Lawmakers: Harrah’s tax cut must also be New Orleans cut

Guy Coates

Thursday, Nov. 30, 2000 | 11:21 a.m.

BATON ROUGE, La. -- Two powerful legislative committees sent New Orleans Mayor Marc Morial a strong message Wednesday -- there will be no reduction in the Harrah's New Orleans casino's taxes unless the mayor is willing to take a proportionate cut in the city's take from the failing gambling palace.

The message was delivered at the state capitol on Wednesday, during hearings by House and Senate committee members considering whether the casino should be granted a reduction of its minimum annual state gambling tax of $100 million. JCC Holding Co. and Harrah's Entertainment Inc. of Las Vegas, 40 percent owner of the casino, say the property will close March 31 if the tax is not reduced.

In the meantime, a special task force in New Orleans is expected to recommend ways either Monday or Tuesday to save the casino for a second time in its shaky history.

It is the second time the casino has been in a financial crisis. The original ownership group, Harrah's Jazz Co., filed for bankruptcy protection in 1995 after operating a temporary casino for about six months. A new agreement with the state was approved in 1998, with JCC Holding again agreeing to pay $100 million.

The casino, in seeking a reduction, also wants its own hotel and unlimited restaurants, both currently banned by state law. Those restrictions were passed by the Legislature to protect the New Orleans hotel and restaurant industry. But JCC Holding says it must have both to compete with Mississippi casinos.

The House and Senate committees that must initially approve any reduction in casino payments through a new contract met Wednesday to get a briefing from the task force chairman.

Gov. Mike Foster has said he will not call a special session of the Legislature to consider cutting the gambling tax until he hears from the task force and until he has enough upfront support from lawmakers.

JCC Holding wants the minimum tax reduced to $50 million for the first year of a new deal, followed by an increase to $55 million the second year and $60 million in the ensuing years.

Several legislators said privately before the legislative committee session that the hang up in the Morial-created task force is an unwillingness to recommend that the city take a cut. JCC Holding is paying more than $20 million annually into the New Orleans community, including $12.5 million in rent for the city-owned casino building.

Ed Butler, a New Orleans bank executive and chairman of the task force, told lawmakers that the panel task force did not intend to make any specific recommendation on how much should be paid by the casino to the state or city.

That's when he got an earful.

"It will be a deal breaker if New Orleans is not willing to reduce its $12.5 million lease to the casino. It will all go away," said Rep. Reggie Dupre, D-Houma.

"It's hard to approach my colleagues about a state reduction without the city taking a reduction. If the city says that's no deal, it would get the same message back from the Legislature," added Rep. Dan Martiny, R-Metairie, chairman of the House committee.

"As a country legislator, I've got a message for you. If you want to preserve that casino and those jobs, the city has to make concessions," said Sen. Don Cravens, D-Arnaudville.

Butler said he got the message and would talk to his colleagues about coming up with specific figures, including a possible recommendation on the city's take from the casino.

Sen. Ken Hollis, R-Metairie, said a specific recommendation is necessary since one of the task force members is Gov. Mike Foster's top financial aide, Commissioner of Administration Mark Drennen.

During a meeting later in the day in New Orleans, the task force learned that both the restaurant association and the hotel trade group in the city remain opposed to lifting the hotel-restaurant restrictions on the casino.

However, member Jerry Fein said that dockside gambling for riverboat casinos, which could come up before the Legislature again in the future, could result in heavier competition for New Orleans restaurants and hotels than if Harrah's had discounted rooms and meals. The New Orleans area has three floating casinos.

"I'm more afraid of the riverboats going dockside," he said. "They can put up all the the hotels and restaurants they want and give them away for free. There's nothing in the law to stop them."