GULFPORT, Mississippi – Before the recession hit, Rick Carter was hoping to borrow money to renovate a hotel damaged by Hurricane Katrina.
Now he says the stringent conditions and high borrowing costs banks want to charge him amid the ongoing credit crunch mean there’s no way he’d sign up for a loan.
“There’s no way I can find anyone to lend me money at a reasonable rate,” said Carter, co-owner of the Island View Casino Resort just a stone’s throw from the Gulf of Mexico. “If we’re going to do anything we’ll fund it ourselves.”
Carter’s casino was originally located on a barge just offshore at Gulfport. But when Hurricane Katrina came through here in 2005, it lifted his casino off its moorings and dumped it on the beach some way off.
In the aftermath of that unparalleled storm, local politicians got together and lobbied for the passage of the Gulf Opportunity Act, which provided tax incentives for the return of developers and investors. Mississippi also decided to allow casinos to build up to 800 feet from the water in order to avoid a repeat of Katrina’s destruction.
Like other casino operators, Carter decided to reinvest on the Gulf Coast. He and his partner Terry Green invested $300 million in their casino resort and golf course.
“Thanks to our local politicians and the good people in Washington, we came back,” Carter said, sitting in a restaurant in the casino. “They saved the Mississippi Gulf Coast. If they hadn’t taken action then this would be a ghost town.”
Now, he is not so sure of the “good people” in Washington. The U.S. government has pumped trillions of dollars into the financial system to help keep it solvent, but he can’t get a loan without paying exorbitant interest.
“It’s amazing to me that after all the money that’s gone into bailing out the banks you can’t borrow money from them,” he said. “Instead of lending that money out they’re just using it to prop up their balance sheets.”
“I don’t get that.”
Carter said that the only real alternative to mainstream financial institutions is borrowing from hedge funds. But they are even more demanding than the banks.
“The problem there is that they charge even more than the banks and they want a stake in your company,” he said. “And we’re not going there.”
So instead of borrowing money, Carter said he and his partner are trimming their sails by cutting back on unnecessary expenses. Casinos in Mississippi have seen their gaming profits slide 11 percent for the year to date, as the downturn has made people less willing to gamble. The Island View’s gaming profits are down, but not by as much as the rest of the state, Carter said, because the number of people coming had not dropped significantly.
The slot machines and poker and blackjack tables certainly seemed busy for a week night.
“But when they come in, they’re willing to spend $90 instead of a $100,” he said. “People are watching their money more carefully.”
Island View has not laid off staff – it employs some 1,400 people — but has cut overtime and postponed investments in order to fund projects like renovating the hotel, which was damaged by Katrina.
“We’re going to fund everything ourselves, even if it means we have to wait a while to do it,” he said.
He added that in the meantime casinos are going to have to get used to a new post-boom world in which there will be less money to go around as the days of easy credit are gone.
“This is going to take a long time to work itself out and the economy is not going to go back to where it was,” Carter said. “People are going to have to get by with a little less and they’re going to spend a little less, including when they’re at the casino.”
“Given the mess this country has ended up in, that’s probably a good thing,” he added.
Photos by Carlos Barria