ATLANTIC CITY — About five years into a state takeover, the city is about halfway to getting some relief from paying off past mistakes, state documents show.
Almost 20% of the city’s 2021 budget is going to debt payments, or about $38 million of the $200 million budgeted.
The debt payment will hit a high of $41.1 million next year.
In 2027, however, the city should get a break. The payments will drop to about $23.5 million, as shorter-term debt is paid off, and six years after that will drop again to about $15 million a year.
“It’s a cliff in 2027, with upwards of $15 million in savings,” Mayor Marty Small Sr. said Saturday. “It will be a tremendous boost to taxpayers. We’re not going to go into the proverbial hole, on a spending spree again.”
The city’s financial health is improving because of the steady discipline the state and city are applying to paying down the debt, said Lt. Gov. Sheila Oliver, who as commissioner of the Department of Community Affairs oversees the takeover.
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“This is why it’s very important to stay the course and continue following the debt repayment plan as it is laid out,” Oliver said Friday.
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The city still owes about $500 million on bonds taken out from 2011 to 2018 to pay for property tax refunds, pension costs and more, according to documents provided by the state Department of Community Affairs.
Overassessment of casinos and a culture of free spending during boom times hurt the city when the recession hit in 2008-09, followed by casino closures in 2014.
About $280 million of the bonds paid for property tax refunds mostly to casinos, which successfully argued in court they had long been overassessed.
And the city failed to plan for the economic contraction many gaming experts warned about, as nearby states legalized gambling and built their own casinos.
“There has been no new debt issued since 2018,” said Leon Costello, the state fiscal monitor for the city, in a recent interview.
As some bonds are paid off, the payments drop significantly, Costello said.
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The current debt will be paid off in 2042.
Most of the debt payments in the 2021 budget are covered by $26 million in state Consolidated Municipal Property Tax Relief Aid, which pays off qualified bonds taken out after 2015.
In years when the casinos pay less than $150 million in payments in lieu of taxes, the city also gets 1.25% of gross casino revenues, called the Investment Alternative Tax, to help pay down its debt. The city budget anticipates receiving $22 million in IAT funds this year.
Councilman Kaleem Shabazz said belt tightening does not have to mean giving up on making improvements in the city.
“We are still very reliant on tourism and people coming here,” Shabazz said. “They have to be assured Atlantic City is a safe venue.”
One way to increase the number of police in the city is through the Casino Reinvestment Development Authority, Shabazz said. It has already funded hiring 68 Class II officers and 15 neighborhood coordination officers for a community policing force, and Shabazz said the city is asking CRDA to hire even more.
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Over the past five years, according to the CRDA, it has spent $10 million on public safety initiatives in the city.
“The consensus is (basing officers in wards) has worked very well. The issue is we need to expand it ... to get a second shift in the neighborhoods,” Shabazz said.
“The city is also actively and aggressively looking to use grant money — we are doing that with the parks,” Shabazz said of seeking to use Community Development Block Grants to improve community spaces.
“We just have to stay focused on economies, doing a better job with the moneys we have and letting people see it,” Shabazz said.
Oliver said the city has been able to significantly lower the local tax levy and reduce the municipal tax rate for its residents and businesses while providing critical services because it is responsibly managing its debt and its budget.
“This is the very definition of competent government,” Oliver said. “As the city’s debt service is further reduced, the state and city will continue working together to try to further decrease the municipal tax rate and increase services for the people who live, work and visit the city.”
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As long as property taxes stay stable or go down, as they have for the past couple of years, residents understand the need for belt tightening, Shabazz said.
“I can tell you for sure the mayor understands it and understands the numbers very well,” Costello said. “You do have a team in place with state oversight that really controls where the spending goes. It’s been successful these past four years.”
DCA spokesperson Lisa Ryan said the city’s Chief Financial Officer Toro Aboderin prepares monthly revenue and expenditure reports, and a team of city and state financial staff members meets at least once a month starting in September to work on the next year’s budget.
“The financial health of the city has improved each year since 2017,” Ryan said.
Costello said some of the bonds have become “callable,” meaning they are eligible after a period of time for refinancing, and he is now pursuing refinancing the 2012 tax appeal bonds to save the city some money.
After 2015, Costello said, it became impossible for the city to borrow more without a guarantee from the state, and the interest rates on bonds went up.
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The high ranged from 4% to 6.5%, Costello said.
After 2015, however, the bonds were sold as “qualified bonds” backed by the state.
Ryan said CMPTRA aid has gone up with the debt payments.
The city faced possible bankruptcy in 2016 after a combination of factors sent its finances into a downward spiral.
Competition from casinos in other states ate into New Jersey’s casino gambling revenue, which fell from $5.2 billion in 2006 to $2.7 billion in 2014, according to the Center for Gaming Research at the University of Nevada, Las Vegas.
With all those tax appeals, the city’s property tax base declined from $20.5 billion in 2010 to $7.3 billion in 2015 and kept going down until a state PILOT law replaced casino property taxes with special payments.
Now, the city’s property tax base is $2.5 billion.
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"It's a cliff in 2027, with upwards of $15 million in savings. It will be a tremendous boost to taxpayers. We're not going to go into the proverbial hole, on a spending spree again."
Atlantic City Mayor Marty Small Sr.