ATLANTIC CITY — City Council hosted a public hearing Tuesday night ahead of a vote next week that would allow the city to issue bonds to pay deferred pension and health care contributions.
The ordinance in discussion was introduced Jan. 1, and it passed on first reading. City Council pulled the ordinance on second reading when it was scheduled to be voted on Jan. 17. Council held the hearing to answer the public’s questions ahead of the vote.
If adopted at next week’s council meeting, the ordinance would allow the city to issue bonds for as much as $55 million to pay deferred pension and health care contributions from 2015.
About 50 people were gathered in Council Chambers to discuss the ordinance with financial advisers, bond counsel and state officials. The hearing began with a discussion about where the city was in 2015, citing casino closings and declines in gaming revenue and the ratable base.
The state’s local government services director, Timothy Cunningham, who was put in charge of the state takeover when it took effect in November 2016, said at the hearing the option to bond for the deferred payments prevents residents’ taxes from going up to make the payments.
As of Dec. 31, the city had more than $344 million of outstanding debt, officials said. These bonds would bring it to just under $400 million.
Cunningham said the ordinance is a step toward a solution that’s “in the best interest of Atlantic City and taxpayers.”
In 2015, the city was urged not to make pension and health benefit payments to the state. The city did not have the finances to make the payments, and an option instead of raising taxes was to defer the payment of the pension and health care bills, Cunningham said.
The city owes about $47 million for the pension and health care payments. Cunningham said they would use the Investment Alternative Tax, or IAT, to fund the bonds.
Under state takeover regulations, the IAT funds are redirected to help Atlantic City pay down its debt, or be used for “debt service.”
Several members of the public were spoke at the meeting and the discussion was continuing between residents, state officials and city councilmen by publication time.
Some residents questioned why the city would be responsible for the deferred payments and wondered what the IATs had been previously used for.
Council President Marty Small said city officials asked the state to forgive the payments, but it’s the city’s obligation to pay the money back.
“The bottom line is the city of Atlantic City owes that money,” he said. “This council is always going to do the right thing and make sound decisions for the residents.”
The ordinance is scheduled to be voted on at the next council meeting at 5 p.m. Feb. 21.