Atlantic City avoids bankruptcy
at a high price under new law
On May 27, Governor Christie signed into law legislation which will hopefully give Atlantic City time to
avoid bankruptcy and a state takeover. Although the
law is an improvement over bills previously considered due to Assembly Speaker Prieto’s efforts to
protect collective bargaining in Atlantic City, the law
is still unprecedented and very sweeping in its reach.
Most importantly, the Municipal Stabilization and
Recovery Act portion of the law gives the state the
unprecedented power to unilaterally terminate or
modify collective bargaining agreements and to avoid
authority of certain laws, such as the PERC laws, for
municipalities determined to be in severe fiscal distress in the five
years preceding the enactment of the law.
Although designed with Atlantic City and its extreme financial
distress in mind, the new legislation might arguably be read to
apply to any municipality determined to be a municipality “in
need of stabilization and recovery” as defined by the law.
However, we believe the definition of a “municipality in need of
stabilization and recovery” is written so narrowly that it should
only apply to Atlantic City.
To qualify as such a municipality, the law requires that the
municipality experience a decrease of more than 50 percent in its
total assessed non-equalized property values and an increase in
outstanding debt exceeding 50 percent in the fiveyear period preceding the enactment of the law
(which terminates at the end of the tax year preceding
the enactment of the law). Additionally, the municipality must be experiencing fiscal distress, which is
determined by analyzing various aspects of the
municipality's finances. Right now, only Atlantic City
meets this description.
Under the Act, the Director of the Division of Local
Government Services ascertains whether a municipality is one in need of stabilization and recovery, and if so, makes
a recommendation to the Commissioner of Community Affairs to
make that determination. If th