Louisiana Gambling Industry Mired in Controversy : Casinos: Politics, uneven regulation and the conflicting interests of riverboat and land establishments put state tax revenue at risk.


Who would have thought that there would be a casino boom in staunchly conservative Mississippi rather than in Louisiana, where games of chance are as much a part of the state's lore as Mardi Gras and Cajun cuisine?

The South's gambling bonanza is now the almost exclusive province of Mississippi, as 32 casinos take in floods of tourists along the Gulf Coast and the Mississippi River. A new casino opens in Mississippi about every two weeks.

Just across the border, Louisiana has eight riverboat casinos. Four are pulling in Texans in droves, but four in the New Orleans area are at the center of a controversy over dockside gambling that could cost the state millions of dollars in tax money.

And the crown jewel of Louisiana gambling--the world's largest land casino, planned for downtown New Orleans--has been delayed by fighting among the state and the city and competing groups of investors with political ties to Gov. Edwin W. Edwards.

While the bickering goes on, Mississippi casino parking lots are full of license plates from the Bayou State.

What went wrong? Analysts provide a variety of reasons: politics, uneven regulation and a concept--building just one big land casino in New Orleans--that was outdated as soon as Mississippi put up its first dockside casino.

As Nancy Todd, a consultant specializing in pro-gambling campaigns, put it recently, Louisiana's gambling industry should be studied carefully by other states considering casinos.

"This is not a shining example of how to do it," Todd told a national gambling industry conference in New Orleans.

From the moment Louisiana legalized 15 riverboat casinos in 1991, during the Administration of then-Gov. Buddy Roemer, the state's gambling business has been in a start-and-stop mode.

Edwards put the riverboats on hold immediately after taking office in 1992 when he refused to appoint a regulatory commission. He then pushed the New Orleans land casino through the Legislature before allowing the riverboats to sail.

But while Edwards was impatient to get the land casino going, delays have stalled the project. The city gave the lease for the permanent casino site to a group headed by developer Christopher Hemmeter, while the state casino commission chose a group of 10 Louisiana investors and the Harrah's casino company.

Eventually, the two groups formed Harrah's Jazz Co. and promised to have a temporary casino open by Christmas, 1993. The latest opening date: sometime between March and May, 1995, provided the partnership can sell enough bonds to finance the $730-million project.

A grand jury in Baton Rouge has spent nearly a year investigating the riverboat industry, although state prosecutors have refused to say specifically what is being studied.

The governor has appeared before the jury, along with his son, attorney Stephen Edwards, who has drawn sharp criticism for representing riverboat companies, and various friends of the governor who have riverboat interests. So far, no charges have been filed.

Then there's the question of dockside gambling, on boats that are tethered to docks, allowing gamblers to come and go as they please, much as they do at a land casino and as they do at Mississippi casinos.

Louisiana law only specifically allows dockside gambling in Shreveport-Bossier City, near the Texas border. Under the riverboat law, other boats--including the New Orleans-area boats--are supposed to sail.

Harrah's Jazz Co. has a 30-year pact with the state that includes a guarantee that it will have an absolute monopoly on land-based gambling. State law says that if that monopoly is breached, the casino operator can refuse the state its share of the proceeds--a minimum of $100 million a year that is being counted on to balance future state budgets.

But the Riverboat Gaming Commission--a separate regulatory panel from the one that governs the land casino--agreed in June to allow all riverboats unlimited dockside gambling when the boats are grounded by bad weather or unsafe sailing conditions.

Since then, one New Orleans-area riverboat has stayed at port, saying its channel has been declared unsafe for sailing. Another is docked at night, citing heavy traffic on the Mississippi River. A third has never sailed, saying heavy barge traffic on its canal makes travel unsafe. The fourth is staying at the dock until nearby power lines coming off the water can be raised.

As a result, the now-stationary riverboats are better able to compete with their counterparts across the border in Mississippi--and, one day, with the New Orleans land casino, which could end up withholding tax revenue from the state.

Riverboat operators are beaming at their 10% to 12% additional monthly haul. The July handle was $58.7 million, of which $10.8 million went to the state.

But Harrah's, seeing its potential business siphoned away, is glowering.

"We are going to be watchful of boats that are not sailing," Harrah's spokesman Bob Dowd promised. "We'll take appropriate action if it's needed."

Anti-gambling activist C.B. Forgotston says that without quick action, the state is headed for trouble. "There's little doubt that Harrah's will be taking the state to court in the future," he said.

State Rep. Emile Bruneau, who represents New Orleans, agrees that the state is in trouble. He said that the single land casino concept--which Edwards first pushed during the 1980s, when Mississippi competition was not considered even remotely possible--is outdated.

"It is one of the specific reasons I voted against the (land) casino law," he said. "I felt then and I feel today we would be better off with several smaller casinos. You can see that today in Mississippi. . . . I think we're going to have trouble with the big casino. It's just too overwhelming."

But some analysts support the Louisiana strategy.

I. Nelson Rose, a professor of law at Whittier College School of Law in Los Angeles and an analyst of state gambling regulatory systems, said that Louisiana was right in refusing to allow the marketplace to decide how many casinos should be built, as in Mississippi. In that state, there will be an inevitable casino bust cycle as the industry overexpands, he said.

But solving the current conflicts in Louisiana will not be easy or painless, he said.

"At this point, you certainly cannot start with a clean slate," Rose said. "There's probably nothing that can be done without hurting some operators and probably the state."

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