Atlantic City avoided a default on Monday by making its US$1.8 million debt service payment.
US.- Mayor Don Guardian said that Atlantic City made a US$1.8 million debt service payment avoiding a default.
The once successful gambling hub is nearly insolvent and might run out of money soon. The city has lost nearly 70 percent of its property tax base since 2010 as casino values plummeted because of competition from neighbouring states.
New Jersey has a strong history of supporting its local governments, none of which has defaulted since the Great Depression. Atlantic City sold the bonds at issue in 2012 to fund judgments it lost to casinos for property tax appeals. Tax-exempt serial maturities from 2023 through 2032 are insured by Assured Guaranty Municipal Corp. The city is getting some breathing room as second-quarter tax receipts come in. It had US$6 million to US$7 million of cash before making its debt payment, said Guardian.
State legislators are fighting over a rescue package expected last year and the extent of a possible municipal takeover pushed by Governor Chris Christie. A vote on a state Assembly bill supported by Guardian is coming up next Thursday.
“If we didn’t make our bond payment it would be detrimental (to everyone), including us. This would reduce the ratings for everybody else in the state of New Jersey,” said Mayor Don Guardian at a press conference. “I wanted to make sure I didn’t put the bonds before payroll, before schools, before anyone else. We’re on the brink. We’re trying to get through day to day.”
City payroll of about US$7 million is due on Friday and its next US$8.5 million payment to its school district is due on May 15 but Guardian said he expects to make both. The mayor added that he could not say when the city would run out of cash, but if tax revenues come in as expected it can survive “into June” although he could not guarantee June bond payments. Moreover, the Borgata Hotel Casino & Spa won’t be paying its next US$7.2 million tax payment because the city failed to pay what it owes on a tax appeal settlement.