After Nevada, New Jersey is the nation’s leading gambling jurisdiction. The state has one of the nation’s premier lottery organizations, it has an active horseracing business, and of course, it has the casinos of Atlantic City.
In 1969, New Jersey became only the third state to institute a government-run lottery. The state’s operations were different than those in New Hampshire and New York, the pioneer lottery states. Both of these jurisdictions had fallen short of their desired revenue goals because their games were slow and relatively expensive. New Jersey set its revenue targets, and lottery organizers went after the targets aggressively. They advertised the lottery to wide markets. They reduced the price of tickets to fifty cents each, and they held weekly drawings. Using a new style of ticket distribution, they witnessed unparalleled success. New Jersey became a model for other new lottery states – a model that suggested significant sums of money could be raised through the lottery. The state were widely imitated.
The major reason that New Jersey is a leader in gambling revenues is the fact that the state has authorized land-based casino gambling for Atlantic City. It now has twelve very large casinos, which generate gambling win revenues exceeding $4 billion a year.
The casinos of the city draw over 30 million visitors a year to the gambling halls, with over 1 million square feet of gambling space, 35,000 slot machines, and 1,450 tables for games. The hotels also have nearly 12,000 rooms.
For most of a century, New Jersey and urban political corruption seemed to go together like the proverbial horse and carriage, whether it was Jersey City’s Boss Frank “I am the law” Hague, or mobsters in control of activities in Newark, or the Republican political machine of Atlantic City. That machine meant Louis Kinley, “Nucky” Johnson, and “Hap” Farley. Scandal surrounded the southern New Jersey beach city that had been known as “the queen of American resorts”.
Atlantic City had developed as the premier summer resort after a railroad connected Philadelphia with the seaside in the 1850s. A permanent two-mile-long plank boardwalk along the ocean became a community symbol. Dozens of resort hotels, some being the most luxurious in the country, sprang up near the beach area. A pier was constructed, and carnival rides, pitchmen, and shows featuring palm readers, snake charmers, and freak displays appealed to the masses while other accommodations sought to reach out to the most affluent. By the beginning of the twentieth century, over 700,000 visitors a year were crowding into Atlantic City. The community also attracted the new gangsters who flourished during the Prohibition era, and these individuals had their hand in many illegal activities, including prostitution and gambling. But mainly Atlantic City was known for its entertainment. The Miss America show was created there in 1921, and in 1929 it moved into a new convention center.
The bosses kept illegal activities alive, but the community itself began to undergo a slow death during the Depression years and World War II. Postwar prosperity did not turn the town around, as its infrastructure – its many old hotels – no longer had the amenities that summer visitors demanded. Moreover, better transportation – faster trains and air service – could take vacationers to Florida just as easily as to Atlantic City.
The city fathers had to react, or the community would be totally lost. Kinley and Johnson ended their careers with criminal convictions; Farley looked for a better conclusion for his reign. He was instrumental in winning the Democratic National Convention for the resort in 1964. This exposure only showed the resort for what it was, a decaying relic from the past. Out of that public relations disaster emerged a concerted effort to bring casino gaming to Atlantic City. In 1970, Farley used his political power and his position as a state senator to seek state legislation to authorize a vote on casinos. He was unsuccessful and was soundly defeated for reelection as his political corruption was exposed. Others picked up the casino campaign, however. In 1972 a commission was authorized to study casino gambling. The notion that legalized gambling could help eliminate illegal gambling was voiced as well as concerns that casinos would bring in more organized crime. The report recommended that the voters of the state decide the question.
A 1974 referendum was placed upon the ballot by the legislature. It called for state-owned casinos in communities desiring them. Opposition led by religious groups used the notion that casinos would be in every city – “in your backyard” – of the state and also that the state would be at risk if it were the owner of the casinos. The measure failed by a 60 percent to 40 percent margin.
City fathers were devastated, but in 1976 they reorganized for another battle, making sure the power structure of the state was fully organized on behalf of casinos. Legislative leaders sponsored the bill that put the casino proposition on the ballot. This time the casino proposals called for casinos only in Atlantic City, specified that taxes from casinos would go to aid seniors and the handicapped, and specified that casinos were to be committed to urban redevelopment projects for decaying Atlantic City. The bill also called for casinos that would be private rather than state sponsored. That last provision was important, as the casino advocates found a company that was operating casinos in the Bahamas—Resorts International Casino of Freeport – that stepped forward to finance most of the campaign. Resorts put more than $1 million into the campaign. The casino proponents included the governor, the legislature, seniors groups, and local leaders throughout the state; opposition was again confined to religious groups. This time the measure passed by a 56 percent to 44 percent margin. Resorts and the other proponents of casinos had spent $1.5 million on the campaign; the church groups opposed to casinos had spent $22,000
The state legislature passed enabling legislation for the regulation of casinos in 1977, and on 2 June of that year Gov. Brendan Byrne traveled to Atlantic City to sign the bill into law. Governor Byrne promised that the people of Atlantic City would be helped by the casinos and not hurt by them. The casinos were to be the most strictly regulated casinos in the world – a claim heard in every jurisdiction that opens gambling halls. The state of New Jersey was going to keep its vigilance at the highest levels to ensure that there would be no wrongdoing. Byrne ended his signing ceremony with these words, “I’ve said it before and I will repeat it again to organized crime. Keep your filthy hands off Atlantic City. Keep the hell out of our State”.
To accomplish the task he set before the state – to revitalize an economically depressed community with classy casinos run with integrity – the 1977 act created two bodies: the Casino Control Commission (CCC) and the Division of Gaming Enforcement (DGE). The CCC was an independent body of five full-time members appointed by the governor. It had its own staff. The DGE was part of the state attorney general’s office. The DGE investigated license applicants, and also it took initial action against license holders if they violated regulations. Its actions were in the form of nonbinding recommendations to the CCC, however (Lehne 1986; Demaris 1986; Mahon 1980). The casinos were required to give the state 8 percent of their gambling gross profits to be used for the designated purposes and also additional funds (up to 2.5 percent of gross profits) to be used by a Casino Reinvestment Redevelopment Authority for projects in Atlantic City. Casinos had to be in facilities with 500 hotel rooms each. They would be allowed to have 50,000 square feet of gambling space with 500 rooms, and more space if they had more rooms. There were very strict limits placed over advertising activity. At first the casinos had to close each evening, but after a decade, they were allowed to remain open twenty-four hours every day. The notion of strict regulation was supported by the placement of state inspectors on the gambling floors at all times, as over 1,000 regulators were available to monitor the action of the casinos, which eventually numbered twelve.
From the onset, it may be suggested that the whole process was compromised. Only one company sought a license at the beginning, and the state was exceedingly interested in gaining revenues from gambling so that it could start fulfilling the many promises made. The first applicant was Resorts International, a company that had developed casinos in the Bahamas. In doing so, the company had developed many ties with questionable characters and had also been involved in giving many gratuities and favors to government officials. The DGE advised that a license not be granted. The CCC after much soul searching agreed to grant a temporary license. In the duration of the temporary license period, the casino realized net profits almost equal to its $75 million capital investment. At the end of the time, it was again investigated by the DGE. The DGE not only reasserted its past reservations about the activity of Resorts in the Bahamas but also pointed out many violations of New Jersey regulations by Resorts during the temporary license period. Again the DGE recommended that no license be given. As there were as yet no other casinos in operation, however, the CCC overruled the DGE and a permanent license was granted (Mahon 1980; Demaris 1986).
The first casino, Resorts International, had started its operations with the temporary license on Memorial Day weekend in 1978. The success of the opening was dramatic, reflecting a strong pent-up demand for legalized gambling on the East Coast. Most players then, as today, came to Atlantic City by roads, with a good share on bus tours. They were not typical tourists in that they stayed only an average of four to six hours each and spent about fifty dollars each visit.
As the 1980s developed, many operators rushed into Atlantic City to set up shop. The Golden Nugget, Showboat, Harrah’s, and the Tropicana came in from Nevada, and Bally’s slot machine company set up its first casino shop in Atlantic City, as did Donald Trump. Some of the casinos experienced substantial success, but for others a reality of flat revenues and slow growth set in. In the early years of casino gambling, the crime rates in the community soared and charges of organized crime involvement were heard. Yet some researchers claim that the criminal activity was more related to the fact that so many visitors came to town than to the fact that they came to town to visit casinos.
By the time Donald Trump built the largest Atlantic City property, the Taj Mahal, in the late 1980s, the era of growth was put on hold. The casinos were supposed to be a catalyst to cause a rebuilding of the decayed resort city, but this had not happened. Properties near the casinos were boarded up, the city’s population declined (although the area population grew), and unemployment levels remained high. The casinos had done their job – they made revenues, and they certainly paid enough in tax revenues to rebuild several Atlantic City–sized cities. There was simply something missing from the political formula. It did not work. On the other hand, the casino owners remain optimistic that true success is right around the corner.
|
|