An Update on the Battered Louisiana and Mississippi Gulf Coast Gaming Industry
An Update on the Battered Louisiana and Mississippi Gulf Coast Gaming Industry
Jeff Barbin and Heather Camp**
Almost a year after Hurricane Katrina damaged every licensed casino facility on the Mississippi Gulf Coast (including one not yet open) and, together with Hurricane Rita, damaged eleven of the nineteen Louisiana casino gaming properties, rebuilding efforts continue.
Mississippi
Prior to Hurricane Katrina, the twelve licensed Mississippi Gulf Coast casinos accounted for approximately 45% of the Mississippi gaming market. Katrina’s virtual annihilation of certain key Coast infrastructure gave rise to serious concerns that the gaming industry (and, indeed the region) might not recover from Katrina’s effects. These concerns, it appears, were unfounded.
Granted, a majority of the pre-Katrina Coast casinos currently remain closed (and some of them may never reopen). However, business is booming for the five Coast gaming establishments that have reopened (Boomtown Casino Biloxi, Imperial Palace Hotel & Casino, Isle of Capri Biloxi, The Palace Casino and Treasure Bay Casino). According to a Mississippi State Tax Commission report, gross gaming revenue for the Gulf Coast counties for the period from January to June 2006 totaled approximately $374 million (note that some of the five casinos were not open during this entire reporting period).
Three additional pre-Katrina licensees (Beau Rivage, Hollywood Casino Bay St. Louis (formerly known as Casino Magic Bay St. Louis) and Grand Casino Biloxi) are expected to reopen by this fall. Affiliates of pre-Katrina licensee Copa Casino (which surrendered its license to the Mississippi Gaming Commission (“MGC”) this summer) purchased certain assets of Grand Casino Gulfport and plan to open the newly licensed Island View Casino Resort on a portion of the former Grand Casino Gulfport site this fall. Silver Slipper Casino (a project that had begun but not quite completed the licensing process prior to Katrina) recently obtained its operator license and plans to open in the fall.
Several of these casinos have reopened or will reopen in “onshore” locations, taking advantage of the “safe harbor” provided by the Mississippi Legislature in House Bill 45 (“HB45”) which was enacted in special session after the storm. Pursuant to HB 45, signed into law on October 17, 2005, the Mississippi Legislature retained the historic requirement that a casino be connected in some manner to specified waters while still allowing shore-based gaming in certain very limited circumstances. HB 45 (now codified as part of the Mississippi Gaming Control Act) generally legalizes gaming in a “structure” located on the shore of Harrison or Hancock County where, among other things, (1) the structure is owned, leased or controlled by the gaming licensee; (2) the part of the structure where licensed gaming activities are conducted is located, in Hancock County, no more than 800 feet from the mean high water line (“MHWL”) and, in Harrison County, no more than 800 feet from the MHWL or no farther north than the southern boundary of the U.S. Highway 90 right-of-way, whichever is greater; and (3) the part of the structure where licensed gaming activities are conducted lies adjacent to the water.
In the months since HB 45 became law, the MGC has valiantly and ably wrestled with some novel questions of statutory interpretation. The MGC has amended its regulations and formulated policies in an attempt clearly define what does (and does not) constitute a legal on-shore gaming site.[1] For example, MGC regulations now require an applicant seeking approval for an-onshore casino site to present the MGC with, among other information and documentation, a survey clearly identifying the locations of the proposed on-shore site, the MHWL and a line located 800 feet (excluding all existing and pending public easements and rights-of-way for public streets and highways) from the MHWL. Despite the questions and complexities surrounding on-shore gaming site approval, applicants do not appear to have been deterred from pursuing new Coast casinos sites, and the MGC has recently granted gaming site approvals for new projects to be located on the Coast.
Louisiana
Of the original eleven Louisiana properties that were affected by the storms, three properties remain shuttered, including Harrah’s two Lake Charles, Louisiana riverboats and the Columbia Sussex Belle Property which was located in New Orleans prior to Hurricane Katrina. Harrah’s New Orleans property re-opened in February 2006 and has since reached pre-storm revenue levels.
In May 2006, Pinnacle Entertainment, Inc. and Harrah’s Entertainment, Inc. announced an exchange of properties whereby Pinnacle would purchase Harrah’s two Lake Charles facilities and Harrah’s would take over Pinnacle’s Grand Casino Biloxi facility. The deal is expected to close in the last quarter of 2006. Pinnacle has announced that it will use one of those licenses next to its existing L’Auberge du Lac facility in Lake Charles to complete an estimated $350 million expansion. It has not announced where it will move the other remaining license.
Meanwhile, Columbia Sussex has announced the relocation of the former Belle of Orleans to Amelia, Louisiana on the Atchafalaya River, South of Lafayette, Louisiana. In July 2006, voters approved the move with a 65% favorable vote. Although the vessel remains in dry dock in Mobile, Alabama for repairs, it is expected the boat will be moved in place and opened by November 2006. The New Orleans Levee Board has sued Columbia Sussex seeking payment of rent.
Despite having three licenses inoperable for almost a year, and having the New Orleans land-based casino closed for almost six months, Louisiana casino gaming revenues for fiscal year end June 30, 2006 grew at an astonishing $164 million or 7.3%.[2] While a substantial amount of the increase is due to Pinnacle’s L’Auberge property, it appears the Louisiana gaming market has benefited from the losses suffered by the Mississippi Gulf Coast properties and by the influx of temporary construction workers in the flood damaged regions of the State.
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** The authors are members of the Phelps Dunbar LLP Gaming Practice, which is headed by IAGA President Dan McDaniel. Jeff Barbin is an IAGA member specializing in Louisiana Gaming matters. Heather Camp is an IAGA member specializing in Mississippi gaming matters.
[1] In a previous article, we noted that the MGC was considering an amendment to what is commonly called its “infrastructure rule (requires a licensee to spend as much on non-casino development, e.g., hotels, theme parks, golf courses, marinas, entertainment facilities, and the like, as it does on its casino). The MGC did not adopt that amendment.
[2] The revenues discussed in this Article likewise excludes Louisiana’s three Native American casinos.