Harrah’s tries again with casino in Big Easy

Alan Sayre

Monday, Oct. 25, 1999 | 11:20 a.m.

NEW ORLEANS -- More than seven years after the Legislature approved the idea, New Orleans begins its second foray into big-time gambling with a huge casino across from the French Quarter and the city's giant convention center.

Despite the plethora of out-of-town guests that will be within walking distance of Harrah's, success is far from assured, based upon New Orleans' casino track record and heavy competition from casino-hotels on the Mississippi coast.

Making it in the Big Easy apparently hinges on the casino's ability to tie into the city's burgeoning tourist and convention business, which hosts about 11 million visitors per year.

Awaiting gamblers when doors open Thursday night on the $800 million project are 100,000 square feet of wagering space with 2,900 slot machines and 120 table games in five New Orleans-themed rooms.

"We are going to be the best casino in Louisiana," said Deborah Simpson, a slot-machine attendant.

The casino was first pushed by then-Gov. Edwin Edwards during his unsuccessful re-election bid in 1987. In the four years Edwards was out of office, the Legislature approved a state lottery, riverboat casinos and video poker machines. Then, Mississippi got a big jump on the city in attracting gamblers.

Upon returning to office in 1992, Edwards pushed the urban casino through the legislature. The project was touted by the Wall Street junk bond market: After all, casino gambling would be a perfect fit in the City of Sin.

Or would it?

Fights between two competing groups for the project -- one which won the city lease for the casino site and another that won state approval for a 30-year contract -- resulted in a compromise partnership called Harrah's Jazz Co.

It took until May 1995 to open a temporary casino in the city's municipal auditorium, far away from the tourist-convention hubbub and across from a public housing project.

The casino, which needed to take in over $30 million a month to break even, averaged about $12 million before closing in late 1995 and filing for bankruptcy protection, putting 3,000 people out of work. The permanent casinos building sat unfinished.

What finally emerged in late 1998 was a new publicly-traded ownership company, Jazz Casino Co., whose majority owners were the holders of $435 million in Harrah's Jazz junk bonds. Harrah's Entertainment is the largest minority partner.

The big question for the new casino and its 2,800 employees is the same as it was several years ago: Whether enough gamblers will drop enough money for it to succeed.

Jay Sevigny, president of Harrah's New Orleans Management Co., which will manage the new casino, said that since 1995, the city's tourist-convention industry has grown from 8 million to 11 million visitors annually, and their annual spending has increased from $3 billion to $4 billion.

In August, the state gambling board was told that Harrah's is aiming for a first-year win from gamblers of $345 million, about $29 million a month. Sevigny won't provide an updated estimate, but says he expects 45 percent of the customers to be area residents who will provide about 35 percent of the casino's winnings.

Still, Harrah's has three major obstacles to overcome. To protect the existing tourist industry, the state ruled that the casino cannot have its own hotel and it is restricted to a 250-seat buffet restaurant and a few standup dining vendors.

In addition, the state will impose a minimum tax of $100 million, which is due no matter how much the casino takes in.

Harrah's has deals for rooms in 10 hotels near the casino and has lined up 15 restaurants to accept its vouchers. Las Vegas-based Harrah's plans to use a database of 11 million regular customers to tout a trip to New Orleans -- and the casino.

As for the $100 million tax, Sevigny calls it "an ominous number," but adds optimistically: "When you see the potential of this casino, it's a much-more manageable number."