New Jersey

Atlantic City Sues State of New Jersey for $33.5 Million

Like a tapped-out gambler just before the bus leaves for home, Atlantic City is going all in, seeking a $33.5 million payout that would solve its immediate cash problems.

The city sued the state Tuesday for aid it says it was promised but never received. The nearly broke city made its demand while defending itself from a lawsuit by the state Department of Education, which unsuccessfully sought to seize control of Atlantic City's cash until its debt to the schools system was paid off.

The city also seeks the appointment of a special master who in effect would oversee the city's own overseer. It asked the court to appoint a special master to oversee the state Division of Local Government Services, which has been overseeing much of Atlantic City's finances.

The $33.5 million would have come from an Atlantic City rescue package that has been stalled in the state Legislature. Its key provision calls for the city's eight casinos to make payments in lieu of property taxes in return for not appealing their tax assessments. The Legislature passed the plan twice, only to have Gov. Chris Christie veto it both times.

Atlantic City's lawsuit said the city has been counting on the money and has already anticipated having those funds for this year's budget. If the city had the $33.5 million, it would be able to pay its schools without a problem, city officials wrote in the court filing.

Christie's office did not immediately return a call seeking comment.

The city is in dire financial straits, brought on in large part by the contraction of its casino industry, which has seen its revenue plunge from $5.2 billion in 2006 to $2.56 billion last year. As the casinos dropped in value, they and other property owners were able to successfully challenge their property tax assessments, blowing huge holes in the city's budget.

The skirmishing Tuesday came hours after the city paid its schools another $4.2 million to bring itself up to date with scheduled payments. It still owes the schools $25.5 million by July 15.

The state wanted Judge Julio Mendez to order the city to set aside the first $25.5 million of an estimated $40 million to $50 million in taxes the city anticipates receiving in early May, and earmarking the money for the schools. But the judge refused, noting that as of Tuesday morning, the city was current on its payments to the schools.

"So far, to everybody's credit, the payments have been made to the satisfaction of the school board," the judge said. "Everybody's pleased. In some ways, the state has succeeded."

But the judge issued an order obligating the city to comply with a state law requiring it to turn over school tax money to the schools. Robert Tarver, an attorney for the City Council, said the city planned to abide by the law all along.

Copyright AP - Associated Press
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