NEW YORK (The Deal) -- When the Resorts International Casino opened its doors on May 27, 1978, politicians and residents alike felt that the gambling den would be just the ticket to turn Atlantic City, N.J., around. A crowd of thousands gathered just off the beach on the city's famed boardwalk with pocketfuls of bills and coins that they couldn't wait to plunk down on tables and drop into machines. It was the first time gambling had been legalized outside of Nevada, and the 1.5 million New Jersey residents who voted in favor of the measure to bring casinos to the dowdy "Queen of Resorts" no doubt believed they had placed a winning bet.
And for many years it was.
State Senate President Stephen Sweeney, a Democrat, recently told The Deal that the city "had a monopoly on gaming for 30 years."
Recently, though, the tide shifted. In the past 18 months, four casinos -- Revel AC, Trump Plaza Hotel and Casino, the Atlantic Club Casino Hotel and Showboat Atlantic City -- have closed their doors, costing 8,000 workers their jobs. The fading fortunes of Atlantic City's gaming industry have taken a toll on the municipality's fiscal situation. An emergency manager has been tapped to look into the city's dire finances.
Three of the four recently shuttered casinos have gone through bankruptcy: Revel filed for bankruptcy for the second time on June 19; Trump Plaza Hotel and Casino, owned by Trump Entertainment Resorts, filed its latest Chapter 11 petition on Sept. 9; and the Atlantic Club Casino Hotel filed on Nov. 6, 2013. Showboat Atlantic City, owned by Caesars Entertainment Operating Co., closed shop before the gaming company's voluntary Jan. 15 Chapter 11 filing.
The run of bad news prompted Sweeney to publicly lament that the city and its boosters had been "knocked down."
So, what happened?
Wayne Weitz, managing director at restructuring firm Gavin/Salomonese, pointed out that part of the problem for Atlantic City is the proliferation of other casinos in the Northeast.
Pennsylvania, for example, granted five casino licenses in December 2006. Those locations have since opened and "Pennsylvania has passed New Jersey as the second [highest earning] casino state in the country," Weitz said. (First, of course, is Nevada, due to Sin City.)
Weitz also said that Atlantic City was once a "huge draw for New York [residents]," but now those fun-seekers are more likely to go to Foxwoods Resort Casino or Mohegan Sun in Connecticut.
For many in the Northeast, "you're not going to A.C. for the casino; you can get the casino elsewhere."
Timothy W. Walsh, partner at McDermott Will & Emery, echoed Weitz's comments.
Walsh noted that a "big issue you have is the easing of casino restrictions in neighboring states," including Pennsylvania, Connecticut and New York. "That takes away a lot of the draw to Atlantic City," he said.
But the proliferation of gambling is only part of the problem. Atlantic City itself contributed to the downturn. The town is too remote and automobile-centric. A contentious labor dispute is simmering. Some of the properties are poorly designed. And while a seaside location is nice enough in the summer, New Jersey's weather isn't exactly a year-round draw.
Nonetheless, developers haven't given up on the city.