Atlantic City casino rush could run out of steam
Atlantic City, N.J.
This city's multibillion-dollar gambling boom is showing signs of growing pains almost two years after the casinos opened. A tight credit market, the "Abscam" probe into casino-related corruption, the prospects of competition from New York, and new efforts by local minority groups to oppose profligate development are raising questions about the long-term success of casinos here.
Not that the boom is over. In the next five years or so, independent investment analysts are forecasting that the combined revenues from Atlantic City casinos will exceed those of las Vegas. Three casinos already are in operation; three more may join them this year.
But "about 35 sites which have been assembled for casino-hotel construction will never be built on," says Anthony Hoffman, a casino investment specialist with the brokerage firm of Bache Halsey Stuart Shields Inc. A primary reason, he says, is that the unavailability of construction credit to some developers means the casinos won't be in operation by 1982 when casino gambling is expected to have begun in New York.
This delay could be the key to whether the casinos are built here. "The economic advantage of being 18th or 19th [with a casino] in Atlantic City is nothing compared with being fifth or sixth in New York," Mr. Hoffman says.
Already, the construction of two casinos has been stopped in midstream by the credit crunch, not to mention numerous other groups of developers who can't find the money to lay the first brick.
But tight money alone is not the reason why there is a new damper on casino dedevelopment. The Federal Bureau of Investigation's Abscam probe -- the "Arab scam" -- is also scaring off investors.
Several groups of New Jersey banks have dropped their casino construction plans like hot potatoes because they felt that Abscam tarnished the reputations of several high-placed federal and state officials and that it might ruin theirs , too.
A byproduct of the FBI's Abscam probe is the planned reorganization of the state's Casino Control Commission (CCC), the state agency that licenses casino operations.