Welcome to Atlantic City, the foreclosure capital of the U.S.

Omar Bustamente/FUSION

Drivers on the expressway to Atlantic City pass billboards promising big payouts for the lucky.

Then they pass signs for gambling addiction treatment programs. And then they see the skyline, a dozen gaudy casino towers hovering over the city like a mirage.

Charles Pugh helped build those towers. A construction worker who grew up here, he’s proud of his work on casinos that have been the backbone of this storied New Jersey town for the past three decades: Showboat. Borgata. Revel. Trump.

Away from the glitz of the casinos, Pugh bought his own house on Michigan Ave. back in 2008. It’s simple, small, and well-built, according to Pugh, who would know. He remembers having his whole family over for barbecues, with his 11 little nieces and nephews running through the yard. “That’s sort of the difference that makes it having a home and not a house,” he told me.

Back then, Pugh was getting more hours on the job than he could handle. But after the recession kicked in, things slowed down, and there were days when he was left waiting for work. Then the days became weeks, and the weeks became months. One year, he worked a total of just 16 days. The casinos he helped build started to close, the bottom fell out on the construction industry, and Pugh fell further and further behind on his mortgage.

Now he owes more than $300,000 on the house, which is set to be auctioned off to the highest bidder next week. He’s one of thousands of homeowners in the Atlantic City area facing the same problem: The city has the highest foreclosure rate of any metro area in the U.S., with one out of every 59 housing units in foreclosure, according to the research firm RealtyTrac. “I guess my story’s like everyone else’s,” Pugh said. “You use your savings and your unemployment checks to make up for it ’til something comes—and nothing comes.”

Cities across the U.S. were hit with a wave of foreclosures in the Great Recession, as homeowners realized they had committed to mortgages they could never pay back. But Atlantic City’s foreclosure rate has stayed sky-high in part because of problems in the casino industry that made this city what it is. Four of the city’s 12 casinos closed last year, taking with them more than 8,000 jobs. And while the profits of those that remain open are up this summer, the unemployment rate is still high and the crime rate is among the highest in the state.

It’s a cautionary tale for other cities around the country that are turning to casinos as an economic life preserver. While Atlantic City’s casino-focused economy gave thousands of locals good, well-paying jobs, it also sowed the seeds for the urban decline the city faces now.

Atlantic City has always been good at reinventing itself, from a upper-class resort town at the turn of the century, to a haven for bootleggers during Prohibition, to a gambling Mecca in the past few decades. But can it make another transformation in time to save thousands of homeowners?

When you drive down the streets in and around Atlantic City, it’s hard to find a block without at least one “for sale” sign.

More than 2,150 homes, condos, and apartments in the metro area are going through foreclosure, a 41 percent increase since this time last year. (The number two foreclosure rate in the country is Tampa, where one out of every 82 units is in foreclosure.)

When people start to fall behind on their mortgage, the bank or lender may negotiate with the homeowner and try to come to a payment plan. If that doesn’t work, the house is sold at a public auction. The process can drag on for years, and some people decide to abandon their home instead of waiting it out. “This is a problem that drags down our entire economy, it hurts individuals, it hurts families, and it destroys neighborhoods,” said Staci Berger, the CEO of the Housing and Community Development Network of New Jersey.

An Atlantic City block in the days after SandyGetty Images

An Atlantic City block in the days after Sandy

After weathering the global recession, Atlantic City was hit with another storm: Hurricane Sandy. The city’s tourist district, with the casinos and the famous boardwalk, escaped the worst of the damage, but many people saw their houses flooded. Some living in basement apartments watched their possessions get washed away. Others wondered why they should pay back a mortgage on a house that was barely livable. “If your house is being taken away from you, and then Mother Nature is physically taking this house away from you, that’s hard to come back from,” Berger said. “People just walked away. Now you see abandonment and blight in places you didn’t see it before.”

Officials tell people facing foreclosure to go to credit counseling organizations, which can help them analyze their finances and renegotiate with the banks to set up a workable payment plan. “People are scared, they’re confused, they don’t know where to turn,” said Stephanie Bittner, a credit counselor with the non-profit organization Clarifi. There’s a big box of tissues on the desk at their Atlantic County office—and it gets used a lot.

Governor Chris Christie has called revitalizing Atlantic City one of his top priorities. He’s brought in an emergency manager, invested money in redeveloping the casino district, and budgeted federal funding to help homeowners. Some think the city’s continued economic problems could become a drag on his presidential campaign. But local officials are concerned that he hasn’t signed a major rescue package passed by the legislature. And housing advocates say more needs to be done to address foreclosures, such as freezing mortgages instead of just throwing more money at them. “There hasn’t been enough assistance at the state level to get people the help they need,” Berger said.

For those who stay in their homes, foreclosure takes an especially strong emotional toll. Pugh’s mother, who lives with him, worries daily about what will happen if they get evicted, and prays for some kind of help. Pugh, 50, has taken a more active approach, quickly turning himself into an expert on the intricacies of the mortgage industry. As he fell further and further behind, he went to seminars about FHA loans and escrow, in-house modifications and postponements, sheriff’s sales and short sales. “We’re not giving up,” he said.

fsn_atlantic-city-map_2Omar Bustamente/FUSION

For most of its history, Atlantic City has been a city its residents could be proud of.

It was founded as a resort town in 1854, attracting tourists with promises of healthful sea breezes and fancy hotels. Business leaders built the first beach boardwalk in the U.S., and it soon became a promenade for the upper-class.

This was the city that inspired the game of Monopoly, whose properties take the city’s street names. The original version of the game wasn’t actually invented by a struggling Depression-era designer, as the traditional story goes, but by a progressive activist to educate people about the dangers of monopolies and unregulated capitalism. It eventually made its way to Atlantic City, where it was picked up by the Quaker community. They inscribed their experience of the deeply segregated city onto the game board: The cheapest properties, Mediterranean and Baltic Avenues, were in black neighborhoods, while the most expensive properties, Park Place and the Boardwalk, were where the rich came to see and be seen.

The boardwalk, circa 1950.Getty Images

The boardwalk, circa 1950.

“Against the backdrop of the whole game, you have this ongoing conversation that still continues today about income inequality and how wealth is created,” said Mary Pilon, a former New York Times reporter who wrote a book on the origins of Monopoly. “The people of Atlantic City made the game their own.”

The resort town was only the first of the city’s many identities. During the Prohibition era, local officials decided against enforcing alcohol laws, drawing thirsty people from far and wide and leading to the gangsters depicted in Boardwalk Empire. In World War II, the hotels were converted into hospitals for the injured and troops drilled at “Camp Boardwalk.”

But as cheaper airfare in the postwar years made it easier for east coasters to vacation in places like Miami, the appeal of the old resorts faded. City leaders turned to gambling as a remedy in 1976, and after a contentious political battle, Atlantic City became the first place in the U.S. outside of Nevada where casinos were legal. The gambling industry promised good jobs: As a dealer or a cocktail waitress, you could get a living wage, health insurance, and a pension, far better prospects than other jobs that didn’t require a college degree.

“It was the type of job you could raise a family on,” says Bob McDevitt. That’s what he did. A big man in his early fifties with bright blue eyes and a crewcut who gesticulates with enthusiasm, he was born and raised here. McDevitt started as a bar porter at the former Playboy casino at age 19 and has been working in the industry ever since. For two decades he’s been president of Local 54, the largest union in the city, which represents non-gaming workers like cooks, waitresses, and cleaners.

New Jersey Governor Brendan Byrne cuts a ribbon at the opening of the first casino in Atlantic City in 1978.Atlantic City Heritage Collections, Atlantic City Free Public Library

New Jersey Governor Brendan Byrne cuts a ribbon at the opening of the first casino in Atlantic City in 1978.

As the casinos prospered, the city around them wasn’t doing as well. Casinos are essentially big boxes—they’re designed not to have windows, clocks, or anything that might remind people of the outside world. Hotel rooms, restaurants, spas, and everything else a vacationer might need were built inside the casino. Many of the old businesses outside couldn’t compete, and the art deco hotels were torn down for parking lots. An underground tunnel was built to take drivers directly from the expressway to the marina casino neighborhood without having to go through the real city. Crime rose, making suburban families even less likely to venture beyond the tourist district.

For a while, that wasn’t a problem. “No one gave a shit, because they only cared about the buses rolling up, the people walking into the casino and keeping them there the whole time,” McDevitt said. There were no efforts to diversify the economy, and it didn’t matter that Pacific Ave., one of the town’s main streets, was until recently, as McDevitt puts it, “like a street in Mogadishu, with the potholes—a fucking mess.”

The casinos are still those windowless boxes. The lights are dimmed to an artificial twilight, and the smell of smoke saturates the air. There are vast rows of slot machines, with names like “African Diamond: Jewel of the Wild,” illustrated with a large cartoon gorilla. Some people gambling are slumped over in their chairs, eyes glued to the slots, while others clap to celebrate a meager win. They’re of every race, spanning 20s to 80s, wearing anything from suits to T-shirts and flip-flops, united only in their glassy-eyed stares.

Annetta McCardell, a pensioner from Laicaster, Pa., who was playing slots at Bally’s the other weekend, remembers “walking down to the city, going to the shops” 40 years ago. But these days, she mostly stays inside and feeds dollar bills into the machines.

When Atlantic City had an East Coast gambling monopoly, it didn’t matter that the city around the casinos was falling apart. Things started to change when Pennsylvania legalized gambling in 2004, followed by other states in the Northeast. New casinos sprouted up in Delaware, Maryland, and Connecticut. And when people in Philadelphia or Bridgeport realized they could drive 15 minutes to a local casino instead of two hours to get to the Trump or the Borgata, they started to wonder: Why would you go to Atlantic City?

ATLANTIC CITY, NJ - JULY 8:  The roulette wheel spins at Caesars Atlantic City July 8, 2006 in Atlantic City, New Jersey. Caesars, along with Atlantic City's 11 other casinos reopend this morning after they were forced to close their gambling floors for the first time in their 28-year history due to the New Jersey state budget impasse.  (Photo by William Thomas Cain/Getty Images)Getty Images

Just about everyone you talk to in the city has a sibling or a spouse or a best friend who works in a casino, if they don’t work there themselves.

And these days, just about everyone knows someone who was laid off last year.

In the span of a few terrible weeks in 2014, with one bankruptcy after another, three casinos fell like a house of cards, for a total of four that year. The market was oversaturated, officials and analysts said, especially with increasing competition from around the region. The closings left 8,000 people unemployed, some whom had worked at a single casino since the day it opened. Others lost two part-time jobs in the span of a few days.

Local 54 and other groups held job fairs and sessions for people to register for unemployment, and they ended up bigger than the relief efforts organized after Sandy. Merydawilda Colón, a social worker with Stockton University, described the problem like a refugee crisis, saying that people were “displaced” from the four casinos that closed. “It wasn’t just the casinos—anyone who worked in any industry connected to the casinos lost their job,” Colón said. “The ripple effect was unbelievable.”

As of May, the Atlantic City metro area’s unemployment rate was 10.1 percent, higher than the state’s 6.3 percent and the national 5.3 percent. The laid off casino workers who didn’t leave town feel betrayed by the promise of good, stable work. “I loved my job,” said Ramon Supelana, 61, a former blackjack dealer at the Atlantic Club, which closed in January 2014. “I was having fun every day.” Now, he’s living on unemployment checks and is planning to go further in debt just to keep up with his mortgage payments.

Omar Bustamente/FUSION

Those who feel the most betrayed might be the workers at the Trump Taj Mahal, who still have their jobs—but barely. When it opened in 1990, the Taj Mahal was billed as the “Eighth Wonder of the World,” and at $1.1 billion, the most expensive casino ever built. Michael Jackson performed on opening night, and a beaming Donald Trump gave the superstar a personal tour as TV cameras followed. The glitz and glamor of the Taj—the crown jewel in Trump’s small empire of Atlantic City casinos and hotels—helped transform the Donald from just another successful developer to the massive, one-man headline-making tornado that he is today.

But by last year, the Trump empire was dissolving, and Trump was gone. (He sued to remove his name from the properties and later settled). “Seven years ago I left Atlantic City before it totally cratered,” Trump said at the first Republican debate. “I made a lot of money in Atlantic City, and I’m very proud of it.”

And while Trump may be out of the management, he still haunts the Taj Mahal. His name is everywhere in the casino and hotel. On one day I was there, his trip to the Mexican border was being streamed on TVs tuned to CNN. A big portrait of Trump adorns the wall at the top of a chandelier-draped escalator. There’s a quote next to it: “I like thinking big. You have to think anyway so why not think big? — D. Trump”

When the Taj was on the verge of closing in December 2014, hedge fund investor Carl Icahn swooped in with a deal to acquire it and keep it open. Since then, Icahn has embarked on a cost-cutting mission to make the casino profitable; it’s currently losing more money than any other casino in the city. Management has slashed workers’ health benefits, pension contributions, and even ended their paid 30-minute lunch break.

In this April 5, 2012, photo, Bob McDevitt, president of Local 54 of the Unite-HERE casino workers union, at a protest outside the Tropicana Casino and Resort in Atlantic City N.J. The Unite-HERE casino workers are protesting the lack of a contract and the termination of employee pension accounts. (AP Photo/Wayne Parry)AP

Bob McDevitt at a protest in 2012.

More than 80 percent of Local 54’s members who work at the Taj voted to approve a strike last month. Now, it’s up to a committee of union leaders to decide if and when to strike. “That property will not succeed if the workers who are currently working there are not involved in the success,” McDevitt told me. “We don’t have a date, but if we go on strike, it’ll be this summer.”

Neither the Taj Mahal’s management nor Icahn responded to requests for comment, but Icahn has said that if he pays the benefits he won’t be able to keep the casino open.

Paul Smith, a cook who’s worked at the Taj for 21 years, told me he was sad that it’s come to this. “It’s home to me,” he said. “My co-workers are like family.” After two decades of repetitive motion in the casino’s kitchen, he has a tear in his rotator cuff and a couple herniated discs in his spine and neck, and says he’s delayed expensive surgeries because of the cuts to the health insurance. “We built our casino to what it is—or what it was,” he said.

New Jersey Casinos Reopen After Budget-Related ShutdownGetty Images

Regulars at the Taj, even if they aren’t familiar with the details of the union fight, say it feels different. The majority of the slot machine seats were empty on a recent Saturday evening. “There’s nobody here,” said Linda Totten, who comes down to the Taj from Bridgeport, Conn. about once a year. “I’ve never seen it this dead.”

McDevitt thinks that if Icahn is successful in cutting workers’ benefits, the other casinos will follow his lead. “That’s a fundamental fact in capitalism,” he says. And for him, going back to the days before benefits and a living wage is not an option.

“They didn’t say, ‘Let’s get gambling so we can have casinos here.’ It was, ‘Let’s get gambling so we can have good jobs,’” McDevitt said. “If this whole thing means that only one fucking generation got to raise their kids with a good job, fucking burn it the fuck down. That’s exactly what I feel about it.”

ATLANTIC CITY, NJ - JULY 1:  People walk along the boardwalk July 1, 2003 in Atlantic City, New Jersey. A new casino, the 43-story Borgata, will open Thursday in Atlantic City with hopes to draw a younger and more affluent crowd to a city that has become depressed due to the proliferation of riverboat gambling and Indian reservation casinos. The $1 Billion Borgata will feature 3,650 slot machines, 11 restaurants,  a 50,000 square-foot spa and numerous retail shops.  (Photo by Spencer Platt/Getty Images)Getty Images

Most people here agree that the city needs to diversify its economy, but what comes after the casino era is up for debate.

Some say Atlantic City should expand its conference center, and bring in conferences from around the country. One developer wants to turn a shuttered casino into a waterpark. An architecture firm has suggested making the city a center for climate change research.

“People keep looking for one magic bullet to solve the problem,” said Ellen Mutari, a professor from the local Stockton University who documented Atlantic City’s casino economy in a new book. “It’s going to take a lot of small initiatives for people to find the things that actually catch on and are economically viable.”

One proposal imperils plans for rebirth: Developers in north New Jersey want to build up to three huge new casinos, in the Meadowlands near Newark and on the Jersey City waterfront, across the river from Manhattan. Proponents say the new casinos would launch economic development, but there’s little doubt they would take even more market share from Atlantic City, in south Jersey. Allowing casinos outside Atlantic City would need to be approved by a state referendum, and locals got a reprieve of sorts after the State Senate president postponed a vote until at least next year.

Talk about the North Jersey casinos around here ranges from the derisive to the apocalyptic: “BEHOLD THE ENEMY,” blared a front page of the Press of Atlantic City earlier this year when the Meadowlands proposal was detailed. “Only in New Jersey can the solution for the overabundance of casinos be to build more casinos,” said Dennis Levinson, the Atlantic County executive. “Only in New Jersey could they they come up with something as bizarre as that.”

My taxi driver Kurt told me, “If that happens, you can probably take Atlantic City out behind the shed and shoot it.”

Press of AC front page

But some local officials are optimistic about an upswing nonetheless, pointing to increasing revenue and tourists. The silver lining of the casino closings is that most of the casinos that survived are actually doing pretty well. According to the most recent financial reports, for the first three months of 2015, six of the eight remaining casinos are profitable, and gross operating profits rose by 26 percent over the same period in 2014.

And tourism numbers are up, as people frequent the growing number of restaurants, bars, clubs, and other non-gaming venues along the boardwalk. “It’s amazing when I have people coming here and interviewing me and saying, ‘Atlantic City is dead, why did it die?’” said Matt Levinson, the chair of the top state regulatory body in charge of casinos. “Just go outside, you can see it’s not dead.”

Across the boardwalk from Levinson’s office sat Rob Torres, a carpenter who grew up in the area. He sat on a bench in the shade from the hot sun, smoking a cigarette. “They’re trying to make it sound like we’re coming back,” he told me. “The only ones who are coming back are the ones who have a lot of money. The middle class, we’re drowning.”

Torres works seven days a week. His wife worked as a dealer and supervisor at the casinos for decades: 24 years at the Trump Plaza, which closed. Two years at the Showboat, which closed. And another two years at the Revel, which also closed. Even with all her experience, she wasn’t able to find a job at any of the casinos that are still open. I asked him if he knew anyone who was in foreclosure, and he laughed. “I don’t have enough fingers and toes to count them,” he said.

The Atlantic Club, one of the four shuttered casinos.Getty Images

The Atlantic Club, one of the four shuttered casinos.

The end of the line for the city’s foreclosure cases takes place at the Atlantic County Courthouse, a half-hour’s drive north of the city in suburban May’s Landing.

At foreclosure auctions every Thursday at noon, bidders from around the area and farther afield gather for the chance to score a great deal.

There was anticipation in the air two weeks ago as about 30 people waited in a taupe-walled courthouse room. It wasn’t your typical idea of real estate speculators: Most people wore T-shirts, shorts, and flip-flops. The crowd ranged in age from 20s to 60s, mostly men, with a few husband-and-wife duos. They all sat up a little straighter when two sheriff’s employees named Terri and Shonda carried in cardboard boxes full of deeds in manilla folders. And then the bidding began: for each property, a lawyer for the bank read the details and a gum-chewing undersheriff played auctioneer: “Going once? Going twice?”

The bidders, glued to their cellphones or flipping through documents, listened as the 50-some properties were read out. Some up for foreclosure are on familiar Monopoly streets—Ventnor Ave., Pacific Ave., the Boardwalk. There could be a hundred things wrong with any of these houses—damage from Hurricane Sandy, a bad case of mold, vandalism and looting, or an owner who doesn’t want to leave. Some of the listings have thousands of dollars of unpaid fines or taxes that will be the new owner’s responsibility. And there are no refunds. Still, there are some steals: a high-rise condo went for just $2,000 a couple weeks ago.

And while a few bidding wars sprouted up, most of the properties received no bids and weren’t sold, instead going back to the bank, where they’ll be put on the market. (It generally takes a few years for a foreclosure to go through the courts before it gets sold at an auction like this, so many of the homes that went underwater during the casino closings have yet to make it to a sale.)

The expert in the process turned out to be the short, older woman with big glasses sitting next to me, carefully taking notes on a yellow legal pad. This was the third foreclosure auction around the state that that she and her husband had been to this week, and she’s learned that “this is not for the fainthearted.” Another woman, a teacher from Newark, came down for the day to see what she can get. “It’s so fun!” she said. She dreams of getting a little place by the ocean for a song, and spending her weekends there.

The names of the former homeowners are mentioned only briefly at the auction as the under-sheriff announces each new case. Frank Balles, the county sheriff, whose office runs the auctions, told me owners will occasionally attend the auctions and watch people bid on their homes. “Sometimes they get pretty emotional when their house gets sold,” he said.

But nothing like that happened when I was there. The owners were out of sight and out of mind—as if everyone there wished they could just disappear, leaving houses to be picked up as easily as poker chips.

green street editedOmar Bustamente/FUSION

One of the properties up for auction was 725 Green Street, a rowhouse not far from Charles Pugh’s home on the city’s non-touristy north side.

The sale was delayed by the bank, but when it’s up for auction later this month, the assembled bidders will be told that their bids are non-refundable. They’ll be advised to bid higher than the outstanding $206,092.46 mortgage. They’ll hear the name of the previous owner—Gordon E. Adams, Jr.—only in passing.

The bidders certainly won’t hear the story of 725 Green Street that Gordon E. Adams, Sr. told me a couple weeks ago. “That was my house,” he said. “My house.”

Raised in Atlantic City, Adams, 69, worked in casinos and at a detox center, helping drug addicts get clean. Now he lives in suburban Pleasantville, across the bay from Atlantic City, with his wife Josephine, 56. Theirs was an Atlantic City romance: They met while working the graveyard shift at the Tropicana casino, where he was a room manager and she was a greeter. When Josephine told her family she was marrying a black man, they told her not to come home again. So she chose a new family instead.

725 Green Street had been in Adams’ family for years, owned by his aunt and then his mother. He lived there after she died, and remembers a close-knit, family-oriented neighborhood. “Back then, people knew the value of keeping a home,” he says. Adams gave the house to his two adult sons, Gordon Jr. and Jason, about 20 years ago. The mortgage was manageable, the house was in good shape, and the city’s casino economy was on the rise.

At first, the brothers were doing fine. But a few years ago, the arrangement started to fray: Gordon Jr. was discharged from his 13-year service in the Navy amid personnel cuts, Jason went to prison for a couple years, and Jason’s wife was laid off of her casino job as a cocktail waitress. Mortgage payments stacked up. “The floor fell out,” Adams says. He asked his sons to give him power of attorney over the house. They refused, and spiraled into foreclosure.

Adams has considered going to the foreclosure auction and making a bid on the house himself. A bidder would likely have to pay most or all of the more than $200,000 mortgage, and the house itself is worth only about $65,000, he estimates. “It would be a gamble,” he said. Ultimately he decided not to bid, but for sentimental reasons as much as economic ones: The dispute over the house drove a wedge between Gordon Sr. and Gordon Jr. “I don’t know where he is. I hope he’s doing well,” Adams said of his son. “Everyone’s got to sail their own boat sometime… Whatever he learned from me, I hope he’s making use of it. If I could only go back in time and start all over again, wouldn’t it be nice—but it is what it is.”

The Adams’ new home in Pleasantville is one of the most lovingly decorated houses I’ve ever seen. They bought the place cheap as a newly married couple, a tiny summer home with no insulation. “When I got this house, you couldn’t even live in it,” he remembered. Since then, as more and more houses around them have fallen into disrepair, they repaired and expanded the house. They built a patio, laying the bricks themselves. There’s a pink-walled office adorned with family photos. A red-tiled kitchen with hanging plants. A blue-wallpapered living room with a nautical theme; photos of each of the ships Gordon Jr. served on hang on the walls.

As I left, Adams gave me some parting advice, standing on his porch and looking down the block: “If a man doesn’t care about his home, it’ll be burned to the ground.”

When I rang the doorbell of 725 Green Street a few hours later, there was no answer. It’s pretty nondescript, with white clapboard siding, sandwiched between two houses of identical design. No one lives there, a neighbor said. Just another empty home in Atlantic City.