New Jersey Governor Chris Christie’s administration sued cash-strapped gambling hub Atlantic City on Monday, seeking to freeze city spending until it remits the millions of dollars it owes to its school district.
In the civil action, State Education Commissioner David Hespe said Atlantic City owed the district $82 million of tax revenues collected for the school year. The city already paid $48 million of that, but must still remit the remaining $34 million by July 15, court documents showed.
That might be impossible. As of April 1, the city had only $8 million of cash available for operations. Second-quarter tax collections that begin in May will not provide enough to fund required disbursements, the lawsuit said.
Christie is seeking to stop the city from making its $3.2 million payroll on Friday, he said in a televised press conference.
The state sued “to protect the property tax collections that rightfully belong to the Atlantic City School District and the children and families they serve,” Christie said.
In New Jersey, cities must act as collection agents by collecting property taxes on behalf of school districts and transmitting the money to them.
The lawsuit is the latest in Christie’s high-stakes game of chicken against city officials and some lawmakers over whether to take over the city’s operations to avoid bankruptcy.
Christie and state Senate leaders say city officials have not done enough to stop the bleeding. They supported a legislative package that links a full state takeover with one that would provide immediate revenue for the city.
The nearly insolvent city has been under state oversight since 2011. Mayor Don Guardian threatened to close City Hall for three weeks beginning on Friday afternoon because it will not have enough money to pay workers after that.
Christie twice vetoed – even after winning changes he sought – legislation aimed at stabilizing the city’s tax base by letting casinos make fixed payments in lieu of property taxes. The city’s state-approved budget relied on those revenues.
In February, Christie pinned that legislation to the takeover measure, which Guardian initially supported but later called a “fascist dictatorship.”
The package is now stalled in the state Assembly, where Speaker Vincent Prieto has refused to bring it to a vote because he says its goal is to dismantle collective bargaining agreements.
On Monday, Moody’s Investors Service downgraded the city deeper into junk territory, to Caa3.
(Reporting by Hilary Russ; Editing by Dan Grebler)