Atlantic City is expected to slash a bond sale by 71 percent to $40 million because the multitude of uncertainties facing the city have made it difficult to borrow, a city official told Reuters on Wednesday.
The struggling New Jersey gambling hub planned a mid-November bond sale of up to $140 million to refund old debt and pay for property tax appeals by overvalued casinos. But that deal is likely to be transformed to a note sale before the end of this calendar year and cut to just $40 million, Atlantic City revenue director Michael Stinson said.
Four of the city’s 12 casinos have shut their doors this year and another plans to close this month because, in part, of increased competition from Pennsylvania and other nearby states.
The closures have helped gut the city’s tax base, jack up countywide job losses, and force the new mayor, Don Guardian, to plan hundreds of staff reductions through layoffs and attrition.
“It’s very difficult to go out to the capital markets when there are uncertain conditions affecting an issuer,” Stinson said. “There are many, many uncertain issues affecting the city of Atlantic City.”
But the oceanfront resort town has some cards up its sleeve. It hopes to reap about $50 million by auctioning off tax liens for shuttered casinos on Thursday.
The Revel and Trump Plaza, both closed, and the Trump Taj Mahal, scheduled to close this month, together owe at least that much in unpaid taxes that the city desperately needs.
The winning bidder pays the taxes, getting in exchange the right to foreclose if the property owner doesn’t repay — with interest — within two years. If nobody buys the tax liens, the city could foreclose within six months, although the timeline could be complicated if the properties are still in bankruptcy at that time.
Because of the potential for interest rates as high as 18 percent, hedge funds could be interested in the liens, Stinson said.
The city may also get support from a package of bills moving forward in the state legislature. One measure, aimed at ensuring a steadier revenue stream for the city, would allow casinos to make set payments in lieu of property taxes for 15 years.