Published: Friday, April 9, 1993
Column: JAMES GILL
Byline: By James Gill
A guaranteed $15 million in annual rent on the Rivergate is too steep and, if the City Council insists on it, the casino deal will be off, according to developer Christopher Hemmeter's money man.
Mayor Sidney Barthelemy's boys don't want the council to demand the $15 million either, but advance a different rationale. They say it is unnecessary because the city will already make more than that under the lease they negotiated with Hemmeter, which gives the city $5 million or 3 percent of revenues, whichever is greater.
That means the city will trouser $15 million a year so long as the casino takes in $500 million a year. That, of course, is a piffling sum. The casino is projected to rake in $680 million. Thus, the argument goes, there is no point in the council's writing a $15 million guarantee into the lease when it can practically bank on better than $20 million anyway.
If it is indeed pointless, the least you can say is that there is no harm in it. And it is pointless only if the revenue projections pan out, and not everybody believes that they will.
Salomon Brothers, the money lenders behind the Hemmeter casino, are evidently among the skeptics. Otherwise, a $15 million guarantee would not faze them at all. But it does, to the point that their vice president declares, "This transaction will not go forward with this kind of amendment in it."
Perish the thought, but maybe someone's been feeding us inflated estimates. No doubt we can rely on those 25,000 new jobs, though.
Whatever, it is obvious that Salomon Brothers and the administration cannot both be right on the Rivergate lease, but this is by no means the only time the casino has spawned irreconcilable arguments.
Legislators, for instance, complain that the city is "dragging its feet" over the Rivergate contract even while the state casino board accuses Barthelemy of indecent haste.
Rural legislators, who do not always contemplate New Orleans with perfect sympathy, opine also that the city has committed greed in its casino negotiations. This is one respect in which New York financiers and down-home Louisiana politicians are in accord.
These legislators are quite a piece of work, the same guys who passed laws setting the state's take at $100 million, and leaving the city with so little say that casino opponents allege in a lawsuit that its home-rule rights have been violated. Now we have to listen to a guy who lives in Sunset and goes by "LaLa" taking us to task for some modest efforts to protect our interests.
The state casino board, meanwhile, continues to get all worked up because Barthelemy refuses to delay signing the Rivergate lease. According to the board, once the lease is signed everyone will assume that Hemmeter's partner, Caesars World, is a shoo-in for the license to operate the casino and nobody else will submit a bid.
The board threatens to eliminate Caesars from consideration for the operating license if Hemmeter signs the lease. Board members are also toying with the idea of forcing a delay with a lawsuit challenging the constitutionality of some lease provisions.
But it may not be necessary to take drastic action to slow things down. The City Council is so bogged down in suggested amendments to the lease that it is unlikely to be ready for signing any time soon. The board might well be able to solicit bids while the council continues to wrangle.
Still, anyone in the gambling industry who wants the operating license knows that Hemmeter will have his lease, whether or not it has been signed when bids are solicited. If the board fears that, with a signed lease, Caesars might be the only bidder, why should it be any more likely that others will bid now?
The theoretical possibility that someone other than Caesars will get to run the Hemmeter casino becomes no more nor less theoretical with the formal flourishing of the mayoral pen.
Still, the threat to eliminate Caesars from consideration for the license has apparently had some effect. Hemmeter now promises to preserve five 19th-century buildings he has hitherto dismissed as undistinguished and insisted on demolishing. A meeting of the minds is possible after all.
James Gill is a staff writer.
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