Gambling mecca gone bad-Atlantic City, NJ

By Martin J . Milita, Jr., Esq.

It seems like only yesterday that Detroit filed for bankruptcy. It’s actually been more than two years since the initial filing, and almost a year since a judge approved the bankruptcy plan.

In the East, the fortunes of Atlantic City have always followed casinos, which is not a good sign in today’s economy. With four of the big gambling houses bankrupt, Atlantic City finds itself hurting for revenue.

The city has a $100 million hole in its budget. This is made worse by the fact that it keeps losing tax refund lawsuits. So far the city has been forced to refund $186 million in taxes after Casino owners contested their assessments.

But the pain isn’t all on the revenue side.

Atlantic City employs 29 city workers per 1,000 residents, almost triple the rate of Newark, with 11 employees per 1,000 residents, and Jersey City, with 10 employees per 1,000 residents. The mayor recommended laying off more than 200 workers, but that would still leave the city with a much higher worker-per-resident ratio than other cities.

So far, the New Jersey government, including the governor, has been quiet on the possibility of a bankruptcy in the state. The state has gone so far as to give the city more time to repay state loans. If Atlantic City goes under, it would be the first municipal bankruptcy in New Jersey since the depression.

While the state government hasn’t mentioned that the city might go bankrupt, it hasn’t taken that option off the table either. It could be that the governor wants to keep all avenues open, since he has the same financial issues at the state level. As long as bankruptcy is possible, he might have more leverage when negotiating pension reforms with unions.

Many other towns, counties, and states have fiscal woes that will only be addressed through some version of bankruptcy or negotiated restructuring. By the time that happens, investors and taxpayers have already lost.

Martin J. Milita, Jr. Esq. is senior director at Duane Morris Government Strategies, LLC.

Duane Morris Government Strategies (DMGS) supports the growth of organizations, companies, communities and economies through a suite of government and business consulting services. The firm offers a range of government relations and public affairs services, including lobbying, grant writing; development finance consulting, media relations management, grassroots campaigning and community outreach. Milita works at the firm’s Trenton and Newark New Jersey offices.

Visit his blog at: https://martinmilita1.wordpress.com

Follow him on twitter: @MartinMilita1

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http://www.dmgs.com/

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Congress to take up Puerto Rico Bankruptcy?

This week, nothing mattered much beyond Greece. The situation has been well-covered, so no reason to recount the story here.

But, the governor of the island state of Puerto Rico (which is a U.S. territory) told the New York Times that Puerto Rico cannot pay its debts. The government and various agencies risk default this month.

Puerto Rico had two big economic contributors in the past – the U.S. military and favorable tax treatment for pharmaceutical companies operating on the island. Both of these things went away over the past 15 years, leaving the country with a big hole in its economy and a bloated government. The territory ran a deficit in every year since 2007 except one, and yet continues to increase government spending. The government employs roughly 27% of the workforce..

As a territory, the island operates like a state in the U.S., and there’s no provision in the Federal Bankruptcy Code for such an institution to declare bankruptcy. Puerto Rico has been pushing Congress to take up a couple of bills that would allow some of the public agencies on the island to declare bankruptcy, but nothing has happened on that front.

The territory’s constitution explicitly states that it must pay its debt before all other expenses, which includes rent, wages, and pensions. What are the chances that Puerto Rican leaders will send all available cash to bondholders and not pay their workers or retirees?  Zero. Anticipate congressional action after the Fourth of July Holiday.