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 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.
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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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