Atlantic City has closed the deal on $93 million in tax appeal relief bonds, the largest bonding of its kind ever documented in New Jersey, officials confirmed Thursday.
In the past, towns have issued bigger capital bonds, which generate funds to build or fix public buildings, roads and other infrastructure. But Atlantic City’s $93 million breaks the record for bonds issued to cover debt, at least since the Great Depression. That’s when the state started Local Finance Board approval of municipal bonds and, therefore, as far back as its records go, New Jersey Department of Community Affairs spokeswoman Tammori Petty said.
Subject to a 2.92 percent interest rate, Atlantic City’s $93 million issue will help pay rebates that are part of tax appeal settlements, mostly with casinos.
Those settlements also assign new, lower values to properties. Cumulatively, they have devalued the city’s ratable based by $3 billion — about 22 percent — since 2011. More than $2.2 billion of that drop occurred during the past year, meaning its effects have not yet been felt.
There is expected to be a 25 percent increase in local property taxes in 2013, state officials have said.
That estimated increase will not be affected by the bonds sold Wednesday. The city will use that money only to refund casinos for any past tax payments now considered excessive in light of the new, lower values determined by the tax courts.
Payments on the bonds will start in May of next year and continue for 20 years thereafter, city Revenue & Finance Director Michael Stinson said Thursday.
“Being able to borrow money for 20 years under 3 percent (interest) is amazing, and we’re moving on now to the next project: budgets and next year’s tax appeals,” Stinson said.
Revel, Tropicana and Borgata casinos have not yet resolved their appeals filed in 2012. Property owners cannot appeal their 2013 assessed value until getting formal notification from the city, which occurs in February.
The city’s first planned attempt at a sale was derailed by Hurricane Sandy, which hit Oct. 29. One week ago, the city was unsuccessful because of disclosure issues that Stinson declined to detail at the time.
The city waited until Wednesday to try again because the New Jersey Transportation Trust Fund already had plans to go to market, Stinson said.
Additional information sought by potential buyers ultimately included details about the $2.4 billion Revel casino owing the city $12 million in property taxes.
When asked why the market felt the struggling new casino’s tax debt was so critical in light of the ratable base disruption causing the city to borrow money in the first place, Stinson was tight-lipped again Thursday.
“But with due diligence, some people might think it is (a big deal),” said Stinson, deferring further comment to City Solicitor Braun Littlefield.
Littlefield did not return calls seeking more information.
Stinson also noted the municipality’s “high” overall tax collection rate. As of Thursday, that was 99.9 percent, city Tax Collector Theresa Elberson said.
Bond sale and offering documents will not be publicly available until after the deal closes, likely Dec. 20, Stinson said.
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