Moody's Investors Service announced Wednesday that it has downgraded Atlantic City's underlying general obligation rating from Baa2 to Ba1 and has listed the city's outlook as negative.
Citing falling gaming revenues, increased out-of-state competition and anticipated casino closures, Moody’s said the downgrade is a reflection of the city’s “significantly weakened tax base, revenue-raising ability and broader economic outlook.”
According to Moody’s, the negative outlook is based on the forecast that “regional competition for casino gaming will further weaken Atlantic City casino revenues and that tax appeals and casino closures will continue to reduce the city’s taxable base and strain the city’s weak financial position.”
The city also suffers from an above-average debt burden, high poverty and unemployment rates and a concentration of taxpayers in an industry “undergoing significant contraction.”
In order to turn the tide, Moody’s says Atlantic City would need to diversify its tax base, attain a structural balance and see growth in its gaming revenues.
The downgrade comes at a turbulent time for Atlantic City. In January, the Atlantic Club Casino Hotel closed its doors, and two more casinos, Showboat and Trump Plaza, have since announced their intentions of closing. Revel, the city’s newest casino, will head to auction next month after declaring bankruptcy for a second time in as many years.
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