Atlantic City's gaming industry on the rocks amid another casino closure

When Atlantic City opened its first casino in 1978, state and local officials talked up gambling as the path to revival for a shore resort plagued by high unemployment and white flight to the suburbs. While the city had its moments -even surpassing the Las Vegas Strip in gambling revenue for much of the 1980s and 1990s - many politicians, residents and business people are giving up on the dream.

The city is bracing itself for the loss of more than 6,000 jobs at the Revel, Showboat and Trump Plaza, and collateral damage as businesses and the city itself cope with the aftermath. In January, the Atlantic Club Casino Hotel, with about 800 rooms, closed.

"Looking back, people should have been preparing for this day for the past couple of decades," said John Palmieri, who leads the New Jersey state redevelopment efforts here, citing the proliferation of gambling locations across the U.S. Other places have been hit, too.

Some casinos in Pennsylvania, Delaware, Connecticut and Maryland are seeing their fortunes decline, along with some near Lake Tahoe in Nevada. But few wagered as much as Atlantic City, where casino property-tax revenue makes up about 65% of the city's budget. The city of 40,000 is now a prime example of the danger of putting too many economic development eggs in the same basket, and failing to invest in other avenues of growth.

As other parts of the nation experience a slow economic rebound, Atlantic City is going in the other direction. Annual property-tax revenue from the three casinos that are closing totaled more than US$ 30 million, or about 15% of the city's budget, city officials said.

Mayor Don Guardian said Atlantic City would have to cut hundreds of employees and slash the city budget to make up for the losses. The city also is proposing a 29% property tax increase for homeowners. The jobless rate, at 13% and likely to rise, already is more than twice the U.S. rate of 6.2%. "This is worse than Sandy," said Eric McCoy, a local minister who leads a regional church association. "The storm eventually went away. This is going to continue."

Revel closure

Today, the US$ 2.4 billion Revel Casino Hotel empties its hotel. Its casino will close early Tuesday morning. Revel is shutting down a little over two years after opening with high hopes of revitalizing Atlantic City's struggling gambling market. But mired in its second bankruptcy in two years, Revel has been unable to find anyone willing to buy the property and keep it open as a casino. It has never turned a profit.

Analysts and competitors say it was hampered by bad business decisions and a fundamental misunderstanding of the Atlantic City casino customer. "The timing of it could not have been worse," said Mark Juliano, president of Sands Bethlehem in Pennsylvania and the former CEO of Trump Entertainment Resorts in Atlantic City. "The financial climate while Revel was developing and when it opened were completely different."

When the Revel opened just two years ago, it was hailed by Republican Governor Chris Christie and others as a game-changer. Instead, it was hurt by competition from Pennsylvania's casinos and by poor business decisions, including building its own power plant that lost as much as US$ 2 million a month. The casino hotel had an operating loss of US$ 185 million in 2013, and filed for bankruptcy protection from creditors twice before this summer's announcement it would close for good.

Atlantic City boomed through the 1920s Prohibition Era, with fancy restaurants and grandiose hotels, along with Hollywood performers. Trains were often packed with vacationers headed to the swanky resort. Its heyday is captured in HBO's "Boardwalk Empire," featuring the ups and downs of Mayor Nucky Thompson. Its streets inspired the modern "Monopoly" board.

Mayor Don Guardian spoke optimistically last week of openings expected next year, including a Bass Pro Shops location and Harrah's Conference Center, that could create 1,300 jobs in the city. Guardian expressed confidence Friday that Revel would be resurrected as a casino under a new name, projecting that it would sell for US$ 25 million to US$ 50 million. That would also reduce the job losses.

"At $50 million, it's certainly a bargain-basement price for a brand-new facility. It's finding the right buyer, meaning having the financial wherewithal, and then that buyer finding the right brand to come in and run it," he said.

Fitch Ratings estimated Friday that US$ 280 million of the US$ 457 million gamblers lost during the last 12 months at the casinos that are closing would be captured by the survivors. That will help boost profits, and perhaps add some jobs at those properties.