Atlantic City, N.J.’s plan to sell one of its remaining assets to another is getting criticism from one adjudicator of its poor credit rating. Mayor Don Guardian announced last week that the city hopes to sell Bader Field, an abandoned air strip once worth hundreds of millions of dollars, to its Municipal Utilities Authority. Both Bader Field and the MUA will be up for seizure by the state on October 3rd, shortly before the city presents an economic recovery plan to prevent a takeover of its finances.
Financial ratings agency Moody’s called the potential sale a “credit negative” Thursday
An analyst with the group said that while Bader Field’s sticker price will cover bond debt and a $73 million bridge loan from the state issued to cover expenses before the takeover deadline, the MUA itself would have to borrow money to make the sale.
The fact that a deadlocked city council and the state legislature would both have to sign off on the deal also failed to inspire confidence.
“Should the MUA sale of Bader Field occur, the $100 million would be sufficient to repay the state and cover debt service,” that analyst wrote. “However, the proposed sale raises many questions. As of the end of 2015, the authority had $7.9 million in unrestricted cash and investments, meaning it would need to borrow nearly the entire sum pledged. Given the authority’s B3 rating and its connection to Atlantic City, market access is uncertain.
“Even if the authority were to have market access, borrowing $100 million would increase its debt by a factor of seven, raising the question of how the authority would pay for this debt – assuming the plan went through, which is far from certain. Even the figure of $100 million is questionable: in an auction earlier this summer, the largest bid received for Bader Field was only $50 million, undermining the proposed valuation.”
Without continuing bridge loan money from the state, the analyst wrote, “it is highly improbable that the city will be able to make its November 1 $9.4 million bond payment.”
Guardian and City Council President Marty Small favor the plan, while Councilman Frank Gilliam and others on the City Council oppose it. The MUA, which controls the city’s water, would have to be “monetized” in the event of a state takeover, a step that could lead to privatization. Guardian has argued for the plan by saying it accomplishes that monetization.
“Other than vengeance, there’s no reason to try to stop this deal,” Guardian told NJTV after unveiling the plan this week. “Other than if you’re on the payroll of one of the water companies that are trying to buy it.
“If the state does not allow the plan to go forward and the state takeover is needed, it’s going to cost the state $100 million a year until they give up and leave.”
Reached for comment, Gilliam said he hasn’t seen clear proposals on what the MUA would do with Bader Field once the deal went through. The Authority, he argued, isn’t “in the land development business.” Gilliam and Small are bitter opponents on the council and will likely oppose each other for the Democratic nomination in the city’s 2017 mayoral election, when Guardian runs for reelection.
“I think it’s another scam,” Gilliam said. “Instead of cutting and making realistic decisions.”