A federal bailout for Vegas casinos?
November 19, 2008 | 10:40
am
Sometimes you toss out an idea at a meeting as a joke or because you think it sounds clever at the time. Then you have to write a story. At yesterday's editorial meeting for Las Vegas Weekly, I suggested, somewhat facetiously, that we do a story on how the federal government should come in as the cavalry to bail out Las Vegas' casino companies. After all, I argued, aren't union jobs at stake? And doesn't the entire Las Vegas (and Nevada) economy depend on the resorts as surely as Detroit does the auto industry? The ripple effect of the casinos' financial problems could be staggering. They already are if you are one of the many locals among the layoffs done by every resort company in town.
Outside the direct layoffs, consider the projects not happening and the jobs not being created during the credit crisis. Many employees lost their jobs when the Stardust closed, but the construction jobs that sprang up in their place vanished when building was suspended at Echelon Place, the casino that was to replace the Stardust. Now, because of credit markets, it will be years before the existing hulk of metal is transformed into a resort able to employ locals. Unless, that is, there is a federal gift/loan to the owners to complete construction on Echelon Place. That could fix the issue for all, and create solid construction jobs leading to solid resort jobs -- all union.
Also, there is the company that idiotically took down the New Frontier after paying a record amount for the real estate. Now they need money to build a hotel on the empty lot. Can the government help? Meanwhile, MGM-Mirage is in the midst of a big hassle trying to get the funding for the final phase of its six-tower City Center development. They need to convince someone to lend them that last billion. Why not solve this easily by bringing in the government?
Certainly the casinos are hurting. Many resorts have found 80-90% of their stock value disappear over the past year. And Las Vegas Sands (owner of the Venetian and Palazzo) recently righted its financial ship thanks to a huge loan by owner Sheldon Adelson, who for his efforts has been rewarded by owning far less of Las Vegas Sands.
Beyond the fact that we are a gambling-based town, are we any less worthy of a federal bailout? The resorts made all the same mistakes that other industries being bailed out made. If in the roaring times of two years ago our casinos overbuilt, spent too much, went private by taking on too much debt, well, why should they be the only ones held accountable? The government could solve Vegas' problems just a few billion. We won't need $25 billion like Detroit. And problems for the Strip could be as devastating for Las Vegas as Wall Street problems for New York or auto industry problems for Detroit. We are a one-industry city with no backup plan.
I ask you, readers, is there any reason why Vegas doesn't deserve a government bailout? And thanks in advance for giving me help on a story I now have due Monday. (photo by Sarah Gerke)
I ask you, readers, is there any reason why Vegas doesn't deserve a government bailout? And thanks in advance for giving me help on a story I now have due Monday. (photo by Sarah Gerke)
A few billion sounds good, but it would come with heavy government strings attached. If you want to truly ruin Las Vegas, let Congress design and manage a few casinos. On the bright side, some of these high-profile disasters like Echelon might be sold to someone who will build an affordable resort. Everyone is catering to the rich and they were the first to flee when the economy tanked. Middle class tourists are about the only ones left, and room rates are plummeting to draw them in. It's a good trend when all the other news is bad.
Posted by: Bill | November 19, 2008 at 11:38 AM
Here's a few pros and cons-
Cons-
Maybe for the idea that the city promotes urban sprawl and is a huge drain on energy resources. That because the desert is so hot it means that every house HAS to have an air conditioner and use up massive amounts of electricity.
That the city doesn't have any effective mass transit and builds streets 6 lanes across that are essentially mini freeways and increases pollution.
The product of casinos is entertainment - while auto makers are manufacturers, that produce goods that are tangible and can be sold and will hold some value and use over time. The ticket stub to the Barry Manilow concert won't be worth the paper it's printed on after the show.
Pros
The casinos employ hundreds of people that have good union jobs.
Much like the automakers, the gaming industry also affects and is connected to other industries, like restaurants, construction, information technology and of course strip clubs.
Because if you don't the people of the state of Nevada will have to pay state taxes.
Posted by: Oscar | November 19, 2008 at 02:12 PM
As much as I love Vegas, and although I'm not in support of a Detroit bailout, two different animals here. MGM and Boyd still are turning profits, HET would be if they hadn't decided to go private. The big three are bleeding cash, so based on that alone I'd say absolutely no.
Posted by: Jinx | November 20, 2008 at 07:51 AM
The Federal Governemt, aka the US Treasury should BUY ALL the casinos from the mob. This would let the mobsters retire in comfort, reduce crime, save millions for the IRS chasing tax cheats in Vegas, ensure that eventually the national debt will be paid off and the burden removed from our grandchildren, and create a national deficit with which we could use for improving many of our social programs. Imagine that - the US Government accomplishing something that makes financial sense and embodies fiscal responsibility.
Posted by: Dean Corso | November 20, 2008 at 09:29 AM
I would be willing to comment for the article by phone.
Michael Zaletel
CEO
i4vegas.com
Posted by: Michael Zaletel | November 20, 2008 at 10:26 AM
why not a few billion dollars to the VA?
Posted by: Carey | November 20, 2008 at 10:31 AM
After decades of hearing about how the democrats are socialists, it is at least somewhat funny to see the republicans fold like a bunch of pansies (real conservatives would let businesses fail )
Posted by: jb | November 20, 2008 at 10:41 AM
The biggest problem is that the casino companies will play 'double your paycheck' with it at the tables.
Posted by: Encinoman | November 20, 2008 at 02:22 PM
MGM just needs to buy a tiny savings and loan (like Hartford Financial just did) and then go with a tin cup to Congress for some bailout money. Once, the fools in Congress used taxpayer money to bailout the first company, it was a lock that many more businesses were going to come begging for taxpayer money, too. Ah, welfare, isn't it just grand?
Posted by: Ted | November 20, 2008 at 03:59 PM
Bailout is not going to happen. For quite a few reasons.
First, gambling is a luxury. It's not a necessity. Although it may be a priority to Nevada, to the rest of the U.S. it isn't. Bailout money thrown at it is guaranteed to be the lowest of the low priorities right now. There are many, many more sectors in the U.S. that are more than deserving for this money.
At the Gaming Expo, the consensus is that, even though gambling winnings are down at casinos, it's still been a successful year. But, according to casinos, it's been a bad year because they haven't had the astronomical numbers that keep increasing. Because those numbers have dropped and the successes in the past are not happening, they are trying to say they have been losing money. Kind of a warped way of thinking, when they are still making money. It's kind of hard to get bailout money when you show profit. Take Steve Wynn for example....if times are so hard right now, why has he built a huge addition to his resort? From all appearances, it don't look like he is crying bankruptcy or bailout.
Thirdly, I can probably safely say that NO politician from Nevada is ever going to even come close to bringing that up for approval. Because of the above reasons, they know they will be laughed at for even trying to pursue that line.
That leaves either one of two (or both at the same time) alternatives: (1) Nevada increases the tax percentage for the gambling "takes" from the casinos statewide; and/or (2) Nevada starts a State tax system.
Posted by: ColinFromLasVegas | November 21, 2008 at 06:40 AM
You are a complete idiot. Unfortunately our government is full of so called leaders as stupid as you are. I won't even try to explain the difference between the manufacture industries in this country and other business. The subject is obviously beyond your comprehension. This is exactly the reason within 50 years this country will be a socialistic government and will go the way of all the other successful socialist countries.
Posted by: Lee Kelly | January 01, 2009 at 12:57 PM