Atlantic City Council members during meeting on Wednesday Sept 7, 2016. They risk defaulting on state loan terms if they fail to dissolve the water works (The Press of Atlantic City / Edward Lea Staff Photographer)

Edward Lea

ATLANTIC CITY — The city is days away from defaulting on state loan terms after City Council didn’t vote Wednesday night on initiating dissolution of its Municipal Utilities Authority.

Council members discussed the authority in executive session, but there wasn’t enough support to reintroduce the authority-related measures, Council President Marty Small said.

Terms of a $73 million loan made the authority’s assets collateral and required the city to adopt an ordinance by Sept. 15 that dissolves the authority if the city can’t pay back the loan.

Failure to pass those measures would result in a default on the loan terms. The state could then demand immediate repayment of money loaned thus far. The city would not be able to repay the loan at this time, putting the authority at risk of monetization by the state, Small and Mayor Don Guardian wrote in an op-ed Monday.

“It’s sad to say, but whatever the state does, we deserve,” Small said. “People didn’t take it seriously. They missed meetings. They claimed meetings were illegal.”

Guardian declined comment.

“We still have a few days to figure it out,” said Chris Filiciello, Guardian’s chief of staff.

Residents packed council chambers Wednesday, and some urged council to rescind a July 28 resolution that authorized the loan.

Councilman Frank Gilliam made a motion to do that, and council voted 5-3-1 to rescind the measure.

But Legislative Counsel Robert Tarver later said the measure needed a two-thirds majority to pass since prior notice of the vote wasn’t given. He also said council can’t rescind the resolution since the state already performed on the agreement by loaning the city money.

Gilliam said the resolution that approved the loan also should have required a two-thirds majority. A pending lawsuit against the city seeks to void the resolution and claims a two-thirds majority of the full council was needed to pass the resolution, since it was an “emergency appropriation.”

“We’re not opposed to making certain decisions and steps we need to advance our situation, but at the same time, we’re very keen on wanting to do things legally and correctly so we don’t find ourselves digging a deeper hole,” Gilliam said

Council has voted down or pulled measures to dissolve the MUA five times.

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