With Prieto’s Takeover Bill in Committee, Can Christie Make Good on His Threats?

Christie on NJ 101.5, where he said he would not allow Atlantic City to declare bankruptcy

Christie on NJ 101.5, where he said he would not allow Atlantic City to declare bankruptcy

Atlantic City Council meets tonight to decide whether to approve a stop-gap measure introducing monthly rather than biannual paychecks for city workers. Assembly Speaker Vince Prieto (D-32) is preparing an alternative bill likely to surface in the Assembly Judiciary Committee Thursday, when it may go to an Assembly vote that same day. And the city, whose total bonded debt has reached $250 million and $150 million to the Borgata Hotel and Casino, is set to run out of money Friday.

As Governor Chris Christie continues to stare down Atlantic City Mayor Don Guardian and City Council President Marty Small over the state takeover of Atlantic City, things are getting even uglier. Christie has called the mayor’s objections to the takeover a disingenuous flip-flop, and said that he will not permit the city to declare bankruptcy if the takeover bill fails.

Over Guardian’s insistence that the provisions announced at the January press conference where he, the governor and Senate President Steve Sweeney (D-3) were not made clear to him beforehand, Christie got tough Wednesday when asked if he would be meeting with Guardian in person.

”I won’t meet with a liar,” the governor replied.

Between scrambling at the municipal level, a takeover plan that Christie has called the only option he is willing to support [link], and Prieto’s hail-mary bid [link]  to form a North Jersey coalition for his own takeover legislation and protect union contracts, Atlantic City could be left with nothing if even one plate stops spinning.

“The existing bill does not have enough support to pass the Assembly. If the governor and Senate president refuse to act, then I am ready to move forward with my own legislation,” Prieto said in a statement.

If the original takeover bill fails, can Christie make good on his threat to withhold a municipal bankruptcy? The governor’s bullying style could backfire as the outcome of the Atlantic City drama sets the precedent for other beleaguered municipalities. The governor has also said that the push for casinos in North Jersey is doomed if there is no consensus on Sweeney’s takeover bill in the Assembly.

Moody’s, the credit rating agency that moved Atlantic City further into junk territory earlier this week, said Christie’s insistence in March that bondholders are “going to have to make sacrifices” could do even more to injure the city’s standing with creditors. Along with a Christie-appointed emergency manager’s recommendations that debt referrals stay on the table, they said the possibility of default due to a stand-still in Trenton could have widespread implications for the entire state.

“While Atlantic City is an extreme case and no other New Jersey municipality is currently facing such acute financial pressure, the state’s posture toward Atlantic City reduces the likelihood that it would rescue other financially distressed cities,” the agency wrote. “The comment is the latest indication the state is considering impairing the city’s general obligation bondholders, either through a negotiated debt restructuring or possible Chapter 9 municipal bankruptcy.”

Senator Jim Whelan (D-2), who voted for the takeover bill in the Senate, said he had his doubts that Christie will be able to follow through on that threat of leaving the city out in the cold in the event of a default. Whelan reluctantly voted in favor of Christie’s takeover bill once a PILOT program for Atlantic City casinos became part and parcel of the legislation.

“I’m not really sure what the mechanism to avoid that is,” Whelan said. “At some point, you just have no money. And if you’re out of money, you default on your payroll, you default on your bonds. I’m not sure what the mechanism is for the state to then act without going into bankruptcy.”

With Prieto’s Takeover Bill in Committee, Can Christie Make Good on His Threats?