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Deadlock on Atlantic City threatens other N.J. cities, credit agency says

Friday, April 8, 2016   (0 Comments)
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NJ.com 04/07/2016

The deadlock between Gov. Chris Christie and elected officials over a deal to rescue Atlantic City from a mounting financial crisis has the potential to send shockwaves through some of the state's largest cities, a credit agency said Wednesday. Moody's Investors Service warned "distressed New Jersey cities" face possible future credit downgrades because Christie has signaled he wouldn't rescue Atlantic City if the city defaults on its debt. Moody's responded to a statement the governor made that could worry bondholders in the midst of his ongoing battle Atlantic City Mayor Don Guardian and state Assembly Speaker Vincent Prieto (D-Hudson) over a rescue plan. Atlantic City is saddled with $245 million in debt to bond holders and $150 million to the Borgata in property tax refunds.

"The state's current posture toward Atlantic City reduces the likelihood it would rescue other financially distressed cities," Moody's said. "While New Jersey has no legal obligation to support Atlantic City's (general obligation) bonds, the state's historically strong support for local governments has helped the credit quality of its financially weaker cities." The weaker cities Moody's refers to are 10 municipalities with poorer credit ratings, including Newark, Paterson, Trenton, and Union City. The warning came the same day the Republican governor traveled to the long-struggling shore town to once again chastise Guardian, a Republican, and Prieto. Both men have refused to go along with legislation that would give Christie's administration control over the city's finances. Guardian said it would give the state too much control, and Prieto said he will not support it unless a provision is dropped that would allow the state to break unions' collective bargaining contracts. "The governor's comment provides another indication that the state is considering impairing the city's general obligation bondholders, whether through negotiated debt restructuring or possibly a Chapter 9 bankruptcy filing," Moody's said.


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