Route to Recovery

A trip through the epicenters of the recession

Facing tough credit market, casino owner will go it alone

Nov 11, 2009 15:49 UTC

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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.”

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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

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COMMENT

With all of the large commercial banks holding up the solid efforts of the USA growth one would think a casino with the flow of funds they have could make a bank in it’s self and flee the National they work with. I think it’s time for us to make a major change! Think about this for any business with client flows. They should IMO. Just find find a local non commercial (not a large National size Bank) yet a small local credit union, Small savings and loan type business and offer their clients specials to firm at that location for doing business with them. Then ask all the local small and large savers to switch over to the same small location so they can grow and loan to the local only business making it possible for firms like the one Rick Carter runs able to get loans at 1.5 to 2% over national rates. Yes kick our the fat cat’s and do business with the small firm. Built them up! Loans must be set up for open change as time passes just like passbook savings would. Drive business to the new bank location by 10 or 15 key business firms. It’s a county full of people helping one another to grow the locations of many a firm then not just of one but thousands so in the end you have both the large National moving out without any clients left and the same small bank growing large due to what a city needs to live out of the dark past. Control is only there due to you letting it be! Yes it will take time yet our Nation has that in spades on it’s hands right now. Make your plan and work the plan helping everyone in the process and you can save your city if you wish to yet the Banks who will not lend (from the past greed and fat bonus payments etc) need not stay in business no matter how large they are. It’s your chance to take back the old to a new life do it now and hold the hand of each person who makes your town one of jobs for life! Just think of what one year of your total work on helping your local town do this across our Nation with new jobs built in the process for others. As we must have this change, new ideas and a willing population ready across our country right now to get more back to peace within our lives and local homes, do it now it will grow and come to be as together we can make it work. Happy Thanksgiving to all who make it work! God Bless you all.

Posted by J.Nelson | Report as abusive

Home of the low rollers

Nov 6, 2009 15:20 UTC

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Photos by Lucy Nicholson

LAUGHLIN, Nevada – There is an name for the kind of gambler that comes to this town in this northern southern tip of the state: “low rollers.”

Las Vegas, some 90 miles to the north, is infinitely more famous,action-packed and expensive. Laughlin is calmer, cheaper and caters to a different crowd, mostly retirees from California or “snowbirds” – a somewhat derogatory term for retirees from northern states who flock here for the winter – who have settled here.

“This ain’t Vegas, Toto,” said John “Mac” McCollum, a realtor over the Colorado River in Bulhead City, Arizona, who refers to the Laughlin crowd as “Q-tips and erasers” (“lots of white hair or none at all,” he explains).

Casinos love high rollers, who spend big and gamble big, looking for a good time, late nights and a lot of fun.

Their more lowly kin are a sedentary bunch on fixed incomes. They drink less, party less, tip less and – most importantly for the gambling industry – they gamble less. They are an interesting bunch to observe, quietly and intently wiling away the hours gambling, often sitting on their own at slot machines.

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A few miles away from Laughlin proper is the Avi Resort & Casino, which is owned by the Fort Mojave Indian Tribe. The tribe (and duty manager Jay Johnson, a really pleasant, easygoing man) let Lucy Nicholson wander about to take pictures of the clientele after the security guards had outlined certain restrictions on what she could and could not photograph.

Over the course of an hour Lucy found that the average age of the people she photographed was about 85. Amusing themselves by gambling while they await death in Laughlin, they really didn’t care whether she took their pictures or not.

In the meantime I found myself, purely by accident, at the bar, where the bartender had to shout at his elderly customers to make himself heard, even though we were somewhat removed from the constant cacophony of slot machines and other devices with flashing lights, bells and whistles designed to coax money out of your wallet.

Welcome to the world of the low roller. Vegas it most certainly ain’t, Toto.

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COMMENT

i think the article is an outrage. it is very insulting towards people of a certain age who still have fun and refuse to sit by the window. The article provides an extreme unhealthy insight look into the almost fascist brain of the author who wants old(er) people to go in hiding. He paints a world where the older/senior citizen doesn’t fit anymore. We – rather young visitors from europe – visit Lauglin and Nevada each year in summer and we enjoy the entertainment, the excitement. Why shouldn’t THEY enjoy it too!Please chief – editor, correct this author. And let him (or here) apoligize to the group of people he/she insulted.

Posted by mike holland | Report as abusive

After seven months out of work, a return to self-esteem

Nov 6, 2009 14:14 UTC

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BULLHEAD CITY, Arizona – The past seven months have not been easy for Eric Musser.

In March, Musser lost his job as a blackjack dealer for the second time in six months. The first time was in September last year, when casinos over the river from here in Laughlin, Nevada, were hurting as the economic downturn led to fewer gamblers. Musser, 27, was taken back in December, with fewer shifts and less money, before he was laid off again.

“It’s been a tough time for us,” he said. His girlfriend is studying to become a dental assistant and they have a three-year-old son, so the loss of income has been hard to come to terms with. They have had to live apart in rented rooms because they could not afford to live together.

But trying to find a job has been even harder.

“I applied everywhere for a job – Del Taco’s, K-Mart, Pizza Hut, Domino’s, Lowe’s,” he said, rattling off a list of retail and fast food establishments. “But I never got a single call back.”

“I never had trouble finding a job before,” he added, standing outside the mobile home where he rents a room with his dog Lady, a midsize brown mutt with a dusty coat and good nature. “When you keep trying like that and can’t find a job, your self-confidence and self-esteem start going down the drain.”

A week and a half ago Musser got an audition at the Riverside Casino, where staff observed him as he manned blackjack and roulette tables with real customers. He was hired on the spot at $7.55 an hour.

“It feels really good to be back at work.”

Musser said the Riverside is the best casino in town with the best tips – he made $350 in his first three days there.

“Now I’m going to save up and if everything goes well in January I’ll find my own place to rent so we can live together as a family again,” he said.

Photo of Eric Musser by Lucy Nicholson

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Arizona town feels a double blow after the boom

Nov 5, 2009 17:14 UTC

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BULLHEAD CITY, Arizona – Not so long ago this town on the Nevada border was in full boom mode.

It was a magnet for people coming to work in the casinos across the Colorado River in Laughlin, plus Californians looking to retire here or have a second home at a fraction of the cost in their own state. Construction workers flocked here to build homes and roads.

All told, successive booms turned Bullhead City from a fishing village just a few decades ago to being a city of more than 40,000 people.

But America’s housing crisis and the most severe downturn since the 1930s stopped the city’s boom dead in its tracks.

“We had booms in the 1980s and the 1990s, but in 2005 and 2006 things went absolutely nuts,” said John “Mac” McCollum. “Then in 2007 all of a sudden the lights went out.”

Many of the construction workers have gone, as have a lot of people who have been laid off at Laughlin’s casinos. Nevada’s casinos have had 20 consecutive months of declining gambling profits.

“Unemployment is on the rise and we’ve had quite a few foreclosures,” said Bullhead City Mayor Jack Hakim. “Families are leaving because there’s no work to be had.”

“It’s going to be tough for a while around here,” he added.

Unemployment in Mohave County where Bullhead City is located is around 10 percent. The median house price here has fallen from nearly $190,000 in January 2006 to less than $93,000 now, a drop of more than 50 percent.

Around 60 percent of McCollum’s sales now are foreclosures.

“Many of the other sales we handle are people trying to avoid foreclosure or at least break even,” he said. “Either way, right now foreclosures are pretty much the only game in town.”

John McCormick of McCormick Development helps run a number of family businesses – a water company, a construction company, a land development company and a real estate broker’s office – and says that many of the people walking away from homes here are either speculators or Californians who bought a second home here.

“If they end up in trouble, it’s so much easier to walk away from a second home than a primary residence,” he said.

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The McCormick clan’s land development business has laid out a subdivision north of Bullhead City with 141 empty lots, complete with roads and water mains. But although there have been plenty of people looking, no one is buying right now. The family business owes the bank $8 million on the development, plus has to pay $160,000 annually in property taxes while the subdivision remains empty.

“There’s money out there but a lot of people won’t let it go,” McCormick said. “They just waiting to see if prices will go lower.”

For Bullhead City to come back, both McCormick and McCollum agree that casino business needs to pick up again but – even more importantly – California’s economy needs to recover.

“If California’s market is in the tank, we ‘re in the tank,” McCormick said. “I think we may be past the worst of it now. But nothing big is going to happen any time soon.”

COMMENT

Bullhead city rules! It’ll never become a ghost town, too much fun to be had there! Take one big lake, one big river, beautiful desert canyons and mountains, shake it all up and add a dune buggy, a jet boat, a kayak and a waverunner. Add tons of weekly happy hours and a Sunday live music jam that rocks this world. Broil it under a hot sun, sprinkle it with fiestas sponsored by the casinos across the river. Hang out in Bullhead for a while and find out just how much fun life can be!!

Native Americans look to renewable energy as casinos struggle

Nov 5, 2009 16:54 UTC

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LAUGHLIN, Nevada — Like the rest of Nevada’s casinos, the Fort Mojave Indian Tribe’s Avi Resort & Casino in the south of the state has been hurt by a slow economy that has resulted in fewer gamblers coming to try their luck.

But as President Barack Obama touts renewable energy and “green jobs” as a way to rejuvenate the ailing economy, the tribe is hoping to hit a jackpot of its own in alternative energy.

“Gaming can’t be the sole source of income for our tribe,” said tribal vice chairman Shan Lewis. “Whether it’s this generation or the next generation, it isn’t always going to be able to support us.”

Though Lewis said plans to diversify, in particular the development of solar power in the desert, date back some years and are not related to America’s longest and deepest downturn since the 1930s, the tribe’s casino business is clearly hurting.

State gambling profits fell 9 percent in August to $847 million from $934 million a year earlier, according to the Nevada Gaming Control Board. In Laughlin, profits fell 13.8 percent to $38 million — the 20th consecutive month of declines.

“The drop in revenue has affected the tribe in general because we use that money to sustain our way of life,” Lewis said. The Fort Mojave Indian Tribe has around 1,300 members in California, Nevada and Arizona.

To cut back, the tribe has reduced shifts at its casino but has tried to avoid layoffs, Lewis said. The Fort Mojave Indian Tribe has also had to shelve plans for a new casino facility in California because of the credit crunch.

“There are just not a lot of institutions out there lending any money right now,” Lewis said. “We feel it’s a great project, we think it’s eventually going to move forward but we’ll have to take a little break there for a while.”

Much of the tribe’s focus is now on lobbying the government for incentives to invest in renewable energy sources, plus upgrade the transmission system so that electricity generated by the tribe could be sold elsewhere.

“If the government wants to see a renewable project out here,” said Jeff Castillo, economic development officer for the tribe, “we can make it happen.”

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Photo by Lucy Nicholson

COMMENT

i think the industry just has to reevaluate its efforts to make their business more profitable. sure, the casino industry is hurting with our downward economy, but every industry takes a hit every now and then.
renewable energy can be a great way to make more money for the tribes, but then again, maybe not. it’s all about making smart and clever business decisions.

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