Death Knell For AC? Not So Fast!

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The Daily Point Headers

Caesars
Caesars Atlantic City


Atlantic City has been failing for many years.  Casinos closingcrime in the streets, small businesses closing and people leaving and not looking back.

More than 5,000 housing units are empty, the result of a 40% decline in population since 1930. Some of them have been boarded up with plywood; a few are so old they’ve begun falling apart.

– The Guardian

Trump Plaza
Trump Plaza

The question is who’s to blame?  In the heat of the presidential campaign there are several voices blaming Donald Trump as his casinos ended up in bankruptcy.  

DO-AC-Logo-hires_teal-200x200As we get ready to broadcast my morning show live from AC on Friday, April 1st, specifically to highlight the Garden State Film Festival, I wanted to offer a couple of thoughts on the city that used to be called “America’s Playground”.  Conversations about Atlantic City typically start with the major mafia influence over labor and construction contracts when Gambling was legalized in the 1970’s.  When this point is raised, it occurs to me that Las Vegas has a very similar mafia influence and they seem to be doing just fine.  That’s not to say that there aren’t clearly issues and added costs that likely hurt the city as it developed into a gambling resort, but given the success in Vegas there must be many other factors.

After gambling was legalized in Atlantic City in 1976, Philadelphia mobster Nicky Scarfo formed Scarf Inc., a concrete subcontractor. Scarf Inc. did work on five of the first nine casinos that were built. The companies that employed Scarf Inc. had to pay non-existent employees but were assured of labor peace at their construction sites, police investigators said.

Scarfo is serving a 55-year federal prison sentence following his conviction in 1988 of being involved in a racketeering conspiracy that included nine slayings.

John McCullough, Philadelphia Roofers Union boss, tried to organize bartenders, waiters, waitresses, bellhops, maids and others in Atlantic City’s service industries, who up to then belonged to Local 54 of the Hotel and Restaurant Employees and Bartenders Union. Local 54 was controlled by a longtime Scarfo friend and associate.

In December 1980, McCullough was murdered in his home by a contract killer.

Scarfo’s influence even extended to the mayor’s office. Atlantic City Mayor Michael Matthews met often with Scarfo family mobsters after his election in 1982 and was later convicted of receiving $10,000 from an undercover FBI agent he thought was an associate of Scarfo in return for arranging the sale of a city-owned plot of land zoned for casino development.

– Washington Monthly

Slot-Machine-5162013NJ Government has long been addicted to gambling tax revenue which has flowed steadily since inception, even as the city falters.  Of course the real story is the lost opportunity compared to the tremendous success in Las Vegas where the casino profits were more than 4 times that of AC.

But profits in Atlantic City have been spotty, trailing far behind those in Nevada. ”Abysmal,” Mr. Roffman said. ”But improving,” Mr. Glasgow said. Mr. Glasgow said Atlantic City casino executives were learning to contain costs, like complimentary offerings and bus subsidies. Earlier, he said, they often ”overreacted” by increasing spending in an effort to head off competition from each new rival casino.

”Cost containment is getting more of this avalanche of revenues down to the bottom line,” he said. Lower Return on the Dollar

Even so, Mr. Roffman noted that for the first nine months of last year, the latest period for which profit figures are available, the casino industry here made only 3.8 cents on each dollar invested, as against 16.8 cents per dollar for the casinos in Nevada for the same period.

– The New York Times

So what happened?  Unlike Vegas, there’s a beach and millions of people that live within a relatively short drive.  There’s only one answer. Politicians who think they know better than the market and the business owners.  When casino gaming was legalized in the late 1970’s it was extended only to Atlantic City and the gaming licenses had to accompany a 500 room hotel…so the small, independent businesses got completely shut out.  In Vegas, you can have electronic gaming in diners!  In 2011 Governor Christie agreed to a change that would allow the minimum number of rooms to drop to 200.  How many casinos have opened and succeeded under the new standard?  Exactly zero.

On January 5, 2011, Gov. Christie signed into legislation a law that allowed developers to build casino hotels in Atlantic City with a minimum of 200 hotel rooms instead of the previous 500. Along with lowering the hotel room minimum, the law also allowed for construction of facilities that were no more than 20,000 square feet, with at least 200 rooms. Developers could also build a staged casino of not more than 30,000 square feet and at least 200 rooms, provided they expanded to the 500-room requirement within five years of licensure.

– Casino City

Christie Sweeney
NJ Governor Chris Christie and NJ Senate President Steve Sweeney

Now the Governor and the Senate President, Steve Sweeney , who incidentally wants to be the next Governor, want the state of New Jersey to take over the finances of the city in order to save it from bankruptcy.

The Mayor is right to be upset.  Clearly the state of New Jersey can’t manage it’s own finances, so how will they do any better in AC?  State management doesn’t bring in more tourists.  State control won’t have people staying longer and spending more money.  This is a political muscle takeover that will empower bureaucrats and politicians who have clear responsibility in wrecking the city in the first place.

There is a three fold solution:

Atlantic City Mayor Don Guardian
Atlantic City Mayor
Don Guardian
  • First, empower the elected Mayor, Don Guardian to submit a long term plan complete with cuts (all the extras that are always mentioned like government cars) and changes to union contracts where necessary in order to obtain temporary and short term state funding for the operation of government services.
  • Second, implement a county police force plan similar to the one in Camden which would enable law enforcement to implement best practices for community relations and crime prevention that have lead to a dramatic reduction of crime in Camden.
  • Third, repeal the requirement of hotel rooms attached to gaming licenses.  It’s time to empower New Jersey’s small and independent business in AC to take advantage of the existing demand for gambling.  This should be accompanied by a long term tax exemption for any business that opens within the city limits.  

Spending cuts, tax breaks, electronic poker while you order breakfast and safer streets will get the city on the right path.  The arrogance of the elite political class in Trenton seemingly waiting for the final collapse looks like the vultures circling a weak and dying man.  The leaders in our state government should be congratulating the Mayor for offering positive steps to save a once great tourist destination, AND acting to save the city instead of waiting for the death knell.

 

 

 

 

 

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