After Latest Casino Closures, Can Atlantic City Reinvent Itself?
Christie calls ‘summit’ to help plan future for ailing gaming hub, but details are thin on the ground
After a string of high-profile casino closures that seem to threaten the economic future of Atlantic City, the gaming mecca is now looking to diversify its appeal with a return to the beaches, restaurants, and entertainment venues that defined its past as a traditional coastal resort.
With two more gaming venues falling victim over Labor Day weekend to fierce competitive pressure from new out-of-state casinos, industry leaders and elected officials have accepted that the city that was once the East Coast’s unchallenged gambling hub can no longer survive on casinos alone.
So economic development officials are investing in retail outlets, financing new restaurants and conference facilities, and paying millions of dollars to maintain the city’s famous boardwalk.
By building up nongaming businesses, and promoting them alongside surviving casinos, the city can appeal to a broader cross-section of visitors, and ensure its long-term future, officials say.
The diversification of the city’s economy was top of the agenda in Atlantic City on Monday when Gov. Chris Christie summoned around 30 elected officials and industry leaders for a two-hour “summit” on how to survive the casino closures that will leave some 7,600 workers out of a job by the end of the year.
Christie declined after the meeting to specify what had been discussed or what assignments officials had been given ahead of their next meeting in 45 days’ time.
But he left no doubt that government and business leaders believe that casinos will play a smaller, if still prominent, role in the city’s future economy.
“Atlantic City has begun the necessary transition from a gambling hub to a diverse and exciting tourism destination,” Christie said. “We have tried to lead a coordinated, aggressive approach to broaden the city’s appeal.”
The shift is needed to offset a sharp increase in gaming supply in the mid-Atlantic market, which is exceeding the growth in demand, according to the Casino Reinvestment Development Authority, a state organization that takes 1.25 percent of the casinos’ revenues to invest in other areas.
With the addition of 14 new casinos in New York, Maryland, and Pennsylvania, there are now nearly twice as many casinos in the mid-Atlantic market and 34,000 more slot machines than in 2006, while slot revenue has dropped by 2.9 percent during the same period, according to the CRDA.
In response, the city is starting to rebalance its economy.
Nongaming revenues in the city rose by about $160 million to almost $1 billion a year in the last two years, while those revenues for Atlantic County as a whole rose to $4.96 billion in 2013 from $4.72 billion in 2010, the CRDA said.
The authority has invested some $700 million in the city’s tourism district in the first five years of its operation, and has plans for another $475 million, according to the state agency.
CRDA Executive Director John Palmieri said in an interview that the agency donated land worth $5 million to $6 million to a developer that arranged for the outdoor-equipment retailer Bass Pro Shops to build a new 80,000 square-foot store in Atlantic City’s main retail district. The agency also made a $12 million loan to the retailer.
Harrah’s new conference center received a CRDA loan of $30 million toward its $130 million construction cost, while Resorts, a casino operator, was loaned $15 million to open its Margaritaville and Landshark bars on the boardwalk. The CRDA is barred from supporting gaming but can fund nongaming businesses financed by casino operators, Palmieri said.
In its future efforts to bolster Atlantic City’s sagging economy, the CRDA will consider supporting new retail businesses, and market-rate housing projects that would help to repopulate a central business district that is now pockmarked with empty lots, Palmieri said.
In contrast, the Revel, Atlantic City’s latest and most spectacular failure, received none of a $261.3 million tax credit agreed by the New Jersey Economic Development Authority in 2011 because it did not meet the conditions of the credit.
Revel was approved for the money, which represented 75 percent of its anticipated tax revenues over 20 years, but in little more than two years of operation didn’t generate the corporate business, hotel, and sales taxes that would have allowed it to be reimbursed under the state’s Economic Redevelopment and Growth program, said Virginia Pellerin, a spokeswoman for the authority.
“Revel has not received one penny of its ERG award,” she said, responding to criticism that the state had supported the now-bankrupt $2.4 billion project – which closed on September 2.
The Revel debacle showed the perils of relying too heavily on casino revenue, said State Senate President Stephen Sweeney, at Monday’s summit.
Sweeney acknowledged that the gaming industry had overestimated the resilience of the Atlantic City market in the face of the explosion in gaming in other states.
“Mistakes were made,” Sweeney said. “All the eggs were put in one basket.”
But until the authorities figure out how to diversify Atlantic City’s economy, the businesses that have depended on the casinos since gambling was legalized in 1978 will continue to suffer.
They include Mark Fowler, who has been pushing “rolling chairs” along the boardwalk since 1992. Fowler said over Labor Day weekend that business is down about 25 percent this year compared with a typical summer, cutting his earnings to around $40 a day for a 40-hour week, after he has paid rent on his chair.
“Since I came back at the end of the winter, business has dramatically dropped,” said Fowler, 60. “It’s been slow all summer.”
Fowler, whose chair is his only source of income, said he didn’t know if he could continue to make a living with the city’s economic downturn adding to a seasonal decline in the number of visitors after Labor Day, but he would give it a shot.
“I’m going to give it a real hard try for a while and see how it goes,” he said, leaning on an empty chair.