NEW ORLEANS—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.
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 Big Easy's experience is a sobering one for any convention city considering a downtown casino, and is especially illuminating as Chicago business and union leaders plan to take a proposal for a downtown land-based casino to the Illinois General Assembly when it opens its veto session this week.
The coalition proposing a casino in downtown Chicago said it is important to study what has occurred in other cities, but also to realize Chicago is different from New Orleans in many respects, including the breadth of cultural offerings and the size of its exhibition hall.
"We have to craft what makes sense for our own situation," said Christopher Bowers, chief executive of the Chicago Convention and Tourism Bureau. "We compete directly with Las Vegas for the largest shows, when in many cases, New Orleans does not."
A casino "would be another arrow in our quiver, from a competitive standpoint," he said, noting the coalition is working with an outside firm to make sure economic projections are on target.Still, skeptics warn that casino operators will promise the world to gain a monopolistic franchise, and that promises are rarely met.
"It's to their advantage to promise anything, get established, and later change the rules back to what they wanted in the first place," said Nathan Chapman, president of Vieux Carre Property Owners, Residents and Associates, a French Quarter preservation group. "You're really playing with a tiger, and you might be happy with it, but at some point, the tiger is going to do what the tiger wants to do."
Indeed, a casino gains tremendous leverage because government officials become addicted to the revenue stream, some observers say.
"Once you have gambling, and it is less than promised, you can't get rid of it," said Tyler Bridges, author of the book "Bad Bet on the Bayou: The Rise of Gambling in Louisiana and the Fall of Governor Edwin Edwards." The former governor and his son Stephen are serving prison sentences for racketeering and fraud in relation to the awarding of riverboat casino licenses.
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.
Their mistake was failing to adequately take into account potential competition from riverboat casinos, from casino development on the Mississippi Gulf Coast and from the vibrant nightlife already in place in New Orleans, noted Steve Rittvo, a gaming consultant who was working for one of the bidders.
Next, to speed up the casino opening, government officials insisted a temporary casino be opened in an economically depressed, crime-ridden area until a downtown casino could be finished.
The temporary casino lasted seven months, opening in May 1995 and closing in November of that year, in tandem with a filing to reorganize under the federal bankruptcy code.
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.
Gaming revenues in 2000 totaled $254 million, of which $100 million, or 43 percent, went to pay the state casino tax.