By the end of today, Atlantic City will use $2.3 million to cover payments due on its bonds, saving investors from the toll of the seaside casino town’s financial collapse, Bloomberg News reported yesterday. With New Jersey seizing control of the city’s finances to avoid a default, the burden is poised to fall instead on residents, municipal employees and businessmen. Atlantic City is the latest test for New Jersey, which hasn’t allowed a local government to default or go bankrupt since the Great Depression -- a commitment that’s left even its distressed municipalities able to raise money for schools, roads and other public works in the bond market. This stands in contrast to what has been seen in California, Alabama and Michigan, where municipalities resorted to bankruptcy after the most recent recession to escape from debts they could no longer afford. The city of 39,000 residents has been veering toward insolvency since a third of its casinos shut down in 2014 due to the proliferation of legalized gambling on the East Coast, which undercut the city’s gambling monopoly. That dealt a blow to its finances, leaving an ongoing budget shortfall of about $100 million, as revenue disappeared and casinos still opened successfully challenged their annual property-tax bills.
