The History of Atlantic City

Atlantic City is a resort town near the southern tip of New Jersey. They legalized casino gambling in the 1970s. Casino gambling in Atlantic City is a $3 billion industry, second only to Las Vegas as an American gambling destination.

Unlike Vegas, Atlantic City is a small town. The population at the last census was just under 40,000. But its reputation is as a resort city. The historic boardwalk (where the casinos are) stretches along four miles of the Jersey shore. 26 million people visit Atlantic City each year, travelling mostly by car from nearby Pennsylvania and New York, though routes via plane and rail are also available.

But Atlantic City was a resort town long before legalized gambling. The city's golden age was the 1920s, when federal law made both gambling and alcohol illegal. Atlantic City's history is more than Donald Trump, beauty pageants, and boxing matches. It's a microcosm of the best and worst about the 20th century.

This article covers the history of Atlantic City from its beginnings to the modern day. We also take a look at what the future might hold for the resort.

A Brief Look at South Jersey

The stretch of land that Atlantic City occupies was described by Benjamin Franklin as "a keg tapped at both ends." He was referring to the fact that South Jersey is sandwiched between New York City to the north and Philadelphia to the west. But it's also squeezed geographically between the Delaware River to the west (with swampy tributaries practically cutting through downtown AC) and the Atlantic Ocean on its immediate eastern border.

Generally speaking, Atlantic City is at the heart of the area of Jersey with a heavy Philadelphia cultural influence. The rest of the state tends to be influenced by New York City. The people calling this part of Jersey home are distinguishable from other residents of the state by their accent, which is much more Philadelphia than Manhattan.

If you've never been in this part of the country, you're missing out. It's gorgeous. The coastline to the south of Atlantic City's boardwalk has pure white sand, ocean water that's warm enough for swimming and surfing five months out of the year, and amazing sport and hobby fishing. Jersey is called "the garden state" partially because of the magnificent soil in the state's central and southern stretches. This area of the country produces amazing fruits and vegetables, tomatoes being the most popular.

Originally a Quaker commonwealth, South Jersey was the population center of present-day New Jersey, and has remained largely settled since the 17th century. Today, the population of the eight counties that make up South Jersey is around 2.5 million. Far from the caricatures presented in popular culture by shows like The Jersey Shore, this part of the country is home to a diverse group of Americans, a strong education system, and plenty to see and do besides lounge on a beach.

The Founding of Atlantic City

The natural beauty in this part of New Jersey was recognizable as a potential resort destination as far back as the 1850s. The first resort hotel in the area (the Belloe House) was built before the city was even founded. Atlantic City was officially incorporated on May 1, 1854, carving sections of the city from nearby Egg Harbor Township and Galloway.

Dr. Jonathan Pitney is considered "the father of Atlantic City." He was a physician and South Jersey native who believed that Absecon Island (where the majority of Atlantic City is located) was the ideal spot for what he called a "medical retreat." Pitney and his business partners proposed the creation of his resort town to Philadelphia railroad executives, who were sold on his notion that salt water and sea air held curative properties.

The opening of the Camden & Atlantic Railroad, which hugged the rim of the bay at the edge of Atlantic City and connected the tiny resort town with Philadelphia, created the phenomenon known as AC to locals. Within twenty years, increased access to the area and the opening of new attractions would bring 500,000 visitors a year to the city.

Soon, hotels and other resort properties were prospering like nowhere else in the country. The United States Hotel, which popped up to serve the influx of new visitors seeking medical treatment on Absecon Island, was the largest hotel in America for decades. Hotel owners soon created the first boardwalk merely to keep sand out of their lobbies. Eventually stretching seven miles to the tip of the Jersey landmass, the Boardwalk is still the most readily-identifiable feature of the Atlantic City metro area.

Atlantic City and Prohibition

The first fifteen years of the 20th century saw a massive building boom on Absecon Island. A second railway was added to help funnel the droves of tourists now flocking to the tiny city. One by one, massive hotels, providing forms of entertainment both legal and illegal, populated the tiny stretch of Jersey Shore.

But what would happen to the city known as "the world's playground" after the 18th Amendment went into effect? How could a city that depended on conviviality and good times survive without John Barleycorn? To put it simply — the consumption of alcohol and a host of other vices went unregulated in Atlantic City for the duration of the 18th Amendment's fourteen-year existence.

The popular TV series Boardwalk Empire is set at the height of both Prohibition and Atlantic City's golden age. It centers on the story of Nucky Johnson, a real-life political juggernaut who single-handedly controlled liquor, gambling, and prostitution, among other crime markets.

The effect of all this underworld activity was immediate. Johnson's influence went as far as the state capitol. It's said that Johnson handpicked congressmen, senators, and governors, thanks to his influence in the Republican Party in the state.

But the end of Prohibition and the beginning of World War Two spelled a near-disaster for the city and for South Jersey as a whole.

The First Collapse

The end of the Second World War led immediately to the first great collapse of the Atlantic City economy.

The first hiccup for the city's popularity was the decline in train travel. The area had long depended on tourists from nearby Philadelphia, New York, and other cities that were close enough for a convenient train trip. With the advent of the automobile, people could look further when choosing a vacation destination. They could also come and go as they wanted, staying for a single night or just a single day, rather than remaining in town for a week or more.

But that wasn't the only factor.

America post-WWII was fast becoming a nation of suburbs. The GI Bill moved returning soldiers out of urban centers and into sprawling private neighborhoods. White flight was a factor in post-war suburban sprawl, as were changes in labor laws and a boom in population. With the suburbs came other luxuries, like air-conditioning, private lawns, and home swimming pools. Why travel all the way to Atlantic City at great expense just to experience what you've got at home?

A final factor may have had a bigger impact than either the automobile or suburban sprawl. More people were able to afford travel by jet to far-away exotic destinations. Families who regularly visited South Jersey were now able to consider places like Miami, California, or Mexico. As the price of jet travel fell, so did tourist interest in a nearby resort haven like Atlantic City.

By the 1960s, Atlantic City was in disrepair. Resorts and hotels were closing and being demolished by the score — but little was moving in to take their places. Of the dozens of huge resorts and hotels along the boardwalk, only three survive. You can find parts of the Claridge, the Dennis, and the Ritz-Carltonas parts of casinos and other buildings.

Something had to be done if Atlantic City were to avoid becoming a ghost town.

The Movement to Legalize Gambling

The first ripple of change in the city's future came in 1970.

For the first time, New Jersey residents voted in favor of a gambling-based referendum, albeit one that created a state lottery. Four years later, the first referendum that would legalize casino gambling state-wide was held. It failed, but by the slimmest of margins.

Businessmen interested in bringing casino gambling to New Jersey got wise and drafted a new referendum two years later. This new legislation limited the scope of legal casino gambling to Atlantic City only. That referendum passed by a margin of twenty points. The first Atlantic City casino (Resorts Atlantic City) opened in 1978.

This was a big deal — after all, at that time, the only other legal casinos in America were in Nevada, nearly two thousand miles away from residents of the east coast. Eventually, fifteen major casinos were built within the city limits. Some of these have subsequently closed, but some are still open today.

AC casino revenues first topped the $1 billion mark in 1981, and revenue grew every year until 2007, peaking at $5.2 billion. That's twenty-six years of growth and high profits.

The Second Collapse

But all is not well on Absecon Island. Atlantic City is in the middle of a second great collapse. In 2014, casino revenues were down for the seventh straight year. The total number of tourists to the city fell for the ninth straight year. The city's airport is struggling. Oh, and the casino industry is in free-fall. Here's what happened.

The 1990s brought competition from the other American gambling Mecca. Vegas revitalized itself, with theme hotels popping up in Nevada as frequently as they once did in New Jersey. Vegas simultaneously became both more enticing as the city of sin and more family-friendly. Improvements to AC casinos were a longer time coming than those in Las Vegas.

Two casinos opened in Connecticut in the early 90s. They were followed by multiple tribal enterprises within a few hundred miles of South Jersey. Expansion of casino and sports gambling in nearby Pennsylvania, New York, and Delaware has chipped away little by little at AC's profits. As more properties appear in non-traditional gambling destinations, Atlantic City casinos begin to shutter their doors.

Not only did New Jersey experience economic hardship in the early 2000s, but the entire country fell prey to a recession in the late 2000s. This came at an awful time for Atlantic City, which was already facing increased competition, reduced revenues, and a surging crime problem. Not only did people not really want to visit Atlantic City. They suddenly couldn't afford it.

Ultimately, six casinos closed between the year 1999 and 2014. The most dramatic closure award goes to Revel, which managed to keep the doors of its cutting-edge hotel and casino property open for less than two years. As if things weren't bad enough, Super storm Sandy hit this part of New Jersey like a bomb, and rumors of the collapse of the city and the destruction of the boardwalk hurt the tourist trade even more.

Now Atlantic City has one of the highest unemployment rates in America--14%. The total labor force that serves the city numbers around 150,000. Thanks to the collapse of the casino tourism industry, 21,000 people on Absecon Island are without work, with few prospects for work in the future.

The Future of Atlantic City

The only thing that will save the city from the same fate it almost experienced in the 1970s is money. And we're not talking about a $100 million renovation. We're talking about a project on the level of what happened in Vegas in the 90s.

The city is cursed by old and often abandoned buildings, a system of roadways that makes little sense in the context of modern transportation, crippling poverty, a surging violent crime rate, and the earliest signs of exodus into the suburbs or to other states.

One suggestion is gaining a lot of attention. Open up casino and sports gambling in other parts of the state and have that sector of the industry pay tribute to Atlantic City to contribute to its redevelopment. Some are concerned that the loss of revenue to Atlantic City would far outpace the income from expanded gaming upstate.

Clearly the city must diversify if it wants to avoid being taken over by the state government. Governor Christie has made that threat as recently as 2011. What would that look like? Remember — Absecon Island is a beautiful haven for wildlife, featuring world-class fishing spots, beautiful beaches and bay systems, and the famous boardwalk. Why shouldn't billions of dollars be poured into the area to develop new spas, retreats, health centers, and other non-gaming activities?

The first step should be to reroute luxury taxes on rooms and other amenities. 100% of all luxury and room taxes in Atlantic City now go directly to the state government. As a triage tactic, returning those funds to the city would stem the immediate threat of collapse and provide local businesses with some incentive to continue to provide services in the face of hardship.

If Atlantic City is still a viable tourist destination in twenty years, it will be because the city has found a way to highlight its natural beauty and other non-gaming features. We expect this will happen. The area is too populated, too important to the state economy, and too important historically to be allowed to fall apart. It will be interesting to see how the state of New Jersey and local AC politicians work this out.