Atlantic City: Too Big to Save?

By Matt Rooney | The Save Jersey Blog

Boardwalk Empire (photo credit: HBO)
Boardwalk Empire (photo credit: HBO)

HBO’s Boardwalk Empire will wrap up this fall, Save Jerseyans, five seasons into a series that launched with critical acclaim but is slated to end amid sober commentary concluding “it’s for the best.” The plot became tired and repetitive. The characters stop developing and evolving. And the initial thrill of its unique period-era theme failed to stand up against its contemporary artistic competition.

We can’t continue to kid ourselves where Atlantic City is concerned. Even Nucky saw the writing on the wall. Many years after the real life seaside emperor was dead and buried, the expression “too big to fail” entered America’s political lexicon during the financial crisis of 2008 as banks, large corporations and, later, car manufacturers received large taxpayer-financed bailouts because, we were told, they were “too big to fail.”  Atlantic City ventures have certainly received their fair share of tax dollars, either directly or through tax breaks, over the past few decades. It didn’t work (in case you’ve been living under a rock and missed the cascade of casino closures in the news).

We’ve subsidized a bad business model with disastrous consequences. That’s not to say there aren’t positive things that can be done tomorrow. The real question: is Atlantic City now too big to save? I suspect the answer is ‘yes’ in the sense that Atlantic City, as we know it, is on its death bed. It’s never been truly “healthy” in the post-WWII era if we’re being honest; gaming was a shot of cortisone to the failing resort town’s heart and nothing more. Out-of-state competition, the legalization of online gambling and a strong Trenton Democrat push for North Jersey casinos will soon decimate any chance of A.C. reemerging as the East Coast’s premiere gambling destination.

But increased competition alone isn’t the whole story. A.C.’s problems are localized and systemic. We found out this week that Atlantic City’s tax base “is likely to shrink next year to half of what it was in 2010” according to its financial chief, falling from $20.5 billion back in 2010 to an estimated $10 billion in 2015. Lacking non-casino ratables, the city’s taxes recently spiked 29% despite spending cuts and operational changes under newly-minted Mayor Don Guardian but none of it could prevent a credit downgrade to junk bond status.

The Christie Administration recently attempted to highlight some “silver linings” including a 95% casino hotel occupancy rate in 2014, an 8.1 percent in retail sales between 2010 to 2013 and a 28% full-service restaurant sales increase. All true. Unfortunately, the host is failing far more quickly and dramatically than antibodies are capable of generating. We’re also talking about percentages here; the pie is shrinking.

Believe me, I’m not trying to play the part of Captain Obvious or Mr. Gloom and Doom, Save Jerseyans. Most of you are already well-acquainted with the breadth of the problem.

My real concern is that our politicians still haven’t come to grips with these challenges.

The Revel casino, slated to close at the end of the 2014 summer season.
The Revel casino, slated to close at the end of the 2014 summer season.

Governor Christie’s “summit” to discuss Atlantic City’s future is two weeks away. His party, with some notable exceptions, was fully-supportive of the ill-advised Revel tax abatement. The other party largely backed it, too, but as I mentioned a little earlier in this post, its members’ currently prefer the “abandon ship” approach in favor of casinos elsewhere in the Garden State with the tacit support of the Democrat state senator of A.C.’s legislative district. Strategy #1 clearly failed. Strategy #2 is clearly illogical – how exactly will MORE subsidized/regulated competition 2-3 hours north improve Atlantic City as an investment? Crickets…

For the summit to succeed, each and every participant needs to acknowledge that the Atlantic City of our fathers is dead and buried. Period. End of sentence. Not debatable. More taxpayer-subsidized giveaways designed to move new tenants into old buildings is, at best, an incomplete and prohibitively expensive strategy and, at worst, an affirmation of the failed business model that doomed A.C. in the first place. Direct intervention by Trenton hasn’t helped A.C. You could argue it’s been predatory.

Our Governor’s macro vision is absolutely the right one. He knows a well-balanced resort with gaming as only one facet of the total experience is the only possible reinvention path for A.C. to talk. That’s precisely why a summit resulting in nothing more than press releases and plans trumpeting public sector handouts and corporate tax breaks would rightly be dismissed as a photo op and little else.

Acceptance is the first step on the road to recovery. This situation isn’t any different.

The creative folks over at HBO will eventually cook up a worthy replacement for Boardwalk Empire. They did it after The Sopranos and they’ll do it again, and again, and again, if history is any guide, because they’re able to think outside of the box and aren’t afraid to do it, either. That’s the HBO brand. I’ll be looking for the same creative courage from our elected official class on September 8th.

8 thoughts on “Atlantic City: Too Big to Save?

  1. This is a ridiculous write-up by someone who doesn’t know what the numbers actually show in AC. NON_GAMING revenue is continuing to rise – by a lot. While gambling revenues are down – even the majority of casinos are still making money – even the Showboat – which is being closed by Bally’s was making money. The casinos that the media is going crazy about closing will be bought out. Why wasn’t anyone going to Trump Plaza? The same reason why no one had been going to Trump Marina or Resorts – they hadn’t been fixed up and renovated since the 1980’s. Revel will not be closed for long and will have a new owner.

    Also – most of the money nbeing used to invest in AC is coming from the CRDA – whcih the casinos contribute to. The fact was that for decades the money was stolen by Trenton politicians to pay for pet projects throughout the state. FINALLY with the development of the tourism district this practice was stopped.

    Is the recent stoppage in decades of robbery by Trenton going to correct Atlantic City over night? No – but the huge expansion of the Steel Pier, the largest convention center on the east coast that Harrah’s Resort Atlantic City is building, the expansion of Gardner’s Basin, the opening of BassProShop will all have a VERY poisitive affect on AC. Atlantic City is NOT a day tripper’s destination – and New Jerseyans have to stop thinking of it as such, Just like Las Vegas is NOT a day trippers destination and has competition THROUGHOUT Nevada. The fact is that Atlantic City is going through the very same change that Las Vegas went through when Atlantic City got gambling. The key difference is that Las Vegas was already known as a fly to destination – and that is what AC has to become.

    This is where all of the AC money was going BEFORE 2011…

    http://www.njcrda.com/community-partnerships-investments/projects-pre-2011/

  2. Well said, Matt. Atlantic City was never going to succeed once it became clear Christie was married to NJ but having an affair with the nation.

    Second, appeasement does not work, yet Christie tried by allowing disgusting party boss politics to get in the way of progress. Whether its the CRDC, the SJTA, DRPA, etc….these organizations bring in hundreds of millions a dollars a year, and the money has been completely misappropriated.

    Next you can’t have a successful Atlantic City with the NY Port Authority running the airport. I was meeting (in his office) with the #1 person in charge of routes (and a most admired executive) for the #1 Canadian airline. I asked him about seasonal flights from Canada to A.C……crickets from NJ’s end. Shameful leadership on our end. Horrible vision and seemingly zero ability to look beyond ‘self’.

    Atlantic City had every opportunity to succeed but the NJ culture of corrupt politics and corrupt disposition of self service first got in the way….again. It seems New Jersey’s culture will never change.it

    PS: Summits are beyond stupid.

  3. You failed to mention one of the biggest reasons for the failure of casino growth in AC. That reason is state government micro management! The state decided that casino licenses would only be awarded to properties with large hotels, granted that this requirement was designed to spur investment and construction spending however it also resulted in casinos which were totally self contained and there was little to no spin off economic activity to other city businesses.

    Las Vegas has neighborhood casinos almost as large as some of the hotel casinos in AC. These neighborhood casinos offer entertainment, dining, movie theaters and other attractions but no hotel rooms. The development of such facilities in AC could attract more day trip customers and perhaps more visitors to AC but are not allowed by law. These neighborhood casinos thrive even though Las Vegas is located over 100 miles from heavily populated areas. AC is located within a few hours drive of millions who would be happy to spend a day in AC but do not want to spend the night.

    The state also required a parking fee be paid even though all casinos offered free parking just as their competition in Las Vegas. This required the casinos to hire parking lot cashiers just to collect the state fee. This also discouraged customers from visiting more than one casino or other area businesses.

    Atlantic City has two things that Las Vegas does not have, a convenient location and an ocean. The failure to take advantage of these assets and to develop attractions which lure visitors and provide spin off benefits to non casino businesses is one result of unnecessary and damaging regulation

    Although state regulations were adopted in hopes of developing a robust and honest industry in AC they resulted, as most government regulations do, to economic stagnation.

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