Harrah's New Orleans: $100 million tax puts long-term viability in doubt

NEW ORLEANS -- The $100 million annual tax that Harrah's New Orleans Casino has to pay the state puts the long-term financial viability of the project in doubt, the head of the casino's ownership company said Tuesday.

The casino also is vulnerable because it cannot offer full dining and hotel rooms like its competitors on the Gulf Coast and faces a move by Louisiana riverboats for unlimited dockside gambling, Fred Burford, chairman of JCC Holding Co., told the company's annual stockholders meeting.

"No one can successfully continue to operate a casino with these financial constraints and still provide economic benefits to the state and the city," Burford said.

The meeting was held shortly before state police reported that the casino won $19 million from gamblers in April, down from $20.5 million in March.

Burford said an aggressive marketing campaign was under way to bring in more out-of-town tourists, including charter flights, and casino officials were working to hold down costs. At some point, however, the casino will reach a limit of what it can do with the current tax and state-mandated restraints, Burford said.

"At the appropriate time, we will enter into a dialogue with the state and other interested parties to make this a viable enterprise," Burford said.

In a later interview, Burford would not elaborate on the "appropriate time," except to say that it would come after the casino had done everything possible to increase its revenue. He would not specify if the state would be asked to reduce the tax, allow the casino to have a hotel and unlimited restaurants, or both.

Over the first quarter ending March 31, JCC Holding lost $34.8 million, or $3.44 per share, on total revenue of $62.6 million. Since the casino opened in late October, JCC Holding stock has dropped from $10 per share to around $1.50.

In late February, Harrah's Entertainment Inc. of Las Vegas, which holds about 43 percent of JCC Holding and guaranteed the $100 million annual tax, began making the daily state payments of about $275,000 for JCC Holding. Harrah's has agreed to put up the tax guaranty through March 31, 2001.

Matched with current revenue, the tax translates into a monthly rate of about 45 percent, which jumps to 53 percent if city fees are included, Burford said. No other casino in the United States operates under such a tax burden, he said.

Burford told reporters that the casino planned to carefully study its revenue patterns over the next few months before possibly seeking state relief. He said the political climate in Baton Rouge would not be a factor. Legislators are currently fighting a deficit-ridden state budget proposal.

Burford would not speculate on what would happen if the casino lost a request for state concessions.

Overall, Louisiana's 13 riverboats and the New Orleans casino won $139.4 million in April, down from $150.5 million in March.

The four boats in Shreveport-Bossier City won the most among the gambling markets with $56.8 million, followed by the New Orleans market with $41 million. The pair of two-boat complexes in Lake Charles won $29.7 million, while the two floating casinos in Baton Rouge took in $13.5 million.

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