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Atlantic City to make $1.8M in bond payment to avoid default

People walk on the boardwalk in Atlantic City, N.J., Nov. 8, 2014.
Don Emmert | AFP | Getty Images
People walk on the boardwalk in Atlantic City, N.J., Nov. 8, 2014.

Atlantic City decided to make its $1.8 million bond payment Monday to avoid default, Mayor Don Guardian said.

The resort has struggled as casinos have closed, taking jobs with them and leaving the city with a widening deficit. The state of New Jersey has cast doubt on the city's abilities to make payments like school district remittances.

"Financially, we're running on fumes," Guardian said. "Massive inherited legacy debt from years of bad decisions on all levels by government, ... we really are teetering on the edge."

The $1.8 million payment was due Monday. Asked whether the city rummaged through "the couch cushions" to come up with the money, the mayor said yes.

The city is nearly insolvent and could soon run out of money, Reuters reported. Guardian said the city has about $6 million or $7 million in cash and will make payroll and school payments this month, but has stopped making almost all other purchases. Making the June bond payment is still uncertain, Guardian said.

Atlantic City has lost nearly 70 percent of its property-tax base since 2010 as casino values plummeted because of competition from neighboring states. The city sold the bonds at issue in 2012 to fund judgments it lost to casinos for property-tax appeals, according to Reuters. Tax-exempt serial maturities from 2023 through 2032 are insured by Assured Guaranty Municipal Corp.

Guardian called for better cooperation between the state and city, saying a default would set a dangerous precedent, allowing the state to take more control from other ailing cities. While a few weeks ago there were no better options than to accept a "takeover" offer, Guardian said he was inspired by the courage of state General Assembly members who offered to compromise.

"Incompetent state takeovers always fail to deliver the results they promise," Guardian said.

— Reuters contributed to this report