Tunica County, Mississippi, will be issuing bonds this week in an effort to diminish its reliance on casinos. The county, one of the US top gambling destinations, will be selling about $148 million in urban renewal bonds to convert the former Harrah’s casino resort into a new “family-oriented” complex.
The project is set to feature a convention center, two hotels, a water theme park and a youth sports complex. The venue is intended to “complement the existing gaming and tourism industry in the region,” according to offering documents for the deal, which is unrated and will be sold to qualified investors in minimum denominations of $100,000, reports Bloomberg.
The move is set to diversify the county’s offerings. Tunica, a county of almost 10,000 residents, has long tied its economy to gambling, which has presented a problem as of late. While in the early days of gambling in Mississippi patrons arrived from other cities and states to the venues, other states close in proximity now have their own casinos, including Missouri and Tennessee.
The bonds will be issued by Tunica County, and proceeds of the sale will be loaned to Tunica Hospitality & Entertainment LCC, which is set to acquire and redevelop the 2,200-acre property. Afterward, the issuer will then lease the property from Tunica Hospitality & Entertainment for as long as 30 years.
Lease payments will cover debt service, further reports the previously cited news source. The county is going to pay the developer annual fees, while also selling the developer the asset concurrently with the bond transaction.
According to the county, the resort will open in stages. Revenue is projected at $35 million in 2022, $104 million in 2025, and almost $124 million in 2031, according to a feasibility study conducted by CBRE Hotels.
Annual debt service is projected at $11.2 million, with annual debt-service coverage at around three times. Should capital not pour in adequate amounts, the risk will be on the bond buyer: the issuer has no obligation to levy special taxes to support the debt.
Tunica County is located in the northern part of the state, on the Mississippi River and less than an hour from Memphis, Tennessee. According to offering documents, it is “one of the top six destinations” in the country in terms of gambling revenue.
While the Federal Reserve Bank of St. Louis described the county’s casino industry as the “Tunica miracle,” the golden days seem to be fading. In 2014, Caesars Entertainment shuttered the Harrah’s casino in Tunica, the largest of 10 in the area at that time, alleging “too much supply in that market” in conversation with Bloomberg.
The first casino in the county opened in 1992, following a decision by state lawmakers to make gambling legal along the Gulf Coast in 1900. Nine other venues followed that success, which is now experiencing a marked setback.
“The Northern Mississippi casino market continues to decline, a trend that began in 2007 due to increased competition,” CBRE Hotels’ feasibility study says. The downward trajectory accelerated with the 2007-2009 recession and, since 2010, gaming revenue has dropped at a 6.4% average annual rate in Tunica.
