Atlantic City State Takeover Approved, But Legal Battle Could Follow
ATLANTIC CITY — This resort city's troubled finances are in the hands of the state, and can be for the next five years. But it's yet to be seen if the city will fight to retrieve that power.
A vote from the state Local Finance Board made it official Wednesday, but there are few details on exactly how the transition is supposed to work. Right now, it could be business as usual in Atlantic City until the state makes a move.
With the 5-0 board vote, the state currently has the authority to break union contracts in the city, sell assets, hire or fire workers and enter shared services agreements.
City officials had five months to craft a financial recovery plan that the state would deem acceptable, but a plan presented last week was denied. The state then denied the city's supplemental proposal.
With Wednesday's vote, Local Government Services Director Timothy Cunningham, or his designee, is put in charge of the city's major decisions.
"It's an incredible responsibility and it's one that I've lost sleep over the last couple weeks leading into, and I'm sure I'm going to a lose a lot of sleep over it tonight," Cunningham told reporters after the vote.
He said the next steps in the takeover process should be hammered out soon when state and city officials meet.
According to Mayor Don Guardian, "all of our options are on the table" as the city dives into the next phase of state control. City officials held off on saying whether they'd take legal action to block the takeover, at least until they know what the move means for them and the city.
Marc Pfeiffer, assistant director of the Bloustein Local Government Research Center at Rutgers, anticipates the matter will end up in court once the details are hammered out, perhaps dragging the battle on for much longer.
"The city probably has good grounds to sue the state," Pfeiffer told Townsquare Media. "I think there's some good constitutional questions about the authority of the state to effectively run a city government through a statute. I think that may be problematic."
Pfeiffer said the takeover language, as its written now, leaves the door open for challenges.
The city has about $500 million in debt on the books, along with a $100 million budget deficit.
Hit hard by the growth of casinos in neighboring states, a decline in gaming revenue is largely to blame for Atlantic City's financial woes. Five of the city's 12 casinos have closed since 2014.
Moody's Investors Service said it views the state takeover as "credit positive" because the state has the ability to make two of Atlantic City's forthcoming debt payments on Dec. 1 and 15.