Atlantic City’s mixed fortunes

DANIEL BURSTEIN November 28 1983

Atlantic City’s mixed fortunes

DANIEL BURSTEIN November 28 1983

Atlantic City’s mixed fortunes

Five years after the first glittering casino opened its doors along Atlantic City’s boardwalk, the New Jersey seaside resort city is poised to overtake Las Vegas as the gambling capital of North America. Despite lean early years, when rows of one-armed bandits stood silent and casinos suffered substantial losses, Atlantic City’s nine casinos now report enviable revenues. They had gross revenues of $182.7 million in August and $167.6 million in September (up 30 per cent from September, 1982). At the same time, Las Vegas grossed an average of $162.3 million in July, August and September. But the casino owners’ refusal to invest enough of their profits in the city to

alleviate high unemployment and a chronic housing shortage has caused mass demonstrations along the boardwalk. Angry local residents claim that gambling has meant little more than soaring crime statistics and a growing urban wasteland to them. Palatial hotels and new construction projects line the boardwalk strip, but William Weidner, the president of the Greate Bay Casino Corp., concedes that Atlantic City, away from the boardwalk, “looks like Berlin in 1946.”

The heavy losses that Atlantic City casinos suffered in their first years of operation convinced some skeptics that gambling would not survive there. Only last year three casinos—the Tropicana, the Playboy Hotel & Casino and the Claridge Hotel & Casino—reported losses of between $10 million and $30 million. Casino operators blamed part of their losses on shortages of restaurants, parking spaces and hotel rooms needed to attract lucrative convention

business. They attached further blame to the state regulations designed to keep out organized crime and attract family vacationers. Those restrictions forced casinos to institute such practices as devoting 30 per cent of their tables to people wagering small bets—a rule that the most profitable enterprise, Resorts International Hotel Casino, said cost it as much as $18 million a year. According to Marvin Roffman, a casino industry analyst at the brokerage firm of Janney Montgomery Scott Inc. in Philadelphia, the state regulations meant that it cost 40 per cent more to run a casino in New Jersey than in Nevada.

The easing of that rule and other reg-

ulatory burdens in 1981 has given Atlantic City casinos a timely second chance. Profits at the casinos are up 20 per cent over last year, and the value of shares in such established casinos as Golden Nugget and Bally’s Park Place are climbing rapidly on Wall Street. Responding to glossy promotion and cheap one-day trips, about 24 million visitors will travel to Atlantic City this year. Analysts predict that Atlantic City’s accessibility to 50 million people living on the northeastern seaboard means that the resort’s casino and hotel revenues will continue to grow by 20 per cent annually, compared to only eight per cent for Las Vegas. Declared Steven Eisenberg, a senior analyst at the New York brokerage firm of Bear Stearns & Co.: “The skeptics have underestimated the pent-up demand for gambling in the northeast.”

Atlantic City’s boom is not universally welcomed. The Casino Control Act stipulates that casinos must contribute

eight per cent of their gross revenues (about $120 million this year) to a general fund earmarked for senior citizen benefit programs throughout New Jersey. As well, legislation requires that each operation also set aside two per cent of its annual revenues for “reinvestment” in Atlantic City. But according to Thomas Flynn, a spokesman for the New Jersey Casino Control Commission, the current provision defines reinvestment so broadly that “it covers Resorts International whether it builds a new wing for a community hospital or puts up a parking garage across the

street from the casino.” Declared Flynn: “People who are expecting a pot of money to solve Atlantic City’s problems of schools, sewers, housing and infrastructure are going to be disappointed.” The state’s legislators are pressing for revision of the law by year’s end, and special interest groups hope that casino owners will direct revenues toward such projects as a new convention centre for the city and a $50million refurbishing of the Philadelphia-to-Atlantic City railway line. New Jersey’s proposals to apply a 1.5-percent reinvestment tax on casinos have

also met with forceful opposition from casino operators. Said David Gardner, acting director of the Atlantic City Casino Hotel Association: “We have asked that the investment be an investment, not a tax. The original intent was to give an incentive to operators to build palaces, not to renovate buildings. Now it is looked at as a panacea for every ill, from fixing streets to solving death by natural causes.”

The influx of cash and people has also resulted in a sharp increase in crime. The incidence of murder and rape has risen by more than 100 per cent since legal gambling arrived. The problem of organized crime, which has existed for years in Atlantic City, has intensified as the riches have multiplied. James Flanagan, deputy director of the New Jersey division of gaming enforcement in Trenton, the state capital, said that he is satisfied “that organized crime is not present in the ownership or operation of the nine existing casinos.” He added that the problem lies in the service industries—laundry services for the hotels, plumbing and construction contracting. Said Flanagan: “In these areas there is definite influence from organized crime.”

Still, the gaming industry has brought some beneficial changes to Atlantic City. Casinos last year paid $40 million in property taxes to the city, stimulating needed public works projects. The unemployment rate has dropped to 13 per cent from 18 per cent, although it still remains far higher than the national average of 8.7 per cent. The casinos have created 30,000 jobs, but most of them went to out-ofstate people, often from Las Vegas. Black and Puerto Rican community groups demonstrated along the boardwalk several times over the past five months against alleged discrimination in hiring. Said Leroy Browne, of the National Association for the Advancement of Colored People: “We were told when we voted for casino gambling that we would get a piece of the pie. What we got is jobs as porters and chambermaids.”

The recent upturn in casino fortunes has fuelled initiatives in nine new casino projects, and the Casino Hotel Association conservatively predicts that 17 casino-hotels will open in the city by 1990. Construction has already started on the new $270-million Hilton hotelcasino, and flamboyant New York developer Donald Trump will open a $200million joint venture with Holiday Inns next year which will be one of the largest Atlantic City casinos. Said Trump: “I go there and I see the numbers. There has never been anything like this in history.” For their part, Atlantic City residents only concede that the gambling boom is a mixed blessing—at best. -DANIEL BURSTEIN in Atlantic City.