Will Atlantic City Sink Like Atlantis?

May 21, 2015 - by Vera

Sink or swim?

As Atlantic City falls deeper into money troubles, the State of New Jersey offers temporary help with financials.

As Atlantic City continues on its road to slow decline, the State of New Jersey offers another life line so that the City doesn’t become financially obliterated – for now, at least. Many are insinuating, however, that New Jersey would be better off investing in other cities and leaving Atlantic City to deal with its troubles on its own. Unfortunately, once left completely to its own devices, Atlantic City will probably sink into financial oblivion.

Newsworks: New Jersey Gives Atlantic City Another Lifeline

Atlantic City’s troubles are lifted for a short while, thanks to some short-term help from the State of New Jersey. According to Wall Street analysts, however, the USD 40 million might not save the City from going bankrupt. The latest latest gambling news regarding Atlantic City reports that it already has a USD 100 million debt, and can’t even hope for some more loans, so the State decided to help out by supporting the loan.

As Chris Foster, financial analyst put it, “It’s almost like your mother giving you a credit card, and what you use to pay off your mother’s credit card is your allowance.”Although for the time being, the loan gives time for Governor Chris Christie’s team to figure out what to do, Atlantic City will eventually have to find a way to pay back the vast credit it has accumulated. The question remains: which areas are the ones where the City can cut back on expenses?

Reuters: Update 1- Atlantic City borrows at high rates to pay off state loan

Atlantic City received a loan of USD 40.6 million from the State of New Jersey. But this loan can’t be considered a gambling bonus:it comes at high interest rates of around 7.5%. The objective of the loan is to be able to bring about new cash flow. With this credit, the State unintentionally created a program that deflects aids straight to investors. Shareowners hope that if Atlantic City declares bankruptcy, their bonds will still be worth a lot (just like Detroit bonds that were left unscathed despite the city’s bankruptcy.)

Governor Christie appointed a team to find a solution to the city’s problems. So far, they authorized lay-offs and the rearrangement of existing loans. Another plan is to sell a USD 12 million in tax-exempt long-term bonds. By selling these, the city hopes to get rid of bond anticipation notes. A.C. has been planning on participating in debt sales ever since they decided that paying off property tax appeal settlements to casinos was one of the most pressing issues.

Casino.org: Deutsche Bank Report Says New Jersey Should Open Casinos Beyond Atlantic City

The State of New Jersey plans to open a casino in a town other than Atlantic City. Deutsche Bank backed the idea, saying that a new casino in another city might solve many of the state’s problems. One of the bank’s analysts, Andrew Zarnett reported, “We believe that one or two casinos in north Jersey could generate well over $500 million, putting $275 million into the state’s coffers and thus is a smart move for the state.”

The state plans on holding a referendum to see if people want to change the gambling laws, but they fear that voter turnout will be subpar. The plan to work around the voter turnout issue is to wait until the presidential elections. But, the more the state waits, the worse the situation in Atlantic City gets: with more casinos opening all around the state, an increasing number in A.C. will have to shut down.

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