Published: Thursday, February 9, 1995
Byline: By FRANK DONZE Staff writer
The state casino board Wednesday rejected its staff's recommendation that it ban owners of the city's land casino from contributing money to political candidates in Louisiana and broaden a ban on the casino's operators.
The board also rejected a proposal that it limit the amount of "bad debts" on which the casino will not have to pay state taxes.
The board's unanimous decisions came at the request of Harrah's Jazz Co. officials, who said both restrictions would put them at a competitive disadvantage with other gambling interests, particularly riverboats, that do not face similar restraints.
The two issues are among a small number that Harrah's officials and the board's staff were unable to resolve after months of negotiations on rules to cover day-to-day operation of the temporary casino, due to open in April, and the permanent casino set to open in 1996. The board is expected to approve the 150 pages of rules next week.
The issue of campaign contributions also came up last year during negotiations on the contract that gives Harrah's the right to run the casino. That contract bars Harrah's Jazz Co., but not individual owners of the casino or companies associated with Harrah's, from making contributions.
The issue received considerable attention after state Senate President Samuel Nunez, D-Chalmette, last year handed out campaign checks on the Senate floor from businessman Louie Roussel III, an investor in the casino and then the co-owner of a gambling boat. House members lined up outside the door of Speaker John Alario, D-Westwego, to receive similar checks.
As proposed by the casino board's staff, the ban would have been extended to all Harrah's affiliates and anyone "who owns any direct interest" in companies that operate and manage the casino or any of Harrah's affiliates.
Harrah's officials said the ban:
Might be unconstitutional.
Would place the casino at a disadvantage compared with the state's 15 riverboat casinos and other Louisiana businesses that are free to make contributions.
Would go far beyond the state's casino law, which prohibits only the company holding the casino operating contract from making contributions.
Assistant Attorney General Tom Barbera said there might be constitutional problems with a wider ban on contributions, but he said the board was within its rights to test the limits.
Board member Gerard Thomas said any more restrictions should be left to the Legislature.
Member James Vilas said the board should not place restrictions on Harrah's when other gambling interests in Louisiana are free to make contributions.
"We should not be tying their arms behind their backs," Vilas said. "They should have an equal voice."
Initially, member Fred Cassibry spoke in favor of the ban, saying it was needed to limit gambling's growing influence on state politics. But after listening to Harrah's arguments, he dropped his opposition.
After the debate, the board voted to ask the Legislature to consider banning campaign gifts by all gambling interests.
Casino board staff members said their proposal to limit the amount of uncollected debt Harrah's can write off, and exclude from state taxes, would encourage Harrah's to use caution in granting credit and to pursue debts aggressively.
The state will receive 25 percent of the temporary casino's gross revenue and almost 20 percent of the permanent casino's revenue, with a $100 million annual minimum.
It is standard practice for casinos to offer large amounts of credit to good customers. But there is no industry standard on how much unpaid credit they can write off.
Nevada has no cap, but New Jersey and Illinois limit bad debts to 4 percent of a casino's gross revenue. All states mandate collection procedures to be followed before a debt can be written off.
Casino board staffers had suggested a limit of between 1 percent and 2 percent of gross revenue, or a sliding cap that would grow as revenue increases.
Ron Lenczycki, president of Harrah's Casino New Orleans, said Harrah's properties in Nevada and New Jersey collect more than 99 percent of the money they advance in credit.
But he said the high recovery rate is in part the result of Harrah's marketing strategy in those states, where it targets a broad "middle market" of gamblers who use cash or get limited credit. In New Orleans, Harrah's plans to go after high-rollers who could get millions of dollars in credit.
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