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.
The CCC, because of reorganization plans and increased pressure from local minority groups, is making it tougher for developers to build on small sites. Black and Hispanic community members are protesting that they are being forced out of affordable housing by the developers. One developer, sources here say, has assembled 1 3/4 acres of land for a casino-hotel project but will be turned down because the CCC wants all new casino-hotel projects to be built on at least two acres of land. Ironically, this developer had little problem obtaining capital for construction because his company sought foreign investors.
Casino development could be opposed more effectively by black and Hispanic minorities, which make up more than 50 percent of the population, if there were not so much infighting between their leaders, says the Rev. Dudley Safaty, associate director of the New Jersey Council of Churches.
For example, there are at least 10 black and Hispanic candidates running for five city commissioner jobs next month. Some of these candidates are attacking each other as well as casino interests and thus hurting their own chances, he says.
Israel Mosee, a respected spokesman for the minority community who isn't running for office, has a dire prediction for the city if more isn't done to help lower-income people who have not been able to cash in on the initial success of gambling.
"This city may die again," he says, basing his opinion on what he sees as the casino's need to develop stronger social and economic links to the community.
Sharply increasing rents have so far forced several thousand blacks and Hispanics to move elsewhere. The city government's efforts to provide subsidized housing are described as "meager" at best by most close observers. And an uncaring attitude toward the community exists among the casinos, Mr. Mosee says.
On the other hand, thousands of local residents have landed permanent jobs with the casinos, many of whom were on welfare or other public assistance before.