Snakes, Alligators Endanger Shuttered Casinos in Poorest State

The entrance to Caesars Entertainment Corp.’s Harrah’s Tunica, Mississippi’s largest casino, is under seven feet of water. At the Rainbow Casino Hotel in Vicksburg, a dozen workers stacked sandbags to try to protect the building from the swollen Mississippi River.

“All these casinos and hotels along the river are going to have problems with alligators and snakes,” said Alicia Brooks, a Vicksburg retail store worker, as she watched.

Slot machines and blackjack tables have gone silent as floods have shut 17 of Mississippi’s 19 river-based casinos in the U.S.’s third-largest gaming-employment market, jeopardizing thousands of jobs and $13 million a month in taxes. Flooding will slow the recovery from a recession two years ago, which was already lagging behind the U.S., said Sohini Chowdhury, an economist with Moody’s Analytics in West Chester, Pennsylvania.

“There is no doubt that the casino closures will weigh on the state’s recovery,” Chowdhury said. “A month of inactivity would deprive the already cash-strapped local and state governments of critical funds.”

Mississippi ranked third among states in employment at its commercial casinos, with about 25,000 people in 2010, only behind Nevada and New Jersey, according to the American Gaming Association. Those commercial venues had more than 33,000 slot- machine and other gaming machines.

First-Class Hotels

Mississippi, the poorest U.S. state based on median household income, turned to casino gambling two decades ago to try to draw higher-paying jobs and bolster its tourism industry with first-class hotels. The latest setback follows Hurricane Katrina, which shut casinos along the Gulf Coast in 2005.

Major employers may cut as many as 15,000 jobs related to the floods, including 12,500 at casino resorts, said Jimmy Giles, director of customer operations support for the Mississippi Department of Employment Security. As of May 11, 2,077 people had filed for unemployment benefits related to the flood, he said.

Moody’s may lower its estimate for job growth of 1.4 percent for Mississippi in 2011, Chowdhury said. The state’s economy grew at a rate that was “slightly lower than the U.S.” last year, and “this gap could very well widen.”

The river in Memphis crested at 47.87 feet on May 10, just below the 1937 record of 48.7, according to the National Weather Service. It won’t crest in Mississippi until next week, then may take three or four weeks for its level to gradually decline, Governor Haley Barbour said May 11. Barbour said it’s too early to estimate damages facing the state.

‘Church People’

“Casinos have been one of the better-paying jobs here and they even have church people working there because the pay scale is better than other places,” said Al Williams, a school-bus mechanic in Vicksburg who has friends who work at the casinos. “Closings are going to hurt a lot of people.”

Structural damage and closure for at least a few weeks will affect DiamondJacks Casino & Hotel, one of two properties owned by Legends Gaming LLC, said Felicia Gavin, executive vice president and general manager.

“We’re definitely going to have structural damage,” said Gavin, who has led the 425-employee casino for three years. “It’s going to have a big impact not only on us but the local community because of taxes.” She declined to estimate potential losses.

The city of Greenville receives $120,000 a month from casino taxes, while the county gets $180,000 per month, said Larry Jones, executive director of the Delta Economic Development Center. The region’s biggest economic boost in the past two years was Churchill Downs Inc. (CHDN)’s $138 million purchase of the Harlow’s Casino Resort & Hotel in Greenville, he said.

State losses are coming just as demand for services will increase with the disaster. “That puts a lot of strain on an already strained state budget,” said Michael Chriszt, an economist at the Federal Reserve Bank of Atlanta. The Atlanta Federal Reserve district includes southern Mississippi.

Rising Unemployment

The state, which had a 10.2 percent unemployment rate in March, could see its joblessness rise to as high as 11.6 percent, said Marianne Hill, a senior economist for the Mississippi State Institutions of Higher Learning.

“Many of the unemployed, in addition to the loss of jobs, will be suffering from the loss of possessions and damage to their homes,” she said. “Some businesses may be unable to recover, and there may be some shift of population to other regions.”

The Ameristar Casino Hotel and Riverwalk Casino in Vicksburg remained open as of May 11. Flood waters may force their closure by next week, said Allen Godfrey, deputy director of the state’s casino commission.

Record Flood

The Mississippi River is expected to crest in Vicksburg at 57.5 feet on May 17, about 1.5 feet higher than the record flood in 1927, according to the U.S. Army Corps of Engineers.

Snakes are expected to be a concern as the flooding moves south to rural areas inhabited by reptiles. The Louisiana Department of Health and Hospitals, in an advisory May 9, urged residents near the river to “be on the lookout for dangerous wildlife the floodwaters such as snakes, rats, alligators or any frightened animal. If you see wild animals, stay away.”

The economic impact goes beyond casinos. About 1,200 of Vicksburg’s 4,000 manufacturing jobs are idled because of flood- related problems, said Wayne Mansfield, executive director of the Vicksburg Port Authority, an economic development agency.

About 1.4 million acres of Mississippi farm and timber land are likely to be inundated by water, including 580,000 cultivated acres of corn, soybeans and wheat, said Andy Prosser, a spokesman for the Mississippi Department of Agriculture and Commerce. Family-owned farms make up about 98 percent of the state’s agricultural holdings, he said.

“Our state’s economy is still based on agriculture in many areas and when farmers lose that income, it’s going to hurt the local economies,” Prosser said.

Mississippi State University professor John Michael Riley estimated farm losses will end up between $250 million to $800 million, depending on how long farmland was flooded.

Still Paying Workers

The income loss at casinos is being cushioned because some, including Caesars and Isle of Capri Casinos Inc. (ISLE), are paying workers for now. Caesars will pay workers through May 31.

Beyond the losses during the closings, tourism officials say they are concerned that news coverage of the floods will keep away visitors even as some hotels and attractions have stayed open. The state is considering advertising and marketing, said Mary Beth Wilkerson, tourism director for the Mississippi Development Authority.

Among attractions still open are Vicksburg National Military Park, antebellum homes, shopping, museums, hotels and restaurants in the area, said Laura Beth Lyons, a spokeswoman for the Vicksburg Convention and Visitors Bureau.

Most of the casino visitors come from nearby states, including Alabama, Arkansas, Florida, Georgia, Tennessee, Illinois, Texas, Louisiana and Oklahoma, according to the state.

Economists say lost gambling income, and visits to nearby restaurants and attractions, are likely not going to be made up later.

“The region is going to be set back,” said Mark Vitner, a senior economist for Wells Fargo Securities LLC in Charlotte, North Carolina. “It is going to be hard to make up those losses. It is a heck of a mess.”

Editors: Anita Sharpe, Jerry Hart

To contact the reporters on this story: Steve Matthews in Atlanta at smatthews@bloomberg.net;

David Mildenberg in Vicksburg at dmildenberg@bloomberg.net

To contact the editor responsible for this story: Anita Sharpe at asharpe6@bloomberg.net

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