Is Atlantic City Heading Towards Bankruptcy or a Rebirth?

Written By Steve Ruddock on February 9, 2015

The trials and tribulations of Atlantic City have been well documented over the past year, and it now appears the city may be at the proverbial crossroads.

The man who led Detroit through the biggest municipal bankruptcy in the history of the United States has been designated as a consultant by New Jersey Governor Chris Christie to help an emergency manager fix the city’s troubles.

In an executive order issued in late January, Kevyn Orr was chosen by Christie as a consultant (Orr led Detroit through its bankruptcy in 2013) and Kevin Lavin was chosen as the city’s emergency manager.

The move isn’t popular in many corners, and has been roundly criticized by New Jersey Senate President Steve Sweeney. In a Philly.com article, Sweeney called the executive action an attempt by the governor to “force a bankruptcy,” evidenced by Moody’s immediate downgrading of the city following the Executive Order. “It signals a limit to the state’s willingness to provide the financial support necessary to prevent a municipality from defaulting or declaring bankruptcy,” Philly.com quoted Sweeney as saying.

A spokesman for Christie said the move was not a first step towards Chapter 9 bankruptcy, and was actually an alternative to bankruptcy.

Sweeney doesn’t see it that way, and has vowed to sue the governor if he went through with his latest proposal, “We might have to get in a big fight here,” Sweeney told a group of New Jersey mayors during a recent conference. Sweeney also called the move politically motivated, stating that emergency managers sent in to “blow up union contracts” is popular in Republican politics – Christie is near the top of everyone’s shortlist of 2016 Republican presidential candidates.

Christie’s Atlantic City legacy

Chris Christie assumed the New Jersey governor’s office in 2010, and during his tenure the city has been a veritable disaster, plagued by dwindling revenue and rising unemployment. To be fair, Christie inherited a mess, but his policies have done little to help the struggling city, and the city’s casino industry has fallen off a cliff on his watch, despite his attempts to remedy the situation.

In 2011 Christie and Atlantic City devised a five-year plan for the city (namely the gaming industry) to get its house in order. The five year grace period has already been accelerated due to the casino industry’s continued struggles. In 2006 the industry posted revenue of $5.1 billion, a number that had dwindled to just $2.8 billion by 2013 – total gaming revenue dipped to $2.7 billion in 2014.

One attempted fix, online gambling was launched in late 2013 to help the struggling industry, but has proven to be little more than a nice revenue stream (taking in $122 million in 2014) and not the revenue generating juggernaut it was expected to be.

The punishment for Atlantic City should it fail to turn things around was proposed competition from a North Jersey casino, effectively ending Atlantic City’s 40-year monopoly on gaming in the state. Unfortunately, nothing the industry has done has stemmed the bleeding, and with an emergency manager potentially taking over, competition from the Meadowlands could be the least of AC’s problems.

2014 a watershed year

2014 put the city’s financial struggles on center stage, as Atlantic City’s already well documented woes came to a head in 2014 when four of the city’s 12 casino properties were shuttered – Atlantic Club, Revel, Trump Plaza, and Showboat –  with a fifth, Trump Taj Mahal, narrowly avoiding closure.

The loss of the four casinos and an estimated 8,000 jobs has even caused apprehension among longtime AC supporters. This past summer Senate President Steve Sweeney (one of Atlantic City’s biggest champions) stated he was now willing to consider gaming expansion outside of Atlantic City.

In fact, things have gotten so worrisome in Atlantic City that the five-year grace period has for all intents and purposes been scrapped after just three years, and everything from expanded gaming in the state to legalized sports betting to blowing up the current taxes on gaming have been bandied about.

The light at the end of the tunnel

Still, some progress has been made in Atlantic City, and the city appears to be rebuilding itself after hitting bottom. The city’s struggles may allow for its rebirth, as the saying goes, “sometimes you have to hit rock bottom before you can rise up.”

Online gaming has underwhelmed, but appears to be a positive step for all involved, providing a new, modern, way for the city’s casinos to generate revenue.

Legalized sports betting looks to be inevitable in the state and like online gaming should provide another positive revenue stream for the gaming industry.

The proposed casino outside of Atlantic City could help Atlantic City if some of the tax revenue collected is set aside as specifically for Atlantic City – a move that should make another casino (i.e. another competitor) more palatable to the current casino operators.

Plans beyond gaming have already begun. Showboat Casino will be turned into a college campus, and several non-gaming developers have begun eyeing investments in the city, with plans for everything from shopping and entertainment, to housing, to family entertainment in the works.

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Steve Ruddock

Steve covers nearly every angle of online poker in his job as a full-time freelance poker writer. His primary focus is the developing legal and legislative picture for regulated US online poker and gambling.

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