DALLAS - A Baton Rouge-based entertainment company wants to reopen a flooded amusement park in New Orleans with proceeds from $100 million of tax-exempt Gulf Opportunity Zone bonds.
Southern Star Amusement Inc. said it would use the bond proceeds to repair and restore buildings and park rides damaged when Six Flags New Orleans was flooded by Hurricane Katrina in 2005. The park has not reopened since the hurricane.
The bonds would be issued by the New Orleans Industrial Development Board. The request from Southern Star will be considered by the board next week, and if approved could be on the agenda for the Louisiana State Bond Commission's meeting July 30.
The site and the equipment, including rides, belongs to the city. New Orleans obtained a $25 million loan from the U.S. Department of Housing and Urban Development to develop the park on city-owned land in east New Orleans.
The park opened in 2000 as Jazzland. Six Flags Inc. acquired the lease and changed the name of the facility in 2002.
Jeff Speed, chief financial officer at Six Flags, said the park sustained an estimated $150 million in damage from Katrina, but so far the company has received only about $35 million of insurance payments. Six Flags is suing insurers over the difference.
Danny Rogers, founder of Southern Star Amusement, said he wants to add new rides and attractions and restore several major existing rides, including the Mega Zeph wooden roller coaster. Long-term plans include a hotel and youth sports facilities, he said.
Southern Star is negotiating to purchase the lease from Six Flags, Rogers said. The park operator filed for Chapter 11 bankruptcy in June, citing debts of $2.4 billion.
"We are prepared to move immediately to take over a revised lease so that the park may be re-opened for the 2010 season," he said. "We believe that we are the only viable option that is available."
New Orleans still owes more than $16 million on the original loan, which will not be paid off until 2017. The $2.4 million of debt service is provided by Six Flags' annual rental payments on the park of $1.4 million and $1 million from the city.
The city has refused to allow Six Flags to terminate the 75-year lease. The company offered a termination payment of $10 million in 2006 for the park and 86 acres it owns adjacent to the property, but the city said that was not enough to pay off the HUD loan and clear debris from the property.
The park is located in a low-lying area near Interstate 10. A six-foot earthen berm around the facility designed to protect it from floodwaters instead confined the flood caused by Hurricane Katrina's storm surge in August 2005. The entire park was flooded to a depth of seven feet by salty, brackish water for more than a month.
In July 2006, Six Flags said the park was an "effective total loss" and it did not intend to rebuild. However, Mayor Ray Nagin said he intended to enforce the provision in the lease contract that requires Six Flags to use insurance proceeds to rebuild on the same site.