Thursday, July 24, 2003
Copyright © Las Vegas Review-Journal

MGM Mirage quits trade associations

Facing $30 million tax hike over two years, company says its interests aren't being served

MGM Mirage faces a $30 million tax hike over the next two years, including a new live entertainment tax on performances such as Eagles and the Dixie Chicks at the MGM Grand Garden. Photo by Jeff Scheid.

MGM Mirage, citing irreconcilable differences, resigned Wednesday from the Nevada Resort Association, the Nevada Development Authority and the Las Vegas Chamber of Commerce.

MGM Mirage Chairman Terry Lanni said that as the largest taxpayer and largest private employer in Nevada, his company is confident it can pursue its own political agenda more effectively than it can by relying on trade associations.

Lanni said the NRA, the NDA and the Chamber of Commerce were "not representing our company's interest" during the just completed legislative session.

"They're welcome to their perceptions, but we're not going to fund them," he said.

MGM Mirage currently pays $500,000 for its membership in the NRA, $125,000 for the Chamber of Commerce and $10,000 for the NDA.

Lanni added that while he respects individual lobbyists representing the NRA and the Chamber of Commerce, it has become clear both organizations are "not working at anything but cross purposes to our own."

On the NRA's lobbying campaign in the just completed legislative session, Lanni said, "Billy Vassiliadis and Harvey Whittemore are two of the brightest people I know and they worked tirelessly with the odds stacked against them. I also have tremendous respect for (NRA president) Bill Bible. I just believe we can be more effective if we husband our own resources."

The NRA could not be reached for comment.

On the Chamber of Commerce, he said it "is welcome to take whatever positions it wants, but it took positions not supported by all businesses. We can't continue to have a dynamic, growing state without (a broad base of business) participating. Wal-mart and large banks pay no taxes, but no one (in Nevada) pays any less for Wal-mart products or bank loans. That is fundamentally unfair."

Kara Kelley, president of the Las Vegas Chamber of Commerce, said MGM Mirage "obviously made business decision to take the resources they are spending and take them in-house. As much as we regret the decision, we respect their right to make that decision."

On the NDA, Lanni said "my concern is historically it has brought a lot of businesses into Nevada that have not paid benefits and (MGM Mirage) ends up paying the cost."

"All three of them, especially the Chamber of Commerce and the NDA, are not representing our company's interest. That's their perception (of public need), but we don't have to help fund them," he said.

Somer Hollingsworth, president of the Nevada Development Authority, said the decision came as a surprise, but "business is business and I understand."

"I'd love to get them to change their mind," he said. "They have been a great member and I have all the respect in the world for the gaming industry."

Hollingsworth said there may have been reason for Lanni's concerns before 1995, but since then the NDA has worked to attract companies that pay high wages and benefits.

Lanni said MGM Mirage will encourage employees to seek public office and will contribute to their campaigns.

MGM Mirage also will conduct "educational campaigns" to make sure employees understand the issues such as the tax package recently passed by the Legislature.

Lanni said MGM Mirage will not review its relationship with vendors based on their membership in the three organizations, as Station Casinos said it would when it recently resigned from the Chamber of Commerce.

However, he said MGM Mirage would review the positions vendors took in lobbying on tax policy and consider changing its relationships with companies that supported taxes on the gaming industry while opposing paying taxes themselves.

"We will evaluate the positions they took in Carson City," Lanni said. "If they actively promoted increasing our taxes and not theirs, we will deal with them accordingly," Lanni said.

"We're tired of being rejected out-of-hand, of having heavy feet stomp on our hands and heads."

Lanni said the newly enacted tax package will cost MGM at least $30 million over the next two years, and that it is "time for this sleeping giant to wake up."

Wall Street analysts said the increase in gaming taxes from 6.25 percent to 6.75 percent clearly will have the most impact on the gaming operators in Las Vegas, with Station Casinos (100 percent of revenues from Nevada), MGM Mirage (75 percent) and Mandalay Resort Group (67 percent) hardest hit.

Fulcrum Global Partners estimated that the gaming tax increase alone would cost Station around 4 cents per share, MGM Mirage around 5 cents, and Mandalay Resort Group around 9 cents on an annual basis.

Lesley Pittman, spokeswoman for Station which recently resigned from the chamber over tax policy, said her company will not resign from the NRA or the NDA.

Mandalay Resort Group could not be reached for comment.

Park Place Entertainment Corp. and Harrah's Entertainment generate about 40 percent and 20 percent of their revenue, respectively, from the Strip and Fulcrum estimated the earnings per share impacts for these companies would be negligible.

Park Place spokesman Robert Stewart said MGM's decision "to withdraw from the NRA is going to significantly affect the NRA and will require us to take a pretty good look at our relationship with the NRA."

Harrah's spokesman David Strow said he could not comment on whether that company might also resign from the organizations.