Mississippi May Float Concept of Land-based Casinos

Tue September 20, 2005 - National Edition
Pete Sigmund

“A casino is coming!”

Looking out from their third-floor window of the Holiday Inn resort hotel in Biloxi, MS, during Hurricane Katrina, a couple saw a massive floating casino heading their way as a 28-ft. storm surge roared across land, including the four-lane Highway 90, from the nearby Gulf of Mexico.

The couple ran to the fifth floor and escaped injury as the casino rammed into the lobby and lower floors.

At least four other barge-borne casinos broke from their moorings and rode high aground on the surge.

Now, the Mississippi legislature may pass a new law allowing casinos on shore, rather than on water. Other states, including Delaware and Pennsylvania, which have considered riverboat casinos, are watching the situation with interest. So are contractors.

A casino can easily cost $200 million. Erecting many new ones is a huge multi-billion-dollar investment, and a big market for building, electrical, plumbing, utility and other construction firms.

Many sections of Highway 90, too, will have to be rebuilt. Before Katrina, it was a beautiful four-lane or six-lane highway, often congested with people visiting the casinos.

“Now it’s a sandbar torn up and in shambles in many places,” one observer said.

Why They Were Built

Built on barges, and anchored next to the shore, Mississippi’s 13 “dockside” casinos on the Gulf Coast, as well as 17 others on the Mississippi River, are required to be on the water under a state law passed in 1990.

“I think a lot of legislators voted for the law because of opposition to gaming in Mississippi,” said a source close to the Mississippi gaming scene (who did not wish to be identified). “They thought that, if the casino was off the coast, it really wasn’t in Mississippi and they wouldn’t be seen as voting for gaming. They also felt that if the gambling industry came here, and it failed, they wouldn’t have a lot of vacant buildings on land.”

State leaders also saw floating casinos as a way of revitalizing the state after the recession of the late 1980s and early 1990s. Putting them on water was a way of isolating them from the rest of society, including detractors.

Nelson Rose, an authority on the casino industry, was quoted as saying, “In Mississippi, they decided to inoculate the rest of the population by surrounding the casinos with holy water.”

What Happened

Instead of a bust, more floating casinos kept coming. The first floating casino opened on the Gulf in 1992, and 12 others followed, each with its own land-based hotel. The latest, the Hard Rock Casino, was scheduled to open Sept. 1, but Katrina had other plans. The barge was severely damaged by Katrina’s fury on Aug. 29.

The dockside casinos drew people from everywhere from Memphis, TN, to Mobile, AL, and employed approximately 14,000. The stakes have been huge. Mississippi casinos generated revenues of $2.77 billion in 2004. Approximately $1.23 billion of this came from casinos in Biloxi and Gulfport, MS. Casinos on the Gulf and Mississippi generated more than $330 million a year in tax proceeds, approximately 10 percent of the state’s budget, allowing the state to have its first budget surplus in more than 100 years.

Of the 13 casinos on the Gulf, two were in Gulfport, one was in Bay St. Louis, MS, and the rest were in Biloxi.

Only one of the barge-based casinos was built to withstand a Category 4 hurricane. This was the Beau Rivage in Biloxi, owned by MGM Mirage. Secured better, it stayed in place and fared better than older properties built a decade ago.

Others, built to the old Standard Building Code for structures fixed in place, weren’t so lucky.

In Biloxi, the surge, which some have called “The Biloxi Tsunami,” carried the President, Casino Magic Biloxi, and Grand Biloxi casinos over Highway 90. (As the third floor couple watched in horror, the President traveled approximately a half mile and crashed into the Holiday Inn approximately 100 yds. inland.)

In Gulfport, the Grand Gulfport and Copa casinos, anchored in the port, were likewise lifted over the highway on the water and deposited on the other side.

Amazingly, the Treasure Bay Casino, built to look like a pirate ship, stayed in place on the Biloxi shoreline, a ghostly structure with many of its planks ripped away. Also surviving are the Imperial Palace, Boontown and New Palace casinos on Biloxi’s Back Bay.

Rebuild on Land?

Casinos in better shape, including the Beau Rivage and the Imperial Palace, are already assessing damage, beginning cleanup and moving toward reopening, which, sources said, could be in three months to a year, depending on infrastructure repair, including rebuilding many sections of Highway 90.

Gov. Haley Barbour is now expected to call a special session of Mississippi’s legislature in Jackson, MS, to enact measures to rebuild the state. The session is expected to be embroiled in debate over whether to permit rebuilding casinos on land.

A state law that took effect earlier this year allows floating casinos to build permanent pilings to stabilize their barges in hurricanes. The president of the Treasure Bay Casino “pirate ship” in Biloxi told legislators in March that storms had cost his casino approximately $34 million in damages.

“Casino operators are expected to lobby very hard to change the law with new legislation allowing casinos on land,” said the source. “They want bricks and mortar, not barges.”

MGM Mirage, however, opposes a move to land.

Alan Feldman, MGM Mirage’s senior vice president of communications, was quoted as saying, “If you allow the casinos to move, what happens to the businesses that have built up around them? Right now is no time to be making changes in public policy. There ought to be a cooling-off period.”

Observers said land-based casinos are cheaper and more efficient than boats, putting floating casinos at a disadvantage. Proponents of the land approach also said floating casinos are more risky, because they are harder to make hurricane-resistant.

“Some are asking owners of the older casinos why they didn’t built properly when they knew that hurricanes would come sometime,” said the source. “It’s easy to say that if you survived Katrina.”

The casino operators are now assessing damages.

“They have to definitely decide they want to rebuild, and which approach they want,” said the gaming source. “Then it will be up to them to push the legislature.”

Larry Gregory, executive director of the Mississippi Gaming Commission, met with casino operators on Sept. 14 while in Las Vegas, NV, for the annual Gaming Expo. The commission regulates gambling activities without endorsing either the land or water approach.

Mississippi taxes its state-regulated casinos at a rate of 12 percent, which is one of the lowest rates in the United States. CEG