Chris Christie, stalking New Hampshire votes, is reportedly embarrassed at the idea of Atlantic City declaring bankruptcy. He shouldn’t be.
There’s no shame in an honest bankruptcy, whether for a city or a person. If you’ve taken on more than you can ever repay, it doesn’t do you any good to pretend you haven’t. It doesn’t really help the people you owe money to, either.
“Atlantic City can’t pay its bills in part because even though it lost a third of its population over the past five decades, it never cut spending.”
Last year, Atlantic City’s budget deficit was more than $120 million — or more than a third of revenues. That would be like if New York City had a budget shortfall of $20 billion. The resort town can’t pay its bills in part because even though it lost a third of its population over the past five decades, it never cut spending accordingly.
And it didn’t do the hard work of building a real city around its own natural, built-in environmental advantages, where people might want to live and work — say, because of its beautiful waterfront.
Instead, the state encouraged the city to bet big on casinos, sucking outsiders’ money in rather than creating a real tax base. That was a sucker’s bet, though: A third of the city’s casinos have closed, and tax revenues have plummeted.
So how did Atlantic City deal with its budget deficit? A year ago, Christie appointed an “emergency manager” to fix the problem.
What did he do? The state offered $40 million in aid — a one-shot deal that New Jersey can’t afford to keep offering. The state also let Atlantic City skip a pension and retiree health-care payment that it was supposed to make to the state to save another $40 million. But that just puts Atlantic City $40 million into debt — to a state pension system that is deep in the red itself.
In real spending cuts, Atlantic City did only $11.6 million — 3 percent of its budget.
Meanwhile, the city still promises pensions to new summer lifeguards who do 20 years of work — because the state forces it to.
And now, Atlantic City faces the same problem all over again.
The city simply can’t afford to pay $35 million in debt payments a year, plus another $40 million in pension and health benefits — nor can it afford the salaries it pays to its workers.
So what to do?
Christie and state Senate President Steve Sweeney don’t want the city to declare bankruptcy — which would allow it to address its debt and retiree promises in a fair manner, just like Detroit did.
Instead, they want a state takeover that’s not really a state takeover, but a “partnership” with the city. And they’ll put more cash into the city, too.
But this is no real solution.
Do the state’s pols — whether Republican or Democrat — have the stomach to cut promises to workers and retirees? If they did, they would have.
But they didn’t; Christie’s first-term reforms didn’t really fix New Jersey’s pensions.
State takeovers work when the state does the right thing. But the ideas that Christie’s emergency manager put forth for Atlantic City — more one-shots like privatizing a convention center that probably nobody wants — hardly instill confidence.
“If Atlantic City’s workers must shoulder lower wages and benefits, and if residents must shoulder far deeper service cuts, shouldn’t they feel like this is something they’re doing themselves?”
And Jersey is conflicted, too: Atlantic City owes the state tens of millions of dollars in missed pension costs. A bankruptcy judge might allow the city to pare those down.
Plus, there’s something undemocratic about a state takeover.
That’s why Christie is calling it a “partnership.” But if Atlantic City’s workers must shoulder lower wages and benefits, and if residents must shoulder far deeper service cuts, shouldn’t they feel like this is something they’re doing themselves?
We saw what happened in Flint, Mich. — where both the city and the state made terrible decisions about the state’s water supply under similar emergency management. Lack of accountability is the rule, not the exception, in such cases.
Bankruptcy allows the city more control over what, and how, to cut, under the supervision of a federal judge.
In January, the state Assembly speaker mused that bankruptcy was appropriate for a certain someone else. “I think Donald Trump is the one who is good at it,” he said. “When you do that, your bond rating really goes down.”
Sure — but not because you’re bankrupt. Because you admit it.
This piece originally appeared in New York Post
This piece originally appeared in New York Post