Gaming companies ask Culinary for ‘relief’ on raises; they’re talking

By Michael Mishak

Friday, June 12, 2009 | 2 a.m.

Las Vegas casino operators, struggling under the burden of heavy debt and declining revenue, are leaning on their workers for help, asking the Culinary Union for “temporary economic relief,” according to the union’s leader.

The casinos are eyeing a scheduled wage increase for about 50,000 hotel and restaurant service employees covered under a five-year Culinary contract negotiated and ratified in 2007. The salary hike was set for June 1, but Culinary Secretary-Treasurer D. Taylor said the union and its contract committee have granted companies a waiver while both sides talk about whether workers would take less than promised.

“We understand the economy has had a severe impact on the gaming industry,” Taylor said. “The companies have asked for temporary economic relief. And we’re asking for a variety of things too. Whether the two minds meet, we’ll see. But we’re not there yet.”

Taylor declined to provide details about the talks but said whatever settlement emerges will be retroactive to June 1. The contract affects both Strip and downtown operators.

Two years ago pay emerged as a major issue for MGM Mirage as negotiations with the union dragged on. The union sought — and won — a series of fixed pay raises over the term of the contract.

The 2007 settlement with MGM Mirage called for a cumulative wage and benefit package increase of $3.47 per hour over the term of the contract, maintaining company contributions to the pension fund and existing family health insurance plans with no worker premiums.

The company had sought a deal similar to the one the Culinary signed in 2005 with Steve Wynn at Wynn Las Vegas. That 10-year contract links pay raises to the consumer price index, and MGM Mirage argued that such a formula ensured labor pacts were “responsive to real-world economic changes.”

An internal memo drafted during the contract talks now seems prescient.

The consumer price index formula “utilizes real-world economic figures and produces wage increases which reflect actual financial conditions and allow the parties to enter into a longer-term contract,” wrote Cynthia Kiser Murphey. “The Company fully supports the incorporation of this model into our future contracts with the Union, thereby continuing the tradition of uniformity that has brought our community decades of prosperity.”

April was the 16th consecutive month that gaming revenue fell from a year earlier — and the seventh consecutive month of double-digit declines. Visitor volume is down more than 7 percent this year, and the average daily room rate is down nearly 27 percent.

State regulators have formed a team of securities experts, auditors and other staff to address a string of casino bankruptcy filings and major debt restructurings.

MGM Mirage, for instance, raised $2.5 billion through new stock and bond offerings in part to pay down bonds that mature this year. The company still has more than $6 billion in bank debt and it may need to refinance next year. Harrah’s Entertainment is also struggling to make loan payments. The company has more than $24 billion in long-term debt. Both operators have shed thousands of workers to cut costs.

Concession talks are ongoing.

“We’re continuing to have discussions with the Culinary,” MGM Mirage spokesman Alan Feldman said. “Obviously, we’re working toward something that’s mutually beneficial.”