A federal bankruptcy judge voided the Trump Taj Mahal's
union contract on Friday, a move that isn't likely to save the troubled casino
but should be a boost for Atlantic City's remaining ones, according to experts.
"It's great news for the city and employees. The
unions are trying to behave like nothing has changed from seven years ago when
the city was at the top of its game," said Roger Gros, publisher of Global
Gaming Business. "They were trying to make believe that [they could] be
continued to be paid the same even though casinos are making half of the
money."
Trump Entertainment has been involved in a battle with
the union in two areas: Union members were asked to give up their health care
plans in favor of a $2,000 credit that could go toward health care costs. It
also wants them to substitute pensions for 401(k) plans.
The decision by Judge Kevin Gross in Delaware to grant a
request by Trump Entertainment to terminate its contract with Local 54 of the
Unite-HERE union is a reality check, gaming experts said.
"Take a look at the situation, it was closing in a
month and [the union members would] lose their jobs and their benefits,"
said Alan Woinski, chief executive of Gaming USA Corp. in Paramus, N.J.
"That was basically what they had: Lose their jobs in a month or lose
their benefits at the end of the month."
With the voided contracts, union members would lose their
benefits but would still have a job if the casino is able to remain open. Many
reports suggest that it could close in November without new investment.
Even footing for
remaining casinos
The last two union contracts dealt a serious blow to the
remaining casinos because it gave Unite-HERE the upper hand, including
negotiations with Tropicana.
Experts say they've been able to bully the casinos into
signing contracts by threatening to strike. In its heyday, a strike would be
tough but something a casino can rebound from. In today's tight financial
times, a strike takes on even more serious financial burdens.
"The last thing casinos wanted after [Hurricane]
Sandy was a strike. If you're Unite-HERE and you know the casinos are
struggling to recover from being closed from Sandy, if you threaten them with a
strike, they're going to roll over, which they did," Woinski said.
It didn't seem like union president Bob McDevitt believed
the declining revenue numbers because he would still go in and ask for more,
Woinski said.
"The continued declines in revenue showed it was
working other way around instead of pressuring them into higher
contracts," he said.
The remaining casinos have some footing in the situation
now."The balance of power has shifted back to the casinos. Casinos have
leverage now. The union leaders can't come and say you have to pay more.
They'll say, 'Are you crazy?'" Woinski said. "So instead of the power
being more towards unions, now we're trying to survive, so you either work with
us or we don't need you anymore.
Terminating the
contract may not be enough to save Taj Mahal
Terminating the contracts will no doubt help Trump
Entertainment's financial troubles as it struggles to keep the casino open. But
experts say the judge's decision isn't enough to save it.
"Will Trump Taj Mahal survive? No. They need an
investment and they need to turn things around," Woinksi said. "They
were down 20 percent last month, so this doesn't guarantee success but it helps
… They definitely need the investment by Carl Icahn and get rid of everybody
who runs that company."
The Taj Mahal reported a 22.9 percent decline in total
gaming win for September year-over-year, according to a report by the New Jersey
Division of Gaming Enforcement. Bondholders, rather than those with skin in the
game, led to the casino's decline.
"Bondholders can't operate casinos, and that's what
happened — not that [Donald] Trump did a great job — but every casino in the
U.S. that's taken hold by bondholders either went bankrupt or sold for
pennies," Woinski said. (Trump sold his stake years ago.)
Other casinos that had the same fate include Revel and
Greektown Casino in Detroit.
"The state has to come and put some skin in the
game. What really needs to happen is a whole reevaluation of the property tax
process in Atlantic City," Gros said.
"There has to be a reevaluation of the city so taxes
are fair. There needs to be a reduction in the size of city government right
now, which is starting to happen. The new mayor is aware of what he needs to
do. It just takes time."
If Trump Taj Mahal closes on Nov. 13, it will join a list
of other troubled casinos that closed earlier this year: Atlantic Club, Revel,
Showboat and Trump Plaza.
Source: Philadelphia
Business Journal
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