TRENTON - Atlantic City ceded authority over its financial management to state officials Tuesday in exchange for a rescue of its runaway budget, marking the most direct example of state intervention in the city's history.
The state's Local Finance Board voted Tuesday to bail Atlantic City out of its $9.5 million budget deficit by approving bonding to pay for property tax appeals and to slightly exceed a state cap on property tax increases after Mayor Lorenzo Langford signed a one-page agreement to welcome monitoring of the city's finances for at least one year.
Both the state and the city stressed that the agreement was part of a cooperative relationship that will benefit taxpayers.
"The parties agree that it is in the best interests of the state, the city and all of their constituencies to minimize property tax increases and to make additional progress in reforming the city's finances," the signed agreement reads.
Langford called the oversight "advisory, rather than compulsory."
"We cannot have too many sets of eyes and ears," the mayor said after the board meeting. "It's a win-win for the taxpayers."
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The agreement allows the state to operate under the "Local Government Supervision Act of 1947," the same statute the city of Camden fell under during the state's takeover of that municipality beginning in 2002. The act allows for the head of the state's Division of Local Finance and the Local Finance Board to retain controlling interests in the financial dealings of the city.
But how much of the wide-ranging law will be administered in Atlantic City is still "to be determined," DCA spokeswoman Hollie Gilroy said Tuesday.
The written agreement signed by Langford and DCA Commissioner Lori Grifa gives few specifics about how the state will use its new authority. Instead, it makes several broad statements about the postive nature of the deal.
Gov. Chris Christie also played up the element of cooperation, but noted that the action was being done in an effort to improve the city's management.
"Atlantic City is at a crossroads where its revitalization and future as a resort destination are now taking shape," Christie said in a prepared statement released Tuesday afternoon. "This is not the time, nor is it the right message to be sending, for Atlantic City to be imposing burdensome tax increases on its citizens and business community. We want to help Atlantic City through this difficult period, but we also want the city to improve and maximize its management and fiscal policies so it is best positioned for revitalization and long-term prosperity."
Details of the deal
The oversight agreement comes less than three months after Christie visited Atlantic City's Boardwalk to announce a proposal to take over and revamp the operation of the city's tourism industry, from marketing strategies to policing and cleaning the areas with high-traffic tourists.
Michael Drewniak, a spokesman for Christie, said the planned oversight will complement the governor's revitalization plans for Atlantic City.
"The city's fiscal management and the governor's vision for a revitalized tourism and casino district go hand and hand," Drewniak said. "Atlantic City's importance and economy also goes beyond its municipal borders and affects all New Jerseyans."
Drewniak also said the details of the state's financial intervention are not yet available, but added that the state's oversight could begin as soon as a consent agreement is entered in Superior Court.
In exchange for the state's intervention, the Local Finance Board unanimously agreed to let city officials sell $8.7 million in bonds to cover tax refunds owed to city property owners from appeals that date back to 2008. That allows the city to stretch the debt payments, a major contributor to the current financial crisis, over a five-year period.
The state also allowed the city to raise property taxes by nearly $2.2 million over the 4 percent state-mandated cap on property tax increases. That amount is nearly $8 million less than the $9.9 million cap waiver the city initially requested.
Officials at the Governor's Office said taxes on an average home in Atlantic City would have increased by $253 if the city's initial $9.9 million cap waiver had been approved. Instead, that increase will be $157.
The final piece of the deal is expected to be finalized tonight when City Council is scheduled to adopt the city's long-overdue budget. Ken Moore, the city's contracted auditor, said the budget that will come before the panel will be for about $216 million.
Why it's being done
State intervention in Atlantic City government has been a common proposal over the past three decades, usually the reaction of state leaders and lawmakers following one of many corruption-related stings that rattled the city's government. But it took a national economic meltdown, a recent proposal for a $224 million local budget and 128 government-employee layoffs to trigger official action by the state.
Christie's concern with Atlantic City's municipal management first became public after the Office of the State Comptroller issued a report detailing more than $28 million in government waste at the hands of several city administrations over the years.
"The governor was alarmed by some of the findings from that report," Drewniak said. "I can say that, with DCA's direct involvement in the waiver request, a need for greater involvement became clear."
The signed agreement with the city and state notes that the local government "has made substantial progress" in addressing the audit's findings. However, it does not provide any examples, and the Governor's Office declined to elaborate.
Negotiations over possible state oversight began after the Department of Community Affairs notified the Langford administration that its request to exceed the property tax cap would be rejected. Instead, the DCA drafted an agreement similar to the one signed Tuesday.
Without a waiver, or another form of substantial state assistance, Atlantic City budget analysts feared the city could go bankrupt by the end of the year, causing government to shut down. The circumstances left the Christie administration with all of the leverage.
Langford and Christie spoke by phone for about 15 minutes Monday night to verbally agree to the deal, a conversation that the mayor said went very well.
"I kind of wish I could have recorded it," Langford said. "That would have completely disspelled the idea that this is a takeover."
City Council President William "Speedy" Marsh said he welcomed state assistance, but like many, he was searching for more details about what Tuesday's development really mean.
"I would like the state to be more specific about what they're coming in for," he said. "But for right now, I'm going to be open and I'm going to be positive."
Mark Juliano, president of the Casino Association of New Jersey, said Tuesday that the gaming industry wanted to see progress with righting the city's financial situation as they explored creating the tourism district.
"I think they are parallel discussions," Juliano said. "The city administration needs to come to terms with how to handle their present budget, as well as budgets in the future, and it's critical for the resort to see that going ahead."
- "We want to help Atlantic City through this difficult period, but we also want the city to improve and maximize its management and fiscal policies so it is best positioned for revitalization and long-term prosperity." - Gov. Chris Christie
- "We welcome this partnership with state government in what we are trying to accomplish for our city." - Mayor Lorenzo Langford
- "Is it going to be perfect? No. But the city has to realize that the alternatives here are worse." - state Sen. Jim Whelan, D-Atlantic
- "With the current financial situation here, this will open our city up to economic development and investment." - Assemblyman John Amodeo, R-Atlantic
- "I would like the state to be more specific about what they're coming in for." - City Council President William "Speedy" Marsh
- "It's just an effort to try to keep taxes as low as possible for the business climate and the residents." - Thomas Neff, director of local services for the Department of Community Affairs
History of Atlantic City takeover proposals
Various panels and government agencies have considered taking over Atlantic City government, or at least having a say in its operations, for decades. But little has come of the talk, until now. Here's a look at some of the more recent takeover proposals.
- 1982 - Gov. Brendan Byrne proposes a "superagency" to guide Atlantic City development.
- 1989 - Gov. Thomas Kean says he doesn't intend to interfere with Atlantic City government, despite calls from state legislators outraged by the alleged corruption that led to the arrest of Mayor James Usry and three city council members. Kean doesn't rule out the possibility of an expanded state role in future local affairs. Two Democratic state senators - including Richard Codey of Essex County, who will eventually become governor - hold committee meetings to consider various options for state intervention in Atlantic City affairs. Legislation moves through the Assembly that would create a special commission giving the state broad powers over the city's planning and budget processes.
- 1990 - Some Atlantic City mayoral candidates campaign on a platform that includes a contention that the state will soon take over Atlantic City government. Gov. James Florio announces formation of a committee to coordinate government agencies operating in Atlantic City, effectively quieting talk of a takeover of the resort's government.
- 1991 - With City Council balking at making temporary budget appropriations, Mayor James Whelan worries about city government coming to a halt, something he says he believes could lead to state intervention.
- 2007 - Top state officials worked secretly in a failed attempt to take control of key parts of the city's government in the aftermath of the disappearance, reappearance and subsequent resignation of Mayor Bob Levy.
- 2008 - The state Senate approves a bill requiring Atlantic City government to get state approval before selling Bader Field, a former municipal airport that became the subject of a bribery scheme.
- 2010 - A state audit reveals Atlantic City's finances are in disarray. A spokesman for Gov. Chris Christie says that while the governor doesn't want a takeover of the resort, a fiscal monitor is a possibility. A leading state Senate Republican says the city has 90 days to fix its management issues outlined in the audit, or he'll push for a monitor. Christie proposes the state intervene in the management of Atlantic City's tourism industry, from retooling its marketing efforts to policing and cleaning the areas of high-tourist traffic.
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