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Dr. Loren C. Scott, Economist, Offers
Comments on Harrah�s New Orleans Casino As Special Session Nears
BATON ROUGE, La., March 6, 2001 - The following was released today by
JCC Holding Company on behalf of Loren C. Scott, Ph.D.
In the special legislative session, the Legislature will be making a
decision about an issue vital to the livelihood of thousands of Louisianians
... whether or not to grant relief to JCC�s Harrah�s New Orleans land-based
casino (Harrah�s) in the form of a lower minimum payment and the easing
of the food and hotel restrictions. We have conducted a comprehensive
study of the economic benefits of the casino project, which should be helpful
in making this important decision. These data show:
| Some 28% of Harrah�s visitors are from out-of-state. This represents
2,011,619 non-Louisiana visitors that the casino attracted. It is
a larger percentage than at the other New Orleans riverboats or those in
Baton Rouge. While hard data are not available, we suspect it is
a much higher percentage of out-of-state visitors than attend Jazzland
Theme Park. The percentage would likely grow if the casino could
control a hotel and bring in more out-of-state visitors to the City. |
| We asked those out-of-state visitors who came specifically to go to
Harrah�s, or extended their stay to gamble at Harrah�s, how much they spend
on other activities while in the city. These tourists inject over
$272 million a year into other businesses in the MSA. Just over $22
million in new dollars was spent in hotels, in excess of $65 million was
spent in restaurants, and over $184 million was spent in other stores and
shops. |
| Of the Louisiana gamblers, 46% said they had reduced their visits to
the Mississippi Coast casinos since Harrah�s opened. We estimate
that over $54 million that was leaving the Louisiana economy is now staying
here due to that shift. |
| Using input-output tables, we estimate that the new money Harrah�s
has attracted to Louisiana from out-of-state has created nearly 4,100 direct
and indirect jobs in the New Orleans region. By way of reference,
the total number of new jobs created in the entire MSA over the December
1999 to December 2000 period was 4,700 jobs. That is, if Harrah�s
shuts down, the area will almost lose the equivalent of all the new jobs
created in the MSA last year. |
| We estimate that the new monies brought to the state by Harrah�s created
about $107 million in new household earnings for Louisiana citizens.
Harrah�s employees alone earn an average of $28,500 a year plus an excellent
benefit package. For many, this is the best job they have ever had. |
| We estimate that Orleans Parish government and agencies have collected
$20.5 million in new taxes from the presence of Harrah�s, not including
the part of the $100 million state payment that is shared with the Parish
(about $6 million). |
In making their decisions about the relief sought, the following additional
comments may be helpful to the legislators:
| Harrah�s is unable to operate profitably with a $100 million minimum
payment due the state, because the company over-estimated the size of this
gaming market. They estimated it to be a $360 million market; hard
evidence now shows it to be about a $260 million market. Harrah�s
had no historical data on which to base their estimate for an urban casino.
It was an estimate. It was wrong, and Harrah�s has paid a dear price
for that forecasting error. The firm has lost millions of dollars
since the casino opened. The State has still received its daily payment
of $274,000 over the last 17-month period, which is equal to over $141
million. |
| Do we want to run off industries just because they are not locally
owned or a high percentage of their customers are local? Do we shut
down Jazzland Theme Park since it is not locally owned and probably has
well over 72% of its visitors from within Louisiana? Indeed, virtually
all of the customers at Benson Motors are from Louisiana, yet a huge chunk
of that firm�s revenues go straight to Detroit. It is logically inconsistent
to �dis� an industry just because Louisiana citizens like to spend their
money at such an establishment. |
| Why not just let Harrah�s shut down and just rebid the contract to
another casino operator? First, the property would be tied up in
court for 3-5 years. During that period, the state would lose the
revenues it could be collecting under the new payment structure demanded
by the Governor ($230 million of guaranteed payments over the first four
years and a rolling 3-year guaranty). Secondly, at the end of that
period, what would we have? An agreement with some other firm that,
at best, would be identical to the one Harrah�s is proposing. Will
this firm be as good a corporate citizen as Harrah�s has been? Harrah�s
has not been associated in any way with some of the scandals that have
plagued the industry in Louisiana. |
Finally, if Harrah�s closes, will all of its 2,900 employees find other
jobs in Louisiana?
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Sure, over time; but not immediately. Remember that about $54 million
in gaming money will speedily dash to Mississippi, enriching those folks,
not Louisianians.
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In the meantime, the state will shell out unemployment benefits to the
laid off workers.
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Until those new jobs are secured, the laid off workers will suffer all
the grief associated with being unemployed.
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Ultimately, they may get new jobs in hotels, motels, and riverboats ...
but will they earn $28,500 a year with an excellent benefits package?
By shutting down Harrah�s, the state will be blowing off some of the best
jobs these people have ever had.
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