New Jersey Governor Chris Christie increased pressure for a state takeover of the nearly bankrupt Atlantic City earlier this month after instructing the commissioner of education to take Atlantic City to court, as the city owes $34 million in outstanding payments to schools. Atlantic City decided to hit back on the April 19 by filing a lawsuit against New Jersey seeking $33.5 million in compensation.

The lawsuit claims that New Jersey had earlier promised to deliver $33.5 million in a financial aid package to help Atlantic City’s struggling economy but in the end never kept its promise. The city states that if the financial aid was delivered as promised, it would have been able to make the required school payments and hence holds the state accountable for its debt to the school district.

The city’s casino revenue stood at $5.2 billion in 2006 but plunged to $2.56 billion in 2015 and is the main reason behind the city’s financial collapse, as four out of the twelve casinos had been forced to close. Atlantic City is expected to receive around $40 to $50 million in taxes during the month of May and New Jersey wants to see the city to use these funds to first clear its $25.5 million in outstanding payments to schools.

The state’s lawsuit requested Judge Julio Mendez to force the city to comply with this requirement but the judge did not have to make any such decision as Atlantic City made its outstanding payment of $4.2 million on April 19 to the schools. Judge Mendez stated that since the city had completed its outstanding payment before the stipulated time, there was no need for the court to instruct Atlantic City and inform them to prioritize its payments to the school system as they were not defaulters.

In a statement, Judge Mendez said “So far, to everybody’s credit, the payments have been made to the satisfaction of the school board. Everybody’s pleased. In some ways, the state has succeeded.”

State legislatures had put together an Atlantic City rescue package for around $33.5 million that required the remaining eight casinos in Atlantic City to make payments on behalf of their property taxes and would be exempt from appealing for their tax assessments. The plan was approved twice by the legislature but Gov. Christie decided to veto the plan on both occasions. The ruling has not gone down well with New Jersey officials and Gov. Christie is yet to respond to the City’s lawsuit.

Atlantic City has also requested the court to provide a special master who will be responsible for overseeing New Jersey’s Division of Local Government Services who is currently responsible for overseeing the majority of the city’s financial resources.

 

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