New Orleans casino’s dire financial situation detailed

Guy Coates

Tuesday, Jan. 9, 2001 | 11:07 a.m.

BATON ROUGE, La. -- The owner of the long-troubled New Orleans casino cannot make a profit even if the Legislature cuts the $100 million tax to $60 million, Legislative Auditor Dan Kyle says.

Gov. Mike Foster said he does not care if the casino cannot make it over the long haul. He only wants about four years of a lower tax guaranteed. After that, the casino can fold, he said.

Kyle's audit, released Monday, said the casino owned by JCC Holding Co. has a nearly $557 million debt and a net operating loss of $98 million for the first nine months of 2000 -- the period audited.

Over a 12-month period, the loss would be $130 million, Kyle said.

The envisioned cut in the state tax and in the amount paid by the casino to the City of New Orleans does not come close to filling the operating loss.

"Unless somewhere in a new structure of expenses, including payments to the state and to the City of New Orleans, they could come up with $130 million, they can't show a positive net income," Kyle said.

Kyle said maybe the casino operator is thinking about taking a loss for a couple of years, hoping business will be better in the long run.

Foster said if the tax is cut, JCC Holding Co. would have to guarantee annual payments to the state for four or five years. After that, he said, "I don't care."

Harrah's Entertainment Inc. of Las Vegas, the minority owner, is the guarantor of the current $100 million tax, which is paid to the state in daily amounts. The guarantee now is for only one year at a time.

Without tax relief and restructuring of the casino financial operation, Harrah's Entertainment will not guarantee the tax for another year. With no guarantee, the casino closes in March.

JCC Holding Co. already has gone to bankruptcy court to reorganize its debt and filings in the court indicate the company has $641.7 million in liabilities and $87 million in assets -- figures that pretty much reflect those in Kyle's report.

Now, the casino's lobbyists must sell lawmakers on the deal that $60 million is better than nothing.

The casino has hired Randy Haney, one of the state's top lobbyists, to head its campaign.

Foster said he is not going to lobby anyone. "It's up to their lobbyists." If the lobbyists can convince Foster they have enough votes, he will consider calling a special session of the Legislature to deal with the issue.

Kyle's audit "makes it easier" to sell the Legislature on paring the tax, Foster said. "Part of the argument against cutting the tax was that the casino was bluffing. The audit says it isn't bluffing about the operation's problems. Dan Kyle is respected."

As for a cut to $60 million, Foster said, "the money is desperately needed for education and the decision is just this: Do we want the money or do we want nothing. If we don't cut the tax, they will shut down and we get zero. Do we put 2,500 people out of work or do we take the money and they keep the jobs."