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Atlantic City shuffles for business as casino luck runs out

Casinos have been Atlantic City’s lifeblood. Now, they’re bottoming out at alarming rates -- four have already closed this year, leaving thousands unemployed. Economics correspondent Paul Solman explores the gamble that elevated Atlantic City in its prime, and how residents and businesses are trying to cope with its decline as a capital of the gambling industry.

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  • HARI SREENIVASAN:

    Casinos in the U.S. rack up billions of dollars in profits each year. But as they pop up in more states and expand in places like New England, classic gambling spots suffer, case in point, Atlantic City.

    Our economics correspondent Paul Solman has the story, part of his ongoing reporting Making Sense of financial news.

  • MAN:

    I got laid off at Showboat August 31 — 28 years.

  • MAN:

    We're actually fighting for our lives out here.

  • PAUL SOLMAN:

    Workers in Atlantic City, New Jersey, protesting a threatened slash in pay and benefits at the latest casino under siege here, the Trump Taj Mahal.

    What will you do if the Taj closes down?

  • WOMAN:

    I don't know. I don't have an idea, because no jobs. So, what do I do?

  • PAUL SOLMAN:

    Four casinos closed already this year, thousands unemployed, and now the Taj, unless its 3,000 or so workers and the city make concessions.

    Hotel union president Bob McDevitt.

  • C. ROBERT MCDEVITT, President, UNITE-HERE Local54:

    The average wage is about $12 an hour. What makes these middle-class jobs is the health care and the — and the retirement plan. And that's part of the original legislation that brought gambling to Atlantic City.

  • PAUL SOLMAN:

    It was an economic strategy forged to restore the city to its heydays, says Mayor Don Guardian.

  • MAYOR DON GUARDIAN, Atlantic City:

    Atlantic city's been around for 160 years, it's been a destination.

  • PAUL SOLMAN:

    First as a health spa, with rolling chairs to ferry the feeble.

  • DON GUARDIAN:

    Then we built beautiful Victorian hotels to attract the rich people from Philadelphia and New York, and that worked for about 40 years.

  • PAUL SOLMAN:

    Into the 20th century, that is.

  • DON GUARDIAN:

    Then we decided to ignore prohibition. That was very successful.

  • PAUL SOLMAN:

    So successful that when the game of "Monopoly" was popularized in the 1930s, its board was laid out as Atlantic City.

  • DON GUARDIAN:

    And this is Park Place and we're walking right up on our boardwalk now.

  • PAUL SOLMAN:

    Further inland, the still upscale Marven Gardens, the still downscale Mediterranean Avenue. Atlantic City was, after all, a city, with its share of poverty, crime, corruption. Postwar, it suffered white flight, urban blight.

    In 1976, New Jersey voters approved casino gambling to revive Atlantic City. And for a long time, it seemed to work.

  • DON GUARDIAN:

    Every year, you either had a new casino, a casino hotel or casino garage that opened up. It provided tons of jobs to anybody that wanted them, minimum education. You work 60 hours, you make a hundred thousand dollars, you had benefits for you and the family.

  • PAUL SOLMAN:

    No surprise, says Tom Ballance, who runs the Borgata, the fanciest casino in town. For nearly two decades, the next closest legal gambling was in Nevada.

    TOM BALLANCE, President, Borgata Hotel Casino and Spa: When people decided that they wanted to gamble, if they were east of the Mississippi, they were coming to Atlantic City.

  • PAUL SOLMAN:

    But gambling, once the best bet in town, is a monopoly no more.

    Otto Graham, who pushes today's equivalent of the 19th century rolling chair, says his business has stalled as casinos have sprouted elsewhere.

  • OTTO GRAHAM:

    New York, Pennsylvania, Connecticut, Delaware, Maryland, they're all over now. And then now you can go online. You don't even have to leave your house. You can sit in your bedroom, living room, and go online and gamble.

  • TOM BALLANCE:

    How do I convince a person who lives closer to Philadelphia Park or Aqueduct in New York to invest an extra 60 or 90 minutes traveling and an extra $50 or $75 in gas and tolls to come enjoy an Atlantic City experience?

  • PAUL SOLMAN:

    The Borgata's answer, invest in Iron Chef restaurants, nightclubs, entertainment, a Jersey Shore makeover, a la Las Vegas.

    Over at the Golden Nugget, says general manager Tom Pohlman:

  • TOM POHLMAN, General Manager, Golden Nugget Atlantic City:

    We built a $10 million five-star spa. We're a four-diamond resort that completely redid all our rooms.

  • PAUL SOLMAN:

    And like the Borgata, they put a premium on customer service.

    Linda Miller is a regular from Long Island.

  • LINDA MILLER:

    I like this place. I like the dealers. I like the whole atmosphere. I love the craps table.

  • PAUL SOLMAN:

    But many, if not most of Atlantic City's casinos just milked their cash cows. In a city rife with economic forecasters, though, monopoly forever? Did no one consult Izabella?

  • WOMAN:

    Did you know a goal without a plan is just a wish?

  • PAUL SOLMAN:

    But how could a plan to compete have come as a surprise, as neighboring states moved to legalize gambling in the mid-2000s?

    Again, hotel union president Bob McDevitt:

  • C. ROBERT MCDEVITT:

    Ten years, ago the people in Atlantic City, the casino folks, were considering themselves geniuses because the city was making $5.2 billion a year. It's — it's sort of like, you know, the rooster thinking that he makes the sun come up in the morning.

  • PAUL SOLMAN:

    And why not believe the short-term illusion if you're raking it in? Until, of course, the day you're not. And when your casino is finally squeezed, one option is to squeeze the employees, by pulling health benefits, for instance.

  • SONJA TOMLJANOVICH, Taj Mahal Waitstaff:

    How am I going to take my kid to the doctor? We have only two weeks' notice. Our health care going to be discontinued.

  • VALERIE MCMORRIS, Taj Mahal Employee:

    I work with girls that have cancer. I work with people that need medication. And it's just — it's absolutely outrageous.

  • PAUL SOLMAN:

    Another option for a collapsing casino, local property tax concessions from the city. But the mayor is holding firm on the Taj.

  • DON GUARDIAN:

    Everyone has to pay property taxes. I have senior citizens on fixed incomes. They don't get a break. I have people that lost their jobs that worked for casinos, they have to pay their property taxes too, and certainly we brought businesses into town for two reasons, to pay taxes and to provide good jobs for — for our residents.

  • PAUL SOLMAN:

    But the city has far less of both, with tourist traffic down more than 25 percent in less than a decade and casino revenue down nearly 50 percent.

    So was it crazy to wager Atlantic City's future on casinos, as opposed to, say, an airport like the huge one in Newark, New Jersey?

    Urban planner Alan Mallach studies such questions.

    ALAN MALLACH, Center for Community Progress: An airport is a powerful generator, spinoffs, other companies, distribution centers — a casino a lot less so.

  • PAUL SOLMAN:

    That's because most of the casino money goes to the owners, to workers who live out of town, and to the state of New Jersey, which collects the gambling taxes, not Atlantic City.

  • ALAN MALLACH:

    Even though the casinos were drawing in literally billions of dollars, very, very little was trickling out to the rest of the city.

  • PAUL SOLMAN:

    Just look at once-pricey Pacific Avenue, right behind the boardwalk casinos.

  • ALAN MALLACH:

    You will see a bunch of cash-for-gold places. You will see some pawnshops, and then you will see a lot of the kind of low-end stores, dollar stores and things like that, that you see in any poor struggling city in the United States and not much more.

  • MAN:

    Hey, Mr. Mayor.

  • DON GUARDIAN:

    How we doing, guys?

  • PAUL SOLMAN:

    The very popular Republican mayor is working hard to turn things around.

  • DON GUARDIAN:

    So, you will see a doubling and tripling of conventions in Atlantic City in 18 months to — to three years. Then what we need is research and development companies coming here and to be creating jobs that are beyond just tourism.

  • PAUL SOLMAN:

    But if the Taj shuts down, there go its tax payments to the city and its jobs. So, as Izabella might counsel the mayor:

  • WOMAN:

    Your enthusiasm could overcome your better judgment.

  • PAUL SOLMAN:

    And she might even extend that warning to new casino ventures everywhere these days, visions of more good jobs and higher tax revenues notwithstanding.

    This is Paul Solman reporting for the "PBS NewsHour" from Atlantic City.

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