Christie Administration Extends $40 Million Loan Agreement With Atlantic City

The Christie Administration has agreed to extend the terms of its $40 million loan agreement with Atlantic City through June 30, New Jersey Department of Community Affairs (DCA) Acting Commissioner Charles A. Richman said on Tuesday.

The original expiration date was Tuesday.

The loan became effective Dec. 18, 2014, to help the city maintain operations after a significant loss of ratables strained the city’s budget. Atlantic City’s ratable tax base has declined from $20.5 billion in 2010 to $7.3 billion in 2015, representing a cumulative decline of 64 percent. It has also resulted in a $101.1 million shortfall in this year’s budget.

Earlier this year, Gov. Chris Christie appointed Kevin Lavin to the newly created position of Emergency Manager for Atlantic City and Kevyn Orr to the position of Counsel to the Emergency Manager.

Lavin was tasked with analyzing and assessing the financial condition of Atlantic City and recommending a plan to put Atlantic City’s finances in stable condition for a long-term basis.

Lavin submitted a report to Christie on March 23, and the announcement of the loan extension was a direct result of his findings, Richman said.

In the report, Lavin outlined the work that was performed, and the actions that are necessary to create a sustainable future for the city. It also provided an update on the fiscal challenges facing Atlantic City’s school district.

He recommends fixing the budget shortfall through a mix of cost reductions, potential payment delays and increased revenue. The plan is to reduce the budget shortfall by about $10 million.

The Department of Education recommends the following to compensate for a shortfall of $47.1 million shorfall in the school district’s budget:

* The School tax rate either to remain the same or increase very slightly to minimize the impact on Atlantic City taxpayers

* A reduction to the School budget, which will include layoffs across all levels and rationalization of other costs except debt service; the School Monitor is exploring debt refinancing alternatives in order to lower debt service expenditures

* After the above noted changes, the DOE is recommending any remaining deficit be covered through either State aid or a bridge loan from a bank

The State Legislature is also considering bill that proposes provide supplemental State aid to school districts in municipalities that have experienced significant declines in commercial property valuations (decrease in valuation of at least 25% between 2008 and 2013 where commercial property represented at least 75% of the total assessed property values in 2008) through the creation of a stabilization aid category.

“The emergency manager has worked collaboratively with the mayor, city officials, county representatives and the Division of Local Government Services to determine the appropriate steps needed to address the city’s financial distress, as well as the best strategy and timing for approaching the capital markets,” Richman said. “Now that the Emergency Manager Report has been released and financial stakeholders are able to ascertain the scope of the emergency manager’s recommendations, the city will be better positioned to address its budgetary shortfalls and resolve its financial distress.”

The DCA will continue to work with the City, in partnership with the emergency management team, to develop a comprehensive plan to set the city on a course for long-term financial stability, Richman said.

In addition to the appointment of Lavin and the report, Christie convened three summits in response to the closing of the Revel, Atlantic Club, Showboat and Trump Plaza and the loss of thousands of jobs last year.