Wall Street rating agency Moody’s boosted Atlantic City’s credit rating by two notches – from B2 to Ba3 – still junk bond status, but far better than when the struggling seaside town was teetering on the brink of default nearly four years ago.
The city has been rocked in recent years by corruption scandals and extreme financial distress as the closure of several of its casinos wiped out wide swathes of its tax base.
In 2016, the Christie administration took over Atlantic City, which saw the closure of five of its 12 casinos amid the Great Recession and competition from neighboring states. In April 2016, Moody’s dropped the credit rating to Caa3 – one notch above default.
Gov. Phil Murphy announced in 2018 that the takeover would continue at least until the originally planned November 2021 benchmark.
Most recently in October, Frank Gilliam stepped down as Atlantic City’s mayor after pleading guilty for federal wire fraud in allegedly stealing $87,000 from a local nonprofit youth basketball league, which he allegedly used for lavish personal expenses.
The Friday rating reflects the city’s “reduced, albeit continued, financial and economic distress,” according to the analysis from Moody’s, which along with Fitch and S&P make up the big three rating agencies.
In November, S&P bumped its rating on the city from BB Minus to B, still below junk bond status.
Moody’s gave a nod to the Murphy administration’s attempts to diversify the city economy beyond just gaming and hospitality, so as to institute a buffer for the city should gaming industry or nationwide economy sours.
The rating agency credited the oversight, which gives the state the ability to slash city expenses and renegotiate cheaper public worker contracts.
Further budget cuts could bode well for the city’s credit rating, Moody’s said, as could a broader economic base, improvement to the tax base and resident’s income, and more money in the city’s reserves to help weather a future economic downturn.
Recent payment in lieu of property tax laws, which will bar future tax appeals, helped the credit rating, as could further cuts to city expenses.
While the “recent health of the casino industry” helped the city, Moody’s notes that if the gambling industry took a hit, or if neighboring drew away customers from New Jersey, then that could damage the city’s credit rating.
And should the rating for New Jersey, which was cut 11 times in the past decade, go up or down, then so too will Atlantic City and any other municipality with heavy dependency on the state.
“The state’s relationship with… Atlantic City is strong and collaboratively we continue to make progress in strengthening the city’s finances, improving city operations and municipal services, and increasing economic opportunities in the city,” Lisa Ryan, a spokesperson for the Department of Community Affairs, which handles the state oversight, said in a statement to NJBIZ. “The Moody’s analysis rightly points out that the city must diversify its economy, address its high poverty rate, and protect itself against storms and flooding if it is to truly achieve health and stability.”