At one point, passage of House Bill 553 by Republican Speaker Taylor Barras seemed inevitable. But the Louisiana Legislature should slam the brakes on this bill, which would allow the parent of Harrah’s, Caesar’s Entertainment, to renew its lease six years early — until 2054 — to operate its casino in New Orleans.
In exchange for getting its renewal now, Harrah’s would increase annual payments to the state by a minimum $7 million yearly to at least almost $69 million annually by the term’s end. Harrah's has also promised to spend $350 million to upgrade and extend its nongambling facilities, including the construction of a 340-room hotel in addition to its existing lodging. Currently, state law caps the casino's hotel rooms at 450.
Few initially had reservations about the agreement. The Louisiana Family Forum, a longtime opponent of gambling, questioned the rationale for an early renewal. New Orleans real estate entrepreneur Joseph Jaeger argued the financial numbers showed the state getting shortchanged.
None of that appeared to matter. The deal cruised along, easily traversing the House of Representatives with Barras at the helm. Democratic Gov. John Bel Edwards, who had garnered campaign support from the lead lobbyist for the effort, backed it as well.
Much of the New Orleans legislative delegation cosponsored the bill. Former New Orleans Mayor Mitch Landrieu, along with successor LaToya Cantrell, both Democrats, as well as various outgoing and incoming City Council members, also supported the pact. Harrah's pledged investment would spin off both temporary and permanent jobs, plus pad city tax coffers and guarantee the state’s annual payment to the city.
But legislative momentum ground to a halt when a leaseback agreement between Caesar’s and real estate investment trust Vici Properties became widely known through an Advocate report last month. That Barras, Edwards, or any New Orleans politician apparently failed to better vet the deal is incomprehensible.
For the next five years, Vici can buy the casino, existing hotel and parking garage, but would be required to rent these assets to Harrah’s in an arrangement common in the industry. Interestingly, the option expires prior to the end of the lease with the state, so securing an additional 30 years by then would inflate the purchase price significantly.
This lends credence to the belief that the state would forsake too much potential revenue with the bill as written. Further, even though Harrah’s has a separate contract with the city already extending to 2054, legal experts disagree over its validity if Harrah’s doesn’t have one with the state by the time the present one expires. A voided New Orleans lease in 2024 means the state could bid out casino operations and potentially fetch even more revenue.
Also deserving closer scrutiny: the business model permitted by the bill would let Harrah’s pursue the all-inclusive strategy practiced by casino riverboats operators statewide — adding hotels, restaurants and retail to their sites. More often than not, that has produced minimal spillover economic development effects that often disadvantaged local businesses.
The ball now lies in the Senate’s court, and it would best serve citizens by scuttling the idea for this year. With legal issues unresolved and financial permutations in flux, at present too many unanswered questions remain to determine a fair bargain on behalf of Louisianans.
What’s on the table may be a good deal, but lawmakers need more time to dispel the uncertainty surrounding it. With no actual deadline in the offing, they can afford to take their time on this to get it right.
Jeff Sadow is an associate professor of political science at Louisiana State University-Shreveport, where he teaches Louisiana government. He is author of a blog about Louisiana politics at www.between-lines.com. When the Louisiana Legislature is in session, he writes about legislation in it at www.laleglog.com. Follow him on Twitter, @jsadowadvocate or write to email@example.com. His views do not necessarily express those of his employer.