Recession, Sandy, mismanagement blamed for S & P’s flagging confidence while Whelan asks for movement on PILOT bill
Standard and Poor’s lowered Atlantic City’s credit rating on Monday, from “BB” to “B.” The decision offers the city yet another challenge as it faces continued layoffs and losses of revenue from the shuttering of four casinos in 2015. As the city and Atlantic County attempt to draw in new business and diversify their interdependent economies, experts fear that the rating will be an obstacle to attracting new investment.
“Downgrading the bond rating to junk status really compounds the troubles of the municipality and some of the independent agencies associated with the municipality because it makes borrowing money more expensive,” said political scientist Dr. Brigid Harrison of Montclair University. “Is a bank going to invest in the development of a new casino? They may, but the interest rate is going to be really high.”
With Atlantic County facing an unemployment rate nearly triple the national average at 16.8%, and with more layoffs possible following the Trump Taj Mahal casino’s ongoing Chapter 11 hearing, the city needs to show its best face to new, non-gaming businesses.
“He can’t be putting all of the economic eggs in one basket,” said Harrison of Atlantic City Mayor Don Guardian.
Harrison placed the blame for the decision squarely on Governor Chris Christie and the committee he assembled for the first Hanson Report five years ago, saying that “the crash and burn really occurred on his watch. If the city had been handled differently starting in 2010, perhaps it wouldn’t have reached the crisis proportions that it’s reached now.”
Harrison argued that the reports’ policy recommendations did not bring enough new ideas to the table and said that she considered the committee’s recommendation to turn the city into a family-friendly resort misguided. She also pointed to the original report’s lack of input from casino executives or from from Atlantic City state Senator Jim Whelan (D-2).
Ben Dworkin, Director of the Rebovich Institute for New Jersey Politics, felt that the city’s troubles have had more to do with the 2008 recession and the economic impact of Hurricane Sandy in 2012. “Despite all the positive things the state has been doing to get AC back on its feet, it hasn’t quite gotten there,” said Dworkin.
“It raises the consciousness of the crisis,” he said of the change in the S & P rating, indicating a possible upside to the decision. Dworkin stipulated that the hike in interest rates “means it’s that much tougher for the city to bond for capital infrastructure.”
“I think the turnaround is started, but it’s far from complete,” said Whelan, whose Payment in Lieu of Taxes (PILOT) bill for Atlantic City casinos is still in limbo. The bill would allow casinos in Atlantic City to pay flat fees, allowing them to skirt high taxes stemming from property value assessments that have not caught up with the second district’s hard times.
“It’s no secret that over the last several years our market share has diminished and casinos have closed and we’re facing those challenges,” he said. On diversification, Whelan said “[that’s] not something you can solve in the short term without, unfortunately, some very strong contractions within the casino industry, which have taken place already.”
Whelan described the need for “stability and predictability,” which he says the PILOT bill would offer. The senator also said that steps like Guardian’s proposal to bring the independent Municipal Utilities Authority in-house could provide some budgetary relief for the city.
Whelan said that he was surprised at how long the PILOT bill has stalled, saying “I would have hoped that this governor would have signed it by now.”
“Until that happens, we’re going to continue with some bad news,” he added.