Have two years of state oversight helped Atlantic City?

State officials say yes.

Local officials say no.

The answer, as the city prepares to enter its third year under the eye of a state fiscal monitor, appears to be somewhere in between.

And regardless of who gets how much credit, major changes have occurred since the oversight began:

  • Atlantic City’s annual budget increased more and at a greater rate during its first year of oversight than in any other year since 2006: It rose by $27.6 million — or 13 percent — to $243.9 million in 2011. Of that increase, $19 million was grants and therefore didn’t increase taxes. Citywide, taxes went up 4 percent during that time. Spending on salaries meanwhile dropped $3 million.
  • Fees for outside legal services increased by 22 percent during 2011 to $4 million, and overall legal costs rose 29 percent to $9 million, despite the state’s insistence that open-ended contracts for legal services be eliminated.
  • The reduction of the local police force by 45 officers, down to 330, came as the resort’s annual homicide count has grown. Despite the manpower reduction, spending in the departmental budget grew by $2.2 million, $500,000 of which was spent on Class II officers dedicated mainly to Boardwalk patrols.

Mayor Lorenzo Langford says the state, in its latest annual report on the Department of Community Affairs’ Division of Local Government Services’ Transitional Aid to Municipalities Program, is taking too much credit for progress in City Hall.

“Many of the initiatives that the state mentions in its report had already been in the process of being implemented by the city before the oversight was instituted,” Langford said.

He’s right about that, but only in some cases. The city had, for example, started tearing down eyesores before oversight started; however, the results of that program are noted as evidence of a more efficient Department of Licensing & Inspections in the DCA report.

The document also states that the DCA rejected all travel reimbursement requests during 2012 except one. The report doesn’t mention that only two such requests were submitted.

Supervision began in October 2010, when the city needed approval from the DCA’s Local Finance Board to exceed the state cap on increasing property taxes. The city needed to borrow money to refund casinos for rebates ordered by tax-appeal case settlements.

Oversight was extended to a third year last month, when the Local Finance Board voted to continue supervision through 2013, moments after approving the city’s plan to issue $103 million in tax-appeal relief bonds.

In the meantime, the DCA put together its report on progress in Atlantic City — and about a dozen other New Jersey towns subject to oversight — during 2011. The accomplishments the state chose to highlight in the document are puzzling.

The report was not intended to be comprehensive, DCA spokeswoman Lisa Ryan said. Former Hamilton Township Manager Ed Sasdelli, who is serving as the city’s part-time fiscal monitor, is not authorized to speak to the media, Ryan said.

But instead of mentioning $3 million cut from spending on salaries, the document’s two pages on Atlantic City highlight smaller-scale items such as the $200,000 cut from the Public Works budget, or municipal towing layoffs that saved $150,000 but also coincided with a $75,000 loss of revenue.

And the report lists the reconfiguration of the Police Department, including the use of Class IIs, as an accomplishment, even though Ryan later admitted the state doesn’t make decisions about police staffing.

The department was downsized by 45 officers from 375 in 2010 to 330 now, the report notes, part of an overall 184-worker payroll reduction not mentioned in the report.

Local PBA President Paul Barbere said he doesn’t know why the state would take credit for cuts in police manpower, since the cuts have led to higher costs, much of it through overtime. That’s coincided with an increasing homicide count and a multimillion-dollar campaign to change perceptions believed to discourage tourism — particularly the resort’s image as a dangerous place.

The DCA also credited itself for the decision to spend $500,000 on Class II officers this summer, even though the state agency has no involvement in police hiring decisions. The city, however, doesn’t know whether it will bring additional Class II officers back, Deputy Police Chief Henry White said.

And Barbere said those part-time seasonal officers “were not what they were brought up to be” in terms of boosting police presence citywide, a benefit touted by officials when the idea was introduced earlier this year.

Ryan mentioned the firefighters’ contract as an example of DCA progress as well. City labor attorney Steve Glickman, however, said the DCA’s presence had “limited impact” on the contract, given the arbiter was bound by law.

Negotiated the summer after the report was compiled, the new agreement sets 1.2 percent raises for two years and freezes them during the third. A reduced salary guide and $15,000 terminal-leave payout caps will apply to future hires.

The deal could be precedent-setting for the city’s five other union contracts that have expired, or will by year’s end, Glickman said.

The report also credits the DCA for actively reviewing tax appeal cases, yet also blames the growing city budget on those appeals and other uncontrollable cost increases for things such as pensions and insurance, even though the DCA is uninvolved in any of the three. Tax appeals were one of the main sources of a 29 percent jump in legal costs to $9 million during 2011, records show.

Tax court battles are complex and expensive undertakings anyway. In Atlantic City, they were all the more so because all 12 casinos contested their property values, which total $13 billion, Ryan said.

Those casino tax-appeal cases have resulted in the city owing a total of $143 million in tax rebates. To cover some of those losses, the city issued bonds totaling $138 million. The municipality must pay off that debt on an annual income that will be down $40 million due to reduced property values, another result of the tax-appeal cases.

That decreased revenue likely will demand a mix of more borrowing, tax increases and alternate funding sources, such as grants. The city already has relied more on grant funding to avoid increasing taxes during the past couple of years, records show.

Financial grants account for about $19 million of the $27.6 million budget increase from 2010 to 2011.

The Division of Local Government Services expects Atlantic City will get more funding, Ryan said.

But to local officials, said city Revenue & Finance Director Michael Stinson, “It’s a concern.”

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