On March 29, Speaker Taylor Barras strode down from his perch overseeing the Louisiana House of Representatives to the microphone on the chamber’s floor, opened a folder and began reciting a list of reasons why legislators ought to pass a bill sought by owners of Harrah’s New Orleans Casino.
Harrah’s would spend $350 million to upgrade the casino, Barras said, if lawmakers would do two things: scrap lodging and restaurant restrictions and extend the company’s exclusive state operating license for another 30 years.
“It is an exceptional $350 million investment in the land-based casino and the property surrounding it,” said Barras, R-New Iberia.
Only four legislators had questions for him — none too challenging — and 24 minutes later, they had approved House Bill 553.
As the bill moved to the Senate for consideration, Barras and Caesars Entertainment, Harrah’s parent company, had every reason to believe the measure would swiftly win final passage.
They were selling a big investment that would create hundreds of jobs and generate millions of dollars in tax revenue. They had the support of Gov. John Bel Edwards and New Orleans Mayor LaToya Cantrell, both Democrats and key voices on the matter. The House speaker, a powerful Republican, was their lead sponsor. No fewer than 21 lobbyists had been hired to make sure that nothing derailed it.
But the carefully laid plans collapsed on May 18. At the beginning of the day, the last of the regular legislative session, the House and Senate were in a standoff over HB553, with the Senate demanding hundreds of millions of dollars more from Caesars over the 30-year license than the House had approved.
Two key meetings to settle the deal took place in Senate President John Alario’s office that afternoon as members of the House and Senate awaited the outcome. The second meeting failed to bridge the gap. HB553 died minutes later when lawmakers adjourned the session, killing the license extension and the $350 million investment — at least for the time being.
Now two questions loom: What happened? And what’s next for Harrah’s New Orleans?
Three ask questions
Caesars’ approach worked masterfully at first. The casino company’s lobbyists lined up a cross-section of Republicans and Democrats in both legislative chambers to endorse the measure and won over key constituent groups — by touting the jobs and tax revenue the $350 million investment would generate.
But when the bill got before the Senate, three men rose to the fore, asking pointed questions about whether the state was actually getting a good deal, questions that Caesars executives and lobbyists ultimately could not answer.
One of them, Joe Jaeger Jr., is a major developer jocularly known by friends as “Joe the Plumber.” Another, Mike Sherman, is a real estate attorney in New Orleans who likes to burrow into intricate financial documents. The third, Alario, R-Westwego, is widely considered to be the savviest legislative tactician in Louisiana politics.
Caesars officials began their lobbying long before anyone else was thinking about when the Harrah’s license would expire.
Dan Real, Harrah’s well-liked general manager, and Randy Haynie, a top lobbyist in Baton Rouge, quietly lined up support from two groups that fought the original legalization of the New Orleans casino in 1992: the Greater New Orleans Hotel and Lodging Association and the Louisiana Restaurant Association.
Real and Haynie got them aboard this time by touting the extra visitors who would come to New Orleans with the $350 million expansion.
On Nov. 2, Caesars representatives invited members of the House Criminal Justice Committee to lunch at Ruth’s Chris Steak House, in Harrah’s hotel, across Poydras Street from the casino. Real outlined the planned investment in a PowerPoint presentation, and afterward he led lawmakers on a tour of the casino.
News of Caesars’ lobbying efforts didn’t become public until a Feb. 1 story in The Advocate. It quoted several lawmakers gushing about the planned expansion. But Alario was more circumspect in his comments. He praised the plan but added, “What else is involved? I just want to make sure the state’s interest is protected. I always like to see the fine print.”
In the meantime, it was full steam ahead for Caesars. Barras presented HB553 to the Criminal Justice Committee on March 21.
“Their continued investment is important to the future of our city and state,” Speaker Pro Tem Walt Leger III, D-New Orleans, told the committee as he sat next to Barras at the witness table. “This may be one of the most important economic development bills you have a chance to vote on.”
It sailed through with no opposition and no difficult questions. Cantrell, then the mayor-elect, attended the hearing and said afterward that she supported HB553.
Eight days later, the full House approved the measure, 79-12.
Opposition was beginning to stir, however, led by an unlikely source. On March 14, The Advocate had published a letter to the editor from Jaeger.
He was little known to the public, although he had a remarkable personal story to tell. After dropping out of Southeastern Louisiana University, Jaeger worked as a plumber and rose through the ranks of his company, becoming its owner. He is now a prominent developer and owns 17 hotels, mostly in and around the French Quarter.
In his letter, Jaeger voiced the first major public objections to the Harrah’s deal, saying that the state could lose out on as much as $500 million by simply giving the license to Harrah’s rather than putting the renewal out for public bid. The current license, he pointed out, would not expire until 2024.
Jaeger’s concerns caught the attention of Alario, the only man who has served as both House speaker and Senate president twice.
After HB553 passed the House, its next stop was the Senate Judiciary B Committee. Alario’s appointee as chairman of the committee, Gary Smith Jr., D-Norco, made no immediate move to schedule a hearing.
That created an opening for Sherman, who first came to Louisiana in 1997, from New Jersey, to attend Tulane. After working for the New Orleans City Council and getting his law degree at Georgetown, Sherman returned to New Orleans — “the culture sucked me in the second I got here,” he said — and pursued his twin passions of law and public policy. After serving as executive counsel under Mayor Mitch Landrieu, Sherman began working for Jaeger and other developers.
Sherman began researching Harrah’s existing state license. He agreed with Jaeger that the public didn’t know everything it should about Caesars’ plans.
Just after midnight on April 29, Sherman was awake because one of his 2-year-old twins was having trouble sleeping. While the boy rested his head on Sherman’s chest, the lawyer continued his research.
About 2 a.m., he discovered that a Las Vegas-based real estate investment trust, Vici Properties, had an option to acquire the New Orleans casino and lease it back to Caesars. The revelation caught Sherman’s attention because, he calculated, Caesars stood to make a huge windfall by winning an early extension of its license.
The Advocate published a story detailing Sherman’s findings on April 29, quoting him as saying, “Harrah's is pursuing a real-estate flip of epic proportions.”
Caesars officials pointed out that the Louisiana Gaming Control Board had approved the deal in October and said the potential sale was much ado about nothing. But lawmakers didn't know about the planned transaction. Neither did Edwards.
For lawmakers, it fueled the doubts that Jaeger had begun planting. What else don’t we know? some asked.
“That brought a big issue up to us,” said Smith, the Senate committee chairman.
More money demanded
On May 9, Cantrell said the bill was in trouble with Edwards and New Orleans City Council members, who were expressing what she described as “serious reservations” about the proposal.
An Advocate news story reporting on the 21 lobbyists raised more questions, as did a news report by WVUE/Fox 8 about possible conflicts of interest on the part of some of those lobbyists.
Smith finally held a hearing before the Judiciary B Committee on May 14. Caesars packed the hearing room with a couple of dozen employees from Harrah’s. Caesars’ representatives touted the bill while Jaeger and another developer, Wayne Ducote, questioned the benefits.
Smith had never hidden his support for the bill. But to get it out of his committee, he had to make Caesars pay more — a lot more. He offered amendments that would require Caesars to pay $1.2 billion more to the state and $102 million more to the city over the 30-year life of the license, as well as to make as much as $80 million more in upfront payments to the state.
Two days later, the Senate approved the bill, 21-16, after scaling back Caesars’ additional payments to the state to an extra $20 million a year, half the additional $40 million the Senate committee had demanded.
Because the House had passed a different version, the Senate bill now had to return to the House for an up-or-down vote.
That night, Alario warned Haynie that Caesars officials would be taking a risk by having the House reject the more costly Senate version.
But on May 17, Caesars’ representatives had Barras ask the House to vote it down anyway. The extra $20 million per year was “a deal breaker” to Caesars, David Satz, a senior vice president and attorney for the company, told an associate.
That set up the final showdown on May 18. House and Senate negotiators had to try to settle on a single measure that both chambers would approve.
The night before, Caesars representatives had tried to sway two “no” votes in the Senate — Sens. Jack Donahue, R-Mandeville, and Bodi White, R-Central. On the morning of May 18, both men said Caesars’ arguments failed to win them over.
Throughout the morning and into the afternoon, Caesars’ lobbyists continued to try to convince legislators to approve a bill that cost the company less money.
At 6 p.m., Barras left the speaker’s chair and rushed to a meeting in the Senate president’s office. Barras, Smith, Sen. Eric LaFleur, D-Ville Platte, and Sen. Karen Carter Peterson, D-New Orleans, tried to hash out the differing views.
But by now a new complication had arisen: Language directing extra casino revenue to water projects in rural areas was not properly worded. House and Senate fiscal staffers were called into the meeting to try to solve that problem.
At 6:30 p.m., when Barras left to return to the House, he was optimistic they could still reach a deal. LaFleur sequestered himself in his office, near Alario’s, to try to reconcile the differences.
'It's too late'
Minutes later, Alario met with Donahue and White, but without Barras. By now, he was willing to accept reducing the additional payments to $14 million per year, the amount of extra revenue that Caesars’ lobbyists were projecting from the casino expansion. Alario was also insisting on an extra $20 million payment from Caesars, to be spread over the first three years of the casino license. But Caesars’ officials were not willing to commit.
At 7 p.m., Alario dispatched Peterson, the lead proponent of HB553 in the Senate, to tell Barras they couldn’t reach a deal. Several minutes later, Barras called Alario to ask if the Legislature could delay adjournment and keep negotiating one or two days more. Alario said no, the bill was dead. Barras broke the news to Satz and Real in his office.
Alario wandered into the Senate chamber. He and several colleagues spent several minutes idly watching a McNeese State-Baylor women’s softball game on a laptop.
“It’s too late, and it’s too complicated,” the Senate president told a reporter as he ambled toward the dais. “I’m sorry it didn’t work out. Our problem is that we don’t have anything to compare it (the deal) to. We don’t know if we’re being fair to the state.”
Caesars conceded defeat 15 minutes later in an email sent to reporters. "These much needed jobs and revenues were denied despite the state's current economic and fiscal conditions, which threaten basic needs," Real said in a statement. "Had HB553 become law even as initially proposed, state and city tax revenues would have been over $1 billion more than the current mandated payments."
Sherman, at a birthday party with friends in New Orleans, learned of the bill’s demise from a tweet. He was stunned. He had been sure that Caesars would muscle the bill through.
Jaeger got the news from a text. He was attending a neighbor’s birthday party in Covington. It had a 1960s theme. Jaeger was wearing a red wig and a sleeveless shirt with a multicolor design.
Since the bill’s defeat, each of the senators involved in the final negotiations — Alario, Donahue, LaFleur, White and Smith — has said that Caesars should not try to revive the bill next year unless the state hires an independent, third-party firm to analyze the deal’s benefits for the state and for Caesars.
“I didn’t have any information about the value of the deal,” Donahue said in an interview. “Tell us what it’s worth.”
Jaeger has passed along the names of two potential companies to lawmakers and estimates that such an analysis would cost the state $100,000. What’s not clear is which state entity would authorize the study.
A Caesars spokesman declined to discuss the company’s next move.