Published: Sunday, July 10, 1994
Column: James Gill
Byline: By James Gill
It is astonishing with what ease politicians have transformed us all into chickens ripe for plucking by the casino boys.
They have hornswoggled most people into believing that a temporary casino is certain to open soon, followed by a permanent one at the Rivergate in the next few years. Jobs will be guaranteed for city residents and government's financial woes will be materially eased.
None of these propositions is true.
If the land casino ever does open, there will be no requirement that any resident of New Orleans, or the entire state of Louisiana for that matter, get hired.
The New Orleans City Council, when it approved the Rivergate lease a few months ago, did stipulate that 80 percent of employees should come from New Orleans, but this was not a smart move. In fact, it made the entire lease null and void under state law, which limited jobs reserved for any one parish to 50 percent.
The council is now fixing to amend the lease in a most baffling fashion. It proposes to abandon any attempt to reserve jobs for local people; instead, employees will be "encouraged" to live in the city, provided it doesn't cost Harrah's a dime.
The state Legislature, meanwhile, has pulled a fast one by passing a bill requiring that 80 percent of the casino operator's hires have lived in Louisiana for a year. That sounds like a guarantee of work for Louisiana people, but the contract the casino board is about to sign with Harrah's makes clear that it is a fraud.
The contract spells out that the casino operator is Harrah's Jazz Corp., which will have few, if any, employees. The hiring will be done by what the contract calls the "manager," a Harrah's subsidiary.
Even if the statute did require 80 percent of casino workers to be from the state, it would be almost impossible to enforce, since the contract makes no reference to hiring quotas, unless you count the clause that says minorities shall "as nearly as practicable" be hired "consistent with the minority population of the state." Not, note, the city, but the state.
Well, if we can't have the jobs, what about the moolah? Sorry, for the deal is set up so that Harrah's will not show enough of a profit to push its tax liability above the $100 million a year minimum until the next century, and even then only by peanuts.
This is accomplished through the old dodge of milking the company for exorbitant fees payable to each of the three partners that make up the Harrah's Jazz Corp. Harrah's itself, which will actually do some managing, will get $16 million in the first year, the New Orleans Jazzville consortium and the Christopher Hemmeter group $5 million each. Those fees, naturally, will rise significantly in the coming years.
The partners will also get $15 million off the top to pay their taxes. If moreover, the corporation should be unable to meet its obligations to the state and city, the partners would continue to draw their fees until the state Supreme Court ruled it was in default, which, of course, would take years.
Although there will be plenty of money to make the partners even richer, not a penny is budgeted to reimburse New Orleans for the extra burdens gambling will place on city services. Mayor Morial puts that extra cost at around $30 million for the first year, and, if Harrah's is not going to pay, the only other possibility is for the state to cough up. This is not thought likely.
Starting two years hence, moreover, Harrah's will be entitled to withhold state taxes if the courts rule that riverboat dockside gambling violates its land monopoly.
It gets worse. The Harrah's contract with the state reduces its state payments to a mere $1 million a month if "force majeure" - such as a lawsuit challenging the city's title to the land - should make it impossible to borrow the $700 million or so required for construction.
Such a suit, of course, is already in the courts. Thus the Harrah's partners could abandon their Rivergate plans, and block anyone else from developing the site while the case is litigated.
A million a month would be a mere bagatelle for the Harrah's crowd, especially if they were to expand their interests in riverboats, which are relatively cheap to build and which stand to make a fortune so long as the Rivergate casino remains a figment of the imagination.
James Gill is a staff writer.
Illustration: Casino workers: How many will really be Louisianians?
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