Atlantic City versus Detroit: Who is better off?
By Hilary Russ and Megan Davies (Reuters) - "At least we're not Detroit," Atlantic City's Mayor joked just last week during his state of the city address. Don Guardian, who took the helm a year ago after two decades of promoting the city's tourism and businesses, may want to start eating those words. New Jersey Governor Chris Christie on Thursday appointed an emergency management team for the troubled gambling destination. And that - start heating up the crow - includes lawyer Kevyn Orr, the man behind Detroit's historic bankruptcy. Some now think Atlantic City is bound to follow the Motor City's path into Chapter 9 bankruptcy. Yet by some measures, Atlantic City is in worse shape than Detroit, with which it shares such traits as a high poverty rate. For instance: Unlike Detroit, which has a number of growing businesses alongside its traditional auto manufacturing sector, Atlantic City relies almost exclusively on casinos, which make up about 75 percent of its tax base. "Detroit has a business hub," said Michael Sweet, attorney at Fox Rothschild. "I don't know what Atlantic City has besides gaming but certainly for it to enter bankruptcy they would need to figure out what's next - the gaming hub of the East Coast is gone." While the Motor City's Big Three automakers emerged from crisis by the time Detroit was being restructured, Atlantic City's casino industry is still in free fall with no apparent hope for federal bailout. "It's a lesson in the importance of revenue diversity for any city," said Tamara Lowin, municipal analyst at Belle Haven Investments. Detroit has General Motors Co's headquarters in the city but also an influx of non-auto related business. Billionaire Dan Gilbert, who founded mortgage lender Quicken Loans, started moving his operations to Detroit in 2010. Smaller businesses have also bet on the city, such as cycle maker Detroit Bikes. Atlantic City, meanwhile, has begun focusing on conferences, shopping and entertainment. Yet, they are still dependent on tourists. And that often means more of the same, well, tourist stuff. "If I had a dollar for every time someone said to me we need to build a water park, I could've built the damn thing myself," Guardian said. And then there are assets. Detroit was able to use the vast city-owned art collection to leverage the city out of its black hole. Atlantic City's main claim to fame: a boardwalk. BEACH OR BUST? By the end of the current fiscal year, Atlantic City's tax base is projected to decline to $10 billion - half of what is was in 2010. Moody's on Friday slashed its credit rating six notches deeper into junk territory. The silver lining? New Jersey traditionally is more supportive of its local governments than Michigan, said Matt Fabian, managing director of Municipal Market Advisors. The state is "very paternalistic," with a "strong history of control and support," he added. And it does have the Atlantic Ocean. "Last I looked," said William Brandt, a Chicago-based turnaround expert at Development Specialists, Inc., "there were no good beaches in Detroit." The tale of two cities Atlantic City Detroit Poverty rate 34 percent 39 percent Median household income $29,200 $26,325 Debt $348 million $2.4 billion* Population 40,000 689,000 Industry decline over years over decades 2013 Murders 3 109 2013 Robberies 114 744 Percentage of jobs devoted 29 13 to gaming/manufacturing ** Notable assets Famous boardwalk Fine Art *At the time Detroit filed for bankruptcy, it had $2.4 billion of outstanding taxable pension bonds and limited and unlimited tax general obligation bonds altogether. Other kinds of debts are not included in this figure. ** Percentage shows gaming for Atlantic City; manufacturing for Detroit. Data from the U.S. Bureau of Labor Statistics. (Reporting by Hilary Russ and Megan Davies in New York; Additional reporting by Lisa Lambert in Washington. Editor: Hank Gilman)
