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Casino Interests Hit the Jackpot in Post-Katrina Development

As tens of thousands of Katrina victims continue to live in dilapidated trailers and thousands more remain stranded in states as far away as Utah and Georgia, multinational corporations loaded with cash are forging ahead with business projects with questionable benefits for the stricken people of the Gulf Coast.

The casino industry is a prime example. Thanks to a bill passed last year by the Mississippi legislature lifting a 16-year ban on land-based casinos, gaming giants like Harrah's Entertainment and Donald Trump's Entertainment Resorts Inc. are pouring millions of dollars into huge, luxurious casinos that will transform the coastal city of Biloxi into the gaming and entertainment capital of the South.

Despite Katrina's terrible impact, the hurricane gave the gambling industry an "opening to muscle through a law change that before was unthinkable in this Bible Belt state wary of casino expansion," the Wall Street Journal recently pointed out.

That story goes back to 1990, when Mississippi lawmakers legalized gambling based on the understanding that casinos would be built only on barges along the Gulf or on riverboats plying the Mississippi River. That was the only way to convince religious conservatives, who oppose gambling, that the industry would not expand throughout the state.

But companies cleverly exploited loopholes in the law and rapidly became the dominant force in Mississippi's economy. In the gambling town of Tunica just south of Memphis, for example, casinos were built on dry land adjacent to, but not quite on, the Mississippi River. The companies then dug ditches that brought the river to their entranceways so their casinos could be classified as "river boats" and meet the terms of the law. By the fall of 2005, the casinos in the Delta and along the Gulf were contributing more than $300 million a year to the state's tax coffers.

The floating casinos on the Gulf were disasters waiting to happen. During Katrina, nearly all of them were destroyed, their remains blown across Interstate 90 and scattered along the shore. In the immediate aftermath of the storm, the state's gaming commission joined with Harrah's and other operators to press the legislature to pass their long-sought change in the law and allow these structures to be rebuilt on solid land.

In a special session called by Republican Gov. Haley Barbour in September 2005, casinos were given the right to build out to an 800-foot area adjacent to a coast or waterway. That technical change alone has generated nearly $3 billion in investment.

Harrah's is now sinking more than $1 billion into a huge casino resort and hotel complex in Biloxi. MGM Mirage, its chief rival, has invested $500 million to restore the Beau Rivage, the largest casino on the Gulf Coast. Trump has seized the opportunity to expand his casino empire beyond Atlantic City, committing an unspecified amount to a casino and real estate project in Hancock County along Interstate 10. That highway is fast-becoming Main Street in this new gambling Mecca, drawing companies such as Pinnacle Entertainment Inc., Isle of Capri Casinos and the Mashantucker Pequot Tribal Nation.

New Orleans may also get into the act. In late July, the city's Levee Board opened negotiations with Atlantis Internet Group Corp. of Nevada for a proposed $200 million hotel and gambling complex along the shore of Lake Pontchartrain.

All of these projects will take advantage of the $3 billion in tax breaks for Gulf Coast investors that Congress included in the Gulf Opportunity Zone Act passed in 2005. Sen. Trent Lott, an indefatigable defender of Mississippi business interests, tried to include casinos in the bill. He failed, but the final $8 billion package provided lucrative tax credits to companies investing in Gulf Coast hotels and shopping centers even if their owners are gaming companies.

As a result, the Beau Rivage may claim more than $50 million in write-offs, the Washington Post reported in 2005. That was too much for Rep. Frank R. Wolf, a Virginia Republican, who urged President Bush in a letter to "do the right thing and make sure federal resources go to the poor, the needy and the vulnerable and not the gambling interests who already have insurance to cover catastrophic events like hurricanes." Bush ignored him, however, and signed the bill as presented to him.

To be sure, the casinos are big employers: The Beau Rivage, for example, will have more than 3,800 people on staff when it opens at the end of August, making it the largest single employer on the Gulf. While these jobs will undoubtedly pump economic life back to the region, the mega-casinos will also lure thousands of low-income workers, who will risk millions of dollars in their sweat equity in slot machines, poker and blackjack. Sadly, most of their money flows one way—into the coffers of the state and the pockets of wealthy investors.

Originally appeared in 2006 on the Gulf Coast Reconstruction Watch website. Copyright © 2006 by Tim Shorrock. Reprinted with permission.


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