House panel also advances casino contract

Wednesday, June 4, 1997 | 10:34 a.m.

A day earlier, a Senate committee also sent the contract to the Senate floor with the same label - no recommendation.

The House Criminal Justice Committee voted 7-4 to send the contract without action after a motion for a favorable vote failed.

While the committee was hearing testimony, Gov. Mike Foster stressed again at a news conference that he was not endorsing the contract.

He said he had only pointed out that if the contract is not ratified, the state could lose control of its own destiny - that a federal bankruptcy judge might be calling the shots.

"You're not going to find me anywhere close to those hearings," Foster said. "...It's quite a responsibility" for the Legislature.

The Legislature approved a land-based casino exclusively for New Orleans in 1992 but it opened only temporarily, shut down in 1995 and went to a federal bankruptcy judge.

A shell of the casino sits in the heart of New Orleans, needing $80 million to $100 million in work for completion.

Roughly 700 businesses are owed a total of $50 million as a result of the Harrah's Jazz Co. partnership shutting down construction and filing for Chapter 11 bankruptcy protection.

The House and the Senate each must pass resolutions approving the contract if it is to be ratified. Both chambers are expected to vote next week.

Harrah's Entertainment Inc. and various other investors formed the partnership that eventually won the right to build and operate a gambling palace that was to add still more glitter to the area that edges the French Quarter.

Construction began in January 1995. In May of that year, a temporary casino opened a few blocks away to help raise the capital needed for construction. The temporary casino failed after six months. The Harrah's Jazz partnership halted construction and filed for bankruptcy protection on November 22, 1995, throwing about 3,000 people out of work for the holidays.

The state sued. Harrah's sued back. Negotiations ensued and eventually there was a new contract - approved by Harrah's, state lawyers, unsecured contractors, bondholders, bankruptcy court and the state gambling board.

That contract must be ratified to save creditors owed $70 million - most of them Louisiana businesses, Sam LeBlanc, chairman-elect of the New Orleans Chamber of Commerce, told the House committee.

Also, the city desparately needs the 3,000 permanent jobs, 1,000 construction jobs and perhaps another 3,000 indirect jobs, he said.

State lawyers said the new agreement gives the state more protections than it had under the original agreement.

Chief among those is a bonded completion guarantee on the unfinished building, and a guaranteed minimum $100 million annual share of the casino's revenue.

The old contract also called for the annual $100 million payment but gave Harrah's the right to keep the money if nearby riverboat casinos conduct dockside gambling. Under the new contract, Harrah's can seek court action to stop dockside gambling, but it cannot withhold the state's money.

What if the contract is killed?

"It should be," said Rep. Steve Windhorst, R-Terrytown, and chairman of the House committee.

Windhorst said if the contract is not ratified, Harrah's must live up to the original contract or reject it.

Rejection means all deals are off and the state can start over again, finding a new operator or whatever, Windhorst said.

He also charged that Harrah's - finally realizing it had made a bad deal originally - filed bankruptcy for the purpose of getting a better contract.

While the new contract would save creditors, Windhorst said he believes that Harrah's will ultimately go for full bankruptcy and leave new creditors holding the bag.

Colin Reed, executive officer of Harrah's Entertainment, disputed Windhorst's claims, noting that his company paid $30 million to bond holders four days before Harrah's went to a bankruptcy court.

The only reason Harrah's sought bankruptcy protection is because New York banks refused to advance further funds for the project, he said.