THE WINNER

ONE STEP CLOSER TO BLACKJACK ON THE BAYOU;
MAYOR CHOOSES HEMMETER AND CAESARS

Published: Friday, November 6, 1992
Edition: THIRD
Section: NATIONAL
Page: A1
Byline: By TYLER BRIDGES Staff writer

Text:

Mayor Sidney Barthelemy Thursday selected the team of developers Christopher Hemmeter, Daniel Robinowitz and Caesars World to build the New Orleans casino over three competing offers.

"We have a team of a world-class developer and a world-class operator," Barthelemy said at a press conference packed with reporters and interested observers.

The choice was expected by casino-watchers, who had been predicting for months that HemmeterCaesars would get the mayor's nod because of the close political ties they have forged with Barthelemy and Gov. Edwards.

"I don't think anybody in the city is surprised," said Ralph Brennan, a restaurant owner who spearheaded the anti-casino effort. "It's all been set up this way for Hemmeter."

Barthelemy has denied being partial to HemmeterCaesars, but did not address the issue Thursday.

He said he chose HemmeterCaesars because they offered the best deal for New Orleans based on an evaluation of seven criteria he developed with three consultants hired by the city.

Barthelemy said the criteria were financial strength, financial commitment, realistic operating projections, benefits vs. risk, architectural design, plans to employ local residents, plans to hire minorities and overall qualifications.

"The benefits to the city had to be significant with a minimal amount of risk, and we looked for immediate as well as long-term financial benefits," Barthelemy said. He said the proposed $38.75 million payment by Hemmeter upon signing the lease would eliminate the city's projected budget deficit next year.

"We are eager to begin as soon as possible so that the people of New Orleans and the state of Louisiana can rapidly realize the benefits of the project," Hemmeter said in a written statement.

Hemmeter has not explained how he will finance his $427 million venture, saying he plans to raise the money through his investment bankers, Salomon Brothers and BT Securities Corp. BT Securities is a subsidiary of Bankers Trust Co., the giant New York bank.

Caesars, which would not put up any money, would run the casino.

"They have contacted their investment bankers," said Ehud Mouchly, one of the city's consultants. "We believe it is a doable deal."

Barthelemy said the casino could open in early 1995. Hemmeter has not said whether he plans to open a temporary casino, which is permitted under the measure approved in June by the Legislature.

To operate the casino, the lease negotiated by Barthelemy with HemmeterCaesars will need approval from the City Council, and the company also will need a gambling license from the state gaming board.

The gaming board is expected to select HemmeterCaesars because Caesars Palace in Las Vegas is Edwards' favorite place to gamble. The board members have been named by Edwards but await Senate confirmation.

A majority of the City Council has supported a casino, and with pressure to get the casino under way to begin creating jobs and tax revenue, analysts don't expect the council to veto the lease.

Although the council won't have a lease to consider for months, it asked the mayor Thursday to require not only that the casino operator meet goals for hiring New Orleanians and minorities, but that the casino be required to do business with New Orleans companies that meet those standards.

Barthelemy said the three other bidders for the casino offered good proposals and the city would turn to one of them if the deal with HemmeterCaesars falls through. The three were Mirage ResortsHarrah's; the Casino Orleans team of Casinos Austria, Carnival Cruise Lines and the Llama investment bank; and the Jazzville group of 10 Louisiana businessmen and attorneys, and Showboat.

While Barthelemy said his announcement marked a great day for New Orleans, the losing bidders took a different view.

"Based on the criteria used by the mayor in making his selection, we continue to believe that our proposal offers the best benefits, the most security and the best approach," said Robert Miller, a Casino Orleans spokesman.

Casino Orleans' proposal included a $100 million upfront payment to the city and an annual rent payment of 12.625 percent of the gross win. Both are far higher than what HemmeterCaesars offered: a $38.75 million upfront payment and 3 percent to 5 percent of gross win.

Jazzville also questioned the mayor's selection, saying that its bid - over the course of a 30-year lease - offered twice as much as HemmeterCaesars to the city in rent payments, civic contributions, tax revenue generated by the casino and payments to local marketing groups.

"We're amazed that someone gets the bid who is giving back so much less to the city - roughly half of what Jazzville was to give," Jazzville spokesman David Kushner said.

Michael Rose, Harrah's chairman, said in a recent interview that "by any reasonable set of criteria, there shouldn't be any other choice. We did not believe that a rational process could choose any of the other bidders."

Miragei/Harrah's offered no upfront payment to the city and based its lease on net profits rather than gross win, but industry analysts gave them high marks for their financial strength and strong track record in building and operating casinos.

An executive with one of the losing bidders, who spoke on condition of anonymity, criticized the mayor harshly.

"I'm upset that we wasted time and a bunch of money - it cost us $1 million," the executive said. "We were told six weeks ago that it was rigged."

Barthelemy's announcement ends a process that began in April when the city asked for bids. Hemmeter and Robinowitz in June offered one of the 10 bids received by the city, and Caesars offered another.

Two weeks later, they joined forces, six weeks after Hemmeter had guaranteed that he would not hook up with a Las Vegas operator. Hemmeter had said a Las Vegas operator would not fit in with New Orleans' ambiance.

Hemmeter came to New Orleans a year ago. Shortly after arriving, he flew Barthelemy, City Councilman Lambert Boissiere, state Sen. President Sammy Nunez, Jefferson Parish District Attorney John Mamoulides, their wives and the city's top casino adviser, Wayne Collier, to visit his resorts in Hawaii.

After The Times-Picayune disclosed the trip, Barthelemy and Boissiere repaid Hemmeter but were cited by the state ethics board with violating ethics laws. Collier did not repay Hemmeter.

Hemmeter also flew Edwards, his companion, Candy Picou, and an aide to Colorado for a weekend in February, in a trip arranged by Robinowitz, a longtime friend of the governor. Edwards also repaid Hemmeter after the newspaper story.

Hemmeter hired Billy Broadhurst, an Edwards confidant, as a consultant, and Caesars hired Bob d'Hemecourt, another Edwards confidant, as well as Henry Braden IV, a close adviser to Barthelemy who worked out of the mayor's office until he began working for Caesars.

Thursday's announcement caps a yearlong courtship between Hemmeter and local movers and shakers. Although new to New Orleans, Hemmeter quickly won a strong following here, wooing politicians and business people during splashy parties and intimate dinners at local restaurants. A key to his success was his friendship with Ron Forman, president of the Audubon Institute, who escorted Hemmeter around town, providing introductions and promoting endorsements from the powers-that-be.

Other businessmen who provided key backing were Thomas Coleman, an influential member of the Business Council, and James Cain, chairman of the Chamber of Commerce.

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# ART:

*** CASINO Q & A ***

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WHEN WILL THE CASINO OPEN?

Probably early 1995.

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HOW MANY JOBS WILL BE FILLED?

About 5,250. Hiring will probably start several months before the casino opens.

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WILL THERE BE A TEMPORARY CASINO?

Hemmeter has not said. But one option for a site might be the former world's fair Canadian Pavilion, a building he owns on the riverfront. It could open in 1993.

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*** WHAT'S NEXT ***

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Mayor must negotiate lease with Hemmeter. Possible by March.

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City Council must approve lease. Expected to go through because council's majority supports casino.

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State gaming board must award gaming license. Board (members not yet confirmed by Senate) could choose someone other than Hemmeter, but not likely to.

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State Supreme Court must rule on suit alleging casino legislation is unconstitutional. Decision expected in a few months.

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*** THE GRAND PALAIS IN A NUTSHELL ***

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Casino cost: $427 million.

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Casino size: 200,000 square feet.

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Owner: Hawaiian resort developer Christopher Hemmeter; Dallas-New Orleans developer Daniel Robinowitz; unnamed equity investors.

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Operator: Caesars World

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Design plan: Demolish Rivergate and build ornate, mammoth casino called Grand Palais.

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Lease term: 30 years with three 10-year options.

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Lease payment: 3 percent of gross for revenue less than $750 million a year, 4 percent for more than $750 million and 5 percent for more than $1 billion.

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Annual projected lease payment to city during casino's first year: $20.4 million.

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Annual casino revenue: $680 million.

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Upfront payment: $38.75 million to city's general fund.

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Lease payment during 21-month construction period: $5 million a year.

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Other payments: $5 million a year to tourism marketing group, $2 million a year to civic and cultural groups, $500,000 to help minority businesses (plus $2.5 million in loans over five years), $200,000 a year to Audubon Park Commission, assuming city's 20-year obligation.

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If casino is sold or refinanced: City would receive 5 percent of net proceeds after expenses are paid.

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GRAPHIC

Illustration: MAYOR SIDNEY BARTHELEMY [COLOR]

PHOTO



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