August 2, 2016 / 5:25 PM / 3 years ago

UPDATE 1-Atlantic City, N.J., makes $3.5 mln debt service payments-mayor

(Adds mayor comment, details of loan)

By Hilary Russ

Aug 2 (Reuters) - New Jersey’s fiscally distressed gambling hub Atlantic City has made its scheduled $3.475 million debt service payments, Mayor Don Guardian said on Tuesday, avoiding what could have been the first default in the state since the Great Depression.

The payments were made on their Monday due date, Guardian said in a statement, even though the city has not yet received money from a $73 million bridge loan agreement with the state.

Moody’s Investors Service warned last week that the city would likely default unless it received the loan. The loan, which at the time of Moody’s warning had not yet been finalized, is part of a bailout package that will also allow the state to move to take over operations if the city fails to craft an acceptable financial recovery plan by early November.

Roughly $3 million of insured 2012 general obligation refunding bonds came due on Monday, along with interest on some of those bonds and other general obligation bonds issued in 2011, according to Municipal Securities Rulemaking Board records.

The city also nearly defaulted in May after almost running out of cash and just before lawmakers passed the bailout package.

“We have worked hard over the past two years to keep Atlantic City operating despite difficult economic conditions,” Guardian said in a statement.

The city, which has seen its property tax base eroded from increased gambling competition in neighboring states, had been trying to lessen the “extremely overreaching” restrictions on the state loan, he said.

In the end, the city still had to agree to several stipulations, including dismissing a city lawsuit against the state, reporting weekly to the state and dissolving the city’s water utility by Sept. 15, Guardian said.

The city does not technically own that asset, but the city council can move to dissolve the authority that governs it and then either sell it or bring it under direct city control. (Reporting by Hilary Russ in New York; editing by Diane Craft)

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