By DAVID GUTMAN and MARIA-PIA NEGRO
COLLEGE PARK, Md.—When Superstorm Sandy put Atlantic City under water, it dealt another blow to a city already reeling financially from the economic downturn and recent casino expansion throughout the Mid-Atlantic region.
The explosion of newly legalized casinos over the last decade in neighboring states--New York, Pennsylvania and Delaware--has eroded the monopoly that Atlantic City once held on Mid-Atlantic gambling.
Now, after the passage of Question 7, Maryland will soon be home to six full-service casinos, cutting another slice from a regional gambling pie that is not expanding.
“There is $6 billion in gaming for the whole region,” said Bob McDevitt, the president of Unite Here Local 54, the union representing Atlantic City casino workers. “The casino in Queens has had an impact, and Pennsylvania has had a devastating impact. Almost $2 billion has moved to Pennsylvania from Atlantic City in gambling revenue.”
Revenue at Atlantic City casinos peaked in 2006 at $5.2 billion, according to data from the Center for Gaming Research at the University of Nevada, Las Vegas. Around the same time, five casinos opened in Pennsylvania, which had just legalized casino gambling, and revenues in Atlantic City began to slip.
As Pennsylvania continued to open casinos (there are currently 11), Delaware horse tracks morphed into racinos, and slot machine parlors opened in New York City, Atlantic City casino revenues fell off a cliff. From 2006 to 2011, Atlantic City casino revenues fell over 36 percent.
And with the revenue has gone the jobs. From 2006 to 2011, Atlantic City lost 12,220 casino jobs, while Pennsylvania gained 11,850 casino jobs over the same period.
“The damage that’s been done has been done, Maryland won’t have that much of an impact,” McDevitt said. “The real impact has been Delaware. When they developed the three casinos in Delaware, they gave people the opportunity to not drive the extra hour and a half to Atlantic City from the D.C. and Baltimore areas.”
Tony Rodio, the president of the Tropicana Casino and Resort and head of the Casino Association of New Jersey, said the success of year-round residents in Atlantic City and the surrounding areas correlates with the casinos’ success.
“When the casino industry is not doing as well, there are not as many hours to be worked, not as many jobs to be had and our local suppliers don’t get as much service requests,” Rodio said.
As casino jobs disappeared, the unemployment rate soared. It was 12.9 percent in October, ranking Atlantic City 362nd out of the 372 metropolitan areas that the Bureau of Labor and Statistics tracks.
While tax revenue has obviously fallen as the casinos draw in less money, demand for social services has spiked. In the last five years, food stamp recipients in Atlantic County, N.J., (home to Atlantic City) have doubled, according to the New Jersey Department of Human Services.
“People asking for help are usually families that are underemployed. They might work in the casino industry, in the kitchens or housekeeping-type jobs,” said Tom Davidson, director of development at Atlantic City Rescue Mission, a local shelter and food pantry.
Davidson has seen a steady increase of people asking for help—including families in crisis who receive one of 250 emergency food baskets every month.
Over the last six years, families receiving assistance from the Community FoodBank of New Jersey nearly doubled, said Margie Barham, the food bank’s southern Jersey executive director.
The rise in families applying for charitable assistance mirrors the rise of unemployment and underemployment in the state, said Diane Riley, the food bank’s director of advocacy.
“People are not making enough. They have to pay their rent first and then perhaps supplementing their food,” Barham said. “They get on food stamps, go to food pantries, try to do whatever they can.”
Sandy has just exacerbated the underlying problems.
“No one is coming to the casinos because half our market is underwater,” McDevitt said. “Half our members haven’t worked since the storm.”
The struggles of workers deepen when the casino business and tourism slows down. The Casino Association of New Jersey calculates that casino resorts support more than 100,000 New Jersey jobs, either directly or indirectly--including construction workers, security guards and vendors. Many residents with jobs tied to the gaming industry end up working only eight months a year, Davidson said.
“A lot of people have learned to deal with it. They will patch two or three jobs together,” Davidson said. He added that these workers often need extra food or clothing to carry them through the rest of the year.
The impact of the industry’s shrinking revenue goes beyond the Atlantic City boardwalk. For nearly 30 years, the casinos invested more than $1.5 billion in housing and development projects in Atlantic City. The projects, which are administered by the Casino Reinvestment Development Authority, included building renovations, the construction of parks and community gardens. The funds also supported homeownership programs and hotel expansions.
In addition to being Atlantic City’s economic engine, the gaming industry is also critical to New Jersey’s economy. Casinos spend billions with small independent vendors throughout the entire state. The industry also pumps nearly $1 billion in tax money at the state and local level--half of which provides housing, transportation and medical assistance for the state’s elderly and disabled. Last year, the tax revenues coming directly from casinos: $277.6 million.
Gov. Chris Christie knew this when he took matters into his hands in a state-led effort to revive the struggling city.
“Atlantic City is dying,” Christie pronounced in 2010; when he proposed to turn the city into a world-class resort filled with spas, fine dining, entertainment and retail that would attract people who want to vacation there.
This September, Atlantic City’s plan to use new attractions to pull in more customers and create more jobs received a blow when Hard Rock International decided not to build a hotel-casino in the city. The developers dropped their plans on the day the group was scheduled to pay $1 million to the state for the project, according to local newspapers.
N.J. state Sen. Jim Whelan, D-Atlantic, told the Press of Atlantic City that this was no surprise given the market conditions in the area and the national economy.
Rodio said that Hard Rock’s decision did not affect the future of Atlantic City.
“I think that we have enough gaming capacity, so the addition of a thirteenth casino in some respects probably would not be a good thing,” Rodio said.
Atlantic City’s 12th casino, Revel, was supposed to help revive the gambling market and create more than 5,000 jobs. The $2.4 billion casino and resort opened in April.
“It has (worked) in the past. A new attraction has helped to boost the local economy,” said David Schwartz, director of the Center for Gaming Research. He cited the Borgata Casino’s success when it opened in 2003 to explain the benefits of opening new casinos.
The state had a vested interest in Revel’s success. Revel’s construction stalled in 2006, after Morgan Stanley walked away from the project. Four years later, New Jersey agreed to reimburse Revel about $261 million in taxes over the next 20 years. The state would receive 20 percent of the profits the casino’s owners would receive.
But, so far, Revel has fallen short of the initial expectations with losses of $37 million between June and August. Meanwhile, all the other 11 casinos had a combined profit of $186 million, according to New Jersey’s Division of Gaming Enforcement.
While Schwartz said that it is too soon to predict the future of Revel, he said that Atlantic City needs to set itself apart from casinos in neighboring states.
“If they do become a destination resort, that would attract people who would not normally stay,” Schwartz said.
The effort to boost the area’s tourist appeal is underway. In 2011, Gov. Christie restructured the gaming regulatory system and created a “Tourism District” to try to slow the city’s decline.
“We are building on opportunities to attract more groups and corporate meeting business; we are continuing to add new brands like Bass Pro and Margaritaville, and developing other tourism drivers” said Kim Butler, a spokesperson for the Casino Reinvestment Development Authority.
“As we change the perception of Atlantic City from gaming-centric to a full-service getaway destination and diversify our offerings, more people will visit and everyone benefits,” she added.
But in the meantime, News Jersey is looking into expanding other gambling options, including Internet gambling and sports betting, the Associate Press reported.
Back in 2011, Christie said he would not consider expanding on-site gambling beyond Atlantic City until seeing the results of the five-year revitalization plan.
Casino operating profits--excluding Revel--were up 2 percent for the third quarter of this year, according to the Division of Gaming Enforcement.
Rodio said this might indicate that emphasizing Atlantic City’s new identity as a tourist destination could work. He said that the existing casinos need to reinvent themselves.
“We cannot be all about gaming revenues,” Rodio said. “We have to be more about all the other amenities and non-gaming revenues that we can get.”