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Business Observer Thursday, Mar. 12, 2009 9 years ago

High Stakes

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Much is at risk as two Gulf Coast legislators chair committees charged with changing the Seminole Indian gambling rules, including the state revenue stream.
by: Jay Brady Government Editor

Much is at risk as two Gulf Coast legislators chair committees charged with changing the Seminole Indian gambling rules, including the state revenue stream.


Billions of dollars, tens of thousands of jobs and the integrity of Gov. Charlie Crist's proposed budget are tied to the Legislature's actions on the state's growing gambling industry.

At issue is whether the Seminole Indian Compact that was overturned unanimously by the Florida Supreme Court can be passed in some form to allow expanded gambling. Crist's proposed state budget includes nearly $300 million on the shaky assumption that it will be.

But Jai-Alai frontons, thoroughbred and greyhound racing tracks spread across Tampa, St. Pete, Sarasota and Naples also have their fortunes and futures on the line, along with the Seminole Hard Rock Hotel and Casino in Tampa and the Seminole Casino Immokalee.

And Gulf Coast legislators are in the driver's seat. State Rep. Bill Galvano, R-Bradenton, is chairman of the House Select Committee on Seminole Indian Compact Review. In the Senate, Dennis Jones, R-St. Pete, is Chairman of the Regulated Industries Committee — the other committee assigned to holding hearings on the compact.

Both committees held lengthy hearings on March 4, leaving many to doubt whether a compact can be finalized in time.

Galvano was not particularly optimistic: “That's my hope, that if we are going to reach an agreement that we do it sooner rather than later, but that's not a guarantee.”

Jones does not see a pressing need to approve a compact this session and is concerned about the impacts Crist's recommended compact might have on the $5 billion horse industry. He's also watching out for gambling venues like
Derby Lane in his hometown of St. Pete, saying “It doesn't serve our community any better to run them out of business.”

Most likely to bog the compact down are the multiple players involved — from Crist to the Seminole Indian Tribe to the South Florida Gaming Coalition to the National Indian Gaming Commission — and each has their own mission.

The hand that's been dealt
Crist signed a compact with the Seminole Tribe of Florida in November 2007 that gave the Tribe geographic exclusivity to conduct Class III gambling, which consists of all gambling against the house, such as slot machines, pari-mutuels, blackjack, craps and roulette, etc.

The Indian Gaming Regulatory Act (IGRA) states that Indian tribes may only conduct such gambling pursuant to a treaty with states called a “compact.” The act also says that if an Indian tribe is not given something of value, such as exclusive rights to a certain type of gambling, that the state may not charge the tribe anything for that gambling except for an extremely minimal cost of regulation. IGRA also requires that a state may give the Indians any type of gambling that the state and tribe mutually agree on, but must give the Indian tribes a compact for the same type of gambling already legal in that state.

The compact was ultimately voided by a unanimous Florida Supreme Court last July 3. The court agreed with the Florida House, who brought the suit, reasoning that the governor exceeded his constitutional authority and violated the separation of powers doctrine by giving the tribe blackjack and other table games that the Legislature has made illegal elsewhere in Florida.

Legislative approval was now required for the tribe to gain the exclusive right to have table games, or Class III games as they are known in the gambling regulatory world. The compact also would grant tribal casinos a 25-year exclusive right to any new gaming outside of Broward and Miami-Dade Counties.

On Sept. 19, Attorney General Bill McCollum asked Philip Hogen, chairman of the National Indian Gaming Commission, a federal agency, requesting the NIGC to shut down table games at Seminole casinos.

Meanwhile, the tribe opened 103 blackjack tables and other table games at Tampa's Seminole Hard Rock Casino. Five weeks later they followed suit at the Seminole Casino of Immokalee.

A week later the tribe petitioned the U.S. Supreme Court, appealing the Florida Supreme Court decision. The petition was recently rejected.

Now, Crist has asked the legislature to approve the compact and has submitted his budget based on a bet the compact will be approved.

In his speech to the Legislature on the opening day of the session, the governor used the same plea that was used to get voters to approve the Lottery, saying, “We must use every dollar available to us to adequately fund education, and I again call upon this Legislature to quickly approve the compact between the state of Florida and the Seminole Tribe. Approval will release at least $2.5 billion over 25 years to help educate our children.”

But before the compact, and after 2004 when the state constitutional amendment was approved to allow slot machines in existing pari-mutuel facilities, there was more of a level playing field with the Seminole Indian casinos. At that time the state was not receiving revenues or other economic benefits from the Seminole Tribe from gaming.

Now, with the tribe operating banked-card games like blackjack and poker in its seven casinos, the pari-mutuel operators are crying foul, saying the Seminoles are operating illegally and want the level playing field restored.

A piece of the action
Enter the South Florida Gaming Coalition. Claiming that up to $500 million a year is at stake, five South Florida pari-mutuel operations banded together to form an alliance to “educate” the public and key decision makers.

The coalition maintains that $107 million in non-guaranteed annual revenue generated by the Seminoles “would displace many more millions of dollars in reliable recurring revenues from the pari-mutuel industry.”

And that's the rub.

Where the Seminole Tribe touts that the compact will lead to 45,000 new jobs, increased tourism, and $112 million in direct and indirect construction spending since the compact signing with “billions to come,” the gaming coalition claims that with a level playing field the seven voter-approved pari-mutuel facilities in Miami-Dade and Broward Counties could generate $500 million “in reliable, recurring revenue to the State of Florida.”

Over 25 years that would add up to $12.5 billion trumping the $10.6 billion projection by the Seminole Tribe. Interestingly, both used the same economic impact consultant, The Innovation Group.

Data provided by the American Horse Council claims the horse industry produces $3 billion in goods and services, has a $5.1 billion economic impact on the Florida economy while providing 38,000 full-time equivalent jobs.

The Florida Greyhound Association's economic impact survey claims the greyhound racing industry, with 17 race tracks and nearly 1,300 employees throughout Florida, generates $10.5 million for state coffers.

Yet, in Crist's speech to the Legislature, he argues that, “Approval of the Compact will preserve and create thousands of jobs for Floridians and will safeguard us against the expansion of gambling to every corner of our state.”

'One of the worst drafted compacts'
With 30 pari-mutuel facilities spread around the state from Pensacola to Miami there's a lot of legislative districts overlaid on top of them. And that may be what proves most problematic for the Seminole Tribe, whose seven casinos are concentrated from Tampa south with a large concentration in Broward and Miami-Dade where seven pari-mutuels also operate.

Adding to the tribe's challenges is the compact itself, called by former State Sen. Steve Geller, D-Cooper City, “one of the worst drafted compacts of the many compacts I have reviewed.” Geller, who testified before Galvano's Select Committee, writes a column for a casino journal and has served as president of the National Council of Legislators from Gaming States.

Geller told the committee that the compact's escape clauses would result in the tribe not having to pay anything. Adding that “it's impossible to tell what it means” he also told the 20-person body, “You can't tell which clause is dependent on which. Your bigger problem is that there isn't a waiver of sovereign immunity. ... You'd have to sue in tribal court. ...You can't have a compact in violation of IGRA.”

The SFGC is in sync with Geller, claiming that due to multiple loopholes in compact language there are no guarantees that any revenues will be collected by the state. A legislative consultant expressed concerns similar to Geller's.

Rep. Mary Brandenburg, D-West Palm Beach, spoke for several when she asked simply how the state can best maximize gambling income.

Geller offered his thoughts on the tax rate issue saying, “The sweet spot for a tax rate in Florida to bring the most tax revenue to the state was 35%, but remember it was an all-inclusive. The effective tax rate is 65%, the best is 35%, so about 30% higher than what the sweet spot would be.”

In wrapping up, Democrat Geller told the panel, “If you passed a lower tax rate you would see a major job boom here in Florida.”

Geller believers the best solution is a broad expansion of gambling.

He would give the Seminoles the same gambling types in the Crist compact, plus bring in more revenue by allowing the pari-mutuels in Miami-Dade and Broward to have additional types of gambling but at a higher tax rate, and to offer other pari-mutuels within 50 miles of Indian casinos Class II video lottery terminals.

Galvano may need more convincing.

Summing up the Select Committee's recent meeting said, “I think there's a growing appetite for equity and how we treat our existing pari-mutuels, but I don't think that translates into an expansion of games.”

Like other legislators, he seemed most interested in looking out for the Tallahassee purse: “Ultimately, we want to negotiate the best deal for the state.”

REVIEW SUMMARY

What. Seminole Indian Gaming Compact
Issue. Pari-mutuels want a level playing field and the state wants more revenue.
Impact. A compact that overly favors the Seminole Tribe could result in a net revenue loss to the state and a net economic loss if pari-mutuels can't compete.

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