., Hudson) has refused to hold a vote on the Christie-Sweeney proposal, saying it would be unfair to organized labor.

Prieto last week introduced a bill that would require Atlantic City to meet certain fiscal benchmarks within two years. If those weren't met, the state would gain most of the powers outlined in Sweeney's bill. Prieto's legislation includes a similar PILOT provision.

There was no sign Monday that the legislative leaders had moved closer to a compromise. "My point is: What's the endgame?" Sweeney told reporters. "You can have the speaker and I in agreement, but if the governor is not going to sign the bill, what do you have? I have a bill I know the governor will sign."

Yet there was little support for Sweeney's legislation at the Assembly hearing.

Assembly Budget Chair Gary Schaer (D., Passaic) noted that the state had granted $13 million in transitional aid annually to Atlantic City in 2014 and 2015 -- "almost a reward for fiscal irresponsibility."

Richman said the the city needed the money last year to help close a budget gap.

A number of the labor contracts Christie wants to break through the takeover bill, Schaer added, have expired and are up for negotiation. The state already has the authority to approve contracts, unless they advance to arbitration.

"The State of New Jersey," Schaer said, "which apparently by any number of recollections has not fulfilled its responsibilities to the municipality -- we're now going to reward the state again by having it involved even more so?"

Richman reiterated Christie's position that the state, under existing law, cannot effect significant change in Atlantic City's government. For example, the state can approve a budget, but it may not cut spending or negotiate contracts.

"When you're the person sitting across the table, and you have the authority that I think comes from (the takeover bill), you are in a much stronger position to see that the bargaining agreement fits the needs of the taxpayers, than you are at the backend, possibly approving them, and more likely watching agreements go to arbitration, where you don't have the authority to deal with it," Richman said.

In any case, he said, the state didn't expect the city's ratable tax base to "fall off the cliff" from $20.5 billion in 2010 to $6.5 billion today.

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