Atlantic City, N.J. bankruptcy 'premature': turnaround team
Reuters
Published Jan 22, 2015 02:57PM ET
Atlantic City, N.J. bankruptcy 'premature': turnaround team
By Daniel Kelley and Hilary Russ
ATLANTIC CITY NJ/NEW YORK (Reuters) - A new emergency management team for the casino resort town Atlantic City said it would take about six months for a turnaround plan to show results but it was 'premature' to talk about bankruptcy for the city, which has seen gaming revenues decimated.
Atlantic City's municipal finances have declined with the fortunes of the local casino industry, which has suffered steep losses due to competition in nearby states.
New Jersey Governor Chris Christie on Thursday appointed a turnaround team, including former Detroit emergency manager Kevyn Orr - a step the struggling casino town has resisted.
"We are digging out of an enormous hole," Christie said. "It's time to confront the dire circumstances with which we are confronted."
Christie, a potential 2016 presidential candidate, acknowledged that there have been multiple bipartisan attempts to get the city on firm financial footing, but said they had failed. All of those plans required significant state resources.
"We haven't gotten there, and I can't wait any longer, Christie said.
The team will be led by Emergency Manager Kevin Lavin, who previously worked for business and turnaround consultancy FTI, Lavin is an expert in "delicate discussions with constituencies with different interests," said John Rapisardi, a bankruptcy lawyer at O'Melveny & Myers, who worked with him.
He will be supported by Orr as special counsel. A former corporate bankruptcy lawyer at the firm Jones Day, Orr most recently guided Detroit through the biggest-ever U.S. municipal bankruptcy.
"Each place is different," Orr said when asked about comparisons to Detroit. "Each place had to be taken on its own."
Orr said it was "premature" to talk about bankruptcy for the city, which must repay a $40 million bridge loan from the state by March 31. It would take about 90 days to implement a plan and another 90 days to see results, he said.
In New Jersey, a city must win permission from the Local Finance Board to file for Chapter 9 municipal bankruptcy.
"If Chris Christie is moving this forward then presumably that access wouldn't be denied," said bankruptcy lawyer Michael Sweet.
Still, there are doubts that Orr can work magic on a city that saw four of its 12 casinos close in 2014. A fifth, Trump Entertainment's Taj Mahal, narrowly averted closing but remains in bankruptcy. The operating unit of Caesars Entertainment, the owner of Bally's Atlantic City and Caesars Atlantic City, filed for bankruptcy earlier in January.
"No one should expect that the appointment of a very competent fiscal manager is the solution for Atlantic City," said Peter Reinhart, professor and director of the Kislak Real Estate Institute at Monmouth University.
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While a fiscal manager may make some tough decisions possible with fewer political implications, Reinhart said, an appointment would not solve the underlying problems of a stagnant tourism and casino industry.
"Atlantic City is not Detroit both in terms of its fiscal situation, nor in its relative importance to the state," Reinhart said.
Detroit turned to its art collection to finance its climb out of bankruptcy, which saw $100 million from the Detroit Institute of Arts pledged over 20 years to ease cuts to pensions and save artwork from being sold to pay city creditors.
"Detroit had a couple of things going for it - they had the art collection... and a business hub," said Sweet. "I'm sure Atlantic City has other unique opportunities ... other assets."
Atlantic City lawmakers earlier this month endorsed steep budget cuts but rejected the idea of a state-appointed emergency manager in favor of local control of the city's budget and hiring decisions.
"I'm not in support of it, but if we do get an emergency manager, I'll work with him," said State Assemblyman Vince Mazzeo, who represents Atlantic City, ahead of Christie's remarks.
Written By: Reuters
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