(Recasts with comparison to Detroit, adds quotes)
By Daniel Kelley and Hilary Russ
ATLANTIC CITY NJ/NEW YORK Jan 22 (Reuters) – It’s
“premature” to talk about bankruptcy for troubled gaming resort
Atlantic City, Detroit’s former turnaround expert said Thursday
as he signed on with the latest bid to revive a city some see as
bound to follow the path taken by the Motor City.
Atlantic City’s lifeblood, gaming revenue, has been
decimated as newer casinos in nearby states such as New York and
Massachusetts lured gamblers away from the storied but
downtrodden New Jersey shore locale.
New Jersey Governor Chris Christie on Thursday appointed a
turnaround team, including former Detroit emergency manager
Kevyn Orr – a step the struggling casino town has resisted.
“There’s only one reason to hire Kevyn Orr after Detroit and
that’s if you’re going into bankruptcy, said Tamara Lowin,
Municipal Analyst at Belle Haven Investments.
Christie, a potential 2016 presidential candidate,
acknowledged multiple bipartisan attempts to get the city on
firm financial footing, but said they had failed. All of those
plans required significant state resources.
“We are digging out of an enormous hole,” Christie said. “We
have problems we have to fix… none of them are unfixable if in
fact we have the political will to be able to get them done.”
The team will be led by Emergency Manager Kevin Lavin, who
previously worked for turnaround specialist FTI Consulting.
Lavin is an expert in “delicate discussions with constituencies
with different interests,” said John Rapisardi, a bankruptcy
lawyer at O’Melveny Myers, who has worked with him.
Orr will support Lavin as special counsel. A former
corporate bankruptcy lawyer at the firm Jones Day, Orr most
recently guided Detroit through the biggest-ever U.S. municipal
bankruptcy.
Orr said it was “premature” to talk about bankruptcy for the
city, which must repay a $40 million bridge loan from the state
by March 31. It would take about 90 days to implement a plan and
another 90 days to see results, he said.
Still, observers said that the appointment was a clear
indication of direction.
“(New Jersey) does have a path to municipal bankruptcy in
its statutes – given that, the appearance of Mr. Orr is surely
making a impression on the municipal finance community,” said
Melissa Jacoby, a law professor at the University of North
Carolina.
In New Jersey, a city must win permission from the Local
Finance Board to file for Chapter 9 municipal bankruptcy.
“If Chris Christie is moving this forward then presumably
that access wouldn’t be denied,” said bankruptcy lawyer Michael
Sweet.
The appointment of an emergency manager was rejected by
Atlantic City lawmakers earlier this month as they endorsed
steep budget cuts.
“I’m not in support of it, but if we do get an emergency
manager, I’ll work with him,” said State Assemblyman Vince
Mazzeo, who represents Atlantic City, ahead of the announcement.
There were, however, doubts that Orr can work magic on a
city that saw four of its 12 casinos close in 2014. A fifth,
Trump Entertainment’s Taj Mahal, narrowly averted
closing but remains in bankruptcy. The operating unit of Caesars
Entertainment, the owner of Bally’s Atlantic City and
Caesars Atlantic City, filed for bankruptcy earlier in January.
“No one should expect that the appointment of a very
competent fiscal manager is the solution for Atlantic City,”
said Peter Reinhart, professor and director of the Kislak Real
Estate Institute at Monmouth University, as it would not solve
the underlying problems of a stagnant tourism and casino
industry.
Atlantic City has some parallels with Detroit in the
importance of casino revenues – Detroit’s reliance on casino
cash to help fund a recovery was criticized during its
restructuring process.
Still, Detroit turned to its art collection to ease cuts to
pensions as it climbed out of bankruptcy.
When asked about comparisons to Detroit, Orr said each place
was different and “had to be taken on its own.”
(Additional reporting by Tom Hals, Lisa Lambert, Curtis
Skinner, Megan Davies, writing by Megan Davies; Editing by Diane
Craft and Christian Plumb)
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