Official insists on equity in La. Harrah’s

Alan Sayre

Wednesday, Dec. 13, 2000 | 10:45 a.m.

NEW ORLEANS -- While declining to sign a report recommending a tax cut for the ailing Harrah's New Orleans Casino, the state treasurer Monday repeated his call for the state to receive stock options in Harrah's Entertainment Inc. in exchange for financial concessions.

Treasurer John Kennedy also said the casino's owner, JCC Holding Co., should guarantee employment at a minimum of 2,750 workers if the state agrees to financial concessions the company says are needed to keep the gambling hall open past March 31.

Late last month, a special city-state study committee recommended that the casino's minimum annual tax be reduced from $100 million to no more than $60 million.

The committee also said the Legislature should allow the casino to offer discounted rooms through its own hotel and add more restaurant facilities beyond the current restriction of a single 250-seat buffet.

Committee Chairman Edward Butler, a New Orleans bank executive, said the idea of HEI giving the state stock rights in exchange for financial breaks might be workable, but there were legal issues the committee decided should be left to the state.

"It might work for the state if the casino turns out successful," Butler said during a news conference as the panel's formal report was presented.

Harrah's Entertainment of Las Vegas owns about 43 percent of JCC Holding and manages the casino.

In a minority report filed with the committee's majority report, Kennedy called for the specific minimum employment if breaks are issued by the Legislature. The committee's report says JCC Holding "should publicly commit to operate the casino for at least the next five years so as to maintain the jobs it provides."

The casino currently employs 3,000. JCC Holding says that without a tax break and hotel-restaurant concessions, the casino will close April 1. The company wants a $50 million minimum tax during the first year of a new deal, $55 million the second year and $60 million per year thereafter.

Kennedy's recommendations did not include a specific figure for a minimum tax and did not address the hotel-restaurant issue.

If the Legislature agrees to a concession plan, JCC Holding plans to enter a voluntary bankruptcy proceeding to restructure $500 million in long-term debt in new stock.

The committee also recommended:

--A five-year tax guarantee for the casino that would be posted by Harrah's Entertainment or "some other financially sound, acceptable third party."

--That the city negotiate "in good faith" with the state and JCC Holding on whether any of the approximate $20 million in payments to the city will be reduced. Key legislative leaders have said that without the city taking a cut, the casino is dead. Mayor Marc Morial is resisting the idea of a reduction.

Butler also said the lifting of hotel and restaurant restrictions will require more negotiation with the trade groups representing those industries in New Orleans. Both groups have refused to agree with the casino having a discount hotel for "high rollers" and a wider variety of restaurants in the casino. JCC Holding says it must have both to compete with casinos on the Mississippi coast.

"Hopefully, they'll come up with something that will satisfy the restaurants, hotels and JCC Holding," Butler said.

Gov. Mike Foster has said he will not call a special legislative session, which JCC Holding wants quickly, until there is widespread consensus on what to do. The governor has said he will require at least a three-year tax guarantee, along with setting aside the tax revenue for teacher pay.

In his minority report, Kennedy also said the tax money should be set aside for teacher pay.

Under the committee's recommendation, the tax actually would be a flat minimum fee or 21.5 percent of gambling winnings, whichever is larger. The current rate is 18.5 percent, the same as Louisiana riverboat casinos pay without a minimum. But the land casino has never come close to exceeding its minimum of $100 million.

Butler said the committee was acting as an advisory body to the mayor and the city council, which will decide the city's official position. Morial said he would review the committee's recommendations and have a response later in the week.