A Blueprint for Compromise: Fixing Atlantic City

Trash and recycling bins stand on a nearly empty boardwalk March 30, 2016 in Atlantic City, New Jersey. (Photo: John Moore/Getty Images)

Trash and recycling bins stand on a nearly empty boardwalk March 30, 2016 in Atlantic City, New Jersey. (Photo: John Moore/Getty Images)

The fate of the City of Atlantic City is hanging in the ballast, and it seems that political leaders are edging ever so slightly at recognizing that no-one’s interest is served by digging in one’s heels. In moving forward, it appears that there is room for compromise, and both state Senate President Stephen Sweeney and state Assembly Speaker Vincent Prieto can be the heroes that save Atlantic City with a little give and take. Gov. Chris Christie can also come out of an Atlantic City compromise with a political win, and perhaps even a legacy to boast of.

What it takes now is for all three to recognize that their “win” can outweigh what they have to give back. What they each need to recognize is that they each need to allow the others to save face. And the idealist in me thinks that each can help the City of Atlantic City, her residents, and the broader south Jersey region with just a little bit of political will. As someone who grew up two miles down the road from Atlantic City, sold salt water taffy as a part time job on the Boardwalk in high school, and paid my way through what was then Stockton State College greeting busses full of slot-playing senior citizens and slinging cocktails at hopeful baccarat players, I ask them to please try to find a way. This is one small political issue that they will deal with in their careers, but in their hands rests the fates of so many people’s economic livelihoods. These people are not politicians – they’re car valets, and retail clerks, and blackjack dealers, and college students slinging cocktails. They’re people who are trying to make a living and support their families in the face of a drastically changing gaming business model.

There are two plans: the state takeover of Atlantic City, proposed by Sweeney is backed by Gov. Chris Christie but reviled by city leaders and many throughout South Jersey. The plan essentially removes most control from the municipality and gives that power to the state Department of Community Affairs, and a recently announced compromise would delay implementation of the plan until after the summer season if the city met certain criteria. The alternative, a bill sponsored by Prieto establishes a series of benchmarks in which municipal power decreases and state control increases if the city fails to meet specified financial goals. The Prieto bill also provides a casino payment in lieu of taxes (PILOT) program, where casinos would provide $120 million total to the city for tax year 2016, and would continue for 10 years based on gaming revenue and the rate of inflation. PILOTs protect the city from the effect of court-ordered reassessments on the eight casinos that remain open.

One key issue that state leaders need to consider: under the Sweeney’s proposed compromise measure, the state would decide on whether to takeover based on the condition that the city to create a budget in which per capita spending does not exceed $3,500 per resident. If the city fails, then the original takeover plan would take effect. The problem with that plan is that it does not recognize the unique situation of a resort town that is home to 39,000 residents, but on any given day could find an addition 50,000 people on its beaches, and another 50,000 in its casinos, restaurants and shops. And so state officials are equating Atlantic City’s service burden to places like Winslow, and Monroe, Teaneck, and Marlboro. When was the last time 130,000 people crammed into Winslow on a summer Saturday? Or 50,000 attended a concert in Monroe? And the people that come to Atlantic City – the “day residents” require city services: police protection, life guards, ambulances, infrastructure, toilets, maintenance and so on. And so the state needs to recognize that while there are serious issues with Atlantic City’s finances, gauging the city’s spending by comparing to places like Patterson or Jersey City is disingenuous.

A simple example: on average, EMS in Atlantic City makes about 20,000 runs a year. Given its per capita population, half of the city’s residents would be calling an ambulance each year. Now they like to party in Atlantic City, but intuitively, we know this doesn’t make sense, and so Atlantic City should not be held to the same standard as other municipalities with similar numbers of permanent residents. And so the state must think more broadly about how to compel Atlantic City to get its financial house in order – a ten percent reduction in spending, or some other formula.

State leaders must recognize also that there is not a lack of political will to solve this problem. Mayor Don Guardian, elected in 2014, has attempted to balance the protection of his constituents’ interests with the harsh fiscal realities that the city faces. And he has does so in a context of constraint: controversial pensions for lifeguards? State mandated. Room Tax? State controlled. Luxury Tax? State controlled. Parking Tax? State Controlled. The state collected $60 million in taxes and fees from Atlantic City visitors, and precludes the city from increasing any of these taxes if it chooses. The city needs to be freed from many of the constraints that are confining both its ability to decrease expenditures and increase revenue if the state wants it to become solvent.

The emergency nature of the city’s fiscal situation has once again meant that there is government by crisis. But this also means that while attempting to figure out a solution, the city and the state must step back and take a look at what the city’s future should look like for a post-gaming centered Atlantic City. And unlike previous examinations, this one must include key stakeholders, including citizens, elected officials, business leaders, tourism experts, and state economic development officers.

There are three key stumbling blocks to compromise. But there’s enough on the table for everybody to go home a winner:

For Both to Compromise On: Collective Bargaining. Sweeney’s target of $3,500 per capita spending is unrealistic, but it is also unrealistic to think that the collective bargaining agreements will not be on the table. Any compromise will have to include unions, casinos, creditors, and other stakeholders, and it will have to include a compromise. But the stick has to be a realistic, achievable one.

For Sweeney to Compromise On: Water. The sale of public assets is an important component of the state takeover. As it stands, the city, under the auspices of the Municipal Utilities Authority, owns the city’s water supply. The state takeover measure sponsored by Sweeney includes a provision that would enable the state managers to sell off this public asset. This is an important compromise because Phil Norcross, the brother of Sweeney’s benefactor and south Jersey power broker George, is a lobbyist for American Water, which has expressed interest in purchasing the city’s water utility. Understandably, Atlantic City Mayor Don Guardian and other local leaders balk at this component of the plan. The problem with selling this asset is two-fold: it represents a one-shot revenue deal, while keeping the water works as a city asset means that, managed correctly, the city could use the water supply as a revenue generator. Secondly, politicians in the city and in the state legislature are concerned about the net effect of privatization in terms of costs for city residents: privatization will result in a rate hike, if not now eventually. And this is a city whose residents can ill afford an increase. Sweeney needs to compromise on this issue, and allow it to be a part of the incentive package in Prieto’s bill, which would mean that the sale of “Waterworks” wouldn’t be on the table unless Atlantic City failed to meet their first year benchmark, and then independent public accountant would be given final authority over any sale, merger or privatization of the city’s water authority.

For Prieto to Compromise On: Under the state takeover measure, the state-appointed director would have the power to veto “the minutes of the governing body of the municipality in need of stabilization and recovery, any board, commission, or department of the municipality in need of stabilization and recovery, and any independent board or authority in the municipality in need of stabilization and recovery, including, but not limited to, the housing authority, parking authority, redevelopment authority, planning board, and zoning board of adjustment.” Key here is that Sweeney and Christie want to control the process of redevelopment, and Prieto needs to give them that power. It may be a behind-closed-doors gentleman’s agreement, but if Prieto wants movement on collective bargaining and water, he’s going to need to give on development.

While Atlantic City has been crumbling, some foresighted souls – many of them friends of George Norcross – have recognized the potential opportunity and have been patching together large chunks of developable property with an eye to large scale investment. In exchange for latitude on collective bargaining and forestalling privatization of water, Prieto should support a strong formula for state support of redevelopment for developers with close ties to the Norcross machine – encouraging the use of Casino Reinvestment Development Authority (CRDA) and the state Economic Development Authority money and, and Mayor Guardian and city council should jump on board as well. Development means jobs and development means tax revenue, and if development pays the city’s bills and makes Norcross and Christie’s friends richer, so be it.

And Sweeney should see this as the enormous political opportunity that it is, as there are several developers who have made or are making considerable investments in the city. The rewards for those investments will be considerable and certainly Sweeney will be rewarded handsomely in the form of campaign donations for his advocacy for these developers. Governor Christie can rest assured that his allies will be rewarded as well.

At the table are a multitude of interests:

  • Joseph Jingoli –Jingoli’s substantial portfolio indicates relationship with Norcross: Jingoli is constructing the $35 million Cooper Norcross Academy in Camden, the Cooper Medical School of Rowan University (in Sweeney’s district, which Norcross was instrumental in creating), and the Rowan College of Business, along with many other projects. Jingoli boasts a diverse array of both public and private development projects and should be assured a seat at the table moving forward.
  • Omar Boraie – Boraie’s New Brunswick luxury condominium development, “The Aspire,” received $4.8 million in Sandy Relief Funds, $60 million in subsidized government loans, $21 million in tax credits. The Middlesex County developer has invested hundreds of thousands of dollars in political contributions over the past several decades, including thousands to Christie’s presidential campaign – and has seen those investments pay off. Atlantic City will be no different. Boraie has secured a $15 million loan from CRDA to fund The Beach at South Inlet, a luxury $71 million 250-unit apartment complex, at the northern tip of the Boardwalk near the defunct Revel.
  • Jack Morris – the Middlesex County real-estate magnate who is a player statewide in multifamily and retail development. Morris’s M & M Development has upscale portfolios in Camden and Newark; his Edgewater Properties develops commercial, luxury rental and private residential development, particularly in southern and central New Jersey His relationship with Norcross extends back more than a decade when his company was chosen for the redevelopment of the Garden State Park racetrack in Cherry Hill.
  • Jon Hanson – this ally of Gov. Christie’s is Hampshire Real Estate was the chairman of the Hanson Commission, Christie roadmap in dealing with Atlantic City. His also is the mastermind behind the Atlantic City Development Corporation, or ACDevCo, the independent not for profit organization that is building a $200 million Atlantic City campus for Stockton University to open fall of 2018. Stockton University’s Atlantic City campus promises to be the cornerstone of revitalization efforts in Atlantic City.
  • George Norcross – while not typically thought of as a real estate developer, reports following a meeting between Norcross and Atlantic County Executive Dennis Levinson indicate that Norcross is considering investing in Atlantic City.
  • Glenn Straub – a Florida real estate developer, paid $82 million for the defunct Revel casino, which had cost $2.4 billion to build. Straub has said that he will invest an addition $500 million in a diverse array of recreational facilities including water parks, rope courses, dressage and horse jumping, a ski run and half pipe, an international art fair, and a new convention center. Straub is seemingly a lone wolf, not connected to any of the major political players but nonetheless is important to the city’s future.

The reality is that all of these developers (save Straub) are politically connected and the politicians who advocate for them (Norcross and Christie) will derive benefit. That is, as they say, the cost of doing business. But it is the city’s best interest that Norcross’s and Christie’s developers get the support they need.

One of the developable plots that will become available soon is Bader field, a desirable 130 acre chunk of water front property along the Albany Avenue causeway. To make Bader Field a developable site will cost about an additional $100 million. Sweeney and Prieto should work with CRDA and the state Economic Development Authority to assist the eventual purchaser. The area is ripe with possibility: it could house a marina, an Inner Harbor type retail/ hotel space, luxury condominiums, or all of the above. In addition, a portion of the land, including the athletic facilities that it currently houses — the Atlantic City Surf Baseball field and an ice rink – should be reserved by the state and the city for use by Stockton University which will be developing a state-of-the-art satellite campus mere blocks away. The cooperation in this public-private development could mean a captive audience for restaurants, retail, and recreational activities.

Brigid Callahan Harrison is professor of political science and law at Montclair State University, where she teaches courses in American government. A frequent commentator on state and national politics, she is the author of five books on American politics. Like her on Facebook at Brigid Callahan Harrison. Follow her on Twitter @BriCalHar.

A Blueprint for Compromise: Fixing Atlantic City