In Atlantic City, mega-merger spells more delays

John Curran

Monday, March 6, 2000 | 4:29 a.m.

ATLANTIC CITY, N.J. - The news was about as welcome as a black cat in a baccarat pit: Mirage Resorts Inc., the flamboyant Las Vegas casino company that has been promising to build here for five years, was cashing in its chips.

Mirage, which persuaded the state to build a $330 million road-and-tunnel connector and to pass a measure giving sales tax breaks to the developers of former landfills, agreed Monday to a $4.4 billion buyout by MGM Grand Inc., another Vegas company planning to build in Atlantic City.

It may have been good news for shareholders, but officials and others in Atlantic City said the takeover would probably prompt MGM Grand to give up on its 35-acre Boardwalk site in favor of taking over the marina district site where Mirage is planning a $1 billion, 1,144-room project.

"It'll mean one less casino for Atlantic City, certainly," said Donald Trump.

Even if both do get built, it likely will take much longer, further delaying a "second wave" of casino development in this town, which has not opened a new one in 10 years.

"Realistically, yes, this will create delays on the second hotel. There's not a whole lot we can do about that," Mayor James Whelan said. "It's unlikely they'll develop both sites at the same time."

Mirage and its chairman, Stephen A. Wynn, insisted on the 2.2-mile connector linking the Atlantic City Expressway with the marina district as a condition of the project.

Eleven homes were razed after their owners agreed to $200,000 buyouts from Mirage. Mirage, meanwhile, kicked in $110 million of the $330 million road's cost. Construction began in November 1998 and is more than halfway done.

Trump, Wynn's rival, accused the state of playing favorites by building a taxpayer-financed private driveway to Wynn's casino and filed several lawsuits over the tunnel and the city's land sale to Mirage.

Supporters, meanwhile, say the road was needed even before Mirage Resorts agreed to develop the former municipal landfill into Le Jardin Palais.

"We are opening a tract of land that has huge development potential, as well as providing better travel in Atlantic City as a whole," Gov. Christie Whitman said Monday. "There is no reason, because of this new deal, to change any of the work the state is doing there."

Indeed, Mirage's interest prompted Boyd Gaming Corp. to commit to a $750 million, 1,500-room project in the marina district. Construction on that hotel, a joint partnership with Mirage, is to begin later this year.

"This is a public project people here wanted for decades," said Peter Hartt, spokesman for the South Jersey Transportation Authority. "Mirage just made it possible by contributing one-third of the cost, which is the largest private-sector contribution to a public highway in the history of the nation."

MGM Grand's plans to build its own project have been snakebitten almost from the start, due to land-assembly difficulties associated with condemnations in the city's Southeast Inlet. The company has spent more than $50 million gearing up and still does not control all the land it needs to build.

"When I think of Atlantic City, another word that comes to mind is 'delay,"' MGM Grand Chairman J. Terrence Lanni said in a telephone interview Monday. "We're used to delays, but we don't like them."

He said MGM was committed to pursuing the development projects of both companies, but said shareholders and the market would have the final say.

"We'll do what we think is in the best interest of our shareholders, but our plan now is to move forward on all the projects," Lanni said.

Michael Pollock, who writes an Atlantic City-based casino industry newsletter, said delays with at least one of the two projects - MGM or Mirage - are inevitable.

"It can delay the continued redevelopment of Atlantic City, in the short term. But in the long term, I believe the economics of the Northeast gaming market mean these projects can be built and can be profitable," Pollock said.

Trump believes otherwise. He says only one casino will be built. "The question is 'When?' It'll take them two years to digest this," he said.

Labor unions, too, were dismayed at the prospect of more delays - or less casinos.

"Obviously, we're not happy about the possibility of one casino begin built, rather than two," said Eustace Eggie, business representative for the 1,200-member Carpenters Local 623. "We were very much looking forward to the construction work."

Closer to home, tunnel neighbor Frances Wright, 70, said the merger won't affect her.

Wright, a retiree, lives in a split-level home on Huron Avenue, directly across the street from the continuing work. Standing on her porch Monday, she pointed out cracks in the masonry she said were caused by vibrations from heavy construction equipment.

"Whether they merge or don't, it won't mean anything to me," she said, raising her voice above the noise of a giant crane. "I wasn't in favor of the tunnel to begin with. Whoever heard of a tunnel being built next to a waterway? I wouldn't want to be the first person to drive through it," Wright said.