Casino trying to loosen reception for tax cut

Alan Sayre

Monday, Sept. 25, 2000 | 9:56 a.m.

NEW ORLEANS - After giving the state a virtual ultimatum for a tax reduction, Harrah's New Orleans Casino is finding a chilly reception from legislators and a lukewarm response from the governor.

Since opening the casino last October after a short-lived temporary casino and three years of bankruptcy reorganization, the casino's owner, JCC Holding Co., has been hinting that the $100 million minimum annual tax payment to the state is too much to shoulder for the project to succeed.

JCC Holding accepted the minimum tax after running into resistance from Gov. Mike Foster in late 1998.

Last week, JCC Holding dropped the gauntlet, saying it would not be able to obtain a state-required guarantee of that payment without a tax reduction.

A major stockholder in JCC Holding and the casino's manager, Harrah's Entertainment Inc., said it would back the tax until March 31 - but could not renew the backing under the current terms. The guarantee is required under the casino's 30-year contract with the state.

That announcement did anything but draw pledges of backing from the Capitol, which has been dealing with the project since 1992.

To get the tax reduction, the casino must overcome resistance from legislators, many of whom have always viewed the project as a major economic development and tax provider.

So far there has been no suggestion that the casino should give up its monopoly on land-based casino gambling in New Orleans - the reason for the high tax.

The original project owner, Harrah's Jazz Co., ran a temporary casino for about six months before closing the gambling hall and filing for federal bankruptcy reorganization. JCC Holding was the ownership company that emerged from more than three years of court proceedings - after the state rejected reducing the minimum tax.

Senate President John Hainkel, R-New Orleans, said the casino's problems were "not a priority with me."

"I'm going to the Capitol almost every day of the week to work on such problems as the budget, education and health care," Hainkel said. "They are big boys. They agreed to the deal. It's a business deal that they decided to undertake."

Rep. Peppi Bruneau, R-New Orleans, suggested that the state put the project up for bids if JCC Holding cannot hold up the terms of its monopoly for a land casino in New Orleans. That idea also was voiced by former Gov. Edwin Edwards, who spearheaded the 1992 casino law, during a break in his insurance liquidation corruption trial in Baton Rouge.

Gov. Mike Foster said he would not call a special legislative session unless there is wide consensus on what to do. Due to the timing of the casino's deadline, the issue cannot wait for the regular legislative session.

Foster initially said the casino must live or die by the terms of the current deal. But on his radio program Thursday night, the governor said he stood by the comment "up to a point" and added that the Legislature has to decide "whether they want 4,000 jobs to go away" with a casino shutdown or take a smaller tax with the idea "that a little is better than nothing."

During a conference call with investors, analysts and reporters last week, Harrah's Entertainment chairman Phil Satre was asked why the company didn't realize the burden of the tax before it went into the deal. Satre said Harrah's used a market projection formula - successful in other markets - on New Orleans and that the city was simply hard to get a handle on.

In the early 1990s, the New Orleans casino market was widely projected to have potential winnings from gamblers of $800 million to $1 billion annually. Figures from Harrah's and the area's three riverboat casinos indicate that market is closer to $500 million, with Harrah's perhaps taking about half.

By the time the casino emerged from its 1995 bankruptcy reorganization and finally opened last October, it was widely accepted that New Orleans had been a bust as a tourist destination point for gamblers.

The issue of the casino jobs - Harrrah's employs about 3,000 - is likely to be a key point of debate in the coming months.

Four economic development groups in the New Orleans area - the Greater New Orleans Chamber of Commerce, the Downtown Development District, the New Orleans Metropolitan Convention and Visitors Bureau and the Greater New Orleans Hotel-Motel Association - have signed on to the idea of a tax cut. All cited the importance of the casino as an employer.

But the hotel association balked at the idea of lifting the current ban on the casino having its own hotel.

Burford has said that the lack of a hotel, as well as state-mandated restaurant restrictions, put the casino at an impossible competitive disadvantage with casino-hotels on the Mississippi coast, which are pulling in more than $900 million a year in winnings.

Walter Abbott, a Louisiana board member of the National Coalition Against Legalized Gambling, said there are many businesses in the state that are having financial troubles and questioned why a casino should get special consideration.

"If I don't get a tax break, I might just pack up my business and leave. What if everyone in Louisiana did that?" Abbott said. "But it's nothing we didn't predict would happen when organized gambling infected this state 10 years ago."