Atlantic City's planned $103 million tax appeal relief bond sale originally expected to be finalized today likely will not happen until next week due to what officials described as disclosure issues.
Listed by the U.S. Treasury at $95 million, the exact amount won't be set until the sale is finalized, but should be around $100 million, said City Revenue & Finance Director Michael Stinson.
Stinson expects the city to try again next week.
But he and Anthony Inverso, the municipality's financial consultant declined comment on the specific reasons for the delay. They also would not say what might change during the next few days to facilitate the sale.
Financial experts said Atlantic City’s well-documented economic struggles and Hurricane Sandy’s effects on the East Coast overall could be at play but that the overall advantageous borrowing climate should counteract those factors.
Whatever the reasons, they did not derail the city's last bond issue for $35 million, intended — like the delayed bonds — to help the city pay court-ordered tax refunds to casinos.
"It's a very large bond issue, and obviously not everybody was comfortable to go out to the market at this point in time," Stinson said Thursday.
The pending bond sale already was delayed once due to Hurricane Sandy and the resulting mandatory evacuation that shut down the resort from Oct. 28 until Nov. 2.
Sandy also cost Atlantic City an estimated $26 million, between overtime and property damage. Much of that should be reimbursed — officials hope — by the Federal Emergency Management Agency and other disaster-assistance programs.
Harder-hit towns north of Atlantic City likewise will try to recoup storm-related costs. But the reimbursement process is neither immediate nor guaranteed. Those other towns likely will look to bond as well, said John Mosseau, director of fixed income for the investment firm Cumberland Advisors.
“The question is, where does (the money) come from, and when does it come? (Towns) could have to bond some of that out, and (issuers) might want to see some progress in that regard,” Mosseau said.
That also might crowd the bond market, making it more competitive. But the borrowing climate is good enough to override those effects, he said.
Yet “there's no shortage of negative press on Atlantic City ... and the woes of the casinos,” Mosseau said, despite continued state government support for boosting tourism in Atlantic City nearly a year after officials changed regulations and heavily increased political and monetary investment in the resort.
Regardless of lenders’ perceptions of the fiscal outlook for Atlantic City, he said, it's still generally the best time to borrow money since the mid-1960s.
“You've never been able to borrow money as cheaply as this. With interest so low and demand for paper so high, I don't really understand (the delay) because the appetite for bond issuances is fairly voracious right now,” he said.
Interest rates were below 1 percent for five-year municipal bonds Thursday.
In New Jersey, the number of applications for bond issuances like Atlantic City’s has increased in recent years, according to state Local Finance Board records.
The board must approve such borrowing by towns and has been vetted more applications during recent years with the tightening of New Jersey’s tax cap.
It started at 4 percent, and exempted things such as union contracts, in 2009. The limit is now 2 percent and applies to wage costs that are determined as formerly exempt bargaining agreements are renegotiated. Debt payments, however, are not subject to the cap.
In Atlantic City, officials might need to borrow still more money next year, depending on the outcomes of pending casino tax-appeal cases.
New Jersey tax courts typically order the refunds to address prior tax payments considered excessive based on new, lower property values.
Cumulatively, Atlantic City property values have dropped about $3 billion since 2011, tax abstracts show. They decreased from $19.5 billion in 2011 to $18 billion in 2012, then another $2.2 billion during 2012 to an estimated $16 billion for next year. The exact figure for 2013 will be available when it's certified Jan. 10, city tax assessor Novellete Robinson said.
But based on those numbers, tax bills could increase about 25 percent for many noncasino properties, New Jersey Department of Community Affairs officials have said.
Pending tax appeals could devalue the ratable base further still, and yield more rebates for casinos.
Robinson said Sandy’s damage to the ratable base will amount to no more than 10 percent, but that’s another potential reduction of $160 million.
“I don't know if it will be that amount, I just know it will be between 0 and 10 percent, based on the information I’ve received,” she said.
Even before the storm, Atlantic City officials and the state Local Finance Board agreed to come up with a plan by May 2013 to minimize the negative effects from the city’s ratable base depreciation and tax credit obligation increase.
The DCA's Division of Local Government Services and Local Finance Board have been overseeing city finances since October 2010. Intended to last a year, officials twice extended oversight since then. The most recent agreement is good through the end of 2013.
Robinson said that no one has approached her regarding that plan yet.
The city will not, she said, proceed with targeted property reassessments or a citywide revaluation this year.
The latter would be the best remedy. But even if the city moved to start that process today, it wouldn't take effect for another couple years, Robinson said.
"In the interim, I plan to address every taxpayer's assessment appeal as they are filed," Robinson said. "There has been no decision with from the city, I've been given no guidelines and the county hasn't ordered it."
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