Author: Casino Connection Staff

After weeks of negotiations, four of Atlantic City’s main casinos have reached a new agreement with Local 54 of the Unite Here union, avoiding a strike just in the nick of time for July 4 weekend, one of the biggest of the year for the city.

The union announced late on Thursday, June 30 that it had reached agreements with Caesars’ three properties, including its flagship casino, the Tropicana and Harrah’s, as well as the Borgata, which is operated by MGM Resorts International.

That left the Hard Rock as the lone holdout, although executives and the union reached an agreement hours before the July 3 strike deadline. Its contract expired after the other properties, meaning it has two additional days before its deadline.

Bob McDevitt, president of Unite Here, told the Associated Press called it “the best contract we’ve ever had” and that the union “got everything we wanted and everything we needed,” including substantial pay raises for workers, in order to combat inflation and rising costs of living.

Exact terms of the settlement have yet to be disclosed, as the terms still need to be fully ratified by membership before they can be implemented, according to Unite Here spokeswoman Bethany Holmes.

This latest labor struggle was somewhat unique for Atlantic City, in that most of its previous standoffs were centered around healthcare and retirement benefits. This instance, however, was primarily concerned with workers’ base pay and compensation. Union officials indicated that the increase in wages was “significant.” Multiple casino workers were quoted by the Associated Press as saying that it was the most substantial pay raise of their careers.

A strike would have been the city’s first since 2016, when Trump Taj Mahal workers refused to return to work after a bankruptcy court nullified pension and healthcare benefits. Interestingly enough, the casino was then sold to Hard Rock in 2018, which was why the contract expired at a different time.

Past strikes have turned violent and cast Atlantic City’s image badly, but union officials and casino executives did all they could to avoid that again.

Previous reports had indicated that the city’s casinos could lose upwards of $2 million per day each if a strike had taken place. Operators had argued that revenue numbers were being inflated due to the fact that a large percentage of online and sports betting revenue is withheld, and that in reality they were struggling to keep pace with pre-pandemic averages.

Those arguments appear to have been unsuccessful, given the recent settlements.

Sources told GGB News that casino executives understood the importance of the union workers in rebounding from the pandemic and were prepared to reward them with higher pay, and attempting to keep pace with soaring inflation.

Following the agreements, Hard Rock International was the only company to offer a comment.

“We are extremely pleased that we were once again able to reach a successful settlement with Unite Here Local 54 to increase wages and benefits for our deserving team members,” said Jim Allen, chairman of the company. “We look forward to further expanding this excellent relationship at both the national and local levels as we expand our iconic brand.”

This represents a major victory for Unite Here, but labor strife is also afoot more than 300 miles to the north in Lincoln, Rhode Island. Local 54’s sister chapter, Local 26, has authorized a strike Friday against Bally’s Twin River Casino over much the same issues: wages and staffing levels.

Bally’s Atlantic City has a “me too” clause in which it automatically agreed to the terms negotiated by the other casinos, and wasn’t in danger of being impacted by an Atlantic City strike. Ocean Casino Resort has a similar agreement and did not take part in the negotiations.

The union seeks wages to match the cost of living, and increased hires, with more full-time schedules. The two sides met June 24 and were set to negotiate again on June 29.

According to spokeswoman Lynette Ng, the contract expired July 1.

Bally’s spokeswoman Patti Doyle did not comment on the strike- vote, saying that the company will “speak to our union colleagues at the negotiating table.”

The union represents about 200 of the 1,900 employees, Doyle said. The union does not represent workers at the company’s Tiverton casino.

Whether Local 54 of Unite Here union goes on strike over the latest contract negotiations is still undetermined. The union voted on June 15 to authorize a strike. It will be in the arsenal of tactics if negotiations turn sour—the union can strike any or all nine casinos, according to the Associated Press.

“We’ve been saying for some time now that casino workers need a real raise,” union spokesperson Bethany Holmes said. “We’re two weeks past our contract expiration, and we’ll continue to try to get there with the companies, but we’re taking a vote this week to put in the hands of the negotiating committee which has the power to call a strike, if necessary.”

If authorized, a strike would come at a time when the casinos are just beginning to show financial recovery after the Covid-19 pandemic. The workers, however, are not. The union wants significant wage increases to help deal with the effect of the pandemic coupled with inflation.

For maximum impact, the union could choose the July 4 weekend to throw up pickets when crowds are the largest.

The casinos say money is not rolling in as fast as the union claims. The industry says they only retain 30 percent of the online casino and sports betting revenue. A more accurate measurement would be in-person revenue.

Ocean Casino Resort and Bally’s agreed to honor the terms of contracts eventually reached with some of the larger casino companies in town, but no contracts have yet been agreed upon.

Caesars Entertainment will invest half of its $400 million allocation for Atlantic City this year to Caesars Atlantic City. The outlay will renovate the casino floor, lobby, outdoor pool of the rooftop Qua Baths & Spa, including cabanas, and valet area, according to the Associated Press.

“This major investment demonstrates our ongoing commitment to elevating guests’ experiences at our resorts as well as advancing the Atlantic City tourism economy,” said John Koster, regional president for the company’s Eastern Division.

These are the culmination of other substantial investments the company is committed to. The property completed renovations to 750 hotel rooms and suites with both a Roman theme and elements of the Atlantic City beachfront. It also plans to open Nobu Atlantic City, a restaurant and hotel within Caesars.

Nobu Hotel Atlantic City will open after the restaurant’s debut, on the top three floors of Caesars Centurion Tower. It will feature redesigned rooms and suites with a Japanese theme.

Chef Gordon Ramsay will open the East Coast’s first Gordon Ramsay Hell’s Kitchen restaurant this summer.

The corporation is committed to complete its investment by the end of 2023.

The peak year for the Atlantic City casino industry in the new century was 2006, the year gaming revenue crossed the $5 billion mark. $5.2 billion to be exact. The following catastrophes occurred:

• Casinos opened in Pennsylvania
• The Great Recession opened everywhere
• Superstorm Sandy
• Tumbling gaming revenues
• Successful tax appeals
• PILOT

Approved in 2016 by the state legislature, PILOT—an acronym for payment in lieu of taxes—put a stop to costly tax appeals which resulted in large refunds from the city of Atlantic City to the casinos. Under PILOT, the gaming halls paid an amount established by a formula involving gaming revenues, hotel room count and acreage. Moreover, the city would know how much tax revenue to expect and budget accordingly. Part of the PILOT revenue went to Atlantic County, and part went to the schools.

But, this being Atlantic City, something was bound to go off the rails, and off the rails it went. The coronavirus pandemic slammed casino revenues for over two years. And this year, a casino tax break expired. The gaming industry, with help from State Senate President Steve Sweeney, pushed for an amendment to cut sports betting and online gaming from the calculations. Their reasoning: most of the revenue went to third-party operators, not to casinos, so why should the revenue be counted as part of our taxes?

Fair or foul? The Press of Atlantic City and ProPublica examined the situation in detail to try and answer that question.

For Atlantic City, property valuation went from $13.7 billion in 2008 with 11 casinos to $3.2 billion in 2016 with only seven properties. Debt skyrocketed to $456 million. The successful tax appeals made a bad situation worse.

PILOT made the bad situation a little better.

Starting in 2020, the city and the casino industry faced another crisis in the form of the Covid-19 pandemic. The casinos shuttered for several months and when they reopened, they did so with a boatload of restrictions. In-person visitation dropped. Most restaurants resorted to take out. But mobile sports betting and online gaming exploded, at least keeping the industry afloat.

Yet, revenue fell compared to pre-pandemic days in 2019, even with the online spending. In 2021, the casinos’ revenues began to improve, but they still pursued options to reduce their tax liability. “Failing to adjust the PILOT would have resulted in egregious, inappropriate, and inequitable taxes for any industry, let alone an industry that is still fighting to recover from Covid-19,” The Casino Association of New Jersey said in a statement.

As casinos pushed for tax relief, the industry recorded profits above 2019 pre-pandemic levels. The industry reported around $767 million in gross operating profit in 2021, the best figure in a decade.

Under the PILOT figures, Atlantic City would have received $133 million this year, $41 million more than the city is actually getting under the amended law, according to state and city projections. Lawmakers passed the amendments with little in the way of hearings or debate.

The city of Atlantic City accepted the change, even though they would lose all that revenue in the process. Atlantic County was not so magnanimous. They sued over its proposed loss of revenue. The court said the casino payment had to align with a 2018 agreement with Atlantic County.

“How do you do a tax decrease of that magnitude while they’re registering those kinds of profits on their books?” said Jim Kennedy, former executive director of the Casino Reinvestment Development Authority, the state agency that oversees the investment of gaming tax revenue for economic development projects.

The timing of the casino request coincided with the expiration of a separate tax break for the industry, that being the investment alternative tax, created in 1984 to finance community projects. But the industry got a break on those taxes, at least for five years, which ended this year.

You can see where this is going and how it all ties together—the Taj Mahal and Revel, both closed, changed ownership and reopened in early summer 2018 as Hard Rock and Ocean, respectively. Online gaming and sports betting mushroomed. Revenue climbed; so did PILOT payments.

Determine the industry’s overall PILOT payment by calculating the prior calendar year’s total gross gaming revenue, which, in 2021, was $4.2 billion. Based on the system established in 2016, the overall PILOT payment would be $165 million, a $35 million hike compared to 2021. Two of the city’s nine casinos would have actually seen a decrease in their PILOT. But under the amended law, every casino pays less, except for Caesars which would pay $15.6 million as opposed to $13.4 million under the 2016 bill.

None of this sat well with the county.

“It is confounding that the casinos can claim they are suffering while all reports indicate they are setting revenue records,” County Executive Dennis Levinson wrote.

But Steve Sweeney issued dire warnings. “We are risking four casinos closing,” he told his colleagues. “And that’s why this bill was proposed.”

“The numbers don’t indicate any casino would close,” said Roger Gros, publisher of Global Gaming Business Magazine, an industry trade publication.

The loss of funds for the county would affect programs such as opioid response, flu and Covid-19 vaccination initiative, and transportation services for senior citizens, disabled residents, and veterans.

Hence, the lawsuit.

A judge ruled in favor of Atlantic County back in February because the state violated a 2018 settlement agreement—a ruling that was upheld by the municipal court last month. The state plans to appeal.

“The industry as a whole is going to use that negotiating leverage, as they always do,” said Robert Sturges, a former leader of the state agency responsible for regulating casinos, the Division of Gaming Enforcement, who now consults for the casino industry. “Does it actually come to that? I’m sure it won’t.”

The industry believes their percentage of online revenues falls between 20 and 25 percent. So why not tax the online portion accordingly?

Golden Nugget Atlantic City appears to have inked a deal to share the PILOT burden, however. The company specified that its internet gaming partner is responsible for the portion of the PILOT dues generated under its online license, according to that firm’s SEC filings.

MGM Resorts International, which owns Borgata Hotel Casino & Spa in Atlantic City, led the way in 2018, when it entered a 50-50 joint venture with Britain-based Entain PLC to form BetMGM, an online wagering sportsbook.

By 2021, Caesars Entertainment Inc.—the parent company of Caesars Atlantic City, Harrah’s Resort Atlantic City and Tropicana Atlantic City—had gone further, clearing several hurdles to acquire one of its online betting partners, Britain-based William Hill PLC, which collects about one-fifth of all the money bet on sports in the U.S., according to the company’s reports.

Bally’s Corp. was making similar moves, scooping up a number of betting sites to support its expansion into the online gambling space. When Bally’s released its preliminary first-quarter results in April 2021, it also disclosed its plan to acquire U.K. online gaming operator Gamesys Group PLC for $2.7 billion. The purchase closed in October, one in a series of buys to bring internet gaming operations entirely in-house.

The list of lawmakers supporting the ban on smoking in the casinos in Atlantic City keeps growing. Assembly members William Spearman and Carol Murphy are the most recent, bringing the number of the lower house to 35, six short of the majority needed for passage of the bill. According to NJ Online Gambling, 16 Senators have endorsed the proposal, which is five short.

The session ends June 30, which means it is unlikely the votes will be there in time, especially with hearings required before a vote in each house.

Just as well—having the ban go into effect over the summer months may be impractical. Some out-of-state visitors, including wealthy gamblers, could have booked trips to Atlantic City, counting on the smoking sections to still be in place.

Then again, if it were possible to pass the measure, the effective date could be set for after Labor Day.

“Passing this legislation is the least we can do for frontline casino employees who worked throughout the pandemic, keeping our already struggling gaming industry open for business during some of the bleakest moments over the last couple of years,” Spearman said in a press release. “We know that a healthy, smoke-free indoor casino industry is good for business and even better for workers.”

Said Murphy, “The dangers of secondhand smoke have been well documented for many years and for Atlantic City casino workers, getting rid of smoking in their workplace is a life-or-death fight.”

While casino executives in Atlantic City have warned of dire consequences that could result from a smoking ban, advocates of such a measure point to improved financial figures noted by the state Division of Gaming Enforcement. First quarter results of $155.6 million was the most profitable since 2008.

“The findings released by the New Jersey Division of Gaming Enforcement continue to undercut claims by casino executives that cite revenue falling short of pre-pandemic levels as the central reason for opposing efforts to make casinos smoke-free indoors,” Chris Moyer, a spokesperson for Americans for Nonsmokers’ Rights, said in a statement issued to NJ Online Gambling.

John DeCree, gaming equities analyst for CBRE, said the ban could cost the casinos 20 to 25 percent of their gaming revenue. The mid-decade closure of five casinos has left an ugly taste for many, and whether that makes lawmakers reticent about change remains to be seen.

To add security to online sportsbook sites, the New Jersey Division of Gaming Enforcement (NJDGE) is requiring two-factor or multi-factor authentication (2FA) for access to sites for betting. The guidelines were issued in March.

The extra steps are expected to stop hackers from getting their mitts onto sportsbook accounts, according to Legal Sports Report.

“The vast majority of the public’s login information is out there for the right price,” said Tom Hill, head of sports betting and iGaming at identity firm Prove. “Or you can pull it together if you know where to look. This is about keeping existing accounts secured.”

Among login options:

• A request for a password, pattern, or answers to challenge questions;
• A request for an item possessed by a patron such as an electronic token, physical token, or an identification card. This is reserved only for the largest transactions, Hill said;
• A request for biometric data, such as fingerprints, facial or voice recognition.

“The challenge for operators is to find the perfect balance,” Hill said. “How do they provide security without added friction?”

Bettors will also have to authenticate every two weeks.

FanDuel and DraftKings already perform 2FA. The rest will be ready, Hill said. Hill also noted that operators tend to be innovative in their thinking about 2FA. He believes other states will do likewise.

“I’d give them and the ecosystem a lot of credit in solving this,” Hill said. “Other industries have legacy systems and blockades to the right solutions. But in the sports betting and gaming space, it’s refreshing to see them moving the ball forward and providing the best experience for the players. It is a juxtaposition to other sectors we work with like banks, healthcare, retail.”