New Orleans Casino Falls Short of Expectations

NEW ORLEANS, Louisiana – As reported by the Chicago Tribune: "Expectations for financial salvation were sky-high back in 1992 when Louisiana, still smarting from the oil bust, cleared the way for construction of a land-based casino in downtown New Orleans.

"Today the winnings on that bet seem paltry compared with the pot of money, jobs and tourism that casino proponents had promised.

"Full-time casino employment stood at only 2,123 in 2003. Counting ripple-effect jobs at other establishments, the total climbs to maybe 4,100--less than a quarter of the jobs projected by the most bullish forecasters at the inception. And annual gaming revenues, minus payouts to winners, are in the neighborhood of $300 million at the casino. That's $200 million to $900 million less than was projected by various bidders.

"The New Orleans enterprise slipped into bankruptcy twice and has wrested significant tax and operating concessions from the state to get back on track.

"…The establishment of a land-based casino in New Orleans, during Gov. Edwards' tenure, stands as something of a how-not-to lesson.

"For starters, bidders for the casino vastly overestimated gaming revenues--projecting anywhere from $500 million to $1.2 billion.

"…The permanent downtown casino opened in October 1999, after a series of delays and project changes caused projected start-up costs to more than double. Although the casino is only a short walk from the French Quarter, traffic did not come close to expectations, due to gaming competition, suburbanites' reluctance to come downtown, and a lack of restaurant and entertainment offerings, observers said.

"…By January 2001, the project was in bankruptcy reorganization again. But this time, it emerged from bankruptcy with a huge tax cut from the state.

"…To try to ensure the casino's viability, the state casino tax was sliced virtually in half. The original minimum of $100 million was reduced to $50 million or 21.5 percentof gaming revenue, whichever was higher. The minimum then escalated to $60 million for the subsequent four years.

"…Harrrah's Entertainment Inc. took full control of the casino in late 2002, finally ending an unwieldy, government-devised partnership structure of which it had been part…"