City of Atlantic City, NJ

Five-Year Recovery Plan

In Brief
October 2016

Atlantic Citys Fiscal Challenge

Atlantic City Taxable Assessed Value
2010-2016 ($ Billions)

$25

As gaming expanded
in surrounding states,
the national economy
struggled, casinos
closed, and the value
of remaining
properties eroded

$20

Atlantic City has

lost more than 2/3 of
its local tax base
since the beginning
of this decade

$10

$20.5

$15

$6.5
$5

$0
2010

2011

2012

2013

2014

2015

2016

Two Resulting Fiscal Problems

With this sharp decline in the local gaming industry, Atlantic Citys severe loss of real
estate values has created two distinct, but related, fiscal problems:
Structural Operating Deficit

Despite multiple property tax rate increases since 2010, the resulting property tax
receipts the Citys single largest revenue source still fell $65.1 million from
$182.1 million in 2010 to an estimated $117.0 million in 2016

Even with sharp cuts in headcount and operating expenses since, the Citys annual
spending now exceeds its annual income, and must be adjusted further downward

Extraordinary Liabilities

As property values declined faster than new assessments could keep up, the City
also faced a series of extraordinary tax appeals that created over $500 million in
one-time liabilities

Some of these debts have already been paid from more than $100 million in credits
against subsequent tax bills and by 2012-2014 bonds that have increased the Citys
debt service levels far above those in most NJ communities. Nonetheless, the Citys
remaining unfunded exposure to the Borgata, MGM, and other pending tax appeals
plus deferred 2015 contributions to the State for employee benefits could exceed
$250 million if litigation continues and interest continues to compound
3

What Has the City Done So Far?

The City has already taken strong action to cut local spending for alignment
with its new revenue realities

Eliminated 358 full time positions more than

27% of the municipal workforce along with over
100 part-time City jobs

Atlantic City Full-Time Headcount

1,323
1,210

Cut the municipal fleet by 121 vehicles since

January 2015

Eliminated leased space by consolidating offices

Saved $1.1 million annually by restructuring

employee Rx and dental programs

Modernized parking meters under new

contracted, operation

Auctioned multiple City properties to expand the

tax rolls, while generating $7.1 million in sales

Launched multiple other efficiency initiatives with

impact in 2017 and beyond

1,045
965

2013

2014

2015

2016

What Has the State of NJ Done So Far?

In May 2016, the State enacted the Municipal Stabilization and Recovery and
the Casino Property Tax Stabilization Acts

The Municipal Stabilization Recovery Act sets forth the requirements for this Recovery Plan

The Casino Property Tax Stabilization Act created and adjusted local revenue streams:

Casino PILOT: Beginning in 2017, property tax revenues from casino gaming properties will be
replaced by a PILOT totaling $120M with about half due to the County and School District.
This does not increase City revenues, but stabilizes against further downward
reassessments/appeals

Atlantic City Alliance (ACA) Funds: Temporarily diverts funds previously used for ACA marketing
activities to the City through 2023 on a declining schedule: $30M in each of 2015 and 2016,
$15M in 2017, $10M in 2018, and $5M in each of 2019-2023

Casino Investment Alternative Tax (IAT): Reallocates IAT from the Casino Reinvestment
Development Authority for ten years under a formula projected to generate $20-30M annually

In 2015, the State also renewed annual Consolidated Municipal Property Tax Relief Aid (CMPTRA)
payments to Atlantic City, a revenue stream long provided to most NJ municipalities, and since 2014
has provided additional Transitional Aid (TA) revenue to the City under a program also already in
place for other NJ urban governments

Collectively, these expanded revenue streams recognize that Atlantic Citys revenue picture has
fundamentally realigned with the loss of the Citys exclusive East Coast gaming franchise and also
provide time-limited, transitional support as the City adjusts to its new revenue realities

Where Does This Leave the City Now?

Structural Operating Deficit Before Recovery Plan Initiatives

While these City and State actions have closed much of the structural
operating budget shortfall, additional steps are needed to regain full balance
Baseline Projection - Prior to Corrective Action
2016
Projected

2017
Projected

2018
Projected

2019
Projected

2020
Projected

2021
Projected

111,786,981
10,000,000
24,708,449
26,260,714
22,300,000
14,021,095

112,970,815
5,000,000
31,294,479
26,260,714
19,000,000
14,232,684

114,178,325
5,000,000
30,055,998
26,260,714
16,200,000
14,458,369

115,409,986
5,000,000
29,081,347
26,260,714
13,800,000
14,700,150

Operating Revenues
Property Tax and Casino PILOT (Municipal Share)
ACA Funds - Temporary Diversion
Casino Investment Alternative Tax (IAT)
CMPTRA Aid / Energy Tax Receipts
Transitional Aid
Local / Other Revenues

120,637,859
30,000,000
13,000,000
26,260,714
26,200,000
19,687,201

111,651,889
15,000,000
23,652,819
26,260,714
26,200,000
13,822,601

Total Revenues

$235,785,774 $216,588,023 $209,077,239 $208,758,692 $206,153,406 $204,252,197

Operating Expenditures

Personnel Costs
Operating / Non-Personnel Expenses
Debt Service
Other Expenses
Contribution to Budget Stabilization Reserve

143,889,087
26,859,969
38,664,442
26,372,276
0

Total Expenditures

$235,785,774 $218,286,134 $214,937,473 $218,192,746 $217,269,735 $216,420,608

Operating Surplus/(Deficit)

$0

146,793,444
27,375,821
28,443,287
11,673,581
4,000,000

148,571,955
27,966,239
24,697,918
10,701,362
3,000,000

149,430,646
28,569,446
27,362,955
9,829,699
3,000,000

153,108,612
29,185,723
25,916,798
7,058,603
2,000,000

154,775,024
29,815,352
24,942,147
6,888,085
0

($1,698,111) ($5,860,234) ($9,434,054) ($11,116,329) ($12,168,411)

Where Does This Leave the City Now?

Remaining Liabilities

Even more daunting, the City also still faces over $200 million in additional
legacy liabilities not yet addressed in the operating budget

Borgata settlement:

$103 million tax settlement of all claims if paid timely under this
Recovery Plan (potential exposure could exceed $150 million)

MGM settlement:

$33 million tax settlement

State repayment:

$43.25 million for repayment of Citys contributions to 2015

employee benefits deferred due to fiscal crisis

Pending tax appeals:

$30+ million reserve recommended to cover potential exposure

$215 million TOTAL

Note: The full impact of the Citys tax refunds due to declining assessments is even greater
than shown above. From 2012 to 2014, the City borrowed a total of $183.7 million for earlier
tax appeals. While already accounted for in the debt service line item of the Citys operating
budget shown on the prior slide, this existing tax appeal debt drives more than 80% of Atlantic
Citys projected debt service through 2040, and is over 20 times greater as a percentage of
total spending than the next largest major NJ City
7

Atlantic Citys Recovery Plan

Atlantic Citys 120-page Recovery Plan details a multi-pronged approach to
these challenges ahead:
Reduce the Structural Operating Deficit

Cut 100 more full-time positions over 450 since late 2013

Reduce non-personnel spending by another 10% over the next two years, and
creatively grow non-tax revenues

Pay Off and Restructure the Extraordinary Liabilities

Sell Bader Field to the Atlantic City Municipal Utilities Authority (ACMUA) for $110
million to help pay off outstanding obligations, while keeping both Bader Field and
the water system under local control to ensure long-term development that is right
for Atlantic City. In exchange for a sale price below the assessed value, the City will
retain a share of eventual Bader Field redevelopment returns

Fund the Borgata settlement through a $105 million financing in the current lowinterest rate environment that will be fully paid from the capacity created by the
Recovery Plans cuts in City spending
8

This Plan Does Not Include a Tax Increase

From 2010 to 2014, Atlantic City increased the municipal tax rate by 86%.
When County and School District tax rate increases are included, the total
local tax rate has already more than doubled since the start of the decade

To stabilize Atlantic City tax rates, the

Recovery Plan includes NO FURTHER
INCREASES to the municipal share of the
tax rate over the full, five-year period of the
Recovery Plan
High tax rates burden residents and
businesses, deflate property values,
increase foreclosures, and discourage
homeownership and investment. With the
3rd highest 2015 tax rate out of 23 localities
in the County, Atlantic City must break
this cycle of higher and higher taxes
starting with stability and working toward
true relief
In the near term, Statewide school funding
reform, if approved, could significantly
increase State aid to the School District
and enable reductions to that major
component of the overall local tax rate

Atlantic City Tax Rates

4.000
3.348

3.500
3.000

3.715

2.541

2.500
2.000

3.422

1.809

1.947

2.164

1.500
1.000
0.500
0.000
2010

2011

Municipal Rate

2012

2013

School Rate

2014

2015

2016

County Rate

This Plan Reduces Reliance on State Aid

The Recovery Plan also sets forth a realistic strategy for decreasing State
municipal aid year by year and increasing local financial independence
Recovery Plan: Declining State Transitional Aid and ACA Funds
$35
$30.0
$30
$26.2

$26.2

$25
Millions

$22.3
$19.0

$20

$16.2

$15.0

$13.8

$15
$10.0

$10

$5.0

$5.0

$5.0

$5

$0
2016 Projected

2017 Projected

2018 Projected
State Transitional Aid

2019 Projected

2020 Projected

2021 Projected

ACA Funds

Note: the Recovery Plan also assumes no increase to State of New Jersey Consolidated Municipal Property Tax
Relief Act (CMPTRA) aid or Energy Tax Receipts provided to Atlantic City over the full five-year period of the plan
10

Atlantic Citys Recovery Plan

Cut Spending First

Building on the Citys actions to date, and ideas from prior State and civic
reports, this Recovery Plan first reduces spending further to fully align with
new revenue realities

Reduces full-time headcount by at least another

100 positions down nearly 35% (458 positions)
from 2013

Atlantic City Full-Time Positions

Transfers a majority of the Citys health and

senior services to Atlantic County under a
shared services agreement
Competitively bids 10 functions to test the
market for whether the private sector can
delivery quality services more costeffectively
Restructures activities where lower
workloads now enable downsizing
Uses an Early Retirement Incentive (ERI) to
streamline headcount with as few disruptive
layoffs as possible
11

Atlantic Citys Recovery Plan

Cut Spending First

The Recovery Plan also cuts non-personnel operating costs by at least 10%
over the next two years, saving $11 million across the five-year period

Telephone system upgrade to a VoIP system is under contract and underway projected to save
$328,000 in 2017

The Citys fleet has already been cut from 598 to 477 vehicles in less than two years, further review is
ongoing, and resulting fleet maintenance contract savings are anticipated

Kelly Act payments for private apartment trash collection have been put out for a comprehensive bid,
with responses received October 18, 2016 and now under active evaluation

Professional services contracting costs will be reduced by at least 10%

With headcount reduction to date, the City has already been able to consolidate offices to eliminate
leased space, and further space consolidation is being pursued

To identify energy cost savings opportunities, the City has engaged a professional consulting team,
and a project plan is now under final engineering review for facility and streetlight conversion

With headcount reduction, the City can reduce the number of printers and copiers, and is advancing
strategies for more efficient and cost effective IT operations

To cover upfront costs for long-term efficiency improvements, the Recovery Plan dedicates all one-time
revenues from property sales to capitalize a Productivity Bank to fund worthwhile investments

12

Atlantic Citys Recovery Plan

Cut Spending First

The Recovery Plan respects the Citys municipal employee unions,

working to achieve cost savings through labor-management partnership

No across-the-board wage increases

Longevity pay to be eliminated for new hires and frozen for incumbents

Education incentive pay to be frozen

New salary scale with a longer pay progression for future police hires

Reduced rank differentials for promotion to police supervisory positions

Overtime formula reductions

Employee groups to modify their base medical plan from NJ Direct 10 to the more
affordable NJ Direct 15, with premiums 4.8% lower in cost, with additional Rx and
dental plan redesign for police

Create a new tier for civilian vacation accrual and reform police extended sick leave

Eliminate terminal leave payments for future police hires and limit terminal leave for all
on-board employees

Agreements have been reached to date with Firefighters, Police Superiors, and the IBEW.
Remaining negotiations are ongoing, with contingencies in place to assure equivalent savings
13

Preserving Core City Services

While the Recovery Plan cuts local spending significantly, it also retains a
focus on maintaining core service levels reflective of the unique service
demands required of a destination City
Atlantic City Average Daily Population, Resident and Estimated Daytime

Daytime population is a better

indicator of a localitys economic
and social activities than resident
population, and daytime
population estimates are essential
for evaluating business
development, gauging
transportation and infrastructure
needs, planning emergency
evacuation, and other needs.

180,000

155,435

160,000
140,000

128,627

120,000

93,827

100,000

67,019

80,000
60,000

39,415

22,193

22,193

39,415

39,415

39,415

Resident Population

Avg. Daily Pop.

Avg. Daily Pop. w. Overnight

Stays

40,000
20,000

State of New Jersey Department of

Labor and Workforce Development

Residents

Daily Commuters

Visitors

Visitors Accounting for Overnight Stays

Atlantic City has one of the highest ratios of commuters to residents in NJ, and a
uniquely high number of overnight hotel and day trip visitors
14

Preserving Core City Services

Even when only partially adjusting for the Citys true service population
(residents, commuters, and overnight hotel visitors, not daytime visitors),
the Recovery Plan achieves comparatively lean staffing levels
2016 Budgeted Full-Time Employees, Urban Municipalities
12.0
10.0

10.8

10.2

9.4

9.1

8.4
8.0
6.0
4.0
2.0
0.0
Atlantic City (Current)

Atlantic City
(W/Recovery
Plan Reductions)

East Orange

Trenton

Paterson

Note: The City of Camden is excluded from the chart above because Camdens police services are provided by Camden County, thereby resulting in a significantly
lower, but potentially misleading result (5.2). Similarly, New Brunswick (5.5) is excluded because of the impact of Rutgers University, with supplemental resources
including a separate police force of 69 officers.

15

Atlantic Citys Recovery Plan

Creative Non-Tax Revenues

While further property tax increases would be counterproductive for

economic renewal, creative non-tax revenue growth is important for
keeping pace with rising service costs and inflation

Parking system modernization already well underway through a private vendor to

optimize revenue

New, voluntary contributions from tax-exempt entities including $1.4 million

annually from Stockton University and South Jersey Gas projected to begin in 20182019 when the new Gateway project is complete

Improved cost recovery through updated fees and fines for fire safety, construction,
Mercantile, and other local activities many of which have been enacted into law in
2016 for Licensing and Inspections, Fire Safety, and other City functions. Next step
ideas include:
Improved beach license cost recovery
New 4X4 beach permits
Municipal advertising programs

16

Atlantic Citys Recovery Plan:

Resolving Liabilities

The City will fully address its extraordinary liabilities through the sale of
Bader Field to the ACMUA and a tax-exempt financing to be 100% covered
within the restructured operating budget

Generate $110 million from the sale of Bader Field to

the ACMUA, and $105 million from a new, taxexempt financing in the current, low interest rate
environment

Pays for all outstanding Borgata and MGM debt, fully

repays the State for deferred employee benefit costs
+ interest, and establishes a $30+ million reserve for
pending tax appeals and other one-time costs

Maintains Bader Field under local control for interim

environmental uses and long-term redevelopment,
with the City to share in potential returns

Maintains the water system as a local civic asset for

the benefit of Atlantic City residents and businesses

17

Atlantic Citys Recovery Plan

The Result: Structural Budget Balance

Through this Recovery Plan, Atlantic City will balance its operating budget
each and every year
2016
Projected

2017
Projected

2018
Projected

2019
Projected

2020
Projected

2021
Projected

Initiatives to Close the Operating Gap

Revenue Initiatives
Expenditure Reduction

0
0

1,215,000
4,851,293

1,240,000
8,827,617

2,723,577
11,091,297

2,804,371
12,511,534

2,840,359
13,508,122

Total Initiative Impact

$0

$6,066,293

$10,067,617

$13,814,874

$15,315,905

$16,348,481

Plan Projection - After Corrective Action - Before Addressing Liabilities

Operating Revenues
Operating Expenditures
Operating Surplus/(Deficit)

235,785,774
235,785,774

217,803,023
213,434,840

210,317,239
206,109,856

211,482,269
207,101,450

208,957,777
204,758,201

207,092,556
202,912,487

$0

$4,368,182

$4,207,383

$4,380,819

$4,199,576

$4,180,069

The Recovery Plans five-year spending cuts and new non-tax revenues achieve a balanced budget
every year, build up a $12 million Budget Stabilization Reserve, and create an annual operating
surplus that can be used to fully cover the cost of paying off the Citys extraordinary liabilities

18

Atlantic Citys Recovery Plan:

The Result: Legacy Liabilities Under Control

Through this Recovery Plan, Atlantic City will also pay down and restructure
100% of its liabilities to reach fully manageable levels
Operating Surplus/(Deficit) After Corrective Action

2016
Projected

2017
Projected

2018
Projected

2019
Projected

2020
Projected

2021
Projected

$0

$4,368,182

$4,207,383

$4,380,819

$4,199,576

$4,180,069

Liabilities
Tax Appeal (Borgata)
Tax Appeal (MGM)
Reserve for Tax Appeals / Other One-Time Costs
State Deferral Repayment

$103,000,000
$33,000,000
$35,750,000
$43,250,000

Total Extraordinary Liabilities

$215,000,000

Cost of New Financing

Liability Pay Down and Restructuring

Proceeds from Bader Field
New Financing

$110,000,000
$105,000,000

Total Liability Restructuring

$215,000,000

2016
Projected

2017
Projected

2018
Projected

2019
Projected

2020
Projected

2021
Projected

$0

$4,139,200

$4,139,200

$4,139,200

$4,139,200

$4,139,200

OVERALL RECOVERY PLAN RESULTS

Liabilities:
Budget Stabilization Reserve:
Reserves for Tax Appeals / Other One-Time Costs:
Operating Budget:

Surplus/(Deficit) Net of Liability Financing

100% addressed
$12 million
$15 million in operating budget; additional $35+ million from Bader Field sale
100% balanced
2016
Projected

2017
Projected

2018
Projected

2019
Projected

2020
Projected

2021
Projected

$0

$228,982

$68,183

$241,619

$60,376

$40,869

After Bader Field proceeds are used to cut the legacy liabilities by more than half, the
modest annual operating surpluses shown on the prior page more than cover the annual
financing costs for the Citys remaining debts and to fund annual capital improvements
19

Atlantic Citys Recovery Plan:

The Result: Budget Balanced, Liabilities Addressed, Prudent Reserves

Plan Projection - After Corrective Action
2016
Projected

2017
Projected

2018
Projected

2019
Projected

2020
Projected

2021
Projected

111,786,981
10,000,000
24,708,449
26,260,714
22,300,000
15,261,095

112,970,815
5,000,000
31,294,479
26,260,714
19,000,000
16,956,261

114,178,325
5,000,000
30,055,998
26,260,714
16,200,000
17,262,740

115,409,986
5,000,000
29,081,347
26,260,714
13,800,000
17,540,509

Operating Revenues
Property Tax and Casino PILOT (Municipal Share)
ACA Funds - Temporary Diversion
Casino Investment Alternative Tax (IAT)
CMPTRA Aid / Energy Tax Receipts
Transitional Aid
Local / Other Revenues

120,637,859
30,000,000
13,000,000
26,260,714
26,200,000
19,687,201

111,651,889
15,000,000
23,652,819
26,260,714
26,200,000
15,037,601

Total Revenues

$235,785,774 $217,803,023 $210,317,239 $211,482,269 $208,957,777 $207,092,556

Operating Expenditures

Personnel Costs
Operating / Non-Personnel Expenses
Debt Service
Other Expenses
Contribution to Budget Stabilization Reserve

143,889,087
26,859,969
38,664,442
26,372,276
0

Total Expenditures

$235,785,774 $217,574,040 $210,249,056 $211,240,650 $208,897,401 $207,051,687

Surplus/(Deficit) Net of Liability Financing

$0

142,260,115
27,057,857
32,582,487
11,673,581
4,000,000

$228,982

141,033,792
26,676,784
28,837,118
10,701,362
3,000,000

$68,183

140,043,008
26,865,787
31,502,155
9,829,699
3,000,000

$241,619

142,704,901
27,077,899
30,055,998
7,058,603
2,000,000

$60,376

143,805,855
27,276,400
29,081,347
6,888,085
0

$40,869

Note: While not formally included in the Municipal Stabilization and Recovery Act, State leadership has also pledged to fund the
Citys additional pension costs associated with the Early Retirement Incentive program. In the Recovery Plan, these additional
revenues are dedicated below the line for additional, important capital investments such as public safety radios and
neighborhood infrastructure not already funded in the lean Recovery Plan
20

Economic and Community Development

The Citys Recovery Plan further aligns its fiscal strategy with a comprehensive
economic and community development approach to rebuild the tax base and
make Atlantic City an increasingly vibrant place to live, work, and visit

Create a positive environment for economic and community

development. Municipal stability is fundamental to ensure safe
and clean streets, a stable tax base, and a reliable partner for
investment

Strengthen residential neighborhoods, promoting

homeownership and blight elimination

Diversify the economic base. With growing stability, the Citys

remaining casinos are now reinvesting in renovated hotel rooms
and meeting space. In tandem, Atlantic City will also focus on
non-gaming, family-friendly events, retail, beach and bay, and
emerging higher education strengths

Enhance economic development tools through State legislation

to enhance existing Grow NJ incentives

Focus on high-impact redevelopment zones and projects:

Stockton-South Jersey gas gateway; Lighthouse District
(Southeast Inlet); Midtown beach block; Ducktown

Coordinate in a common direction across all State, County, City,

and community stakeholders

"I'm telling you to buy here...

Over the years, the city has just
lacked a plan. There hasnt been
a plan here for years. That is
starting to happen now.
- Developer Bart Blatstein, Press of Atlantic
City, September 14, 2016

We believe that Atlantic City is

going through a renaissance, and
we have every intention of being
an anchor part of that
renaissance.
- Dr. Harvey Kesselman, President, Stockton
University, NJ Spotlight, June 24, 2016

21

Atlantic Citys Recovery Plan

This City Five-Year
Financial Recovery Plan is
the first comprehensive
strategy put forward to
provide solutions for all of
the fiscal challenges now
facing our community
While no realistic plan can
avoid some sacrifice, fully
address every concern, or
bring transformation
overnight, this is Atlantic
Citys plan to best achieve
long-range stability,
maintain local priorities,
and position our City for
the future

It all fits together:

Spending cuts and reforms bring the annual
budget under control
Bader Field sale proceeds reduce the
extraordinary tax appeal liabilities down to a
manageable level
The new budget has room to pay off what is
left, like a homeowner would pay off a
mortgage, at a level the City can afford and
to fund a renewed capital improvement
program
Atlantic City will be financially stable again,
providing a platform for economic growth and
resurgence
22

Atlantic Citys Recovery Plan

Balances the City budget every year, while establishing prudent reserves
Fully addresses the Citys legacy debts and liabilities, providing a clean fiscal slate
going forward
Does not increase municipal taxes, already too high
Decreases reliance on State aid over time
Continues to cut spending to adjust to the Citys new realities, while preserving core,
neighborhood services
Respects existing City union agreements, and builds on labor-management partnership
to achieve additional savings
Promotes greater efficiency with innovative funding for overdue technology upgrades
Renews a regular capital improvement program to preserve basic infrastructure and
invest in City neighborhoods
Maintains local control over the future use and development of civic assets: Bader
Field and water system
Creates the framework of municipal stability essential for homeowner and business
investment in growing and diversifying Atlantic Citys economy
Maintains local self-determination for the days, months, years and generations to come
23