January 5, 2017

Twilight Zone

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 What’s Keeping the South Inlet Empty?

In mid-August of last summer a real estate investor from Florida named Bruce Pender bought a small plot of land in the South Inlet neighborhood of Atlantic City. He paid $25,000 to acquire 206 S. Vermont Avenue, tax records show. The old owner, Seaview Property Development of Turnersville, had been sitting on the land since 2005.

In real estate terms, this was one of the rarest commodities going: beachfront land about an hour’s drive from Philadelphia—two and a half hours (give or take) from New York City. But there were no gaudy Jersey shore monstrosities or quaint Victorian B&Bs at 206 S. Vermont. The land contained a fence about three feet high that surrounded a vegetable patch. Next door, to the north, was a modest house (presumed owners of the vegetable patch) and next to that a pizza shop called Tony Boloney’s (locally famous) but toward the beach—the direction in which land values generally increase—a succession of vacant lots stretched more or less unbroken to the sea.

Pender was not a stranger to Atlantic City. In 2014, he took over a stalled condominium project called Formica’s Way on the midblock between Georgia and Florida Avenues in the Ducktown neighborhood, completing construction and marketing the units to middle-income buyers—young school teachers, class-two police officers, EMTs. And he wanted to do something similar in the Inlet, where he was proposing a three-story duplex, on the theory—controversial in Atlantic City—that people who still liked living near the beach should not be impeded from doing so by policymakers.

To achieve this dream, Pender needed a use variance, since the South Inlet was zoned for “resort commercial” development, meaning a higher-density apartment building (or casino hotel) was permitted but a two-family house was not. In an ordinary city, this would mean an appearance before a zoning board—a group of local residents who would hear testimony from witnesses, assess credibility and ultimately decide whether the proposal made sense for the community in which they lived. But in Atlantic City it meant an appearance before the Casino Reinvestment Development Authority, or CRDA, the agency tasked with reinvesting a special casino tax into neighborhood projects, whose board of directors includes the Attorney General of the State of New Jersey, the State Treasurer, representatives of a few powerful unions, the Chair of the Casino Control Commission and a few other lesser political lights, including the mayor of the city. Or as one local official, who declined to be named because his work brings him into contact with CRDA, put it, “Atlantic City is the only municipality in the state – out of 565 municipalities – that has to have its planning decisions looked at and reviewed by the governor’s authorities unit.”

On October 6, attorneys and engineers for Pender appeared before CRDA’s Land Use Division to give testimony on the urgent civic matter of whether their client should be able to build a duplex atop a vegetable patch in a long-neglected section of the South Inlet. The hearing began around 10:00 a.m. on Tuesday morning. It was chaired by Lance Landgraf, the director of the division, with an assist from Robert Reid, land use officer. Christine Cofone, CRDA’s internal planning consultant, came down from her offices in Red Bank, 82 miles up the Garden State Parkway. Forty pages of testimony were lovingly produced by a New Jersey certified court reporter, and these revealed that what was preventing development on the site in question was not crushing poverty or endemic crime or FEMA guidelines or ISIS or brucellosis but setback requirements, which overlapped with one another, meaning there was no buildable footprint at 206 S. Vermont Avenue. Or, as Cofone put it, “I don’t even think you could really get a compliant doghouse on this property if you apply the setbacks.”

On November 15, the full CRDA board met to consider Pender’s duplex, which, by this point, had the support of CRDA Executive Director John Palmieri, the planning consultant Christine Cofone, Land Use Director Lance Landgraf, Atlantic City Mayor Don Guardian, and, at least in general, of city Planning Director Elizabeth Terenik, who said she supports one-off development of lower density projects in the neighborhood. Or, as Sheldon Grace, the realtor repping the property who’s worked in the Inlet for decades put it, “We thought this was a no-brainer.”

But the full CRDA board was circumspect.

Some members didn’t know—or said they didn’t know—what was located on the site (a vegetable patch) or who the developer was (despite his track record) or what plans he had for the property (precise plans were filed on CRDA’s own website). They did seem to know the project could mean change. And the prospect of change in a neighborhood that has been notoriously, changelessly blighted for decades, made them uneasy.

Give Pender his variance and they could expect more applications. Before you knew it, people might be building houses all over the South Inlet. And Atlantic City’s most notorious non-ghetto may recede into memory. Or as one of the board members said, “We’re creating what I think may be a precedent.”

Surprisingly, to the uninitiated, this seemed to be regarded as a bad thing.

In due course, a motion to table the application was made by David Rebuck, sitting in for State Attorney General Christopher Porrino. It was seconded by Robert Shaughnessy, sitting in for Ford Scudder, the State Treasurer.

And with that Pender’s dream of a duplex disappeared into a bureaucratic rabbit hole, to be seen again who knows when.

***

It’s easy to confuse the problems of the South Inlet with those of other urban American disaster areas. Atlantic City had a poverty rate of 37%, per census data released in December. It was poor before casinos, poor when it had them, and it’s even poorer now that five of them have been shut down. Most of the people you see in the South Inlet are people of color. Most of the businesses are run by ethnic minorities. The Alpha & Omega grocery is owned by Greeks and staffed by Oaxaqueños. Around the corner, the marquee of the Baba Jones Food Market announces you can buy baby food with your EBT card. There’s also Mike Hauke’s pizzeria Tony Boloney’s, which sells tikka masala slices to intrepid hipsters, construction workers and the few remaining neighbors. In 2015 in a New Yorker article, Hauke described his patrons as a mix of “shitbags, crackheads, hustlers, and pimps.” These were happier times. Today even the shitbags seem few and far between.

The same New Yorker story concluded, with no apparent irony, that if it weren’t for “zany schemes” Atlantic City would “still be a sand dune.” But 206 S. Vermont was very like a sand dune, and the many schemes hovering around it—zany and otherwise—were exactly what was keeping it that way.

Pender’s neighbors—or rather the owners of the surrounding vacant lots—didn’t seem especially poor. 212 S. Vermont was owned by Joseph Zoll of Media, Pennsylvania, who was investing in the Inlet in the 1990s when MGM Grand spent nearly $50 million to acquire land for a casino they said would cost $800 million to build. MGM needed less than an acre to complete their footprint, and a parcel owned by Zoll on Oriental Avenue was part of it. The company offered him, and other owners, $100 a square foot and he rejected it. The city promptly declared the land blighted and moved to seize it through eminent domain. It’s currently underneath the Revel casino.

For that matter 208 S. Vermont was owned by Polo North Country Club Inc., the company of Glenn Straub, the eccentric millionaire who bought the Revel out of bankruptcy for $82 million in 2015. Polo North owned at one time, reportedly, 70 empty lots around the district.

As late as the 1960s the Inlet had been a mix of working-class houses and summer homes, boarding houses and motels. But in the late 1970s, following the gaming referendum, a zoning ordinance designated half the city from Albany Avenue to the Inlet for resort casino development, causing land values to spike. Residents were not wealthy. Many were renters and were forced out of their apartments. With no plans for replacement housing, they crowded into nearby neighborhoods, which began to sag under the influx.

Around this time, the New York Times interviewed a resident of the President Towers, where—along with those at the neighboring Ritz—all residents were evicted. “A constable came Sept. 28 and threw the notices in our faces,” David Koll told the reporter. “I’d get out tomorrow, but there is nowhere to go in Atlantic City.”

This phenomenon played out across the city in what’s now known as the Tourism District, but the Inlet was especially hard hit. A study by the Rouse Corporation estimated land values jumped from $4.45 per square foot in 1976 to $39.15 per square foot in 1980. Bryant Simon, in his book Boardwalk of Dreams, says landlords staged freezeouts and power cuts, or let their properties deteriorate deliberately, to drive out tenants. In the first four months of 1981 there were 117 fires across the South Inlet, he says. 105 were ruled suspicious.

In 1978 the New York Times interviewed the inhabitants of 213 S. Vermont, about 140 feet from Pender’s vegetable patch, where Aurea Santiago and her five children lived in a house whose absentee landlord had boarded up the windows and cut the heat to discourage their continued occupancy.

The Times quoted William Downey, then director of the city Housing Authority, who told the paper, “We made a promise before the casino referendum to take care of our own so nobody would have to leave Atlantic City for lack of housing.” But landlords were subject to economic forces too. “Property owners have a right to use their property as they want to.”

If land-use policy helped create the economic distortions that flattened the Inlet—that made vacant lots more valuable than neighborhoods—maybe changes to that policy were a precondition to reclaiming part of the lost city. But by the end of the casino monopoly, the city had lost control over zoning.

In 2011, when the city was undergoing its penultimate crisis, legislation was passed giving CRDA broad authority over land use in what was designated the Tourism District, which included the casino zone and city assets like Bader Field and Gardner’s Basin.

The Tourism District was supposed to encompass areas where the majority of entities “if any” were involved in tourism. On Vermont Avenue – where there were few entities involved in anything – this might have been a stretch, but CRDA included the South Inlet when it adopted the boundaries.

Governor Christie (not yet wildly unpopular) signed the Tourism District Act on February 1, 2011, in the atrium of the Revel casino (not yet completed let alone bankrupt two times), hailing the legislation as an example of what was possible when state legislators worked together in a bipartisan manner with the governor. City Councilman Marty Small called it a “dupe” to take over the city. Councilman Mo Delgado vowed to sue to block its implementation. Then-Mayor Lorenzo Langford boycotted the ceremony entirely. Susan Ney Thompson, the interim director of CRDA, called it “one of the landmark days that we’ve had here in Atlantic City.”

“Today we have a new way of working in Atlantic City that’s more streamlined, that leverages a number of resources and gets everybody working in the same direction, and that’s critical.”

Under the new law, the city could still make some planning decisions by issuing “redevelopment” plans, but such changes would be subject to CRDA approval. Absent its own zoning, CRDA would use the city zoning, but the agency was expected to draw up a master plan and adopt its own land-use regulations.

In 2012, CRDA adopted its master plan for the Tourism District, a fantastic document that imagines Atlantic City as a kind of cross between Dubai and the Beijing Olympics. But even after 2014, when the casino monopoly at last collapsed, the agency seemed in no hurry to rezone.

Under municipal land use law, a master plan must contain two elements to “effectuate” zoning: a housing element and a land-use element, and CRDA’s master plan contained neither. It doesn’t contain them to this day.

The agency spent $800,000 on the 2012 master plan, but until those elements are written, approved by the board and signed off on by the governor, the document’s not complete. CRDA couldn’t change the zoning, even if it wanted to.

A little over a year ago, the city council named M&J Melrose LLC official redeveloper for the South Inlet. M&J comprised Joseph Jingoli, the fabulously wealthy and powerful construction mogul, and Jack Morris, the also very wealthy and powerful real estate mogul.

At the time, the move was seen as an attempt to gain leverage over Glenn Straub, owner of the Revel casino, which sat within the redevelopment zone. Jingoli had been a partner in the firm that built the Revel’s outrageously over-capacity power plant, built to provide energy not only to two Revel towers (only one was built) but to the Inlet neighborhood (most of which was still vacant). He and Morris were thought to covet the casino. But all those acres of beachfront land would have been a nice consolation prize. Or maybe they were the main prize from the beginning.

The move was also seen as an attempt by the George Norcross political machine to establish a foothold in the South Inlet. Jingoli had worked with Norcross constructing the Cooper Norcross Academy in Camden ($35 million? $45 million?). Morris’ relationship with the shot-caller went back more than a decade, when he was redeveloper of the Garden State Racetrack in Cherry Hill. Both men also enjoyed, reportedly, a healthy working relationship with Jon Hanson, the real estate mogul and Christie “point man” for Atlantic City, whose committee drafted the report on which the Tourism District was based.

But in February, city council had a change of heart. Maybe they got cautious about giving team Norcross a bigger entree into the city. Or maybe they lost the stomach to fight with Glenn Straub—notoriously combative and deep-pocketed—who had his own plans in the redevelopment zone. Whatever the reason, the council abruptly voted to rescind the agreement with M&J Melrose.

** Between December 2015 and February 2016, Marty Small took over the role of council president from Frank Gilliam. So Small was president when the city council voted to rescind the deal with M&J.

Gilliam opposed rescinding the deal.

See below for a full statement from Council President Marty Small.

***

For the last forty years, Atlantic City has been an experiment in urban renewal through monopolistic casino gambling. Since 1984, CRDA’s been charged with conducting that experiment. But the agency is going through a leadership shakeup. The industry that funds it is in turmoil. Its role in a city that is, itself, the subject of a state takeover is muddled. And the Investment Alternative Tax, which provides the CRDA budget, is being diverted under the state takeover to pay down the city’s crushing debt. Bondholders über alles.

Under the most benign conditions, urban renewal is, to use the cant term, a kind of redistribution, a subsidy to private developers who would otherwise have to acquire, assemble and remediate land on their own. CRDA may be a diminished agency but its condemnation powers are stronger than those of the city. It is positioned to grant lucrative subsidies, tax abatements, contracts to well-heeled companies. Arguably this is a good thing: construction jobs in industries that need them, public projects on a scale not possible in other cities. But it’s been a double-edged sword for the city. And it puts the agency at the nexus of powerful unions, wealthy donors, organized voting blocks—and the elected officials who need access to them.

The South InletCRDA spent more than $8 million preparing a two-acre parcel for a mixed-use development in the South Inlet, a notable achievement. But next door is a much larger plot of land. It is not prepared for development, but it’s vastly more valuable. CRDA doesn’t own the beach blocks of Vermont, Rhode Island, Metropolitan Avenues. But it still has tremendous authority over how, when, and by whom that land is developed. You don’t give that up without getting something in return. Not in an election year.

The CRDA board met on December 20, and again Pender’s duplex was on the agenda. Two weeks earlier, John Palmieri (who’d supported the duplex) had stepped down as executive director, and his $225,000 severance package was still in the headlines. “The authority needs to reconsider what it does with the resources available,” he told the Press of Atlantic City.

It was the last meeting before Christmas, and some of the board members were festively attired. Robert Mulcahy, the chairman, wore a pocket square and saddle shoes. I’m always astonished at the racial composition of the CRDA board, which is 100% white in a city that’s at least 83% not. And Debra DiLorenzo is the only woman.

Most CRDA votes are unanimous, or nearly so. The heavy lifting—fights resolved, grievances aired, arrangements arranged at—takes place in committees, which are not public. By the time the board meets to sign off on decisions a curious harmony has been achieved. But this meeting was unusually contentious. Atlantic County’s Howard Kyle, a member, later said it was a “rare glimpse of dissension on the board.”

There were four land-use items on the agenda. Three were so trivial—a new deck off Maine Avenue, a small addition in Ducktown—it was hard to comprehend why a board that included the state’s attorney general, the state treasurer, the mayor of the city and the chair of the casino control commission was being asked to consider them.

All three passed with minimal comment, unless you count one from Robert Mulcahy, who asked, “Why do we have to do this?”

“Every time they request building permits from the city of Atlantic City, they need to prove that they’re a permitted use,” Lance Landgraf said.

The main event was 206 S. Vermont, the little property no one knew anything about, except that it was right in the middle of one of the biggest landbanks on the eastern seaboard.

Landgraf had been on vacation in November, but he’d prepared a short presentation for Pender’s proposal. Aerial photographs showed cars and trailers parked across the Inlet’s usually pristine empty lots—confusing, until Landgraf noted the photo was taken during construction of the Revel, when the South Inlet was turned into a massive building site for years. But the work crews—which had sustained Tony Boloney’s at least—were long gone. “The majority of this area is vacant,” he said.

Pender was requesting an unusual number of variances, Landgraf said, not because his project was so unusual, but because of the anomalous zoning. He cited the CRDA master plan, which called for residential construction that would “spark” a 24-7 live-work-play feel in the neighborhood, noting Pender was obliged to demonstrate his proposal conformed to those goals and objectives.

As in November, the most vocal opposition came from Edward Gant of the electricians union (a Norcross ally) and Richard Tolson of the bricklayers union (also team Norcross) who questioned the setbacks and the appropriateness of dropping a two-family house into a neighborhood that was clearly destined for grander things.

Gant’s objections were philosophical and had to do with the direction the neighborhood should go in, a question, he said, that hadn’t been given sufficient attention by the board. Tolson, for his part, seemed unconvinced by nearly a million dollars’ worth of ULI reports and master plans that called for residential development, which was being met, at any rate, with the Boraie project (the Beach at South Inlet) that had just broken ground on the old Pauline’s Prairie site, a few blocks inland.

“This is not a residential neighborhood,” he said.

Someone moved to table the proposal again. It was seconded.

Available inlet land.Palmieri, the lame duck executive director, interjected. He seemed frustrated at the suggestion there wasn’t enough discussion (“This is not being done in the dark”) and noted the proposal had already been tabled once before.

“In a way, what has driven us to take a hard look at this request is the integrity of the neighborhood as it once existed and the fact that we’ve got, I don’t know—a hundred acres? two hundred acres?—through the district that is not getting developed.”

Palmieri said Landgraf was preparing land use documents that would allow Pender’s duplex, but it would take a while to go through the process.

“In the meantime, we have a property owner that simply wants to install a small residential unit that requires some relief. And I’ve been here for five years. We haven’t seen anything happening.”

Looming over everything was the question of what a big developer would want. Whether Prince Charming would be more impressed, or less, if the big empty Inlet were made marginally less empty. Or, phrased more benignly, if you allowed the project, how much would it hinder future development?

“Very little,” Robert Mulcahy said.

“Because if you were going to do anything, you’d have to take care of Tony Boloney’s.”

“So, now you’d have to take care of two people,” Tolson said.

Tied closely to this was the question of precedent. If you established that Vermont Avenue, or Metropolitan Avenue or Rhode Island contained buildable lots, would the land become more valuable and harder to acquire in the future?

At one point Sheldon Grace, the realtor, said he had other investors who were waiting to move forward with other projects. “Hopefully,” he said, “this will spark things back on track.” But I couldn’t tell if this helped or hurt his case, and his lawyer tried to assure the board his project was unique. “I don’t think you’ll be creating a precedent which will hurt your goals and objectives.

“You will be taking one small parcel of land, making it developable, improving it, with an investor who wants to do it, without any detriment to you whatsoever or, more importantly, your plans overall.”

Who knows if he was convincing.

Earlier, Richard Tolson had said, “If the master plan is to build houses and duplexes down there, then so be it.” But this would be the first one CRDA approved, and if development were going to come to that end of town (CRDA-enabled development) “these are going to be costly purchases down the road.”

Atlantic City’s been teetering on the edge of bankruptcy. City government has been selling off the furniture to raise money. Its main asset is beachfront land, from which it derives the overwhelming share of its revenue through property taxes. But a proposal that would increase, potentially, the value of some of that land was being questioned by a state agency, exactly on the grounds that it might increase them.

In the end, Debra DiLorenzo moved to vote on the proposal. Someone seconded it. And there was a vote, and it was close. But Pender lost. There would be no variances today. And the dream of a two-family house in the Inlet went back down the rabbit hole.

***

Step one for rezoning the “anomalous” South Inlet is a completed master plan for the Tourism District. The final “housing element” and “land use element”—which CRDA staff have been working on for years—needed to be written. I was told those documents were months—maybe twelve months—away from being ready to go before a board, but Lance Landgraf, in an interview on December 23, said he’d finished the documents the week before Christmas. They would be set to go before a CRDA committee as early as this month. Beyond that, the process was more opaque.

He called the latest turn in Pender’s month’s long odyssey a “speedbump” and seemed genuinely optimistic the project would go forward. For what it’s worth, under the zoning Landgraf has drawn it up, Pender’s “two-family home” (Landgraf dislikes the term duplex) would be a permitted use.

In the meantime, the seasons turned.

Jesse Kurtz, the councilman for Atlantic City’s sixth ward—which does not include the Inlet—said he thought the move to sit on Pender’s duplex reflected CRDA’s general “operating principle” of keeping big slate’s blank for big developers, sometimes public-private partnerships, like Atlantic City Development Corp’s Stockton University-South Jersey Gas project on Albany Avenue. Such projects enjoy the privileges of no-bid contracts and access to public funding, and have the blessing of government agencies ready to hand over pristine parcels of pre-assembled, developable land.

He noted that the state’s new monitor in city hall, Jeffrey Chiesa, had asked city council to pull its redevelopment plan for Martin Luther King Boulevard from the council agenda, twice.

“My interpretation of these events is that the DevCo wants to keep its options open as to whether the midtown around the boardwalk will be the next spot it develops, or the Inlet will be.

“And I think that whole house controversy at the meeting…It wasn’t just the precedent of the house, it’s this whole operating principle of CRDA and CRDA-enabled entities like the DevCo that they want to have as much of a so-called blank canvas as possible.”

Chris Paladino, the chief of the ACDevCo, told us he’s only been to the South Inlet to go to Gilchrist.

***

William Cheatham is one of the few members of the public I’ve seen speak at CRDA board meetings. He’s an older man, and one of four people of color I counted—in a room that held about forty—in December.

After about thirty minutes of high-level debate on the philosophical implications of Pender’s duplex, the board invited public comment, and Cheatham stood up, to audible sighs from the crowd, who seemed to find this pro forma nod to public involvement tedious even before it began.

“I remember when that Inlet area was a viable part of our city, densely populated part of the city. In fact, the first ward ran Atlantic City.

“All this vacant land’s been up there for so long. I watched it. I seen it. And when I see the dirt being dug up and something happen in that area, I jump up and down and say ‘Wow something is happening.’ But if one little man wants to build one little house, you guys say it ain’t going to fit in your plans.”

“Now, all your planning, everything y’all doing is great but I ain’t gonna be around here all that time that ya’ll are planning for.”

“Let’s get something done while I’m alive, gentlemen.”

_____________

UPDATE: 1/9/17

Council President Marty Small, in a phone interview, assured us the opposition to the redevelopment agreement had nothing to do with M&J but instead with the process. He said First Ward Councilman Aaron “Sporty” Randolph was not given a chance to meet with the proposed redevelopers before the vote. He met with firm officials after, and said they didn’t have a satisfactory redevelopment plan.

“That’s pretty much why we stopped everything,” Small said.

More from Small’s statement:

“That project was shoved down city council’s throats toward the end of 2015. It was offensive to the First Ward councilman that he couldn’t even get a meeting before a vote was taken. He subsequently met with them afterwards and he said that they didn’t have a plan. Nothing against Jingoli. Obviously, they’re reputable builders. But this is totally against the process. And we did what we thought was right.”

“It was on city council. And we did the right thing in overturning it. And as we said, if they want to go through the process. We’ll gladly entertain anything. I mean it’s not about who’s the builder. It’s about building Atlantic City.”

I asked him what he’d like to see in the South Inlet.

“I mean, it’s unfathomable that we have all that prime real estate empty. So we’re open for business. But we just want the process to be correct.”