Friday, September 16, 2005

High and Dry?

Casinos on Mississippi Gulf Coast ponder where and how to rebuild.

Posted By on Fri, Sep 16, 2005 at 4:00 AM

Mississippi plans to pull out all the stops to hang on to its casinos, even if it means allowing them to build on dry land.

At least seven of the 13 casinos on the Mississippi Gulf Coast were severely damaged or destroyed, said Larry Gregory, executive director of the Mississippi Gaming Commission, after taking a walking tour of several properties last week. The image of casino barges tossed on to and over U.S. Highway 90 is likely to be a Katrina classic for years to come. Gregory said, however, that the damage was well short of total devastation.

"Beau Rivage and Imperial Palace withstood it fairly well," he said. "There was not a lot of damage to the hotels. The Hard Rock hotel which was supposed to open on September 1st looked fine except for broken windows, but there was major damage to the casino."

Casinos are the state's largest private employer and contribute $330 million in taxes annually to the state and to the counties in which they are located. The state's share -- nearly $200 million -- is 5 percent of its total tax take. The Gulf Coast and Tunica are the two biggest casino markets, each with over $1 billion in total revenue.

Mississippi officials are facing three big issues related to casinos: helping employees in the short term, persuading casino operators to stay in Mississippi and rebuild, and the legislation that requires the casinos to float instead of being built on dry land.

"The first priority is employees," Gregory said. "There are lines a mile long of people looking for paychecks. Most casinos are handing out checks and answering questions about insurance."

After the cleanup, the focus will shift to rebuilding. Mississippi faces competition from Louisiana and specifically New Orleans. Louisiana's casino taxes, however, are twice as high as Mississippi's combined state and county tax rate of 12 percent.

"The casinos have said their intention and commitment is to return to the Mississippi Gulf Coast," Gregory said. "There's going to be a lot of discussion about where to rebuild. A lot of companies have said the risk is too great to put barges back on the water."

When Mississippi opened itself to casinos 13 years ago, laws required "floating" casinos along the Gulf and on the banks of the Mississippi River. In a concession to river navigation and the danger of flooding, riverside casinos were allowed to move to man-made lagoons several hundred yards from the river. But the casinos on the coast, despite the threat of hurricanes and the memory of devastating Hurricane Camille, are required to be on the waters of the Mississippi Sound, where they were easy prey for Katrina.

"The governor said he will address the issue within a matter of weeks," said Gregory. "He has to call a special session of the legislature if he decides one is warranted. The gaming regulations cannot be changed without legislative action."

Mississippi's casino licensing policy lets the market determine the survivors. Several of the earliest casinos in Tunica and on the Gulf Coast were no-frills operations that raked in huge profits before giving way to elaborate properties such as the $750 million Beau Rivage in Biloxi. Gregory said there will not be a repeat of the wild, wide-open days.

"To even contemplate or think someone could come in with some mom-and-pop casino or barge, well, they better just keep rowing their barge to some other location and not stop here," he said.

The Gulf Coast casinos emptied their slot machines before Katrina came ashore.

"Most of the slots on the first floors were damaged," he said. "We don't take them off. They weigh a lot, probably 500 pounds, if not 1,000. By state law they can stay on the premises during an evacuation, but all the money is taken off and deposited in banks."

That has not stopped looters from cracking open some machines.

"They may find a dime but they're going to be disappointed," Gregory said.

Tunica was unscathed and may even see a business boost with the Gulf Coast out of commission. Hundreds of storm refugees are being housed at shelters in Tunica and DeSoto County, including the convention center of the Grand Casino.

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