Harrah's Bigger and Better in Atlantic City

The love fest between the governor and the casino industry took another step forward Tuesday.

A year after a bitter battle over increased casino taxes, Gov. James E. McGreevey and David Jonas, senior vice president of Atlantic City operations for Harrah's Entertainment, shared a podium to announce preliminary plans for a $200 million expansion.

The proposal calls for a 700-room hotel tower - Harrah's fifth - a nationally known restaurant, a nightclub, spa and more gaming space.

Approval by both the city and Harrah's corporate board of directors must wait until the details are finalized.

Elements, such as design and location of the tower and the signing of the restaurant, are expected to be ironed out by the end of the year, Jonas said.

If built, Harrah's will have 2,330 rooms, making it the largest hotel in the state. The company has had contacts with a number of restaurant chains for both Harrah's and Showboat, the casino's sister site. Among them: The House of Blues.

"We have every reason to believe we'll be back here before the end of the year to get into particulars," he said. "But make no mistake, we will invest in Atlantic City."

Jonas attributed the announcement to two factors in the last 12 months.
First, a warmer relationship with Trenton, bolstered by a promise of both no new taxes and a spirit of cooperation over any future issues affecting Atlantic City, such as revenue contributions for the horse racing industry. The administration also has set aside $92 million for expansion of nongaming amenities, such as hotel rooms, restaurants and retail.

Second, the Borgata factor. The impact of the Borgata's opening last July pushed Harrah's to act on its expansion at both of its properties in Atlantic City.

"What a difference a year makes," Jonas said. "A year later, Harrah's is ready to invest. Without rooms, this market will never reach its full potential."

He credited a more open dialogue with the administration and a better understanding of the political process for the thawing. The industry accepts responsibility in paying higher taxes to help alleviate the state budget deficit, he said.

Harrah's expects to get a share of the $92 million pot. Of that, $60 million comes from the hotel tax imposed last year. The balance is a return of a portion of the new gaming taxes also enacted last year and earmarked for capital construction.

The funds will come in the form of credits from Casino Reinvestment Development Authority commitments. Each casino contributes 1.25 percent of its gross gaming revenues to the CRDA for use in projects in Atlantic City and elsewhere.

As for the Borgata influence, it has attracted a younger, more affluent, cash-paying customer, who often can't get a room or restaurant reservation in town, especially on weekends. Harrah's being next door gives the company an advantage in drawing the overflow.

"We can't ignore what the Borgata has done for the market. We've already seen the benefits," Jonas said. Harrah's occupancy rate was 94.9 percent last year. The city average was 93 percent.

Diane Husband of Bayonne has experienced a no-vacancy sign in Atlantic City. "So if this tower helps, I'm all for it," said Husband, as she waited to check in to Harrah's as a paying guest.

Yet Rae Reff, a retiree from Phillipsburg, visits Harrah's about once a month and has never had a problem getting a room. But she gambles enough to earn complimentary rooms. "I think it's been fine here since they opened the Bayview Tower," she said. The Bayview opened in 2002.

It's the cash-paying visitors who will let Atlantic City grow as an economic powerhouse and job generator.

McGreevey rattled off impressive numbers: 45,000 jobs in the casinos, 33,000 indirect jobs and $2.3 billion in economic activity with vendors.

He also pointed out that New Jersey generated more new jobs last year than the rest of the Northeast combined.

"We understand the critical importance of Atlantic City, not only for those in the region but as an economic catalyst in the entirety of the state," he said. "To get more conventions and more air service to Atlantic City, we've got to build more hotel rooms to help meet the explosion in the demand for accommodations. Conservative estimates show this $92 million investment will result in thousands of new hotel rooms."

In addition to anticipated towers at Harrah's and Showboat, Caesars Entertainment, Sands and Trump Hotels have discussed additional hotel rooms, while Tropicana and Resorts will add almost 1,000 rooms combined this year.

Playing on casino operator Donald Trump's popular line from his television show, The Apprentice, McGreevey said: "In Atlantic City, our message is, you're hired."