Published: Thursday, August 12, 1993
Byline: By DAWN RUTH Staff writer
The state casino board's decision Wednesday to rebuff Christopher Hemmeter's elaborate plans for the world's largest casino in favor of a competitor's smaller version, stunned New Orleans officials who were counting on a Hemmeter victory to pull the city out of financial crisis.
After the board voted to grant a monopoly casino contract to a group of local investors and Harrah's Casino Hotels, gloom enveloped City Hall, which is in the midst of a painful layoff of more than 300 workers.
The city has already leased the Rivergate site - the only authorized location for a casino in New Orleans - to Hemmeter. The lease sets the terms and conditions for the rights of the Rivergate site, and it obligated Hemmeter to pay the city $15 million by the end of 1993 if he won a state gambling contract.
A grim-faced Mayor Sidney Barthelemy said the state's decision to give the contract to Harrah's Jazz Co. instead of Hemmeter and Grand Palais Casino Inc. dashes hopes of stopping the layoff before it becomes effective in the first week of September. He said the city can't count on getting any additional gambling money before the end of the year despite promises from Harrah's Jazz Co. to meet commitments made by Hemmeter.
The decision also sets the stage for a disagreement between the city and the state over the demolition of the Rivergate, officials said.
The city's lease requires that the Rivergate be demolished and replaced with a new facility that will outshine any casino in the world. But the state board endorsed a scaled-down, less expensive casino plan that calls for renovating the Rivergate.
The city's most immediate concern is balancing its 1993 budget. Wendell Gauthier, chairman of the local investors who teamed with Harrah's to seek the casino operating contract, said city officials need not worry about its financial problems because his group will match all of Hemmeter's financial commitments if Harrah's Jazz Co. secures rights to the Rivergate.
Gauthier predicted that he and Hemmeter will quickly negotiate a deal to transfer the city's Rivergate lease to his company, letting Harrah's Jazz Co. pay the $15 million by the end of August.
"On the 23rd, they are going to have $15 million," Gauthier said.
But city officials apparently don't buy that.
Barthelemy said there are too many variables that could delay payment, and the city must proceed with the layoffs to make sure the city has a balanced budget.
Because the state casino law designates the Rivergate as the casino site, Hemmeter must agree to transfer his lease rights to the site to Harrah's, and the City Council must approve the transfer.
Hemmeter said Wednesday he wants the negotiations to proceed swiftly, but two council members said they don't think the council will approve any deal that does not include demolition of the Rivergate.
"I am adamant that the Rivergate must come down," said Councilman Jim Singleton, whose district includes the Rivergate. "We need a new facility. One that makes a statement about New Orleans."
Councilwoman Dorothy Mae Taylor, who as chairwoman of the council's Rivergate Committee shepherded the Hemmeter-city lease through council proceedings earlier this year, said she is also determined to stick to the terms of the lease.
Taylor said she favors a grandiose casino like Hemmeter's Grand Palais because it will attract more tourists and help the city compete against Mississippi's dockside casinos.
"It's got to be extraordinary," Taylor said.
Barthelemy also appears willing to stand firm.
Though he refused to be specific about the future of the Rivergate, he repeatedly said Wednesday: "We are going to stand on the lease."
But Phil Satre, president of Promus Cos. Corp., Harrah's parent company, said Harrah's would abide by all provisions of the city's lease allowed by state law but would not tear down the Rivergate.
It's unclear if the city can realistically refuse to bend to the state's wishes on the design of the project. New Orleans could lose millions of dollars in gambling revenue if the state decided to bypass the city by letting Harrah's operate a casino on state land rather than city land.
The state Legislature would have to amend the casino law to remove the permanent casino from the Rivergate, but the law doesn't specify a particular site for a temporary casino.
With the city's annual deficit running about $30 million, city officials have been counting on gambling money from a temporary casino to get the city through 1994. Hemmeter had agreed to give the city 5 percent of gambling revenue from the temporary casino in addition to a cut of the permanent casino's gross revenue.
Taylor said there are many legal questions that must be answered before the city can decide its next moves.
But a city official familiar with state law said the city's power to override the state is limited. Asked if the casino board put the city back to square one Wednesday, he said: "It puts us 6 feet under."
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