Press Editorial Against County Bonding AC Debt

Asking Atlantic County to borrow money and give it to Atlantic City to pay off the Borgata must sound familiar to anyone who has gotten pleas from a free-spending relative who's now dead broke. Goes like this: "You've got lots of money. Your credit rating's good and you can borrow. I'm tapped out. Just help me this one time, I promise I'll pay you back."

Such pleas have divided plenty of families, and the potential for enmity between the county and city is just one of many reasons the county shouldn't do it.

When Senate President Stephen Sweeney last week urged the county to lend the money to the city, he tacitly acknowledged the county couldn't count on the already overly indebted city to repay it. So he suggested the state could write a letter promising to pay the debt if the city doesn't.

That's perfect - just like the note a sponging relative would write, and probably just as worthless.

Frankly, guarantees by the city and even the state to repay the debt are only as good as their fiscal conditions, which aren't good. The county's credit rating is better than the city's (which is junk and useless) and the state's rating. If Atlantic County gave a large loan to a failing city, even one backed by a deeply indebted state, then ratings agencies might downgrade the county's debt and make its future borrowing more costly.

This approach to dealing with the $160 million Atlantic City owes Borgata Hotel Casino & Spa, especially coming from Sweeney, is enough to make us suspicious
.

An acknowledged powerbroker for Sweeney's Democrats and occasional ally of Gov. Chris Christie is Camden County insurance executive George Norcross. George's brother, Philip Norcross, is a lobbyist representing the Casino Association of New Jersey.

With one Norcross brother on the politics side and another on the casino business side, it's fair to wonder just how hard Atlantic City has fought claims by casinos for refunds of hundreds of millions of dollars on their taxes.

Sweeney said last month that municipal bankruptcy wasn't needed because the casinos are willing to renegotiate the debt. "They're willing to stop the fights on taxes, but they're not willing to do that until they see this government rein its costs in," he told The Press editorial board.

Yet there he was last week, before the reintroduction of the Atlantic City rescue and rehab legislation, trying to line up a payoff for the Borgata.

The debt negotiation with Borgata, Mayor Don Guardian told The Press in December, is "the single issue that makes bankruptcy work for the city." He imagined a bankruptcy court knocking $140 million off the Borgata debt in a municipal reorganization.

That's the beginning of a strong argument in favor of bankruptcy, one that could easily outweigh Sweeney's worry that an Atlantic City bankruptcy would been seen as a precedent and raise borrowing costs for other N.J. cities. We think ratings agencies can see Atlantic City's situation is unique, which is why the state is assuming control of its finances.

Atlantic County Executive Dennis Levinson's fears about a big loan to Atlantic City seem entirely justified.

 What we'd like to see instead is for the state's Atlantic City legislation to allow the Local Finance Board, or whatever state entity winds up in control of the city's finances, to have the option of filing for municipal bankruptcy reorganization.

The passing weeks and comments by officials make it look like that may be preferable or even necessary eventually.

http://www.pressofatlanticcity.com/opinion/editorials/our-view-county-shouldn-t-lend-to-spendthrift-atlantic-city/article_afe478e5-64c4-5cdc-93fc-b7b2380bad94.html