Casino construction is booming in Atlantic City, but how these projects pan out will depend on several factors that could have big effects on the companies doing business in the area.

Since 2003, about $2 billion of new casino development and expansion has been completed in Atlantic City, with the largest being the hip Borgata Casino owned by

Boyd Gaming

(BYD) - Get Report

and

MGM Mirage

(MGM) - Get Report

.

An additional $1 billion to $2 billion is under construction at properties owned by

Harrah's

( HET) and

Trump Entertainment

( TRMP), while the Borgata is in the midst of a major expansion.

Another several billion dollars of projects could be coming over the next few years.

Morgan Stanley

(MS) - Get Report

, for one, recently bought a 20-acre vacant parcel of land on the boardwalk, which it plans to turn into a casino site.

All this construction comes as Bader Field, a small municipal airport in the city, is set to close, likely freeing up more development space. The 150-acre site may be razed and re-zoned as a mega-casino project.

As well, developers in the city continue to eye New Jersey legislators, who are currently considering proposals to allow slot machines at racetracks in the northern part of the state to deal with the coming slots boom in neighboring Pennsylvania and New York. If such legislation were approved, it could affect new construction in the city.

The closure of Atlantic City's Bader Field airport, which is set to occur in September, brings numerous opportunities to the city. The small municipal airport currently prevents casinos from building past a certain height because of the flight patterns.

Once the site is closed, "all the height restrictions that currently exist because of Bader Field, particularly the center boardwalk locations, will disappear," James Perry, CEO of Trump Entertainment Resorts, said on his company's recent earnings call.

This "could result in taller casinos being built, particularly the Caesars or around Trump Plaza, which was in the direct flight pattern," Perry said. The Caesars property is owned by Harrah's.

The city will look at different options for rezoning the airport after its closure, which could provide up to 150 acres of developable land. Of course, one option is another casino project, which wouldn't make current operators happy.

If a casino site were proposed there, "we expect vigorous opposition from existing casino operators," says Joe Weinert, a casino consultant with Spectrum Gaming Group.

Travel to the city, by and large, won't be affected by the closure since most visitors arrive through Atlantic City International Airport.

Morgan Stanley Rolls the Dice

One company closely watching the future of Bader Field is Morgan Stanley, which recently paid about $70 million for a 20-acre vacant parcel of land between the Showboat and Trump Taj Mahal casinos.

There's been much speculation as to who the investment bank will team up with on the site. Morgan Stanley owns the land, but is not planning to be the developer or operator of any casino built there, says company spokesman Mark Lake. He declined to comment on the ongoing discussions for the site.

Early rumors said

Hard Rock Casinos

, which is owned by the U.K.'s

The Rank Group

, was eyeing a deal at the property.

However, Thomas Carver, executive director of New Jersey's Casino Reinvestment Development Authority, says a Hard Rock deal does not appear likely. Although Morgan Stanley executives were tight-lipped when he met with them in recent weeks, Carver says the basic feeling he has gathered of late is that Hard Rock will not be involved with the site.

The latest buzz is that Kevin DeSanctis, who is leaving his post as president of

Penn National Gaming

(PENN) - Get Report

later this year, will work with Morgan Stanley on the project, Weinert, the Spectrum Gaming consultant, recently wrote in the newsletter

Gaming Industry Observer

. Other industry sources have confirmed hearing this rumor.

Of course, even if DeSanctis is eventually involved on the operations side of a new casino, it doesn't rule out Hard Rock being used as a brand for the project.

"We're very interested in Atlantic City, but we can't comment on ongoing transactions," says Michael Soll, vice president of Hard Rock Casinos.

DeSanctis didn't return a call seeking comment.

For its part, Penn National has long mentioned being interested in entering the Atlantic City market. On its recent earnings call, the company's management said it looked at buying the Sands casino -- the smallest in the city - from financier Carl Icahn, but that the asking price was too steep. Penn also said in its recent earnings call that it is interested in Bader Field if the city rezones it as an additional casino zone in the city.

Legislation Looms

In the background of all this deal buzz is the question of whether the New Jersey legislature will continue to give Atlantic City preferential gaming status treatment in the state.

With slot machines coming next year to Pennsylvania and to certain racetracks in New York in 2008, there has been talk that New Jersey might approve the introduction of slot machines at the Meadowlands track in the northern part of the state to fend off the new competition. If this occurs, several of the proposed developments in Atlantic City, which enjoys a status as the only place in the state to allow slots, could very well be put to rest or altered.

In late July, New Jersey Gov. Jon Corzine said he still opposes adding video lottery terminals (a specific kind of slot machine) at northern New Jersey race tracks, but he also said that given the competition coming from nearby states, the matter needs to be looked at.

"The best thing for New Jersey to do is to continue to promote Atlantic City so that it continues on the path that it is," says Joe Corbo, president of the Casino Association of New Jersey and general counsel at the Borgata Casino, who opposes adding slots elsewhere in the state.

Over the next few years, an additional $2 billion to $3 billion could be earmarked for additional development in Atlantic City, including the MGM and Morgan Stanley projects, Corbo says. He admits that estimate might be light, given that the starting cost for a casino resort development is roughly $1 billion and several potential projects are being eyed in addition to the MGM and Morgan Stanley sites.

"Atlantic City is poised with all these incredible potential projects on the horizon. Why would you want to take a chance on that?" Corbo says.