In May last year Atlantic City’s water authority hired advisory firm Acacia Financial Group to craft a concession agreement that would help the authority both retain its independence and stave off a state takeover of the city. Acacia Financial helped draft two 100-page-plus documents chock-full of inside information and financial details but just a few months later it abruptly ended its $20,000 contract with the water authority because it had accepted another contract – with the New Jersey department that held state-takeover powers.
New Jersey, now tasked with plucking Atlantic City from its financial death spiral, is sitting on a detailed plan that would help potential buyers put a price on one of the casino resort’s few remaining assets: its water authority. What’s more, the plan calculates the future water-rate rises that might be possible for the authority.
“Their analysis sets forth what a combined rate structure could be, given a concession model,” said Bruce Ward, executive director of the Atlantic City Municipal Utilities Authority said in an interview last month. “It was necessary, absolutely,” he added.
Acacia Financial told the Department of Community Affairs (DCA) that it was working for the Atlantic City Municipal Utilities Authority (ACMUA) at the time it submitted a proposal to the DCA to help draft Commissioner Richman’s response to Atlantic City’s then unwritten recovery plan. A spokeswoman for the DCA did not respond to a question about whether Acacia’s involvement with the ACMUA was a factor in the department’s decision to award Acacia that work. The spokeswoman said that Acacia resigned from its responsibilities with the water authority when it was awarded the contract with the DCA. Officials at Acacia Financial did not respond to requests for comment. The company advises many municipalities and municipal authorities and is frequently an advisor to the state.
The water authority’s Executive Director Bruce Ward said Acacia Financial notified the authority at the end of August that the advisor would end its arrangement with the water authority because of its new relationship with the state. Acacia had been working with the MUA and the law firm Capehart Scratchard over the summer to draft a proposal for a concession arrangement. Under the plan, the water authority would charge a private company a one-time fee to run the water authority as a long-term concession. The fee would go to Atlantic City to help the city pay down its crippling debt.
Ward said it is not the first time the authority has seen a confidential advisor walk away from a contract, taking insider knowledge, experience and information over to a state agency. The MUA’s own auditor upped and left the authority to work with the state’s emergency manager Kevin Lavin two years ago, he said.
The plan constructed by the water authority and its advisors was jettisoned in September when Atlantic City’s financial advisors dreamed up the competing plan that would have had the Municipal Utilities Authority buy Bader field for around $110 million, to inject cash into the struggling casino resort and save it from having to sell outright its water authority.
What Next?
Ward said last week he had had no update from the city’s emergency manager, Jeffrey Chiesa, regarding the state’s plans for the water authority.
In total, the water authority spent over $100,000 hiring a lobbyist (William Layton of Cammarano, Layton, & Bombardieri Partners) and high-profile lawyers from Capehart along with Acacia Financial, in a last-gasp effort to retain independence. While the concession agreement would have sold off some of the water authority’s existing business, at least the authority would have had the choice of its partner and the authority would have continued in an advisory role with perhaps some influence over water rates. With the state now charged with deciding the fate of Atlantic City’s assets, the water authority is not likely to get to choose its future or control rate hikes. The DCA spokeswoman declined to comment.
The Press of Atlantic City’s Christian Hetrick wrote here about the possible future for the water authority. Atlantic County has expressed interest in operating the authority as a concession and private companies New Jersey American Water and Suez North America met with City officials in 2015, Hetrick reported.