Trump Taj Mahal Gets a Reprieve, But Will it Be Enough?
On Friday the Trump Taj Mahal won a small, yet important victory in their quest to remain open when Federal Bankruptcy Court Judge Kevin Gross nixed the contract between Trump Taj Mahal casino and Local 54 of the Unite-HERE union.
Thus, ending the health care plans and pensions of over 1,000 employees.
The casino, owned by Trump Entertainment, has been threatening to close its doors on November 13 if they were not allowed to terminate the pensions and health care obligations of their 1,100 or so unionized employees.
The union was, not surprisingly, vehemently against this and there are already rumblings of the workers going on strike and picketing the casino.
As a mea culpa Trump Entertainment has said it would offer each affected employee a $2,000 stipend to shop for an individual insurance plan under the Affordable Care Act.
While tremendously unpopular with the union workers, the decision may lead to the Trump Taj Mahal staying open and the 3,000 people it employees staying off the unemployment rolls – casino closures in Atlantic City can no longer be seen as empty threats.
These are jobs the city desperately needs to save, as Atlantic City has already lost some 8,000 casino jobs due to the closures of Atlantic Club, Revel, Trump Plaza, and Showboat earlier this year.
With all of these opposing interests at play (the casino, unionized workers, and non-unionized workers) chances are the strife between Trump Taj Mahal and Local 54 is going to get worse before it gets better.
State Assistance Still Needed
Still, Friday’s ruling doesn’t insure the casino will remain open.
Investor Carl Ichan (who controls the debt of the Atlantic City casino) has stated all along that he will only pump $100 million into the Taj Mahal if the union contract was voided and if the state throws the Taj Mahal a $175 million lifeline in the form of a PILOT program (payments in lieu of taxes) and access to the Economic Redevelopment Grant and the Urban Revitalization Grant.
All of these measures would require votes in the state legislature.
This is the second attempt for state aid made by Trump Entertainment since they filed for Chapter 11 bankruptcy protection. The company’s original Chapter 11 restructuring plan wanted the union concessions and for Atlantic City to cut its property taxes by 80% along with receiving an additional $25 million in tax credits from New Jersey.
What’s Best For Atlantic City?
The first problem that arises if Trump Taj Mahal gets its way is one of precedent. Will Atlantic City and New Jersey be willing to make similar concessions to other casinos down the road, and what would happen to the Local 54 Unite HERE union if the contracts they have are simply torn up?
The second problem is one of market size and market share. Atlantic City is currently operating with eight casinos, after starting the year with 12. This right-sizing of the market has been something analysts have been stating for a number of years, but some feel the market is still too crowded – some analysts have proposed the market is only large enough for six casinos.
With the recent sale of Revel to Hard Rock (and their stated intention to reopen the property as a casino) it may be better for Atlantic City in the long run for Trump Taj Mahal to close its doors to keep the market at eight casinos.
The casino market in Atlantic City may finally be right-sizing, but the financial strains on Atlantic City’s local economy and workforce has been extremely damaging and another 3,000 unemployed workers is something nobody really wants to see occur, which has left the city and state to balance the potential short-term aid with the long term consequences.
Whether the Revel can turn things around its new owners is unclear, but if it does, it will likely be at the expense of other casinos in the market.
The Trump Name
As if the Trump Taj Mahal didn’t have enough problems on its plate, Donald Trump himself (who has a small 5% interest in the property that bears his name) has been suing to have his named removed from the building.
Trump allowed Trump Entertainment to use his name in perpetuity during one of his own bankruptcy filings, and is claiming that the casino’s demise is hurting his brand.
