Aug 26 Atlantic City, the down-on-its-luck New
Jersey gambling mecca, will sell up to $140 million of municipal
bonds later this year to pay for property tax appeals by its
The city has borrowed about $205.7 million altogether since
it started issuing tax appeal bonds annually in 2010, but this
year's offering is expected to be the biggest, the city's
finance director Michael Stinson said on Tuesday.
Moody's Investors Service downgraded the city to junk in
July, which would usually lead to higher interest rates when the
city seeks to borrow in the capital markets. But the new bonds
will be supported by a state program that in essence gives
bondholders first dibs on state aid, itself subject to annual
appropriation by the state legislature.
Under the New Jersey Qualified Bond Act, a New Jersey
municipality pledges a portion of its expected state aid to
repay qualifying bonds. The state treasury then holds back that
amount to cover debt service and pays bondholders directly.
That program "will reduce considerably the interest, and
over the twenty-five years will result in tens of millions of
dollars of savings," Mayor Don Guardian said.
Existing debt issued by other cities under the program was
downgraded to A2 in May, after Moody's cut its rating on New
Guardian addressed reporters in a teleconference on Tuesday
about how to reverse the city's downturn and diversify its
economy beyond casinos, which have struggled in the face of
increasing competition from neighboring states.
He and state and country economic development organizations
plan to aggressively market the city to conventions and large
meetings, and to invest in the boardwalk, entertainment venues,
and other non-gambling attractions.
They also expect to soon open a job training and placement
program for dislocated Atlantic City workers.
Still, the city will have to trim about $40 million from its
budget over the next four years, to make up for reduced revenues
because of decreased gambling, Guardian said.
That may mean layoffs and spending cuts. In part through
attrition, the municipal workforce will have to shrink by up to
300 employees, Guardian said.
"All options are on the table for how we cut costs,"
The city wants to issue the new bonds early in the fourth
quarter, Stinson said. About $15 million of the total amount is
to pay for non-casino tax appeals.
Most of the remaining balance is to cover $88 million of tax
appeals for the Borgata Hotel Casino & Spa for 2011 through
2013, and an additional amount for 2014 that hasn't yet been
finalized, Stinson said. Borgata is owned by Boyd Gaming Corp.
of Las Vegas.
(Reporting by Hilary Russ; Editing by Chris Reese)