Study panel: Cut Harrah’s New Orleans tax by 40 percent

Alan Sayre

Friday, Dec. 1, 2000 | 12:07 p.m.

NEW ORLEANS - To keep Harrah's New Orleans Casino in business, the state should cut its minimum annual gambling tax from $100 million to $60 million, a special study panel recommended Thursday.

Meanwhile, despite a legislative warning that a bailout deal for the trouble casino will die without concessions from the city, Mayor Marc Morial said the city would not be "bullied" into taking cuts in its share of the deal.

The committee also said the state should reduce hotel-restaurant restrictions on the casino. Currently, the casino cannot have its own hotel at the casino site, while it is limited to a 250-seat buffet that is not supposed to give cut-rate or free meals.

The recommendation calls for JCC Holding Co., the casino's owner, to be able to offer free or discounted rooms to its players. The company wants to have its own hotel to do just that. Also, the committee said that the casino should be able to expand its dining services.

JCC Holding has said that unless it gets major concessions from the state, it will close the casino on March 31, throwing 3,000 people out of work. With the concessions, the company plans to enter bankruptcy reorganization to take care of $500 million in long-term debt while it continues operating.

In addition to a hotel and unlimited restaurants - two items opposed by New Orleans hotel and restaurant trade groups - JCC Holding has proposed a gambling tax of $50 million during the first year of a deal, followed by $55 million the second year and $60 million in the ensuing years.

The committee's recommendation would put the tax at $60 million or 21.5 percent of gambling winnings, whichever is larger, on April 1. JCC Holding has proposed an alternative percentage of 18.5 percent, the same rate that Louisiana riverboat casinos pay with no minimum.

The panel also wants Harrah's Entertainment Inc., which owns about 42 percent of JCC Holding and manages the casino, to guarantee the minimum tax for five years. Gov. Mike Foster has said a multiyear guarantee is required before any bailout plan can be considered.

The recommendations will be sent to Morial, who appointed all but two members of the committee. The governor's two appointees - Commissioner of Administration Mark Drennen and state Treasurer John Kennedy - were not present for Thursday's meeting.

In addition, the panel also heeded the advice of key legislators and recommended that Morial negotiate a reduction in the amount of direct payments the city receives from JCC Holding. Without a reduction from the city, the bailout deal likely is dead, members of a joint House-Senate committee told study panel chairman William Butler on Wednesday.

JCC Holding currently pays $12.5 million annually in rent for the city-owned casino building. Including payments to other Orleans Parish agencies and state money to the city for casino support services, such as police protection, the total annual tab comes to about $26 million.

The warning was repeated to the study panel Thursday by Rep. Danny Martiny, R-Kenner and chairman of the House Criminal Justice Committee.

"In Baton Rouge, we deal with perception and the perception there is that if the state is going to take a cut, the city is going to take a cut," Martiny said. "Without that coming from this committee, it is tantamount to saying that Harrah's is not worth saving."

Martiny said that to sell the deal to a reluctant Legislature, the city will have to show that the casino will benefit the entire state and not just New Orleans.

"If you can say it's beneficial only to New Orleans, you've got me," Martiny said. "But that won't do anything for the guy in Shreveport."

The study committee recommended that the mayor and other city officials negotiate the issue with the governor and the Legislature. The panel did not recommend a specific dollar figure or percentage for any city-related payment reductions.

Earlier, Morial said he was opposed to any cuts for the city, which led to the legislative warning. On Thursday, he said: "I will not negotiate in the press. I will not draw a line in the sand. I will not be bluffed. The city will not be bullied. We will not be threatened by anyone with respect to trying to do what's best in the overall interest of the city."

The study panel also recommended that the Legislature call a special session at the earliest possible date to consider a bailout plan. The gambling tax and the hotel-motel restrictions are part of the 1992 law that legalized the casino.