- Donald and Marla Trump tour the new Trump Casino in Buffington Harbor in July 1996.
Donald Trump has presented himself as the only presidential candidate with the experience and drive to rescue those Americans left behind by globalization. Amazingly enough, Gary, Indiana, a steel town that had faced agonizing decline over the last 50 years, played a part in saving Trump. As Indiana prepares to go to the polls May 3, it's useful to consider what, if anything, Gary got in return.
Trump's public relationship with Gary began with an astonishing admission of the social costs of his own business. In March 1989, Trump visited Chicago to promote his yet-unopened Atlantic City casino, the Trump Taj Mahal. Asked about the push to bring legalized gambling to Gary, Trump offered his opinion that Chicago and Gary would be bad places for casinos. The week the Taj opened, Trump told the Chicago Tribune that gambling had "not been the savior of Atlantic City. But it's certainly been good to a couple of casino companies." After 12 years of legalized gambling, "we still have slums here."
Both the city of Gary and Resorts International Holdings, a Trump competitor lobbying to legalize gambling in Indiana, argued that Trump was attempting to protect his massive investment in Atlantic City. For all of Trump's public concern about the well-being of Atlantic City, the Taj recruited workers not only from Gary, but also from as far away as Puerto Rico and Ireland for hospitality positions that paid as little as $6.25 an hour.
If Trump had been worried that Gary might be developed into a casino town that would eventually threaten his ambitions to remake Atlantic City into a national destination, his fears were misplaced. Financed by high-interest junk bonds, the Taj Mahal would need to clear $1 million a day to remain solvent. Trump had wagered that Atlantic City and the American economy would boom.
A little more than two months after opening the Taj, the Trump Organization missed $73 million in debt payments to banks and bondholders. By March 1991, the entire Trump corporate empire was in a state of noncompliance on $1.1 billion in loans. All three of Trump's Atlantic City casinos eventually filed for Chapter 11. Threatening his lenders with endless litigation, Trump was able to hammer out an agreement in which his personal debt of $900 million would be deferred until June 1995.
Meanwhile, Indiana had legalized casino gambling on boats in summer 1993. Indiana lawmakers refused to concentrate casinos in one depressed city, so Gary was rewarded with only two gaming licenses. In September 1993, Donald Trump arrived in person at Gary City Hall "to see about a riverboat."
Although his casinos were still very deep in debt, Trump had sought to own or manage additional casinos not only in Indiana, but also in New Zealand, Ontario, Louisiana, Mississippi, Alabama, Missouri, and Nevada. The stakes were high. In November 1993, the Wall Street Journal reported that Trump had been negotiating with his lenders to retake full ownership of his casinos so that he could make a public offering of the Atlantic City resorts and retire his remaining personal debt. Multiple analysts agreed that it would very difficult to sell investors a stake in one or all of Trump's Atlantic City's debt-ridden casinos alone.
That December, Trump gave a presentation that featured a 48-square-foot model of his proposed casino boat and a video of Tina Turner singing "Simply the Best." Explaining his past statements about Gary were "a guesstimate," Trump said he'd concluded that the town needed gaming "a lot more than it did five years ago" after talking to multiple community leaders. Trump bragged he ran the largest casino operation in the world. He didn't mention his lingering financial problems: according to Newsday, all three Atlantic City casinos were still $1.5 billion in debt.
By Trump's side in Gary was lobbyist Scott Pastrick, the son of one of the region's most powerful politicians, East Chicago mayor Robert Pastrick. The Post-Tribune of Northwest Indiana noted that Trump evaded the issue of how his project would be funded while fielding easy questions from the audience members, some carrying signs reading "Trump + Gary = Jobs."
The Trump Organization spent nearly $1 million on its Gary proposal, according to Vanity Fair. But unhappy with his previous treatment of the city and bothered by his lack of guarantees for local economic opportunities, in January 1994 Gary gave Trump third place in its recommendations for a casino license.
Trump had once warned that a Gary casino would “empty the pockets of people in Chicago.”
Still, Trump wasn't out. "We have over $120 million in cash, and nobody else can claim that," Trump boasted to the Indiana Gaming Commission, which had the power to decide the finalists for the Gary licenses. Whereas Trump had once warned the Chicago Tribune that a Gary casino would add to the local welfare rolls and "empty the pockets of people in Chicago," now his company's estimates for gaming revenues far outstripped those of its competitors. To sweeten the deal, Trump even insinuated he could woo Michael Jackson back to his hometown for a concert.
So in December 1994, the Indiana Gaming Commission voted unanimously to award licenses to Trump and Don Barden, an African-American cable magnate from Detroit. "Unfortunately, people say, 'No one will go to Gary,'" explained commissioner Ann Bochnowski. "If there is a name like Trump, people will go to Gary."
Gary was then contending for the title of the most violent city in the United States. The U.S. Steel plant that had provided jobs to more than 30,000 people in the late 60s now employed somewhere between 6,000 and 8,000 workers (even though it was more productive than before). A reporter for the New York Times described the 4,000-acre complex as "almost devoid of human beings."
"We knew something different had to be done when we found ourselves championing our economic development successes at a ribbon cutting for a McDonald's," Indiana state senator Earline Rogers remarked. The city's immediate aspirations were almost pathetically modest—a hotel, a theater, better-paid police, money for basic infrastructure repairs. From there, Gary hoped to build on its strengths—proximity to Chicago, excellent transportation links, dirt-cheap real estate. No one could pretend that the casino jobs would replace those once offered in the steel mills, but they were better than the alternatives.
In June 1995, Trump Hotels and Casino Resorts sold $155 million in bonds at the astoundingly high interest rate of 15.5 percent. The new company, which combined the Gary boat with the Trump Plaza in Atlantic City, sold ten million shares at $14 a share on the New York Stock Exchange. "In marketing the deal, the underwriters had emphasized what they viewed as the magic of the Trump name in drawing casino patrons, and emphasized that the name could be invaluable in starting casinos in areas newly opened to gambling," wrote the New York Times.
Gary had helped breathe new life into Trump's finances. "I know Gary has had rough times," Trump announced at the September groundbreaking of the casino boat dock at Buffington Harbor, on the northwest edge of town. "It is the beginning of the end of those rough times."
Then, the following January, Trump Hotels and Casino Resorts moved to purchase the Taj Mahal. Complaining that Trump's sleight of hand would burden the Gary boat with a long-term debt load of roughly $1.3 billion, the Indianapolis Star concluded the "gullible" Indiana Gaming Commission "had bought a bill of goods from a notorious self-promoter."
On June 20, 1996, Donald and Marla Trump inaugurated the 290-foot casino boat. Unlike Barden's, promotion for the Trump boat purposely avoided the word "Gary." The ship, the Times of Munster noted, was "a narcissistic tribute to The Donald. Everything from the gambling chips to the Botticelli 'Birth of Venus,' inspired murals bear Trump's name." Nonetheless, the paper marveled that it had "never seen people lose so much money and still have a smile on their face."
Even though Trump's Gary boat initially smashed its own ambitious targets for paid attendance, not all was well with the parent company. After soaring to a high of $35.50 in 1996, its stock was trading as low as $2.75 in the autumn of 1997. The drop couldn't be blamed on management lavishing its Gary employees with pay. Average annual compensation in wages, tips, and benefits for Trump employees was $24,931, 18 percent less than Barden's workforce. Trump Hotels and Casino Resorts recorded net losses of $321 million from 1996 to 2000, but had it not been for its enormous debt payoffs, the company would have been profitable.
Despite the financial struggles of its parent company, the Gary boat contributed $42.2 million in much-needed local taxes in its first three years. Yet a key component of Gary's redevelopment still involved reinventing the city as a tourist destination. In March 2000, Gary announced that it would host the Miss USA pageant. The pageant's partial owner was none other than Donald Trump.
the “gullible” Gaming Commission “bought a bill of goods from a notorious self-promoter.”
—The Indianapolis Star, 1996
City Hall said the plan was an opportunity to showcase the city before a national audience at a rate far cheaper than if it had taken out ads. Pageant supporters also spoke of destroying the image of Gary as a place too dangerous and too broken to visit, let alone invest in. For one night, Gary wanted to take pride not in its lost past, but in its present.
Unfortunately, Gary's lack of showbiz experience would come to haunt the city. The city used more than $2.2 million from its casino fund to underwrite the pageant. (For comparison, the government of Branson, Missouri, spent just $125,000 on the 2000 Miss USA competition.) In addition to security and transportation, Gary paid for a Michigan Avenue shopping spree for contestants. According to the Post-Tribune, planners hoped to bring the likes of Maya Angelou, Hillary Clinton, Destiny's Child, and even the Jackson Five to events surrounding the pageant. But none of the big corporate sponsors Gary hoped to win panned out.
The juxtaposition of Miss USA glamour and "Gary reality" wasn't lost on the smirking national press. "Last Friday's Donald Trump-run pageant took place in Gary, Ind., which meant it was short on the sophistication of Atlantic City and long on a really disturbing smell," wrote Joel Stein in a Time magazine piece entitled "Miss Get-Me-the-Hell-Out-of-Here."
The following year, an ABC special hosted by Peter Jennings used the 2002 Miss USA pageant to showcase Gary's poverty and violence. "This pageant does a great job of promoting Trump, he flies in here and gets that attention, the girls stay at his hotel, which is all great for him, but we don't get much as a city," complained city council president Roy Pratt. The Miss USA pageant left Gary in 2003.
Between 2001 and 2003, Trump Hotels and Casino Resorts suffered net losses of $124.5 million. In 2004—the year The Apprentice debuted—the company booked a net loss of $191.3 million. The company, the heart of which consisted of four hotels and a boat, was $1.8 billion in debt.
With The Apprentice burning up television ratings, Trump, then chairman of the board of Trump Hotel and Casino Resorts, told USA Today that casinos were a "very small piece of what I do." In November 2004, the company filed for Chapter 11. "I don't think it's a failure," Trump told the Associated Press. "It's really just a technical thing." The "technical thing" allowed Trump to remain chairman of a reorganized company with a $2 million annual salary and a $500,000 raise from the previous year.
In November 2005, the Gary casino was sold to Barden's Majestic Star Casino & Hotel. Its fortunes have since gone up and down, with the Majestic Star filing for Chapter 11 in 2009. Despite its hopes of making Gary an entertainment center, the city is still heavily dependent on the revenue the two boats bring in.
The forces that have broken Gary are complex. It would be unfair to expect a casino owner to solve the social damage done by the intense international industrial competition, white flight, environmental degradation, the crack epidemic, and public and private disinvestment.
But it's a pity that Trump, on his way out, failed to share any of his secrets for making money from failure. Trump Hotels and Casino Resorts never came close to turning a profit, even as the casino business in general boomed. Over a 13-year span, Trump Hotels and its successor, Trump Entertainment, lost $1.1 billion, the company writing down or restructuring $1.8 billion in debt. An investor parking $100 in the company's stock in 1995 would have ended with a little less than $11 in 2005. Yet Fortune has estimated that Trump was compensated $82 million for his leadership. Even though he proved himself a mediocre casino owner, at least Trump remembered this old adage: "The house always wins." v