Casino Connection Atlantic City

30 Years of Gaming

How casinos saved Atlantic City

by Roger Gros

Toward the end of every September in pre-casino Atlantic City, a bitter old joke would make the rounds: “Last one out of town, turn out the lights.”

And it wasn’t far from the truth. Atlantic City in those days was a 10-week economy. Most businesses struggled to make their nut during those weeks. July, August and the first two weeks of September, culminating with the Miss America Pageant, was the most important time of the year. Locals said it best: “Three months of hurry; nine months of worry.” Most workers collected unemployment in the off-season. It was a dire situation for most Atlantic City residents and businesses, with little hope for improvement.

The solution was apparent. With Nevada the only legal U.S. gaming jurisdiction, the history of quasi-legal casinos in Atlantic City provided some hope. After all, the gambling clubs that called Atlantic City home during the 1930s and ’40s helped make this city the entertainment capital of the East Coast. Investigations in the 1950s by Senator Estes Kefauver led to a crackdown and effectively ended the games, not only in Atlantic City but also in other gambling towns like Biloxi, Mississippi; North Covington, Kentucky; Steubenville, Ohio, and others.

Simple Answers

So when it came time to revitalize Atlantic City, gaming was a logical, if not the only, choice.

After the back-room gambling halls shut down, Atlantic City’s plight got even worse. The 1964 Democratic National Convention produced some historic American political drama (including Robert F. Kennedy’s speech just nine months after his brother’s assassination). It also exposed Atlantic City for exactly what it was: a second-class resort on the decline.

The first hint that gaming could be the solution came in 1968, when the New Jersey Assembly held hearings considering the introduction of legalized gaming. Every member of law enforcement who testified agreed that legalized casinos would be impossible to police—except for one: Essex County Prosecutor Brendan Byrne.

“I discovered that you couldn’t stamp out gambling, so I thought why not legalize it and make the state a partner in the gambling operation?” said the future governor of New Jersey.

But there were several problems with that scenario. First, the current governor would not approve gaming under any circumstances. And the only legal gaming jurisdiction in the United States at that time was Nevada, whose reputation was, shall we say, less than stellar. New Jersey itself had something of a sullied background. It was widely regarded as one of the most corrupt states in the country. And Atlantic City itself wasn’t squeaky clean, either.

“The political leadership in Atlantic City was going to jail and would continue going to jail,” says Steven Perskie, now a Superior Court judge, then a freshman assemblyman. “So the idea of bringing casinos to Atlantic City was to take an industry with an unsavory background, that couldn’t be financed without mob-related union money, and putting it into the most corrupt city of the most corrupt state in the nation. So that idea didn’t fly very well.”

Nonetheless, as a candidate for governor in 1973, Byrne supported the idea of legalized casinos for Atlantic City. His election provided a window for Perskie. But political realities soon hit home.

“We discovered,” says Perskie, “that we couldn’t get a gaming bill passed without including some of the other communities that needed help as well.” So the referendum put before the voters in November 1974 held out the option that gambling could be approved for any town in the state, if that town and the county in which is was to be located voted for it. Byrne did not support it. He wanted a bill that would benefit only Atlantic City.

The referendum failed by a large margin, mostly because New Jersey residents didn’t mind helping Atlantic City, but didn’t want casinos in their backyards.

Second Chances

After the loss in ’74, Atlantic City Mayor Joseph Lazarow organized the Committee to Rebuild Atlantic City, or CRAC.

“Atlantic City at that time was no different than it is today,” says Perskie. “In those days, you could not get any three people in a room to agree on anything. Yet on this issue, you had the commercial, hotel, union, racial and political leadership of both parties united on how to approach it. In 1976, we realized this was not only a second chance, it was likely our last chance. To my amazement, it worked. Around that table from April to November, everybody behaved. After the referendum, everything went back to normal.”

For Perskie, the second referendum was successful because they learned from mistakes made the first time around. “Since we had been asked all kinds of questions about the casino industry during the ’74 campaign—how would it be controlled, what games would be offered, who would oversee the casino and the like—questions we could not answer—we decided to write the Casino Control Act before the ’76 campaign began so we’d have all the answers,” he says.

Pressure to get the casinos open began to mount immediately after the election. “The very day after the referendum passed,” says Dan Heneghan, now pubic information officer for the Casino Control Commission, but for 15 years the main gaming reporter for the Atlantic City Press, “we got a call at the newspaper from the Associated Press asking us where the first casino was located.”

Locals had a little more patience than the AP… but not much. “There was quite a bit of pressure to get these casinos open,” says former Senator Bill Gormley, then a freshman assemblyman. “It soon became apparent that the casino would be ready long before the investigation was over, so we had to amend the Casino Control Act to provide for temporary licenses.”

The initial investigation process was somewhat convoluted, mostly because it had never been done before, even in Nevada, where licensing was a much less complicated affair. But in April, a temporary license was approved for Resorts and on Memorial Day weekend, the dice began to roll.

Byrne made headlines that day when he warned organized crime to “keep your filthy hands off Atlantic City, and stay the hell out of our state.”

Today, he believes that goal was met. “I knew that with the State Police under Clinton Pagano, I could introduce casino gambling without the influence of organized crime,” says Byrne. “Everybody laughed at me. But there was no reason we couldn’t do it, and we did. It was such a big business that reputable people wanted to get involved to keep organized crime out.”

The permanent license for Resorts International, which had bought and renovated the former Chalfonte/Haddon Hall, was a bit more difficult. The Division of Gaming Enforcement had recommended against it, citing 17 deficiencies. G. Michael “Mickey” Brown conducted the state’s case against Resorts before the commission.

“There was never any pressure on me to go easy on Resorts,” he says. “There may have been pressure on members of the commission, but it was a social pressure to get this thing started. There was concern that we’d kill it before it got started.”

Later that year, Resorts was granted a license by a 5-0 vote. The opening of Resorts was followed one year later by Caesars Boardwalk Regency (now Caesars Atlantic City) in the renovated Howard Johnson’s Hotel. Later that year, Bally’s opened, followed in 1980 by the Brighton (later the Sands), Harrah’s and the Golden Nugget.

Licensing issues complicated the opening of most of the casinos, as the state Division of Gaming Enforcement and Casino Control Commission began to sort out procedures and the balance of power in the regulatory scheme in Atlantic City.

Business Bust

The passage of the referendum in 1976 found many Atlantic City business owners dancing in the streets. Whether it was the golden goose or the streets paved with gold, each expected to profit from the introduction of casino gaming. But the largesse flowing from the casinos largely missed the businesses of Atlantic City.

For one, restaurants that expected to get some spillover from the casinos were sadly disappointed when virtually no casino customers ventured away from the casinos to eat. After all, the casinos provided gourmet dining; there was no need to leave the properties. Some of the city’s most venerable restaurants—Kent’s, Hackney’s, Starns, Carson’s—all closed soon after casinos were introduced.

Other businesses such as furniture stores, auto dealers, department stores and others followed the people. Most new employees of Atlantic City casinos had decided to settle on the mainland, not in Atlantic City. The growth that some had forecasted for Atlantic City was realized in Atlantic County and beyond.

Steve Batzer, who became the most knowledgeable insurance expert in the gaming business and was president of the Atlantic City Chamber of Commerce for several years in the early 1980s, explains why most businesses didn’t make it.

“Many people believed that by merely being in Atlantic City, you were going to participate in the upside of casino gaming,” he says. “In fact, that wasn’t the case. There were a few people who were very fortunate because they owned land in a critical place and made a fortune by selling it, but the businesses that became successful really had to work at becoming businesses the gaming industry could really count on. In the early years, there was a commitment to using local businesses but in many cases, they just weren’t qualified to handle accounts the size of the casinos.

“I was very fortunate to be associated with what was then a national insurance brokerage that already did business with casinos in Las Vegas. So we very rapidly had the capacity and ability to ramp up to handle gaming accounts. But it wasn’t as easy as everyone thought it was going to be. You had to work hard at it.”

Mac Seelig, now president of AC Coin & Slot, a major slot machine manufacturer and distributor, discovered quickly how difficult it was to make a mark in the gaming industry.

“When we first started seeing the vast amounts of people coming into Resorts,” he says, “we were like a deer in the headlights. We didn’t know what to expect. For the perspective of local businesses, it was a shock. The simple volume of money and orders was overwhelming. We had never dealt with purchase orders or change orders. And some big businesses were coming in and running us over.”

But the expectations were never met, according to Seelig. “We expected to be treated differently, to be spoon-fed,” he says. “And the casinos didn’t have time to do that. It was a big business, after all, but it led to some dissatisfaction.”

Seelig soon discovered a way in. As a vending machine supplier along with his wife Kay, he wanted to expand his business into the casinos. But since his business concerned coins going into machines, he figured out a more logical way to do business with casinos.

“We had a vision of what the gaming industry was going to become in Atlantic City, as a family,” he says. “It was just a logical step for us and we were fortunate.”

Promises Promises

The campaign to legalize gaming in Atlantic City included several predictions about what it would mean for the city. In 1976, a study commisioned by CRAC estimated that by 1985, casinos would generate the following:

• 33,690 new jobs, including 24,600 in casino hotels (today, more than 50,000 jobs have been created in casino hotels alone)

• $844 million in new construction (today, more than $5 billion in new and renovated buildings—and growing rapidly—have been built)

• $330 million in payroll (today, more than $1.4 billion is paid out annually) One thing gaming did not do was to solve the unemployment problem in Atlantic City.

State Senator James Whelan, who served two terms on the City Council of Atlantic City in the 1980s before being elected mayor in 1990, says no one realized that it wasn’t enough just to offer jobs.

“Atlantic City was no different than any other urban center experiencing the decay that most cities were at that time,” he says. “Despite all our efforts, it was impossible to cut into the unemployment rate significantly enough to make a difference.”

While Atlantic City itself languished, the mainland boomed. New housing developments, shopping centers, movie theaters (which had fled Atlantic City) and other businesses sprung up to service a population that dramatically increased during those early years. Egg Harbor Township grew so fast, it almost outstripped the highways and school systems.

The Casino Reinvestment Development Authority was formed in 1984 to address the needs in Atlantic City that had gone unanswered. The CRDA (or “creeda” as it was dubbed) immediately set about building desperately needed housing in the city. The slums of the North Inlet were the first target, and in a remarkably short period of time, the entire neighborhood was leveled and rebuilt. Because the elevation had to be raised to avoid flooding, the cost of each home averaged more than $250,000. They were sold at a loss for about $170,000.

“The formation of the CRDA was an important milestone in Atlantic City,” says Whelan. “It’s been a tool that we’ve been able to use to bring some of the promise of casino gaming to the city.”

Gormley says the CRDA was one of the most important pieces of legislation ever passed related to gaming. After the housing issue eased, he says bills passed in the 1990s were able to capitalize on the promise of the CRDA.

“We were able to use the CRDA to take Atlantic City to the next level,” he says. “If we didn’t pass the room credit bill and build a few towers, with about 4,000 to 5,000 rooms total, we wouldn’t have been ready for the next generation of hotels. And if we hadn’t done the entertainment zone bill, where would we be? We wouldn’t have the Walk. We wouldn’t have the Quarter. We wouldn’t have the Pier. We would be nowhere.”

Lean Years

The hustle and bustle of new casinos opening in Atlantic City masked the indifference—and at times outright hostility—of state officials toward Atlantic City. Whelan said it wasn’t just the state.

 “Even U.S. Senator Bill Bradley would have nothing to do with us,” Whelan says.

The decision to deny a license to the internationally known and respected Hilton Hotels Corporation threw a chill on the investment prospects of the city. And by the time the last casino of the decade opened—Showboat, in 1987—the chill had turned to ice.

Governor Tom Kean, who had blithely lasted nearly two terms without so much as a nod toward Atlantic City (with the possible exception of the legislation creating the CRDA), suddenly noticed the malaise enveloping the city. Probably the most important gaming decision of the Kean administration was to appoint former state Senator Frank “Pat” Dodd as a member of the Casino Control Commission.

Dodd didn’t waste much time. He immediately began to investigate the way the commission did business and found some immediate problems. “Something as simple as fingerprinting,” he says. “There was a huge delay in getting people licensed, which required taking fingerprints. I found out that only two retired state police officers were doing the fingerprinting so the appointments were backed up three weeks. We resolved that one quickly.”

Other things didn’t go so quickly, but when a new governor took office, Camden’s Jim Florio, he made streamlining the casino industry a priority and appointed former state Senator Steve Perskie his chief of staff.

A year later, Perskie became chairman of the commission and instituted revolutionary changes that transformed the commission from an adversary to a partner. Perskie and his successors took the time to meet with Wall Street investment bankers to give them the facts about the New Jersey regulatory process.

Today, CCC Chairwoman Linda Kassekert considers this part of her job. “I don’t consider us cheerleaders for the gaming industry,” says Kassekert, “but I believe it is our responsibility to inform investors about how we regulate the industry, and why we should be considered fair and business-friendly.”

But still Atlantic City languished because of doubts about the stability of the regulatory and political systems, and mostly because of a lack of hotel rooms and convention facilities.

“We needed two facilities,” Gormley explains, “a convention center and a special events arena. And if we moved the convention center to where it is today, we could bring the rail line back, which we could not have done otherwise. So it was a no-brainer.”

But it wasn’t until Gormley introduced a bill to offer CRDA tax credits to casinos that built more rooms, then designated “entertainment zones” to encourage the construction of non-gaming amenities, that things began to move again.

“We had to be creative to get this thing moving,” he says. “The room credits, the zoning and the infrastructure improvements we made—like the tunnel—started the ball rolling. Now all we have to do is keep the tax situation stable, and Atlantic City will boom.”

New Dawn, New Day

After 30 years, there is still a lot to be done in Atlantic City. In retrospect, however, some believe that the promise of casino gaming has been fulfilled in a uniquely Atlantic City way.

Perskie explains why it’s a two-part answer. “When you look at the data we published about what would happen if you passed casino gaming in New Jersey, we surpassed it by so much, it’s laughable,” he says. “So we dramatically underestimated the economic power of gaming on Atlantic City. We weren’t even close.

“In terms of what we really had in mind, which was to redevelop the infrastructure and tourism industry in Atlantic City, there’s again two different answers. Did we, over the 30 years, come as far and as fast as we could? The answer is categorically no. The industry fulfilled its obligation by coming into Atlantic City, investing money and running an honest shop. But government did not. Government in Atlantic City did not, government in Trenton did not. At least until the 1990s, when things started to change.

“In 2008, we have to admit that we have come a long way, but also recognize we have a long way to go.”

Whelan believes that a lot has been accomplished, but there will always be more to do.

“I always use the analogy that in 1976, the diving horse was a great gimmick, but after 30 years, it wasn’t so fresh anymore,” he says. “If you’re in the tourist business, you have to constantly change. Las Vegas understands this, and so should we.”

Dennis Gomes, former president of the Tropicana and Trump Taj Mahal in Atlantic City and the Golden Nugget in Las Vegas, believes the Vegas experience will help Atlantic City when it comes to regional competition. Because Las Vegas was not hurt by California gaming, he doesn’t believe Atlantic City will ultimately be hurt either.

“Las Vegas is the mecca of gaming and Atlantic City is the mecca of gaming on the East Coast,” says Gomes. “So the more believers there are, the more people will want to go to mecca.”

Dodd says government has to get out of the way regarding decisions made for Atlantic City and let the people who run the businesses make the decisions.

“Take the rail line, for example,” he explains. “If we used the money that has been invested so far, we could have bought everyone who has ever ridden the rail line a brand new Volkswagen.”

Byrne says the non-gaming amenities that have recently become such a big part of Atlantic City is the right way to go.

“Atlantic City has to make casino gambling part of the overall entertainment package,” he says. “That’s how Atlantic City will survive and prosper. States that offer just gambling and casinos on their own are not doing as well and won’t be as successful in the long run.”

Batzer hopes that the current construction in Atlantic City will be its salvation. “If the four or five major projects that are on the drawing board get up and open,” he says, “Atlantic City will be just fine. And we don’t have to be just a regional destination. I think Atlantic City can be much more. Given its demographics and access to European markets, Atlantic City can be much more.”

Gormley says a little thing like one-way traffic on Pacific Avenue can make a huge difference, but overall there needs to be cooperation between all interests in Atlantic City, as there was in the beginning.

“I’m excited about the future because there’s so much upside potential,” says Gormley. “It’s a matter of integrity. If we can emulate what happened in 1976 where certain personalities were set aside, a lot can be accomplished.”