Atlantic City Economy 2019

2019 Budget Address
January 15, 2019

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presented: January 15, 2019

I am pleased to report that Atlantic County government is in very good shape. 2018 was a year of significant accomplishments and we are on our way to achieving our goal of a strong, diverse and sustainable economy.

We are ramping up our economic development efforts. We provided both financial and staff support for the Atlantic County Economic Alliance and helped to firmly establish its role as the lead agency for business attraction and retention in Atlantic County. The county played a leading role in establishing the ACEA. We now have a professionally staffed, private nonprofit economic development agency focused solely on regional economic development.

Atlantic City is a city located in New Jersey.With a 2020 population of 38,041, it is the 23rd largest city in New Jersey and the 1035th largest city in the United States. Atlantic City is currently growing at a rate of 0.39% annually but its population has decreased by -3.83% since the most recent census, which recorded a population of 39,558 in 2010. Economy at a Glance SHARE ON: PRINT: New York-New Jersey Office. Atlantic City-Hammonton, NJ. Atlantic City-Hammonton, NJ; Data Series Back Data Aug 2020 Sept 2020 Oct 2020 Nov 2020 Dec 2020 Jan 2021; Labor Force Data. Civilian Labor Force. 123.4: 112.4: 115.4: 120.2 114.1. Atlantic City has been the home of a rotating network of casino properties and resorts since gambling was legalized in the late 1970s. The hotels offered by these resorts range from five-star luxury to basic economy. Prices during the week are substantially lower than weekends. Resorts opened in May 1978 and was the first Atlantic City casino. The property has perennially struggled toward the bottom of Atlantic City casino revenue rankings. Resorts was up 6.6 percent during 2014 against 2013 numbers. It was up 16.4 percent in 2015. Resorts is the best performer in Atlantic City in terms of comps against 2014 numbers.

Atlantic City Economy 2019 Jeep

We saw the successful opening of the Stockton Campus in Atlantic City. This project, which offers an opportunity to help transform Atlantic City into a town that offers more than just casinos, would not have happened when it did if the county did not step up. Even though Stockton is a state university, the state was in no position to bond. During the last administration, the state’s bond rating was downgraded 11 times. Meanwhile the county maintained its outstanding ratings and never missed a pension payment. Atlantic County was able to step up at no cost to the taxpayer.

We completed construction of the first building of the National Aviation Research and Technology Park (NARTP) on schedule and on budget. We are concluding tenant negotiations and expect to have the building fully rented by mid-year. We are now beginning to develop plans for a second building. The New Jersey Institute of Technology, one of New Jersey’s foremost research universities, agreed to manage research operations at the park. The NARTP is now included in a newly created Aviation Innovation Hub comprising a one mile area around the FAA Tech Center and the Atlantic City International Airport, which has been designated as a Smart Airport Test Bed Research Facility.

Atlantic County is now the center point of an emerging aviation industry in New Jersey as our economic development efforts extend beyond Atlantic County. We developed new strategic partnerships with major aviation companies and institutions such as Boeing, Lockheed, Embry-Riddle Aeronautical University, Joint Base McGuire-Ft. Dix-Lakehurst, the National Institute of Aerospace, the FAA, General Dynamics, and Thunderbolt Software, LLC.

The county was awarded a New Jersey Economic Development Authority Innovation Challenge Grant to develop an operational plan for an Aviation Training Academy needed to develop aircraft maintenance and repair operations. Embry-Riddle Aeronautical University agreed to be our partner on this grant. The significance of Embry-Riddle, the foremost aeronautical university in the world, agreeing to partner with us on this grant cannot be overstated. As with NJIT, their partnership helps validate our economic development efforts.

We also introduced a new workforce development initiative in partnership with Embry-Riddle to improve STEM education in Atlantic County high schools by implementing an aviation STEM program. This is a key component of our economic strategy that calls for improving the skills of the local workforce so that graduates are better able to pursue careers in technology related fields and make our workforce more attractive to potential employers. Our goal is to work with our school districts to structure their curricula so they align with our economic strategy and are reflective of new employment opportunities.

The development of offshore wind energy will offer our area new economic opportunities. Ørsted (headquartered in Denmark) has been designated the developer of an offshore wind farm off the coast of Atlantic City. The county, through the ACEA, provided Ørsted assistance in finding a suitable location that can accommodate their assembly and maintenance operational needs. They recently opened their administrative offices in Atlantic County. This initiative is expected to create approximately 1,000 jobs a year during its construction phase and another 100 permanent jobs.

I am also proud to report that a decade ago the county stepped up to keep Boscov’s department store opened and saved hundreds of jobs. Boscov’s has not missed a payment and its Egg Harbor Township location is Boscov’s highest earning retail department store. We are in the final year of a 10-year agreement without any cost to the taxpayer.

These are just a few of the highlights of our economic development efforts. In the year ahead we plan to build upon the foundation we have established. We have a solid economic development product to sell and interest is growing in what we have to offer.

We were successful in our challenge of the Casino Property Tax Stabilization Act, more commonly known as the Casino PILOT. This misguided law was unfair to every non-casino property taxpayer in Atlantic County. For some reason the sponsors of this legislation inexplicably failed to guarantee the county a fixed percentage of the 10-year PILOT. Prior to our lawsuit, the state eventually gave us a paltry 10.4% share. We insisted that a 13.5% share of the PILOT was fair. Unfortunately, we had to spend almost $300,000 in legal fees to get what was rightfully ours in the first place. However, the cost to taxpayers for not challenging the law would have been much greater. The difference between the 10.4% share as originally offered and 13.5% over the life of the PILOT is $30 million.

Over the past 10 years, our region has faced significant economic challenges but we were able to work through them successfully. As a result of a national decline in the housing market and the decline in the local casino industry, the tax base of Atlantic County had dropped $27.3 billion. The next highest value loss in the state was approximately $17 billion. The impact of a declining tax base was exacerbated by the fact that we also had to refund over $78 million because of successful tax appeals, mostly by casinos, due to overassessments. These overassessments occurred while the city was subject to strict financial state oversight. No other county has even come close to what we had to refund. For 2018, the county’s refunds of $8.3 million are approximately twice what the next highest county refunded.

In order for Atlantic County government to absorb all this, we had to be in a strong financial position. Whenever possible, Atlantic County has implemented a policy of “pay as you go” so as not to burden the next generation with any debt we would incur. Our current surplus stands at $18.3 million, of which 50%, or $9.165 million, will be applied to the 2019 budget.

The years ahead will offer more opportunity. This optimism is reflected in the 2019 budget I will introduce. Despite some state generated uncertainties at this time, our financial outlook is very good. We have been working with the state monitor for Atlantic City to finalize a number of property tax appeal refunds which we had been led to believe were settled. While these refunds do impact our financial operations, we have been assured that they should not have any significant affect this year.

In 2019, there will be no tax increase. Based on the information we have from the state, it appears the county general purpose tax will go down one cent.

In 2018, the county successfully negotiated nine union contracts. The majority of those contracts settled at 2%. Our total salary and wage expense is up $1,142,235 million, a 1.51% increase. We lowered our health benefits cost by negotiating with unions to move into the State Health Benefit 2030 Plan. By moving to this plan, employees pay less in their pro-rata share and see more in their paychecks. While the state raised the health benefits premiums by 2% for 2019, the county has reduced that entire increase and reduced the overall expense by $148,163 as a result of this change.

The 2019 budget includes some increases that are beyond our control. The first are the psychiatric payments made by the county on behalf of residents. That increase is $620,995 for 2019 and is on top of the $599,530 in 2018.

Although the Joint Insurance Fund has been an effective cost management tool for the county by ensuring ongoing training, regular financial and programmatic case reviews, and sharing of legal services, our cost is determined by an actuarial projection. This year’s projection requires that the county increase this line item by $507,937.

Our total Other Expenses line item is up $536,195, 50% of which include state administered, county funded programs such as the Medical Examiner and Harborfields Detention Center. The lion’s share of the balance is the ongoing maintenance costs of our buildings in Facilities including the additional new space for the police academy on the Mays Landing campus of Atlantic Cape Community College.

The county has maintained a steady debt service for many years. By keeping that line item stable, we have been able to provide funding for major projects such as: the Criminal Court Complex and Government Complex in Mays Landing, Vocational School addition, Atlantic Cape Community College’s Hospitality Wing, Public Works equipment, Facilities and Planning/Engineering capital projects, along with the Stockton Atlantic City campus and the Aviation Research Park, to mention a few. The county’s net debt expressed as a percentage is less than 0.457% of our total debt capacity.

The county’s two bond credit ratings remained stable in 2018. In rating the county Aa2, Moody’s Investors said, “the county has retained a stable financial position despite dealing with the fallout from the financial issues of Atlantic City...” Moody’s credits the county with strong liquidity, modest debt and pension burden, and strong financial management practices and policies.

Standard and Poor (S&P) rated Atlantic County as AA stable. They noted our “very strong liquidity, strong budgetary flexibility, strong budgetary performance, strong debt and contingent liability profile, very strong management, and a strong institutional framework.”

Such findings are validated by the fact that the county has had 19 perfect audits in a row by five different auditors.

In conclusion, let me emphasize that we are in good financial shape. This is due to the ongoing efforts of a great financial team and cooperation of this Freeholder Board. That does not mean that we can now sit back and relax. Just the opposite. It means that we must continue to reduce costs and find efficiencies. Most important, we must work hard to ensure that we build upon the opportunities that lay before us and that we work together to ensure our future prosperity.

Thank you.

Republicans seeking to eject Democratic incumbents from two General Assembly seats in this November’s elections for the 2nd Legislative District are hoping voters will endorse their arguments that Democrat-backed policies on casino taxation have damaged the economy of Atlantic City and its county.

GOP candidates Phil Guenther and John Risley believe they can help overcome a big Republican deficit in voter registration in the Atlantic County district by convincing voters that a 10-year freeze on casino taxation under the city’s 2016 payment in lieu of taxes (PILOT) program has driven up taxes for other property owners and hurt the local economy.

“We need to eliminate or restructure the taxes being frozen in Atlantic City,” said Guenther, in an interview. “Our preference would be that we get the property valuations right for the casinos, that legislatively we find a way that is fair to value the casinos and tax their properties.”

Guenther said Assemblyman Vince Mazzeo, one of the incumbent Democrats, wrote the legislation that froze the casino taxes at a time when five of the city’s 12 gaming halls had closed because of competition from gaming in nearby states.

“Most tax revenue from casinos goes to Trenton to begin with, and now one source of revenue for the city is frozen,” Guenther said. “That was the direct result of legislation that Mazzeo authored.”

Rich DiCriscio, a spokesman for the Democrats’ campaign, said the PILOT program had helped to stabilize both tax revenue from the casinos and the broader Atlantic City economy.

Helping a city on the brink

“Atlantic City was on the brink of bankruptcy when Vince Mazzeo took office in 2014,” DiCriscio said. “He quickly took action, passed the PILOT legislation to stabilize tax rates in the city, and now Atlantic City’s economy has turned around. That legislation is single-handedly responsible for ensuring that casinos paid their fair share into the city’s budget and kept Atlantic County taxpayers from picking up the tab.”

The Republicans also argue that the state takeover of Atlantic City government by the administration of former Gov. Chris Christie in November 2016 needs to end despite last year’s announcement by Gov. Phil Murphy that the state will continue to oversee the city’s perilous finances, possibly until the scheduled end of the program in 2021.

Guenther and his running mate, John Risley, oppose a plan by Mazzeo to transfer local taxing authority to the county from its municipalities because it would increase costs to taxpayers and weaken local control.

“The plan would create a county bureaucracy which would take over all the assessments and all the workings of the tax assessors in all the towns in Atlantic County,” said Risley, a stockbroker and investment adviser. “We would have to hire a lot of people, and it would take all local control away and put it all in the county’s hands.”

Mazzeo said through a spokesman that he supports a countywide tax assessment because it would cut costs and help reduce property taxes. “It’s long past time that we address the sky-high property taxes across our state and find a way to shrink redundant government costs without cutting services,” he said.

Even if the Republicans win the district, Risley said he has no illusions that they will be part of a majority in the Legislature. “Will be in the minority, no question about it,” he said. “It doesn’t bother me because I’m all about Atlantic County.”

For his part, Mazzeo focused on the district as a whole, and pledged to continue to work for lower property taxes.

Paying less in taxes and for prescription drugs

Mazzeo, 55, a small-business owner who lives in Northfield, said he has made some progress on curbing property taxes since the last Assembly election in 2017 but that more remains to be done. “Too many seniors and hard-working families in Atlantic County pay too much in property taxes and for prescription drugs,” he said in a statement.

He acknowledged that the district is among about a half-dozen of a statewide total of 40 that will be competitive in the Nov. 5 election but predicted that he and his running mate, Assemblyman John Armato, will prevail.

“My district has been competitive for over a decade and I know that a win is never handed to you in Atlantic County,” he said. “My district has always been targeted in the past, but I have found a way to win because Atlantic County families know that I am on their side.”

In 2017, Mazzeo and Armato won 28 and 26% of the vote, respectively, some six percentage points ahead of Republicans Vince Sera and Brenda Taube.

Guenther said the GOP would work to overcome the Democrats’ advantage of about 16,000 registered voters by working to attract the district’s approximately 57,000 unaffiliated voters (more than those registered for either of the main parties), urging high turnout among Republicans and hoping to attract any Democrats who are frustrated by the incumbents’ record.

Still, the larger number of registered Democrats may exaggerate the party’s advantage because many of them are in Atlantic City where turnout is traditionally low, said Ben Dworkin, director of the Rowan Institute for Public Policy and Citizenship at Rowan University.

Atlantic City Economy 2019

Registration not deciding factor

Is Atlantic City Going Out Of Business

“Voter registration doesn’t mean as much here,” Dworkin said. “The Democrats have a clear plurality in terms of voter registration but many of those votes are in Atlantic City which historically doesn’t have the kind of turnout that Democrats would always want.”

He noted that the district is one of only two among the state’s total of 40 where representation in Trenton is split between the parties; the district’s state Senate seat has been held by a Republican, Chris Brown, since 2017.

The GOP candidates see Brown’s incumbency, and the fact that he previously served three terms as an assemblyman in LD2, as hopeful signs that they can seize the district from the Democrats.

“The model that we know has been successful already has been Chris Brown’s election to the Assembly and the Senate,” Guenther said. “We believe that the people in the second district understand the issues. Our challenge is to make sure we get that information out.”

Guenther, 61, who was mayor of Brigantine for 25 years until January 2018, said he had been planning to retire but was persuaded to run for the Assembly by GOP officials. He is a former teacher and school principal, and now superintendent of the Atlantic County Vocational and Special Services school districts.

Armato, 71, a retiree from Buena Vista Township, said he will focus on reducing property taxes by working to cut costs and fully fund the state’s school-funding formula if elected to a second term.

“Providing property-tax relief is always a priority,” he said in a statement. “We have made some great strides during the last two years, but New Jersey still needs to fully fund the school-funding formula and focus on shared services to bring property taxes down.”

He played down the possibility that national politics will influence the local race now that President Donald Trump is under threat of impeachment, saying that 2^nd District voters are more concerned with local issues.

Atlantic City Economy 2019 News

“President Trump has been at the center of the media’s attention for four years but that isn’t what people talk to me about at their doors,” he said.