Atlantic City’s fiscal crisis may prompt New Jersey to depart from its historic practice of supporting local-government finances as the gambling hub heads down a path similar to Detroit’s, Bloomberg News reported yesterday. An emergency-management team hired by Governor Chris Christie that includes Kevyn Orr, who guided Detroit’s record bankruptcy, is considering deferring bond payments to help fix the seaside city’s finances, according to a March 23 report. Asking bondholders to accept less than they’re owed would undermine New Jersey’s reputation for nurturing distressed cities, said Ted Molin, a senior credit analyst at Wilmington Trust Co. in Delaware. The last time a municipality in the state defaulted was during the Great Depression, according to its Department of Community Affairs. Any debt losses in the city of about 40,000 would probably cause borrowing costs to rise for fiscally strained New Jersey cities, said Matt Fabian, a partner at Concord, Mass.-based research firm Municipal Market Analytics. “For cities with even a chance of distress, you have to assume the state would pursue bondholder losses,” Fabian said.
