A Louisiana Senate committee Monday narrowly approved a no-bid, 30-year extension in Harrah’s New Orleans’ operating license but only after requiring the casino company to pay hundreds of millions of dollars more to the city and state.
The Judiciary B Committee approved House Bill 553 on a 4-3 vote after adopting amendments that would cost Harrah’s a $40 million one-time payment to renew the license and an additional $40 million in annual tax payments that would raise the minimum from $60 million per year to $100 million.
Over 30 years, that $40 million increase in present day value would amount to an additional $1.2 billion in tax payments to the state.
Another amendment would guarantee the city of New Orleans $6 million per year in “casino support services,” up from the $3.6 million originally included in HB553, or $72 million over 30 years.
“I think it represents a better deal,” state Sen. Gary Smith Jr., the committee chairman, who offered the amendments, said in an interview immediately afterward. Representatives of Caesars Entertainment, Harrah’s parent company, had no prior word of his amendments, he said.
A Caesars spokesman afterward lauded the decision to keep HB553 alive but said company executives were still reviewing the amendments to determine whether they were acceptable.
Joseph Jaeger Jr., a New Orleans hotel owner and developer who testified against the measure, called the amendments “a good start” to improving a deal that he believes would shortchange the public.
HB553 now goes to the Senate Revenue & Fiscal Affairs on Tuesday. It must pass the committee to advance to the full Senate and then return to the House for approval, during the waning days of the regular legislative session, before the governor would decide whether to sign the measure into law.
If the bill ultimately passes the Legislature, Harrah's is promising to invest $350 million to build a 24-story hotel, add an upscale food court and flashy nightclub and create a one-block entertainment district on Fulton Street between its existing hotel and parking garage. A Smith amendment would require Caesars to spend the money within six years, with the Louisiana Gaming Control Board certifying they did so.
Harrah’s could not reduce the $350 million investment or reduce promised tax payments to offset the $40 million one-time payment, Smith said.
That amendment was aimed at a recent offer by Caesars’ lobbyists to make a $21 million upfront payment. But they had told state officials that they planned to offset the $21 million by spending less than the $350 million and by reducing tax payments near the end of a new license agreement.
In one other substantive change, another Smith amendment would require Caesars to return to the Legislature in 30 years to extend the license once again. Under the previous version of HB553, the full Legislature would have had no say in whether to renew the license, with that authority given instead to the Joint Legislative Committee on the Budget.
Critics told the committee members to reject the original version of HB553, arguing that they didn't have enough information to know whether Harrah's is offering a good deal because the state has not sought an independent analysis of it.
Representatives of Caesars told senators that they ought to take the deal now because they couldn't guarantee that higher-ups at Caesars would make the $350 million available for investment in future years.
Harrah’s state license to operate the only land-based casino in New Orleans does not expire until 2024. Caesars’ lobbyists are asking the Legislature to renew it six years early.
The special hearing took place six weeks after the House easily passed HB553 with no questions, due, in part, according to legislators, that Speaker Taylor Barras, R-New Iberia, is the sponsor.
But Smith repeatedly declined to hold the hearing as questions mounted about the deal, including the lack of an independent assessment and the revelation that Vici Properties, a Las Vegas-based real estate investment trust, has an option to acquire the lease that the Harrah’s casino has with the city of New Orleans.
The Louisiana Gaming Control Board had approved that deal in September, but Caesars officials had not informed key legislators and Gov. John Bel Edwards of it. Edwards has generally been supportive of the measure. (Another Smith amendment would require Caesars to give a total of $40 million to the state and city, with 75 percent going to the state, if Vici exercises its option.)
Caesars packed the room with employees wearing purple t-shirts meant to put a human face on the high-stakes dealings. But in the end, none of the employees spoke during the two-hour session.
Barras began the hearing by calling his bill “an expansion of an economic development opportunity in New Orleans,” adding, “We could not have asked for a better partner down in New Orleans.”
State Sen. Karen Carter Peterson, D-New Orleans and a member of the committee, signaled her support for HB553 by leaving the dais to sit to Barras’ left at the witness table.
“Turning our back on a $350 million on-gaming investment is not an option,” Peterson told her colleagues. “If we waited until next year, there’s no guarantee it would be here.”
Dan Real, the casino’s general manager, emphasized that they had to act now.
“We have one shot to get this right,” he said. “One. Otherwise you’re gambling. I can’t promise you where that money will be in the future.”
Facing questions by state Sen. Greg Tarver, D-Shreveport, Real apologized for not informing legislators about Vici’s planned acquisition of Harrah’s New Orleans. He said Vici has acquired 21 different Caesars properties around the country.
Tarver also questioned Real why Caesars wants to renew the license so early.
Real said the existing 400-room Harrah’s hotel is full every night with people who belong to Caesars’ Total Rewards program, which gives points to its members based on how much they spend.
Real said Caesars would fill the new 340-room hotel with gamblers who otherwise are choosing not to visit New Orleans because they can’t stay at a Caesars property and garner Total Rewards for doing so.
State Sen. Norby Chabert, R-Houma, however, was unconvinced, saying he thought lawmakers were rushing the decision by voting this year.
“I don’t think anything is wrong with pumping the brakes a little bit,” he said.
Then it was the turn of opponents.
Randy Waesche, a financial consultant, and Wayne Ducote, a real estate investor, told the committee members that the state wasn’t getting enough for extending the lucrative license, especially since Caesars had agreed to be acquired by Vici.
Waesche is the executor of Jaeger’s will, and Ducote owns a small portion of two of Jaeger’s 17 hotels.
For his part, Jaeger asked, “How can you determine whether it’s a good deal or a fair deal if you don’t have a professional evaluation of its worth”? He added, “There’s not enough information. … The state and the city need to get a fair deal.”
Waesche, Ducote and Jaeger all said they were fine with Harrah’s keeping the state license, as long as Caesars agreed to pay substantially more money.
Throughout the hearing, it was not clear how the committee would vote until Tarver spoke near its end.
“This bill is better than it was,” said Tarver, signaling that the measure would pass on the 4-3 vote.
HOW THEY VOTED
Voting for HB553: Sens Gary Smith, D-Norco; Karen Carter Peterson, D-New Orleans, Greg Tarver, D-Shreveport; and Ronnie Johns, R-Lake Charles.
Voting against HB553: Sens Norby Chabert, R-Houma; Eric LaFleur, D-Ville Platte, and JP Morrell, D-New Orleans.