City, governor ready for concessions, but is the Legislature?

Saturday, Jan. 13, 2001 | 10:22 a.m.

Mayor Marc Morial and Gov. Mike Foster said they are prepared to make financial concessions to keep the Harrah's New Orleans Casino alive. And the casino owner, JCC Holding Co., announced it has reached a restructuring agreement that will wipe out much of its half billion dollar debt.

But a tax cut deemed crucial to the casino's survival still faces rough going in the Legislature, particularly in the Senate.

"On the House side, there appears to be more of a willingness to try it. It does not appear that the Senate wants to do it," state Rep. Danny Martiny, a Kenner Republican and the chairman of the House committee that oversees gambling legislation, said Friday.

Sen. Ken Hollis, R-Metairie and a casino proponent, said he hopes his colleagues will go along but acknowledged it will be tough and that sentiment among lawmakers changes frequently. "It's like Silly Putty," he said.

Foster has been supporting a plan backed by casino officials to cut the casino's $100 million annual tax to $50 million the first year and require a "rolling guarantee" of $60 million for the next three years.

On Friday, Morial gave few specifics but said he would be willing to lower payments to the city, which owns the casino building and leases it for $12.5 million and also receives millions for support services for the casino.

"I think a $5 million reduction in the lease is something - as a part of an overall restructuring of our relationship, depending on where that $5 million comes from - we think we can work that into our future finances," Morial said.

Both men stressed the need to protect the more than 2,800 casino jobs.

Morial's press conference came shortly before another hurdle for the casino was cleared. JCC Holding, which recently filed for reorganization under federal bankruptcy law, announced it has worked out a deal with creditors to reduce debt from more than $500 million to $125 million.

Creditors including a group of banks holding the casino's loans and holders of bonds that financed the casino will be 51 percent owners of the restructured company, which will retain the name JCC Holding.

Still, even with the restructuring agreement in place and the support of Foster and Morial, casino officials say survival hinges on a break in the $100 million minimum tax they once agreed to.

Only the Legislature can grant that and they will have to do so in special session soon. Harrah's Entertainment Inc., which operates the casino for JCC, has been guaranteeing the minimum tax but will not do so beyond March 31. JCC must shut down without the guaranteee.

Foster, meanwhile, has said he won't call a special session to bail out the casino unless there is a consensus among lawmakers.

The Senate is a problem for the casino in part because general anti-gamblng sentiment is stronger there than in the House. Senate president John Hainkel, R-New Orleans, is a Foster ally but also a gambling opponent who has been reluctant to get behind the Foster-backed casino plan.

Even gambling supporters could pose a problem. Lawmakers with riverboat casinos in their districts will be under pressure to get some type of concession for the floating casinos if the Harrah's minimum tax is reduced.

Hollis said one proposal being worked on would allow dockside gambling for boats that are now required to cruise. Another would allow casinos to replace riverboats with barges that can hold more gambling machines, a move attractive to northwestern Louisiana casinos that already are allowed to conduct dockside gambling.

Complicating the issue is the fact that the bailout measures would likely require two-thirds votes because they involve tax increases. Although the Harrah's proposal backed by the governor would lower the minimum tax from $100 million, it would also - in apparent anticipation of future success - raise the tax rate from 18.5 percent to 21.5 percent. Casino proponents may argue that the payments are contractual obligations to the state, not taxes. But it will be up to the legislative leadership to decide.

The riverboat measures also would likely mean increases in tax rates. Under the scenario outlined by Hollis, dockside riverboat tax rates would go from 18.5 percent to 21.5 percent; barges would be taxed 23.5 percent.

Another complicating factor is JCC Holding's desire for a casino-run hotel and full service restaurants. New Orleans hoteliers and restaurateurs oppose the move. Hotel operators are particularly worried about the prospect of competing with hotels subsidized by casino winnings.

"I think the best thing would be for the hoteliers and restaurateurs to meet with the state and Harrah's and work out an agreement," Morial said.