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Did Atlantic City just violate the terms of its state loan?

Thursday, August 18, 2016   (0 Comments)
Share | 08/18/16

Atlantic City may already be on the verge of violating the terms of a state loan, only weeks after accepting them, the city council president said Thursday. The state agreed to lend the financially struggling seaside gambling resort $73 million to stay afloat as it works on a five-year financial plan due in November in an effort to avoid a state takeover.  One of the terms was that the city had to dissolve the Municipal Utilities Authority by Sept. 15.

But the Atlantic City Council voted 4-4-1 Wednesday night on an ordinance to dissolve the authority — a deadlocked vote that meant the measure failed.  That, Council President Marty Small said, likely means the city may soon violate the loan. And failure to meet Sept. 15 deadline means the city would have to repay the loan immediately.  "When the city shuts down and people lose their jobs because we have to pay the state $73 million we don't have, you can go to the council people that didn't support it," Small, who voted for the ordinance, told NJ Advance Media on Thursday.

The Press of Atlantic City was the first to report of the vote. The newspaper noted that a 2007 council rule prevents the panel from voting on failed ordinances again for six months.  The Press added than a 2008 rule allows the council to bring back failed measures with a majority vote. But that appears unlikely. Councilman Frank Gilliam, who voted against the ordinance, told the Press he was bothered by a lack of transparency leading up to the vote and said he was "never in favor of the loan."

Moody's Investors Service, a Wall Street credit rating agency, said last week that the loan would give the city enough time to come up with a plan. But without it, the agency said, there was "a high probability" the city would default on its debt within the next few months. Small told NJ Advance Media that he and other council members "explained for over an hour how important and how critical it was" to approve the MUA ordinance. "The (rescue) bill stunk. But it was our only shot. We have to make the best of it," Small said. "The loan stinks. But we have to make the best of it. This is the time to step up for residents of Atlantic City."

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