ATLANTIC CITY — The city is a step closer to finally making money off its prized water works.
City Council on Wednesday approved the first reading of a proposal to sell Bader Field to the Municipal Utilities Authority for $110 million, a major part of the city’s fiscal plan to avoid a state takeover.
Council narrowly passed the measure by a 5-4 vote. Council must approve the ordinance again at another meeting for it to be adopted. The proposal is also subject to state approval.
City officials say the sale would raise much-needed money for the broke city while keeping the prized water system in public hands. Proceeds from the sale would go toward paying down the city’s roughly $500 million debt.
The sale is a crucial part of the city's five-year fiscal recovery plan to avoid a state takeover. The city has until Nov. 3 to submit the plan to the state. The plan's rejection would result in a five-year state takeover of the city’s finances and major decision-making powers.
"This measure as we on council know is a critical and important part of the recovery plan to be presented to the state," said Shabazz, the ordinance's sponsor.
The authority, which provides the city’s drinking water, is financially independent of the city, deriving nearly all its revenue from ratepayers. It has long been at the center of debate over the resort’s financial future, with officials considering dissolving, leasing or selling the utility.
But council has pulled or voted down measures dissolve the authority five times amid pressure from residents to keep the authority independent.
Council President Marty Small, Councilmen Shabazz, William Marsh, Jesse Kurtz and Aaron Randolph voted in favor of the ordinance. Councilmen Frank Gilliam, George Tibbitt, Moisse Delgado and Councilman Chuen “Jimmy” Cheng voted against the measure.
Randolph, an authority employee, normally abstains on authority-related measures. He proved to be the swing vote Wednesday night.
"Because this is part of the plan (to avoid a state takeover), and I could always vote on the plan," Randolph said, when asked why he voted on an authority measure this time.
The authority would borrow to buy Bader Field, a 143-acre former airstrip. The authority has a B3 credit rating, according to Moody’s Investors Service. That’s better than the city’s Caa3 rating, but is still considered junk by investors.
Gilliam raised concerns about saddling the utility with $100 million in debt.
"What happens if the MUA can't make the bond payment?" Gilliam asked. "Who owns it then?"
The city tried selling Bader Field in a sealed-bid auction this summer but received a high bid of just $50 million. The city did not accept that offer.
Tibbitt questioned how the bond market would react to the proposed sale price, since it's $60 million more than bidders were willing to pay. He also implied the sale may not even be legal.
"We don't know if this is in fact a legal deal," Tibbitt said. "The (state Board of Public Utilities) does not allow, currently, publicly-owned authorities to be land speculators."
Small defended the sale and said it's an important part of the city's efforts to stave off a state takeover.
“It's the right thing to do for the residents of Atlantic City," Small said. "You’d rather deal with us, like us or not, than (Gov.) Chris Christie and his administration and anyone else coming here wreaking havoc on the town."
Small also announced that a special council meeting to announce the completed fiscal recovery plan will take place Monday at 5 p.m.
Mayor Don Guardian, who called the vote "critical" Wednesday, has said the sale could act as a "poison pill" to scare off private companies seeking the water system. A potential buyer would have to absorb the debt from the Bader Field sale.
Guardian said another part of the city's fiscal plan, focusing on the city's $500 million debt, will be announced Thursday.
The city projects $72.9 million in savings from 2017 through 2021 in its plan. The city has annual budget deficits of about $100 million.
Meanwhile, the city submitted a revised 2016 budget to the state that requested less state aid, Guardian said.