ATLANTIC CITY — Moody’s Investors Service has upgraded the resort’s bond rating.
The report, which improved the city’s bond rating from Ba2 to Ba1, said the increase reflected the “substantial strengthening of the city’s fiscal position,” including a sharp increase in fund balances and declines in debt, while maintaining a positive outlook.
Representatives from Moody’s met with Mayor Marty Small Sr., Business Administrator Anthony Swan, Chief Financial Officer Toro Aboderin, auditor Leon Costello and others in the finance department in City Council chambers May 27, the same day the city announced a planned property tax decrease for residents.
“The Ba1 rating recognizes that Atlantic City has proven its ability to achieve good fiscal outcomes under the current fiscal framework created by the state,” said the Moody’s report. “Its cash position and budget management are strong (70% of revenue), it is in structural surplus, and its debt is rapidly declining (92% of revenue at the end of 2023, down from 169% in 2018).”
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The city also made strides in addressing its deferred capital payment, which also contributed to its new rating, according to the report.
In September 2022, Moody’s upgraded the city’s long-term issuer rating to Ba2 from Ba3, with the outlook remaining positive.
The outlook by Moody’s said the city’s budget management was strong and consistently generating substantial surplus while managing good fiscal outcomes, which represented a significant improvement from only a few years ago, when the administration considered the city’s capital needs a drag on its credit profile, Small said.
“While I will always shoot for the stars, and was seeking a multi-tier upgrade from Moody’s this year, I am grateful Moody’s recognized all the great things happening in Atlantic City under my watch, and gave the city yet another upgrade and positive outlook,” Small said Tuesday. “I also appreciate Moody’s once again acknowledging strong government as a reason for the city’s success. The next upgrade will put us in the investment grade, and I will stop at nothing to make sure we achieve that.”
Getting the city’s finances in order was part of the motivation for the 2016 state takeover, signed into law by then-Gov. Chris Christie.
Atlantic City taxpayers will see a reduction in both their school and municipal tax rates, Mayor Marty Small Sr. said Wednesday.
In 2021, Gov. Phil Murphy signed legislation extending the takeover another four years.
Although the report anticipates the state will give the city what it needs to maintain fiscal balance, it won’t keep all the elements in its current fiscal system after 2026, after the state takeover has ended as well as the current agreement under which casinos make payments in lieu of property taxes.
“The primary risk facing the city is the expiration in 2026 of the fiscal framework under which this has been achieved. Governance is therefore a key driver of this rating action. If the current system expires, the city could once again face the volatile casino property tax revenue structure that presented so much trouble a decade ago,” the report states. “This high-poverty city is still not in a position to withstand that type of volatility.”
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