Atlantic City Round-Up

ATLANTIC CITY -- If New Jersey Governor James McGreevey wants to place video lottery terminals at racetracks, he must first win a popular vote on the issue.

That's the conclusion of Herbert Stern, an influential lawyer who also happens to be counsel to the Casino Association of New Jersey, the trade group representing the Atlantic City casinos.

Stern researched the state's recent history of gambling expansion and found that the state has submitted even "the most subtle and incremental" expansions to a public referendum. He noted that even allowing racetracks to offer wagering in the evening, in addition to the day, required a statewide vote in 1966. Other popular votes through the years allowed casino-based simulcasting from the tracks, Sunday horse racing, and casino gambling only in Atlantic City.

Such votes were required, Stern said, because the New Jersey Constitution expressly prohibits the Legislature from authorizing "gambling of any kind ... unless the specific kind, restrictions, and control thereafter be submitted to" a referendum.

"Given this background, it is patent that any move to place thousands of VLTs of several New Jersey racetracks without submission to, and approval by the majority of, the voters in a referendum specifically authorizing that specific kind of gambling would violate the antigambling clause of the New Jersey Constitution," Stern wrote.

Stern said it's "equally plain" that voters did not have VLTs in mind when they amended the constitution in 1969 to allow a state lottery.

Casino association President Dennis Gomes sent a copy of Stern's opinion to legislators, urging them to defeat any VLT measures. Gomes has said he's confident that the casino industry could defeat a public referendum to allow VLTs.

The casino association can now point to three legal opinions that VLTs must be subject to a referendum. There are apparently no legal opinions to the contrary.

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The Casino Control Commission voted 4-0 to approve the costlier terms of a $490 million bond sale sought by Trump Hotels & Casino Resorts, enabling the company to finally complete the deal.

Trump Hotels will use proceeds solely to refinance debt, including $312 million backed by Trump Marina Hotel Casino that was to have come due in November. The company does not have the cash to pay off the debt.

Trump Hotels had been attempting to complete such a bond sale since last spring, but ran into investor concern first about the company's reputation and financial results and most recently about possible hikes in New Jersey casino taxes and this summer's opening of Borgata Hotel Casino & Spa.

As a result, Trump Hotels had to repeatedly sweeten the terms over the last two months and Chairman Donald Trump had to personally invest $30 million as part of the deal. The company priced $425 million in first-mortgage notes with an effective yield of 12.75 percent and $65 million of second-mortgage notes at 17.625 percent, the last 6 percentage points of which will be paid in in-kind notes.

The Division of Gaming Enforcement, which has been warning Trump Hotels to improve its balance sheet, "reluctantly" did not oppose the deal. DGE Deputy Attorney General James Forgarty said the deal costs Trump Hotels more and gives it less flexibility regarding capital improvements.

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Uniformed State Police, vehicle searches, delivery inspections and baggage restrictions were in evidence as Atlantic City casinos, fearing acts of domestic terrorism, went on a heightened state of alert when the war began in Iraq.

"With some deliveries that are not routine, we're verifying the source before they can enter the property," said Rick Santoro, senior vice president of corporate security for the Trump casinos.

"We do have (state) troopers going around in uniform and in marked cars to reassure the public," said Division of Gaming Enforcement spokeswoman Kerry Hand.

Tom Davis, president of Sands Casino Hotel, said security officers were checking cars as they entered the self-parking garage and that he advised employees to "kind of ratchet up the vigilance." Sands, like other casinos, made plans for emergency evacuations.

"For example, the kitchen people would go to a parking lot across the street and a supervisor would meet them and take roll to account for all employees. We have a grid of where people are to go," Davis said.

The war, however, does not seem to have caused the expected decline in casino business. Executives and analysts had predicted that the "CNN effect" and fear of terrorism would keep gamblers at home for at least the first few days of the war.

Casino bosses said volumes seemed strong through the early days of the war.

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The two Harrah's Entertainment casinos in Atlantic City paid $835,000 in bonuses to 5,700 hourly and nonmanagement employees last year as part of the company's Performance Payout program.

Each eligible employee can earn up to $200 per quarter as a reward for his or her role in providing superior guest service. Since Harrah's Entertainment began the program in 1999, the company has paid its Atlantic City employees $5.8 million in bonuses.

(Joe Weinert covers the gaming industry for The Press of Atlantic City. He can be reached at jweinert@pressofac.com.)