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September 30, 2014

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Casino board unanimously approves contract

BATON ROUGE, La. -- The contract that is to bring life to a New Orleans land casino and guarantee the state its $100 million in taxes was approved by the state gambling board Tuesday.

Gov. Mike Foster already has asked legislators to call themselves into a special session in late January to ratify the contract.

Senate President Randy Ewing said he believes the Senate has the necessary votes to call itself into session. Twenty votes are needed to call a session -- the same number needed to ratify the contract.

In the House, 53 votes are needed. House leaders, too, are optimistic.

The first contract, which did not guarantee the tax money, came within one vote in the Senate and two in the House of ratification.

If legislators approve the revised contract, the casino should be operating by early 1999, said Fred Burford, representing Harrah's companies, which have the biggest stake in the venture.

What was once to have been the nation's largest gambling palace, the casino opened in temporary quarters in 1995 while construction was started on a permanent site.

In November 1995, seven months after the opening, the temporary casino shut down and the Harrah's Jazz partnership obtained bankruptcy protection.

The permanent gambling palace, a scaled-down version of the original plan, is left as an eye sore on the Mississippi River front in the heart of downtown -- a partially finished but deteriorating complex.

Left holding the bag have been the owners of $430 million in junk bonds sold to help finance the project, and over 900 creditors owed $57 million.

The new contract is supposed to solve all the problems, the Louisiana Gaming Control Board was told Tuesday by Harrah's.

Burford said the new partnership of bond holders and Harrah's Entertainment -- Jazz Casino Co. -- believes the permanent casino can attract even more tourists to make the operation a success, especially in light of the closure of a riverboat casino that operated in the downtown area. That boat is moving to Shreveport.

Between the riverboat and the temporary casino, gamblers had poured $200 million to $250 million into the operations in a year's time, Burford said, adding that Jazz Casino needs about $250 million to break even.

The board approved an earlier contract this year but the Legislature refused to ratify it because the governor was cold on the idea. The state's taxes were not guaranteed like he wanted.

The 1992 law setting up the casino calls for the state to receive $100 million a year from the casino operator. The tax has been the albatross for the project.

Each year, the tax money must be guaranteed under terms of the new contract, John Campbell, an attorney for the state, told the board. If the guarantee falls through, the casino shuts down.

Jazz Casino will be owned by the bond holders and Harrah's Entertainment Inc., said Burford, adding that Harrah's has committed $335 million to the project and will guarantee the tax money in the first year.

Other guarantors can be sought in future years, Campbell said.

The contract also calls for the creditors to be paid in full.

Additionally, the contract spells out that the Legislature can allow a casino boat on Lake Pontchartain -- currently Bally's -- to have dockside gambling without breaking Harrah Jazz's land casino monopoly.

The casino law says if the exclusivity agreement is broken, the land-based casino does not have to pay taxes.

"The contract takes care of that," said Sen. Ken Hollis, R-Metairie, the legislative floor leader for the casino project.

Foster has sent letters to the 144 legislators, urging them to ratify the contract.

"I am firmly convinced that approval of the contract is not about whether you approve or disapprove of gambling in Louisiana," Foster wrote. "The Legislature and the Constitution gave the people of Orleans Parish the right to decide that question."

"As I see it, it is now our duty, yours and mine, to assure that both the state and casino operator live up to their obligations," Foster wrote. "I know that all of you recognize the importance of this matter to the parties involved, the creditors, the city of New Orleans and the state of Louisiana."

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