N.J. assumes vast powers over Atlantic City

TRENTON - In a blow to Atlantic City elected officials, New Jersey's Local Finance Board voted, 5-0, on Wednesday to grant its director, Timothy Cunningham, far-reaching governing powers over the beleaguered city.

The long-feared takeover vote, a by-product of the state's Municipal Stabilization and Recovery Act, was a worst-case scenario for the city, which has been fighting a takeover threat from Gov. Christie for the last year, even as it barely escaped going broke.

Mayor Don Guardian called the decision "devastating."

Cunningham, who recused himself for the vote because of the authority the takeover gives him, seemed equally stunned by the power shift. He said he may appoint a designee to handle day-to-day operations.

"I'm still absorbing the magnitude of the responsibility that's been leveled upon me today," Cunningham, 44, told reporters after the meeting. Cunningham is also the director of the Division of Local Government Services, part of the state's Department of Community Affairs.

He said Atlantic City's problems had kept him up nights, but declined to give specifics on how he would proceed, or how far he would exercise the powers the obscure state board had just granted him. It is the state's first attempt at a takeover of a city since Camden in 2002.

The extent to which the state will wield its new power remained unclear. A copy of the resolution adopted by the board was not made available to reporters. City officials left a short private meeting with Cunningham saying they had been told to continue with "business as usual." They said they would wait and see before deciding whether to file a court appeal to try to block the takeover.

Cunningham cited his two years with the Local Finance Board and, before that, as deputy county administrator with Passaic County as qualifications for his new role.

The law gives the state up to five years to run Atlantic City, granting Trenton the power to hire and fire, sell off assets, veto City Council minutes, eliminate departments, and nullify union contracts.

The Local Finance Board specifically excluded the power to declare bankruptcy from the resolution placing power exclusively in Cunningham's hands.

Cunningham said unions should consider their contracts still in place, but gave few specifics on how he would proceed.

Before voting on the takeover, the board approved Atlantic City's 2016 budget, first increasing the tax rate, which Cunningham paradoxically said would result in a decrease of about $13 per typical household.

Guardian warned that any additional tax burden on residents would result in its citizens "walking away from their homes" and facing foreclosure.

Solicitor Anthony Swan described the vote as "historic in nature" and cautioned against consolidating powers of the legislative and executive branch in one person.

He described city residents and employees as "frightened to death" of the takeover.

Board member Dominick DiRocco tried to characterize the takeover as something less than that.

"It's really just an acceleration of the collaboration of the state and the city," he said.

Guardian said it was still not clear how far Cunningham intended to go in taking over day-to-day city operations.

Activist Steve Young told the board the takeover was an example of how "the whole country will turn out under guise of Gov. Chris Christie and President-elect Donald Trump."

Christie spokesman Brian Murray declined to issue any comment on the takeover.

Ed McManimon, the city's financial adviser, who helped draft its rejected plan and represented several other municipalities at Wednesday's meeting, said Atlantic City's problems were not of its own making.

"This isn't a problem of mismanagement," he said. "This is a problem of large economics."

Guardian said he still believed the city's coveted Municipal Utilities Authority was at the heart of the state's takeover. At least two private companies have sought to buy the MUA.

Lena Smith, an activist with Food and Water Watch, echoed those concerns.

"The takeover of Atlantic City is about denying the people a voice in their own future, and the likely handover of a precious asset - the city's water system - to private corporations close to Gov. Christie, Senate President Steve Sweeney and political power broker George Norcross," she said in a statement.

Cunningham said his preference would be to work with the council before figuring out other methods of "operationalizing" the state's powers.

Earlier this month, the state rejected the city's recovery plan, saying it was not likely to achieve financial stability.

It found fault with a proposal to have the MUA issue $110 million worth of bonds to purchase the city's old municipal airstrip, Bader Field, and give the city needed cash to pay off its debts.

State officials have called for the MUA to either be run by Atlantic County or sold to a private company or otherwise monetized.

The city has been on the verge of default since its casino industry began to crater, with five casinos closing since 2014 and the city's ratable base collapsing from $20 billion in 2010 to $6 billion currently. It has a $100 million hole in its budget and has $500 million in debt, mostly issued to pay casinos that successfully appealed back taxes.

City officials say they have cut the payroll, imposed other cost-saving measures, and created a plan that would allow them to settle debt with Borgata, the city's largest taxpayer, which is owed about $150 million from successful tax appeals.

The action Wednesday caps a nearly yearlong tug-of-war with the state over the future of Atlantic City, during which the city teetered on the edge of bankruptcy but managed to pull back from the brink and pay its bills. City workers agreed to defer paychecks in April and then to a monthly, instead of twice a month, pay schedule. Many of the city's taxpayers even showed up early to pay taxes.

The city was given 150 days to come up with a plan to avert a takeover. Most viewed a takeover as inevitable. At the time, Christie mocked the city's ability to meet that deadline, saying, "Tick tock, tick tock."

On Wednesday, time ran out.

"I haven't had three easy years if you haven't noticed," Guardian said on his way out of Trenton.

arosenberg@phillynews.com

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