Saving Atlantic City: A mayor who thinks small may be the answer
Guardian, the tall, 61-year-old, bow-tied, balding, gray-haired Republican mayor of Atlantic City, N.J., is a political oddity. He describes himself as an admirer of Republican budget priorities who is “economically to the far right.” In office just over a year in this majority-nonwhite city of about 40,000, he already has cut the size of his city’s workforce by about a third, trimmed its budget sharply and fought with labor unions. He’s a first-time politician but a skilled political operator, talking with ease to blue-collar city workers and visiting drag queens.
He also has loads of praise for President Barack Obama’s “My Brother’s Keeper” mentoring program; has overseen sharp increases in municipal property-tax rates; and says he’s “to the far, far left” on social issues. He won election in a city where Democrats outnumber Republicans nine-to-one—partly on the strength of his popularity in the city’s large African-American community. He also is the first openly gay Republican to head a significant American city.
In the roughly three years left in his term, Guardian will face one of the toughest challenges of any prominent mayor in the country: the reinvention of a city that has squandered a fortune. If he succeeds, Atlantic City could emerge as an example of how a genuinely smaller, more efficient government benefits a diverse and troubled city. If he fails, there’s a real chance this famous resort town could disappear from the map. The ultimate outcome will depend not on executing grandiose plans, but on getting the small things right.
Atlantic City long has held deep cultural significance. From 1921 through 2004, it hosted the Miss America Pageant, which returned to Boardwalk Hall last September after a decade away. It is home to the first boardwalk, the birthplace of saltwater taffy and the source of the street names in Monopoly. With the 1964 Democratic National Convention, it became the smallest American city to host a major-party political convention in modern times. It’s also the place where gambling began its transformation from the disreputable refuge of gangsters to a mainstream form of entertainment.
Most important, though, Atlantic City offers a uniquely American story of invention, innovation and reinvention. Perched on coast-hugging barrier islands, the city offers excellent beaches and perfectly flat land for building. But it’s basically an overgrown sandbar, and nature, left to its own devices, will almost certainly wash it away in time. (Indeed, since the 1980s, federal policy has prohibited subsidies for new development of many such coastal areas.) Before legalized gambling arrived in 1978, the city progressed through a series of identities: a health resort, before modern medicine; a hub of railroad hotels, before the advent of the automobile; a “free zone” where Prohibition went unenforced, until Prohibition was repealed; and the home of one of the nation’s first true convention centers, before larger, better-appointed palaces began to draw business away.
Over time, such reinventions have proven more difficult to pull off. The city has lost population fairly consistently since the end of World War II. In 1976, New Jersey voters legalized casinos in the city, hoping to create a cash cow for the state that would also stimulate local development and keep out organized crime. Licenses were doled out sparingly, with the state Casino Control Commission requiring prospective developers to put up massive resort hotels. Current city planning director Elizabeth Terenik says commission officials of the time “knew quality and understood it.”
For a while, it seemed to work. The Taj Mahal became the first heavily themed casino outside of Las Vegas, and the Borgata became the first big casino in the country to combine a gaming resort with boutique hotel ambiance. The city’s casinos were launched and financed by legitimate businesses. Money was raised on Wall Street, rather than from the mob, so crucial to Las Vegas’s earliest growth. As the only sizable gambling mecca east of the Mississippi, Atlantic City’s casinos thrived through the 1990s and early 2000s. Just three years after the first legal bets were placed, gaming revenues topped $1 billion. They continued to rise each year for the next quarter-century.
While most of the taxes collected went to statewide programs, Atlantic City’s local government got to enjoy the benefits of ever-increasing property tax receipts. “You could increase spending by $5 million a year and nobody would notice,” explains Guardian. “The money was always there.”
But soon enough, the taste for legal gambling spread. For a time, this posed little threat to Atlantic City and may even have helped it, by normalizing entertainment options previously frowned upon as vice. But the legalization of big casinos in nearby Pennsylvania and Maryland dealt a serious competitive blow. Since 2006, annual gaming revenues have fallen almost by half, from $5.2 to $2.9 billion.
Last year, four of the city’s 12 casino hotels—including the much-touted, super-luxury Revel beach resort—closed their doors. This meant mass layoffs that continue to spill over into related industries in a town where more than half the private sector jobs involve the casinos directly. Atlantic City’s unemployment rate remains well above 12 percent, and poverty rates are twice the national average. With more than 85 percent of all municipal revenues coming from the casinos, and with the collapsing real estate market bringing a raft of property tax appeals, the city’s finances entered a freefall.
That was the situation that greeted Don Guardian last fall, when he defeated a two-time incumbent to become the first person elected mayor of Atlantic City listed on the ballot as a Republican. (Elections before the 1990s were officially nonpartisan.) A self-described “lifelong Jersey boy,” Guardian attended the now-defunct Upsala College in East Orange and first came to the Jersey Shore as a regional executive with the Boy Scouts of America. A connector and community activist, he involved himself in every aspect of the city and took a job with one of the then-new casino hotels. His employer seconded him to a Special Improvement District that used payments from the casinos to maintain the city’s boardwalk, beaches and other tourist areas. He ran the ACSID for 20 years, cleaning and brightening the city’s tourist district, even as an indifferent and corrupt city government wasted enormous resources and frittered away opportunities. Along the way, he met his now-husband and moved into a home in a largely African-American neighborhood on the city’s north side.
It’s easy to underestimate the difficulty of the job Guardian now faces or the depths of the crisis faced by his city. During a visit on a single day in May, his top two items of city business involved laying off more than 80 percent of the city’s recreation department and attending a development board briefing on the need to declare nearly the entire city an area in need of redevelopment. Atlantic City is in deep trouble.
Atlantic City’s plight offers a stark contrast to the political left’s standard narrative about what ails American cities. The decline of the manufacturing base isn’t the problem: Atlantic City never had any manufacturing to speak of. It’s not the decline of unions; the two major employers, casinos and government, have some of the strongest unions in the country. While its tax base is paltry today, tax receipts grew annually for 30 years, and the city could invest in almost whatever it pleased. Throughout that period, casino and government jobs were readily available to nearly any local resident with a modicum of skill. Endemic racism also doesn’t appear to be a determinant cause. The two Republican political bosses who ran the city for much of the 20th century, Enoch “Nucky” Johnson and Frank Farley, while corrupt, did not count racial bigotry among their numerous faults. Indeed, both relied on the support of black citizens and helped them play a role in the Atlantic County political machine.
But conservative explanations of urban blight and decline do little better in this case. Gambling can’t be the cause of Atlantic City’s unique troubles; 20 of the 25 largest metropolitan areas in the United States now have casinos. Las Vegas, which relies just as heavily on its gaming industry, got hit much worse than Atlantic City during the recession, but now has a significantly lower unemployment rate. Corruption long has been rampant in local government, with at least five mayors that faced criminal charges in the past half-century. But Atlantic City’s population and prosperity peaked during the era when Nucky Johnson, a figure directly involved in organized crime, ran the place. Low residential property taxes and a major new industry didn’t exactly spark a boom; population continued to decline for the first decade after gambling was introduced.
So what’s the matter with Atlantic City? Part of the blame may lie with the New Jersey Casino Control Commission. Central planning by commission bureaucrats decreed that major casino resorts must have at least 700 rooms. These self-contained worlds gave patrons little reason to leave. As David Schwartz of UNLV describes in his book Suburban Xanadu, even when these structures were economically successful in their own right, they did little to benefit surrounding communities or serve as a catalyst for broader economic development.
It took some time for the commission’s folly to become evident. In the early 1980s, with Las Vegas the only real competition, it would have been hard to lose money in the gaming business. Through the early 2000s, it was still common for Atlantic City’s casinos to “comp” the overwhelming majority of their rooms to gamblers and even pay to bus them into town. Profits on the tables and slots were so large that every other part of the enterprises could be a money loser.
The “bigger is better” strategy continued even as Atlantic City’s East Coast gaming monopoly began to erode. Smaller operators and even one publicly traded company were denied casino licenses. Donald Trump and the precursors of modern casino giants MGM Resorts and Caesars erected their Atlantic City casinos with plenty of government support to build new roads and even to take private homes by eminent domain. This cozy relationship and insulation from new competitors didn’t exactly inspire tip-top management on the part of casino owners. On occasion, the commission had to force fire sales of hotels because of deplorable conditions. In 2007, it stripped the Tropicana of its casino license after rampant customer complaints about bedbugs, cleanliness and other basics of hotel management. But bringing about change proved hard.
“They were providing the jobs and benefits and pensions,” Guardian explained. “Nobody, and I mean nobody, wanted to change things back then.”
More recently, the state involved itself heavily in the construction of the $2.4 billion, 1,399-room Revel, opened in April 2012. An architectural marvel with sweeping views of the ocean from the casino floor, elegant dining and a top-end spa, Revel promised to reinvent the city. When funding ran out, the hotel received a tax credit, at the strong urging of Gov. Chris Christie, worth more than $260 million against future profits. The venture stayed open just a little more than two years, never made a profit and, in bankruptcy, has attracted bids of less than 5 percent of its construction cost.
In short, thinking big has failed Atlantic City. Central planning didn’t produce lasting prosperity. The Casino Control Commission’s strong hand locked Atlantic City into a disastrous pattern of building big even when the market demanded something else. Single-industry towns rarely prosper over the long run, and single-industry towns where central planners control that industry do so even less frequently. As corrupt as the city’s party bosses of days past may have been, as lacking as they were in honesty and effectiveness, their crowning grace likely was that they never tried their hands at central planning. Even the gangsters of the Prohibition era focused on smuggling booze, not serving it.
That’s why Don Guardian just might succeed by thinking small. “I don’t want to second-guess anyone,” he offers, and proceeds to do exactly that a few minutes later. “When I went to Revel [for a pre-opening celebration] they served me a martini that was $18. $18! That was a problem. It wasn’t what people wanted.” He reserves his greatest enthusiasm for things that probably don’t concern most mayors. He talks at length about some ground-level space in a parking garage behind a successful new outlet mall at the city’s entry. The space has been transformed into a combination art gallery and African-American history museum, with murals and frequent SoHo-style art openings.
In a conversation with a TV producer for a special promoting the upcoming summer season, he emphasizes other smaller-scale events that show progress: how casinos have remodeled to host smaller meetings, a new “entertainment shopping” Bass Pro Shops location with giant aquariums and taxidermy. He’s as eager to promote the “1,000 DJ sets” planned for the summer as he is headliners like Meghan Trainor, who will come to Atlantic City for concerts this summer.
Meanwhile, the government is shrinking drastically. Crime is down under Guardian, despite a police force that is nearly one-third smaller than it was a decade ago. Guardian also used his expertise in boardwalk maintenance to transform how the city cleans its streets. He terminated a contract with Atlantic County and replaced heavy street sweepers with leaner, nimbler, cheaper-to-operate equipment run by the city. Streets now can be cleaned daily during high tourist season for less than the city used to pay the county to do the same work every two weeks.
A previously bloated recreation department, with some staff who were paid to do something called “watching boilers,” will be cut to a small fraction of its former size. Some of the savings will be redirected to supplement existing programs run by the Boys & Girls Clubs and Little League. Guardian is dismissive when asked about the havoc unions will raise over the mass layoffs: “It’s a free country,” he says, with a wave of the hand.
It isn’t that Guardian is incapable of thinking big. He wants to attract a college to Atlantic City and, for now, has pinned hopes on a deal that, if all the complicated moving parts fit together, will bring a campus of the state’s Richard Stockton College to the now-shuttered Showboat Casino building. He also would like to see one of the large vacant casinos demolished and replaced with a waterfront piazza that would let visitors see the ocean when they arrive in the city. New tax arrangements with the remaining casinos, still up for approval by the state Legislature, likely will give the city a slightly larger share of the revenue and a more reliable revenue stream.
But thus far, it’s his vision of limited government and small thinking that is showing results. While bond rating agencies downgraded the city’s debt earlier this year, they gave positive notice to a plan by a state-appointed “emergency manager” (something of a misnomer, since he had no power to change municipal policy) to stave off bankruptcy for the near term. Nongaming tourist revenue, which Guardian says was under $100 million 10 years ago, exceeded $1 billion for the first time last year. Free waterfront concerts, newly remodeled casinos and a cleaner-than-before boardwalk also may lure visitors.
But the biggest problems Atlantic City faces are beyond a mayor’s ability to address. In late April 2014, the large casinos had 1,400 job openings. Filling them with city residents would likely bring the unemployment rate down to around the national average. But a very poor local school system leaves many locals unqualified for those jobs. Guardian hopes a college might train at least some of the otherwise unemployed to help fill the gap.
Even worse, there’s an existential threat to Atlantic City. Barrier island erosion and the natural sinking of the Eastern Seaboard, combined with climate change and sea-level rise, means it could eventually be wiped off the map, possibly within a century. Keeping the city whole will require improved flood protections, the cost of which will likely mount into the hundreds of millions of dollars, at least. Whether that price tag is worth paying will hinge greatly on whether the city’s economy dissipates as rapidly as the sand on which it is built.
If Atlantic City is going to succeed, it needs to change. It has done so before and, against long odds, has remained viable as a place to live and do business. Big government and lots of tax money could not save Atlantic City. Saving it will require thinking small.