This week's City Council meeting will determine the fate of Atlantic City and the Atlantic City Municipal Utilities Authority (ACMUA) for years to come.
The question is: Why should City Council vote for the upcoming pieces of legislation surrounding the ACMUA before Sept. 15? The answer is simple: If City Council does not pass these pieces of legislation, the city will default on the terms of the loan agreement with the state, ultimately resulting in the city shutting down and in liquidation of the ACMUA.
Passage of the legislation is absolutely critical in ensuring that the city maintains its sovereignty and the ACMUA remains under local control. To be clear, the legislation does not dissolve the ACMUA and any argument to the contrary is false.
Failure by the city to adhere to the terms of the loan agreement would result in a default. Once there is a default, the state could, and most likely would, demand that the city immediately repay all monies advanced to the city. If the city weren't able to repay the advanced monies on demand (which it could not), the city's failure to repay would result in a "payment" default. Under the terms of the loan agreement, the state could only reach the ACMUA if there were a payment default.
In the event of a default, the state could take the following actions: 1) Stop all loan advances to the city; 2) Require that the city deliver each item of collateral on demand; and 3) withhold state aid. Any of these actions by the state would absolutely devastate the city of Atlantic City and essentially destroy its sovereignty.
Furthermore, in the event of a "payment" default, and only a payment default, the state could demand immediate production of the collateral resources outlined in the loan agreement, which include Atlantic City Alliance (ACA) monies of $60 million, Investment Alternate Tax (IAT) monies of between $13 million and $18 million, or any state aid received to date, or in the worst case scenario monetize the MUA to recover the outstanding payments if the above sources were insufficient.
Pursuant to the loan agreement, the city may borrow up to $73 million. The city anticipates paying that $73 million back through the ACA and IAT monies. Therefore, the state will never reach the ACMUA as the city's other sources of collateral should more than cover the loan.
Unfortunately, the ACA and IAT monies will not be released until after the city submits its budget plan in November. A default that led to a payment default now would directly contradict the efforts of everyone who has defended the city's sovereignty and right to home rule.
These potential defaults are absolutely preventable. Dissolution of the ACMUA is preventable. Loss of the city's sovereignty is preventable. Again, the legislation does not dissolve the ACMUA.
We are asking that City Council put aside any differences or disagreements and come together for the future of Atlantic City.
Donald Guardian is mayor of Atlantic City. Marty Small is president of Atlantic City Council.