Are AAA’s in the future for Atlantic City?
While rating agency Moody’s may not bestow the highest score for Atlantic City’s financial standing, the company says recent news that the state will continue overseeing the city’s finances is a positive sign for AC’s credit rating.
Good news and bad news for Atlantic City
Moody’s ratings are a way for investors to quickly understand the stability, of, in this case, a city’s financial profile.
What Moody said this past week about the city’s financial health was a statement, but not an official rating. The last time Moody’s rated Atlantic City was March 28 of this year.
At that time, they gave the city a Caa3 rating with a positive outlook, which means that they foresee the city’s financial stability getting stronger.
However, for the time being, the credit rating isn’t a good one.
According to the Moody’s website, a “Caa3 underlying rating reflects the city’s continued, albeit reduced, financial and economic distress. The affirmation also incorporates the positive impact of the takeover by the state.”
While the agency’s positive outlook is encouraging — a sign that whatever the state is doing is working — Atlantic City still has its share of financial hurdles it needs to overcome in order to get a better rating from Moody’s.
The report noted the following steps could be taken to improve the city’s finances:
- Improved liquidity and reserve position
- Further reductions in expenditures
- Diversification of the economic base
- Material improvement in tax base and resident wealth and income
City’s financial problems go back years
In 2016, Atlantic City was in a crisis. It was two years removed from the infamous casino contraction of 2014, in which five NJ casinos closed.
Then-Mayor Dick Guardian and his city councilmembers were struggling to come up with solutions for the city’s financial frailty. Then-Gov. Chris Christie gave Guardian and his colleagues an ultimatum: Fix your budget or submit to a state takeover of your books.
Guardian submitted a budget for 2016-2017, as well as a five-year plan to eliminate the city’s debts. However, Christie wasn’t satisfied and didn’t consider the budget a plausible one.
In November 2016, he announced that the state would send in a team to take over Atlantic City’s finances. Within six months, the state-led team came up with a plan to balance the budget that included cutbacks and lay-offs.
The state’s first major victory came when it was able to settle an outstanding $165 million property-tax refund with Borgata Hotel Casino & Spa for $72 million.
Atlantic City state report and the future
This past month, Gov. Phil Murphy’s special counsel in charge of the state takeover of Atlantic City, Jim Johnson, recommended that the oversight continue through 2021.
The extension of oversight was the result of a 64-page report titled “Atlantic City: Building a Foundation for a Shared Prosperity.”
In the report, Johnson said that the city needed to continue to build its infrastructure and strengthen its relationships with various state agencies if it wants to have long-term success.
“The citizens of Atlantic City deserve to have their local elected officials control their destiny,” said Mayor Frank Gilliam. “I am very optimistic that this is a huge step in the right direction for Atlantic City and its future.”
Moody’s, apparently, is similarly optimistic.