State Senate President Steve Sweeney said Wednesday he wants Atlantic County to use its excellent bond rating to finance Atlantic City’s tax refunds to the Borgata Hotel Casino & Spa, with the city making the actual payments.
But Atlantic County Executive Dennis Levinson, who had heard of the idea in conversations but never seen details in writing, said he cannot imagine a way to do that without putting all county taxpayers at risk.
The city could settle with Borgata for less than the $160 million the city now owes, if the county’s bond funds were available to it, Sweeney said.
The county’s bond rating is higher than either the state’s or the city’s, making borrowing much less expensive, Sweeney said. Atlantic City’s bond rating is so low it effectively can no longer borrow.
“If you could negotiate with Borgata and say, ‘If we can pay you this now, do we settle?’ The county could bond and the city could pay it back and give a little profit if necessary,” said Sweeney. The state could add a letter promising to pay if the city cannot, he said.
Sweeney also would like the county to purchase the Atlantic City Municipal Utilities Authority, he said, which some officials have estimated to be worth about $100 million.
But Levinson was skeptical about both proposals.
“What guarantee would the county have that the city would pay its debt?” asked Levinson about the bonding idea. “And what guarantee do we have that the state would come through on a guarantee?” he said, referencing the state’s own budget problems.
Levinson added that the freeholder board would be unlikely to support it.
“I’m completely in the dark about what that would entail,” said Levinson about the idea of the ACMUA purchase.
New legislation sponsored by Sweeney giving the state more control over city finances is expected to be introduced Feb. 11, said Sweeney.
He said the state intervention/takeover bill is still being worked on, but he is hopeful it will have all funding built into it so separate funding legislation is not needed.
Legislation needs to move soon in order for state aid to be available by April 1. That’s when the city is expected to run out of money.
Sweeney said the entire county would benefit from getting the resort’s finances under control.
“What happens in Atlantic City impacts every single town in Atlantic County, and the county can be part of the solution,” said Sweeney, a Gloucester County freeholder for 14 years. “In my mind we need all levels of government to work together to get us out of the situation.”
He said counties sometimes bond for municipal projects in shared services agreements.
The state took bankruptcy off the table too soon, said Levinson, who questioned why Borgata would settle without the threat of bankruptcy.
“Certainly it should have been used as a hammer,” he said.
But Sweeney said there would be a cascade of other cash-strapped cities wanting to declare bankruptcy if Atlantic City were to move forward with it. Just talk of Atlantic City considering it caused several cities’ credit ratings to fall, he said.
Levinson also said Borgata took advantage of Atlantic City, essentially out-lawyering the city.
“The judge made the determination that Borgata made a better case. That doesn’t mean they were right, just had better lawyers,” said Levinson. “They got flat out out-lawyered and the taxpayers have to pay for that.”
Borgata and the city went to court over appeals for the tax years 2009 and 2010, and Borgata won a $62 million judgement for those two years. Then the casino settled cases from 2011 through 2015 for more than $88 million.
But the city and Borgata are still fighting in court over the city’s inability to pay, and the casino may reopen the settled years and potentially end up with even larger refunds. They are next in court Friday.
“I’d be willing to sit down and willing to listen to hear what their proposition is,” said Levinson. “We’d sit down with our people in treasury, finance and (County Administrator) Jerry DelRosso.”
But he said he’d need more than just promises that county taxpayers wouldn’t end up on the hook for the bonds if the city and state couldn’t make payments.
“The Senate President and I have a close relationship and we are in contact,” said Levinson. “But I don’t know how the state or city could guarantee payment. We can’t weaken one entity with the possibility of strengthening another. I would need far more guarantees.”