Atlantic City’s mayor may have sealed the fate of the bankrupt Trump Taj Mahal.
On Monday, a comprehensive plan was revealed that could have saved the struggling casino. However, a tax break that was key to the plan’s success has been reportedly shot down and could lead to the property’s closure.
Trump Entertainment filed papers detailing a comprehensive plan intending on saving the Trump Taj Mahal. According to ABCNews, the plans hinges on several key concessions, including a massive tax break from the city. However, Atlantic City Mayor Don Guardian revealed a tax break would not be possible.
Deal Would Give Icahn Ownership
The proposed deal by Trump Entertainment would effectively give principle debt holder Carl Icahn control of the Trump Taj Mahal. Icahn wants to convert debt into equity in the casino and then wants to invest approximately $100 million in improving the casino.
However, the deal requires several concessions be made from various parties. First, he wants the casino employees union to abandon their pension plan and participate in a 401(k) plan. He also wants them to abandon their health care through the union and participate in the Affordable Care Act.
Next, he wants the city to reduce tax assessments on both the Trump Plaza and the Trump Taj Mahal. He wants them reduced from $248 million and $1 billion to $40 million and $300 million, respectively. Finally, he wants $25 million in tax credits or other investments from the Casino Reinvestment Development Authority.
“No Hope” Without Icahn Money
According to the court filings from Friday, the outlook for the Taj is grim. The property contends that without Icahn’s money, there is little chance for the property to survive beyond November. Trump Plaza is currently losing $7 million per month and will run out of money completely by mid-December. At present, Icahn appears to be the only solution.
The casino union contends that Icahn is attempting to use this to his advantage. They claim that the proposed Icahn deal would result in a cut in total compensation to employees of approximately 35%. Court filings reveal that the union was willing to give up their pensions, but not their health care.
According to the Local 54 of Unite-HERE, Icahn is “seeking to take advantage of the Atlantic City crisis to do away with the health care thousands of south Jersey casino workers and their families have fought for and relied upon for over 30 years. The impact of these proposals throughout south Jersey communities would be dire.”
Tax Breaks Not Possible According to Guardian
Guardian quickly stated the city’s position on the Icahn proposal, essentially nixing the requested tax reassessments. Guardian told the Associated Press, “Given the difficult economic situation in Atlantic City, we are not in a position to accept these requests. We cannot afford those demands.”
Guardian’s unwillingness to reduce tax assessments should not come as a surprise considering the financial crisis the city is currently experiencing. The city already has to cut $40 million from its budget over the next four years and that was before the closure of four casinos in 2014. The Taj would make the fifth casino to close its doors.
Is There a Plan B?
Some of the demands put forth in the initial Icahn deal seemed a bit excessive, so one has to wonder if this was just the “first attempt” by the company or if they really put all their cards on the table. Icahn could try again with a similar proposal, but a better strategy may be to possibly negotiate with city officials and see if there is a tax arrangement that could help keep the Taj open.
Atlantic City doesn’t want to see the Taj close and its 2,800 employees certainly don’t want to lose their jobs. The potential to save the Taj exists. Now it’s a question on how much Icahn really wants to pay and how much the city is willing to give up to keep the casino.