MILLIONS OFFERED TO STATE
Published: Saturday, June 5, 1993
Byline: By BRUCE EGGLER and FRANK DONZE Staff writers
Only two companies submitted bids Friday to operate a casino at the foot of Canal Street, but each offered to pay the state far more money than required under the state's 1992 casino law.
One offered to pay the state a $100 million bonus next spring in addition to all state taxes it will owe.
The other offered to advance the state $200 million this fall, to be subtracted from future tax payments, and to pay more than the required 18.5 percent tax on casino revenue.
Submitting bids to the state casino board were:
Grand Palais Casino Inc., formerly known as Celebration Park Casino Inc. and consisting of developers Christopher Hemmeter and Daniel Robinowitz. It proposes to tear down the Rivergate convention center and build a Grand Palais Casino that would be operated by a subsidiary of Caesars World Inc. Total cost of the project is put at $490 million, with actual construction of the casino costing $170 million.
The company offered to pay the state $200 million in advance and to boost the required 18.5 percent annual tax to as high as 25 percent, depending on how much the casino grosses a year. The company earlier promised to pay the city more than $40 million before the casino opens; it already has paid $15 million.
Harrah's Jazz Co., a joint venture of New Orleans Louisiana Development Corp., a group of 10 New Orleans businessmen and lawyers generally known as the Jazzville group, and Harrah's Casino Hotels. It proposes to renovate the Rivergate as a casino to be known as Harrah's Jazz Casino. The project is expected to cost $227 million, including $168 million in construction costs.
It offered the state a $100 million up-front bonus plus the payments required by state law: 18.5 percent of annual revenue, with a $100 million minimum. It also offered a $30 million up-front payment to the city.
The two groups submitted their bids to the state board, formally known as the Louisiana Economic Development and Gaming Corp., shortly after 4 p.m. Each gave the board a $200,000 check; half of the fee will be refunded to the losing bidder.
William Nungesser, presiding in the absence of board Chairman Max Chastain, said each group will make a detailed public explanation of its proposal to the board. The Grand Palais group won a coin toss and chose to make its presentation second, on June 15. The Harrah's group will make its presentation June 14.
As late as Thursday, Chastain was holding out hope that more than two companies would submit bids to run what is expected to be the world's highest-grossing casino. There was talk in industry circles that a consortium of Mississippi casino operators might submit a bid.
But Mayor Sidney Barthelemy's decision in 1992 to award Hemmeter the right to build a casino at the Rivergate site, plus a widespread suspicion that the Hemmeter-Caesars group has the inside track with the state board, dissuaded all other major gambling companies except Harrah's from submitting bids.
Several of those companies, including Harrah's, Hilton Hotels Corp., ITT Sheraton Corp. and Mirage Resorts Inc., submitted proposals to the city last year.
Wendell Gauthier, president of New Orleans Louisiana Development Corp., and Michael Rose, chairman of the Promus Companies Inc., parent company of Harrah's, said Friday they are sure they will be treated fairly by the board.
Rose said he was "highly confident our bid will be successful" even after seeing details of Grand Palais's latest financial offer to the state.
Hemmeter offered to advance the state $200 million within 30 days after a temporary casino opens, meaning the state could get the money by Dec. 1. But Gauthier said that would amount only to a short-term loan of money the state would get anyway, while his group's $100 million offer would be on top of all tax payments. The $100 million would be payable upon opening of the first phase of the casino, projected for April 1994.
"If someone offers to loan you $200 or to give you $100, your choice is clear," he said.
Hemmeter declined to comment directly on the Harrah's proposal. But he pointed out the higher tax percentages his proposal offers the state: 19 percent of revenue up to $600 million a year, 20 percent of revenue between $600 million and $700 million, 22 percent of revenue between $700 million and $800 million, 24 percent of revenue between $800 million and $900 million, and 25 percent of revenue above $900 million.
Besides Gauthier, the members of the Jazzville group are lawyers John Cummings, Calvin Fayard and Mike St. Martin, and businessmen Ronnie Lamarque, Louie Roussel III, Duplain "Pete" Rhodes, Burnell Moliere, T. George Solomon and Carl Eberts.
If the casino board chooses the Harrah's proposal, that group would have to reach some accommodation with Grand Palais, which has a lease on the city-owned Rivergate site.
The two groups might combine in some way, although their sharply different plans for building the casino would be hard to reconcile. Or Grand Palais could sell its development rights to the Harrah's group or replace Caesars with Harrah's as the casino operator. Either move would require City Council approval.
Here is how the two proposals compare in some areas:
Size: The Grand Palais would have 200,000 square feet of gambling space, including 388 table games and 8,300 slot machines. The Harrah's Jazz Casino would have 120,000 square feet of gambling space, featuring 200 table games and 4,800 slot machines, but could be expanded to 200,000 square feet if demand warrants.
Temporary casino: The Hemmeter-Caesars group proposes converting the Municipal Auditorium into a 100,000-square-foot temporary casino which would operate from November 1993 until the Grand Palais is ready on July 4, 1995. Hemmeter said he has an agreement to lease 28 acres of nearby land to provide additional parking and house service facilities. The Harrah's-Jazzville group proposes using part of the Rivergate as a temporary casino while the rest of the building is renovated. The first 40,000 square feet would open April 1 and the second 40,000 square feet Dec. 1, with the whole building ready by March 1, 1995.
Parking: The Grand Palais would have two nearby garages on Convention Center Boulevard totaling 2,100 spaces, with 800 other spaces to be arranged in nearby garages. Gauthier said the Harrah's Jazz Casino would have 1,300 parking spaces in underground garages beneath the casino and other spaces on nearby property owned by members of the Jazzville group.
Casino design: The Grand Palais would have six casinos on three floors, each with a different theme. For example, a below-ground "Lost City Casino" would include a replica of a pirate ship with animated characters and a members-only gaming area featuring an ancient Roman motif. Other areas would include a Monte Carlo Casino, with an entrance fee and dress code; a 100-yard-long replica of a Hong Kong street. The Harrah's casino would be divided into nine areas, each designed "to give a look and feel of the Louisiana experience." Among the motifs would be a nighttime Mardi Gras scene and a daytime bayou scene.
Other attractions: The Hemmeter-Caesars proposal includes a 30,000-square-foot "family entertainment center" in the casino featuring a carousel, video games, bumper cars and other attractions. The group also proposes a multimillion-dollar water clock that would come to life every 15 minutes with displays of water, light and music, and a 2,000-seat theater - modeled on Milan's La Scala opera house - on a parcel of land across Canal Street adjacent to Canal Place. The Harrah's proposal includes an exterior "Jazzwall" that would commemorate some of the city's noted musicians.
Financing: The Harrah's Jazz Casino would be financed with a $36 million contribution from Harrah's, including $4 million in cash and a $32 million loan to the casino partnership; $4 million in equity from the local investors; and a public bond offering of $317 million. Donaldson, Lufkin & Jenrette, a large Wall Street firm, would manage the offering. The $357 million total includes $130 million for the up-front payments to the state and city.
The Grand Palais project will involve $330 million in bonds and $160 million in equity, including a public or private sale of about $110 million in stock. Caesars World must buy at least $10 million of that stock. The bond and stock offerings would be managed by Salomon Brothers, another prominent investment banking company.
Highlights of the casino bids
Harrah's Jazz Co.
Casino name: Harrah's Jazz Casino
Cash offer: $100 million up-front payment to state, plus state-mandated annual payment of 18.5 percent of gross win, with $100 million annual minimum.
Plan: Renovate Rivergate and open casino in three phases beginning April 1994 and ending in March 1995. Temporary casino would be first section to open.
Cost: $227 million.
Gambling space: 120,000 square feet, with ability to expand to 200,000.
Casino jobs: 4,000.
Owner: 10 local investors would own 50.5 percent. Harrah's would own 49.5 percent and operate the casino.
Grand Palais Casino Inc.
Casino name: Grand Palais
Cash offer: $200 million advance on first year's tax bill. In addition, would pay 19-25 percent of gross win, with $100 million annual minimum.
Plan: Demolish Rivergate; begin construction Sept. 1. Temporary casino would open in Municipal Auditorium by Nov. 1. Grand Palais to open July 4, 1995.
Cost: $490.6 million.
Gambling space: 200,000 square feet.
Casino jobs: 5,750.
Owner: Developers Christopher Hemmeter and Daniel Robinowitz plus future stock buyers. Caesars World would operate the casino.
June 14: Harrah's Jazz Co. explains proposal to casino board. Open to public.
June 15: Grand Palais Casino Inc. explains proposal to casino board. Open to public.
June 21-25: Casino board goes to Nevada to observe gaming operations of Caesars World and Harrah's and to meet with law enforcement and gaming officials.
June 28-July 15: Casino board reviews proposals with consultants and bidders. Open to public.
July 15: Casino board chooses winning proposal. Open to public.
July 16: Contract negotiations begin with winning bidder.
Illustration: Harrah's Jazz Co. would spend $168 million refurbishing Rivergate, built in the mid-1960s.
Grand Palais Casino Inc. would demolish the Rivergate and spend $490 million on a new building.
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