Rarely does municipal policy hit me so personally, but I can’t help it with Atlantic City.
Not only does it have broad cultural significance, from Boardwalk Empire to Bruce Springsteen songs to Monopoly, but as a child from the Philadelphia area, I spent many summers “downa shore” in a rented house, playing miniature golf in Ventnor, climbing up Lucy the Margate Elephant, eating salt water taffy and White House cheesesteaks, and walking the boards among the glittering casinos. I was part of my family’s second generation of summer shore-goers — when she was a teenager, my aunt was briefly the half-woman, half-ape at Million Dollar Pier. (It was a costume.) Atlantic City was part of growing up.
And it’s dying. In 2006, Atlantic City casinos had revenue of $5.2 billion. This year that will be cut in half, to figures not seen in 30 years. Revenues will deteriorate further in coming years, according to the Fitch credit rating agency. At the beginning of the year, 12 high-end casinos were open. By the end of the month there will be eight. Closures include Atlantic Club, Trump Plaza, Showboat and, most spectacularly, Revel, a $2.4 billion project that only lasted a couple of years. One of the remaining casinos, the Trump Taj Mahal, could file for bankruptcy.
That drop in casino revenue means the loss of over 5,000 jobs in the city, about one-fifth of the total casino workforce. As 65 percent of the city budget comes from casino property-tax revenue, municipal employees will also face layoffs, and the city plans to hike property taxes on residents 29 percent to make up the difference. This urban tragedy should also trigger an end to the fiction that cities can, in the words of blogger Duncan Black, “gamble their way to prosperity.”
Casino gambling first came to Atlantic City in 1978, when it was still more of a family resort destination, home to the Miss America pageant and several national political conventions. The novelty of an East Coast gambling hall led to some boom years, but most of the non-gambling attractions melted away (Miss America’s still there), and the Boardwalk became more of a promenade to get from one hotel-casino to the other.
From the very beginning, the beachfront casinos raking in profits did essentially nothing to benefit the city as a whole. Remember those cheap streets on the Monopoly board, Baltic and Mediterranean? They’re a block off the Boardwalk, yet the game is accurate. They’ve looked abandoned and shabby for decades. Casino owners deliberately walled off their palaces from the rest of the city.
Without any diversity of attractions for tourists, Atlantic City faced competition once Native American reservations, riverboat gambling and eventually full-fledged gaming establishments popped up throughout the Northeast, in Pennsylvania, in New York, in Delaware and Maryland and beyond.
Everyone bought into the myth that gambling would bring in needed tax revenue, and that you could attract plenty of blackjack and slot machine players no matter how many casinos you built. But the demand was not infinite, and ultimately got divided among all these sites, hurting Atlantic City perhaps the most.
How did city and state leaders react? By unveiling a plan to turn Atlantic City into Las Vegas. Somehow, their response to a glut of gambling was to add more gambling, only with lots of flash and nightclubs and fine dining. Revel, the linchpin of this strategy, secured a $1.2 billion investment from Wall Street mega-bank Morgan Stanley, and $261 million in tax incentive guarantees from the state of New Jersey. Gov. Chris Christie called Revel a “game changer” when it opened in April 2012.
Gamblers looking to pop down the shore for a couple days clearly didn’t want that type of entertainment colossus. Moreover, the project racked up almost $1 billion in debt during the construction phase, straining the budget right from the beginning. Revel never made a dime, and flamed out just two years after its opening. The $261 million could have been guaranteed for something meaningful for city residents, for infrastructure or workforce development or education services. Instead, New Jersey doubled down on Atlantic City…and crapped out.
Incredibly, one of the solutions state leaders have proposed to cauterize the wounds from gambling in other states is to expand New Jersey gambling outside of Atlantic City. State Senate President Steve Sweeney has floated a voter referendum authorizing this, and Christie has been receptive. Bergen County in northern New Jersey has been mentioned as a potential site, perhaps in the new Meadowlands complex, the beneficiary of yet another wad of public money.
Officials say they’ve learned the lessons from Atlantic City in designing the Meadowlands complex, mindful of not leaving the surrounding area behind. But clearly they haven’t, because sinking more money into gambling just dilutes existing casino revenue further, especially in Atlantic City. In addition, building these shrines to entertainment, when New Jersey doesn’t have enough cash in its transportation fund to service its roads, is simply irrational.
Christie and leaders of both parties planned a summit for next week to discuss how to revive Atlantic City’s fortunes. I’d say they should start by recognizing that throwing in with a succession of developer dreams that don’t integrate the concerns the entire community has been a recipe for the city’s failure for nearly 40 years. The city has an unemployment rate of twice the national average, and now must brace for a new wave of unemployed workers in need. That’s a direct result of banking on the savior economy, the idea that one business or one gimmick can provide permanent prosperity.
Atlantic City, with its wide coastline, infrastructure for tourism and proximity to millions of Northeasterners, carries the foundation for a solid economy. That’s why it provided people like me with decades of memories. If city leaders would stop chasing get-rich quick schemes like the lifers working the nickel slots, maybe they could turn things around.
Top Reads from The Fiscal Times: