New Orleans CityBusiness: New Orleans adds new chapter to long history of gambling

Following the oil bust of the 1980s, New Orleans officials rolled the dice on gambling to replace lost tax dollars.

New Orleans has long been synonymous with gambling so it made sense for the city to cash in on its history.

Keeping with tradition, Louisiana officials squabbled among themselves and lost valuable time as other states reaped the benefits of legalized gambling. While gambling measures were still being debated in Louisiana, Mississippi officials passed legislation of their own in 1990 and dockside casinos sprang up along the Gulf Coast. The resulting economic boom was dubbed the Mississippi Miracle.

Being a year behind certainly didn't help us but our statutory structure probably had a greater negative impact than anything else, said Wade Duty, Louisiana Casino Association president. Mississippi views casinos as economic partners in their economy, where in Louisiana, it's just a cash cow to be bled until it dies.

Mississippi casinos are taxed at an average 8 percent of winnings, Duty said. Louisiana casinos are taxed an average 21.5 percent, he said.

In 1991, the Louisiana Legislature issued 15 riverboat casino licenses and it OK'd construction in 1992 of a land-based casino at the Rivergate site at the foot of Canal Street. Although several riverboat casinos, including the Showboat Star, the Grand Palais and the Crescent City Queen, ended up relocating to other parts of the state, three eventually made their home in the New Orleans area: Bally's Casino at the lakefront, Boomtown Casino in Harvey and Treasure Chest Casino in Kenner.

Again, in keeping with Louisiana tradition, the first attempts to create a gambling industry were mired in failure and corruption.

Public officials in state after state have been indicted and convicted in gambling-related illegal activity, said Guy C. Clark, chairman of the Washington, D.C.-based National Coalition against Legalized Gambling. Louisiana seems to top the lot with blatant corruption at all levels of government.

Since gambling was legalized, more than a dozen state officials including former Gov. Edwin Edwards and former Gaming Commission member Ecotry Fuller have been investigated on corruption charges.

Fuller was later acquitted but Edwards, his son, Stephen, and three others were convicted in May 2000 on charges related to selling gambling licenses.

Because we put this artificial cap on the number of licenses, that produced some of the situations both neutral and negative, Duty said. You build artificial value into something when you artificially limit their number.

Louisiana hasn't missed the gaming boat completely, though. After a rocky start, Harrah's New Orleans has become the biggest tourist attraction in the state, casino officials say, bringing nearly 6.7 million people through its doors in 2004 even as the Gulf Coast market flourishes.

I think they are two very different markets, said John Payne, who will assume the post of Gulf Coast regional president for Harrah's this summer following the completion of the Harrah's merger with Las Vegas-based Caesar's Entertainment. Both are very attractive markets but our property has the city of New Orleans as its anchor and the Gulf Coast doesn't have that.

For the 2004 fiscal year ending June 30, the casino took in $300.2 million from 6.6 million customers. In June 2001, the end of the first full fiscal year of the casino's operation, Harrah's took in $256.3 million from 6.5 million customers.

After the merger is complete, the Grand Casino Biloxi and the Grand Casino Gulfport will become Harrah's properties.

Bally's Casino New Orleans, also a Caesar's Property, will be acquired by Fort Mitchell, Ky.-based Columbia Sussex Corp. for approximately $24 million. Bally's fate is still unclear.

We are excited about the Bally's Casino New Orleans acquisition, said William Yung, president of Columbia Sussex Corp. We think it provides a great opportunity in the New Orleans market and we plan significant improvements and changes to the property.

In the last fiscal year ending in June 2004, Bally's took in $60.5 million, down 22 percent from the $77.6 million the casino made during 1995, the first full year of operation for all three riverboats except Bally's, which was open for 51 weeks.

Treasure Chest took in $110.7 million last year, down 10.6 percent from the $100.1 million it made in 1995.

Boomtown Casino fared the best of the three, raking in $113.6 million from 2.3 million gamblers last year, up 62 percent from the $70.1 million made from 1.5 million gamblers in 1995.

The riverboats draw mainly local players but a recent economic impact study indicates some money spent at the riverboats would otherwise be spent in out-of-state gambling halls if the casinos weren't here.

By legalizing gambling, Louisiana jumped on a bandwagon that swept the United States in the 1980s and 1990s, according to Tyler Bridges, author of Bad Bet on the Bayou, a book documenting the rise of gambling in Louisiana.

From 1974 to 2000, the number of states with casinos rose from one - Nevada - to 11, Bridges said. The number of states with lotteries went from 14 to 37 plus the District of Columbia. Indian- run casinos are now in 27 states.

Legal or not, gambling has been part of the city's fabric nearly from its founding. New Orleans once had a street named Craps, a portion of a street in Faubourg Marigny that was renamed Burgundy Street in 1852 following complaints from churches.

Harrah's hasn't always had the gambling success it enjoys today. When its temporary land-based casino opened in May 1995 while the permanent casino was under construction, bidders made wild forecasts of annual revenues ranging from $500 million to $1.2 billion. Winnings were a fraction of that and the casino closed seven months later.

Following its October 1999 opening, the permanent casino was again criticized as a disaster and by January 2001 it was in bankruptcy again. To keep the casino operating, the state agreed to slice its $100 million cut nearly in half.

Five years later, the Canal Street casino is now one of the most profitable in the Harrah's portfolio, according to company officials.

When other attractions in the area are drawing 1.2 or 1.3 million people, clearly we are a major driver of tourism throughout the state, Payne said.

Construction of a hotel and entertainment district along Fulton Street should be completed by mid-2006, Payne said. In March, Harrah's filed for permits to develop the building's second floor, which has been vacant since the casino opened.

The company is aggressively promoting the casino through direct mail campaigns to customers in its internal database and buys at least 8,000 seats a year on planes to fly gamblers to the city, Payne said. One of Payne's greatest pleasures, he said, is speaking with people who once opposed the casino but have changed their minds.

Fortunately for me, it happens quite often, Payne said. I've been in this community for two years. My wife and I love it here and many people have come up and commented that the casino has really been a great addition to the city.