New Jersey extends contract for Atlantic City fiscal work

Reuters News
Posted: Feb 05, 2016 4:44 PM

By Hilary Russ

NEW YORK (Reuters) - Atlantic City, New Jersey's cash-strapped gambling hub, may no longer have a state-appointed emergency manager, but some big costs for outside professionals working to resolve its fiscal crisis will continue.

The state extended its contract with Ernst & Young LLP [ERNY.UL] for another year, through the end of 2016, according to documents obtained by Reuters through a public records request.

In 2015, the firm billed state taxpayers $2 million for restructuring services.

Atlantic City could see its cash flow turn negative by April and is one of the most dangerous cities in New Jersey despite a drop in crime last year.

Including work by EY, emergency manager Kevin Lavin, the law firm Skadden, Arps, Slate, Meagher & Flom and other professionals, taxpayers are now on the hook for at least $3.34 million.

The continuation of EY's work for up to another year sheds light on the still-unfolding saga of state intervention in the seaside resort town.

"The state has gone in and very aggressively worked with municipalities in the past," said Rutgers University senior policy fellow Marc Pfeiffer. "The difference here, however, is that the Division of Local Government Services has the smallest number of staff in known memory."

When Governor Chris Christie appointed Lavin in January 2015, the state was trying something new, said Pfeiffer, who served for 26 years in that division. But Lavin did not have the authority to direct changes in city government, Pfeiffer said.

Christie, with state and local officials, proposed additional state oversight of Atlantic City's operations on Jan. 26. While its budget already must be approved by the state, the new proposal would give New Jersey the power to sell assets, dissolve departments and terminate contracts, including with public labor unions.

Robert Lougy, New Jersey first assistant attorney general, has been one of the state's contacts for EY regarding its contract. His spokesman said the contract with EY was extended "to enable them to complete the work" but declined further comment.

The state denied Reuters' request to provide Lougy's emails, texts and letters, which could help explain decisions about the firm.

This year, EY will charge a blended rate of $470 per hour, compared with the previous rate of $455, according to the amended contract signed by state officials on Jan. 15.

An EY spokesman said the firm does not have "additional insights to share at this time" because it cannot discuss client work.

(Reporting by Hilary Russ; Editing by Daniel Bases and Leslie Adler)