ATLANTIC CITY — An executive order suspending transitional aid to the financially distressed resort is a credit negative, according to one ratings agency.
Moody’s Investors Service said Gov. Phil Murphy’s July 3 executive order that placed nearly $235 million in reserve, including Atlantic City’s $3.3 million in transitional aid for the current budget year, created uncertainty for nine impacted municipalities in New Jersey.
Moody’s noted that the loss of transitional aid is a “source of major budgetary pressure” and could result in “draconian cost-cutting or large tax increases.”
However, Moody’s noted that since transitional aid is typically not disbursed until the latter part of a fiscal year, “the risk, though real, is not imminent.”
But, if the aid is not released “the credit quality of the affected municipalities will suffer,” Moody’s said.
The state’s fiscal year begins July 1 and runs through June 30 of the following year.
The city’s reliance on transitional aid has decreased significantly in recent years. In 2016, the city received $26.2 million in aid from the state. Aid was reduced to $13 in 2017 and $3.9 million in 2018.
Atlantic City has been under state control since late 2016 when then-Gov. Chris Christie and the state Legislature approved the Municipal Recovery and Stabilization Act.
In 2016, 2018 and 2019, Atlantic City’s municipal tax rate remained flat, while in 2017 city officials approved a reduction.