Atlantic City Council will postpone a vote on issuing $55 million in new debt to pay for pension and healthcare contributions that were deferred in 2015, two councilmen said. The council had planned to vote on the second and final reading of the bond ordinance at the meeting later on Wednesday.
Republican Councilman Jesse Kurtz said he sought to postpone the vote because he did not believe it was necessary to rush through new bonding to cover an IOU from 2015. Council President Marty Small on Wednesday confirmed the vote would be postponed.
The issuance would be a further addition to Atlantic City’s already hefty debt load. The cash-strapped city issued $68 million in bonds last year to pay for successful tax appeals by multiple casinos and a commercial property owner. The cost of that issuance – including legal and other fees – was nearly $4 million. And although the city’s debt rating was raised a notch last year, it is still deemed to be a “junk” credit, meaning that it will pay more to issue bonds.
The pension and healthcare commitment from 2015 was $37.2 million. The state’s emergency manager in Atlantic City at that time approved the decision not to pay the amount so the city could balance its budget. Kurtz said that issuing $55 million in debt to pay for the deferred amount plus 10 percent in annual interest does not make sense. “The] state can and should forgive the deferred payment, waive the punitive interest, reduce the payment and/or interest, delay repayment, or some combination of these options,” he said, adding, “Aren’t they supposed to be helping us?”
Former CRDA executive director Jim Kennedy also questioned the issuance on Twitter:
AC City Council is set to authorize to bond $55 million to pay a 2015 pension and health benefit state differed $38 million obligation which has been accrueing at 10%. A 2015 state obligation of $38m requires a $55m debt. No wonder Christie left this mess for Murphy’s team. pic.twitter.com/jsAko0o5mk
— Jim Kennedy (@ACEconPolicy) January 17, 2018
Kurtz said that with the casinos’ tax payments locked in under the Casino Property Tax Stabilization Act (better known as the PILOT legislation), other businesses and residential taxpayers have to bear the cost of new debt issuance by the city and they are depending on the council to make the right decisions to avoid a tax increase this year.
A message left with the mayor’s office was not immediately returned.