Casinos are turning profits. Plans were announced recently for a $375 million renovation and reopening of Trump Taj Mahal by Hard Rock casino and Stockton University just broke ground on a satellite campus. A luxury apartment complex, the first to be built in Atlantic City in decades, is under construction. The city’s credit rating has improved.
Atlantic City, left for dead for the last ten years, is having a revival.
“I always say Atlantic City is like Dracula — you can’t kill it, no matter how hard we try,” quipped state Sen. Jim Whelan, who was mayor of Atlantic City from 1990-2001.
It’s all coming after a decade that featured a 50 percent drop in the city’s casino revenues. Nearly half of the city’s casinos closed and 10,000 people lost their jobs, leading to a massive spike in home foreclosures. The city’s finances were so grim, the state took over control in November.
But this week, the sound of heavy equipment and hundreds of construction workers echoed near the city’s fabled Boardwalk. A new playground stood ready for when the local elementary school let out. Property taxes have been reduced. For the first time in a very long time, there is something to be optimistic about in Atlantic City.
“I think we are definitely into the next phase of the city’s history, said David G. Schwartz, an Atlantic City native who is the director of the Center for Gaming Research at the University of Nevada, Las Vegas.”Atlantic City has faced adversity before, and it has always moved forward – even though it sometimes took a few decades.”
Atlantic City has been attracting visitors since the 1850s — and its fortunes have been rising and falling ever since. The HBO show “Boardwalk Empire” cataloged the city’s boom in the 1920s, as local officials aggressively turned a blind eye to prostitution, gambling, and a lack of interest in obeying the country’s Prohibition laws.
By the 1960s, however, the city was in decline. The low point came when the city hosted the 1964 Democratic National Convention. National media — fresh off the Republican convention in thriving San Francisco – were appalled at conditions in Atlantic City, which had rundown hotel rooms, high prices and a perceived lack of customer service. “We just weren’t ready for an event of that size,” said Whelan, who was a “rookie lifeguard” in the city at the time.
The opening of Resorts casino in 1978 – the first such legal site in the U.S. outside of Nevada – kick started a revival that remarkably produced an increase in the city’s casino revenues every single year through 2006. When Borgata — said to be the first “Las Vegas quality” property in Atlantic City — opened in 2003, it led to hundreds of millions of dollars in upgrades by many of its rivals in an effort to keep up.
Then came another downturn. New York and Pennsylvania opened casinos in 2006 and Atlantic City’s casino revenues nosedived every year through 2015 as former tourists stayed close to home. Five of the city’s 12 casinos closed in 2014, including the $2.4 billion Revel property that had opened just two years before.
But just when Atlantic City seemed beyond saving, another turnaround began. In the shuttered casinos, the closed businesses on the Boardwalk and the empty lots, developers began seeing bargains and opportunity.
“People are deciding that there is money to be made in Atlantic City, ” said Atlantic City Mayor Don Guardian “You also see the same developers who were involved in the Jersey City waterfront, Newark, and elsewhere like that. So they are coming here with a background that has been successful – they’re not just pie in the sky.”
Hard Rock International last month announced plans for a major renovation and rebranding of the shuttered Trump Taj Mahal, bringing the number of casinos in the city as of next year to eight. It is expected to bring back thousands of jobs.
The Stockton campus project will include three-story, 56,000 square foot academic building along with a 200,000 square foot residential complex that will house more than 500 students. It is part of The Gateway Project that includes an adjacent six-story office tower for a new South Jersey Gas headquarters.
Real estate developer Jon F. Hanson, who is Governor Chris Christie’s adviser on sports and entertainment industry issues, said that the Stockton site has been a catalyst for other development plans.
‘”People saw that deal and realized the whole area was going to change for the better,” Hanson said. “The key is the foot traffic, which is lacking in Atlantic City – it has always been lacking, really. People didn’t go out of the casinos. As for naysayers about the city, whichever ones are left don’t understand real estate.”
Guardian said the diversification of the city’s economy beyond a focus on gambling will pay long-term dividends.
“If we create a lot of options, when we go into the next recession, we’ll be glad we’re not relying on just tourism and gaming anymore,” he said.
Guardian – a Don Bosco Prep graduate and former Palisades Park resident – publicly feuded with Christie over the state takeover of the city’s finances in November. But he does acknowledge that the reduction in city spending has played a role in the turnaround. And the Stockton satellite campus site “could not have happened without heavy state influence,” Guardian said.
The Stockton and Hard Rock are just two of a number of construction projects underway or in the planning stages in the city.
Boraie Development, which has been active in the rebuilds of Newark and New Brunswick, has begun the early stages of construction of 250 luxury apartments in the city with amenities that include stainless steel appliances, granite countertops, and hardwood floors. The $81 million project, called The Beach at South Inlet, is the first such apartment complex to rise in the city in several decades.
Philadelphia-based developer Bart Blatstein purchased the Pier Shops retail center for just $2.4 million on 2014 and reopened it as The Playground. He also bought the shuttered Showboat casino in 2016 for $23 million. Blatstein has since reopened Showboat as a non-gambling hotel, and bought three other lots near the hotel – including a volleyball court – as he seeks to expand recreational options in the area.
By mid-summer, a 200-foot high observation wheel with large climate-controlled gondolas along the lines of the London Eye is scheduled to open at the Steel Pier, adding another non-gaming attraction to the city’s mix.
In March, a water park developer announced a purchase of the former Atlantic Club casino and a $135 million hotel renovation and “Dolphin Village” water park plan that could lead to the reopening of 300 of the site’s rooms before the end of this year.
While major problems remain – including crime and alarming unemployment and foreclosure rates – the temporary construction jobs and permanent university jobs should stem some of the bleeding.
Whelan, a Democrat, said that the state takeover, though controversial, “gave everyone a sense that the state’s all-in here, and that they feel that we have to make sure this all works.”
Roger Gros, the publisher of Global Gaming Business magazine, agreed.
“After some initial hesitation, I think the state takeover has been good for the city. The state overseer did things that Don Guardian should have done when he was elected — cancel those prohibitive union contracts, fire half of the city employees and stop pandering to the voters. He’ll probably pay for those mistakes in the next election, but it depends upon who wins if we go back to the “bad old days.”
State Senate President Stephen Sweeney, a Democrat from Gloucester County, also was in a conciliatory mood recently.
“When we disagree, we disagree,” Sweeney said at the Stockton groundbreaking. “But when we agree, we work like hell to make things happen. Atlantic City is too important to the entire state for it to fail.”
At the same event, Christie told reporters, “I don’t want to be here exercising this judgment [on the city budget]. But the people of New Jersey were tired of writing multi-million checks to Atlantic City to keep them afloat.”
The state’s tightening of the city’s budget has had an impact. A recently-announced 5 percent municipal tax reduction hardly makes up for the near-doubling of the same rate in the previous seven years. But it’s another symbol of Atlantic City seeming to turn a corner.
Taxes had increased when casinos lost up to 90 percent of their value in the wake of the 2006 openings of casinos in neighboring New York and Pennsylvania. The Atlantic City casino industry lost nearly 50 percent of its peak revenue total in the past decade. But 2016 brought a modest uptick in such revenues. More importantly, all seven surviving casinos turned profitable – with Borgata leading the way with $244.7 million in gross operating profits – an increase of 13.3 percent from 2015.
Another plus for the city is that the 15 percent reduction in spending in its latest budget led Moody’s last month to describe the numbers as a “credit positive.”
“Beleagured is still somewhat of an operative word, but we’re on the way back,” Whelan said.