It’s been more than a week, but the power is still off at Atlantic City’s closed Revel casino and developer Glenn Straub and the casino’s former power plant operators are still battling.
Meanwhile fines are being levied, court hearings are being held and Straub may be blocked form installing emergency diesel generators at the site over environmental concerns. In fact, a judge granted an injunction to ACR Energy to block installation of the generators on grounds it might damage ACR equipment.
And through it all, Atlantic City waits to find out what the fate of the property will be and how it will affect the sale of the nearby—and also closed—Showboat casino.
Just business as usual for the troubled casino.
Straub is the Florida-developer who picked up the $2.4 billion casino for just $82 million through bankruptcy court. But Straub refused to deal with ACR Energy, which owns the power plant constructed for the casino and is seeking payment for back energy bills and the plant’s construction.
So ACR turned off power and water to the building and it’s sat in the dark ever since. Straub—who owns the land the $156 million plants sits on—promptly threatened to evict them.
Even a hearing before a federal judge couldn’t shake either side from their stance in the fight.
U.S. District Judge Jerome Simandle heard from both sides last week and implored the two to work out some kind of deal.
“We’re talking here about what I think is a very humble objective,” Simandle said. “Getting the lights on.”
Simandle ordered the two sides to keep talking, but so far no resolution has been announced.
Meanwhile, Atlantic City has been fining Straub $5,000 a day—after an initial $10,000 fine—for not providing power to the building. The resort’s fire department says it would be impossible to fight a fire at the 47-floor tower without water in the building and electricity to power elevators and the fire suppression system.
Straub tried to circumvent ACR by bringing in two large diesel-powered generator trucks, but the state’s Department of Environmental Protection said they will likely block their being hooked up saying they would not meet clean-air standards. The DEP is urging Straub to seek out newer, more efficient generators.
Straub, however, says he will install the generators anyway since the DEP’s fine for using them—about $3,000 a day—is less than the city’s fine for having no power. The city, however, must also issue a permit for the generators to be used.
Ultimately, Straub hopes to connect the Revel tower to the power system at Showboat—which he is also purchasing—and ultimately the municipal power grid. The sales agreement between Straub and Stockton University—which is selling the former casino to Straub—includes a clause that calls for Stockton to immediately begin to provide power, electricity and hot and cold water from Showboat to Revel, according to the Press of Atlantic City, which reviewed the sale agreement.
Under the agreement Stockton would first access the energy required to operate Showboat, but would then sell any excess power to Revel at cost plus a markup of no more than 15 percent, the Press reported.
ACR, however, contends that they own Revel’s electrical equipment and system and asked the judge to bar Straub from using them.
ACR also issued a statement saying it would be illegal for Straub to get energy from Showboat as he would essentially be rebuying energy sold to Stockton by local utility Atlantic City Electric. The company also maintains that running wires between the two casinos would violate Atlantic City Electric’s franchise rights.
The utility has not commented.
Straub did tell reporters that the constant battling is making him consider abandoning the project.
“I’ll pack my bags and this thing will sit here for three years,” he said. “People, if you’re going to stand in our way, we’re packing our bags and headed down south.
“I’m starting to buck up against a lot of details that cause people to go out of business down there. I can see why Caesars shut down Showboat,” he said. “The whole thing is more time wasted as opposed to working on projects. I need to work on these projects. If I’m going to be tied up and there’s this much hassle to run a business here, I don’t need to run a business here.”
ACR has been seen as battling with several other potential buyers for the property before Straub. ACR Energy borrowed $118.6 million in the municipal bond market to finish building the energy facility under a deal that had Revel paying back those costs with interest.
However, that high debt along with high energy costs from the plant were seen as a major reason for the casinos’ bankruptcy.
Straub has reportedly offered to pay operating costs for the plant while seeking other power, but ACR officials say he would not pay for energy and water during the interim.
Straub now says he is “done” with ACR.
What’s less clear is whether Straub will continue in his efforts to buy the Showboat casino from Stockton.
The university originally bought the closed casino for $18 million and planned to turn the site into a city campus complete with a working non-casino hotel and student housing.
However, the neighboring Trump Taj Mahal objected saying student housing next to its casino could create problems with underage students trying to drink and gamble at their casino. Trump Entertainment invoked an old covenant between itself and the casino’s former owner Caesars Entertainment that the property only be used as a casino.
That issue seemed destined for court as well until Straub stepped in to buy the property for $26 million.
Since then, the resort’s City Council tabled voting on a redevelopment plan for the site since the university seems ready to sell the property—though the school might still lease back part of the facility.
The uncertainty over the purchase—and how quickly it came together—have caused some controversy on Stockton’s main campus with the school’s Faculty Senate and the Stockton Federation of Teachers passing a resolution asking to gain seats on the college’s Board of Trustees to help review such purchases in the future.
Spokespeople for the group say they are worried the school will now be stuck with an unusable property.
