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The Big Deal

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  • | 11:16 a.m. June 4, 2010
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What. Gaming compact's influence.
Issue. Can Tampa Bay Downs and Gulf Coast greyhound tracks compete under new rules?
Impact. A billion dollars in state revenue plus scaled-back hotel-casino development may add up to a better deal down the road.
By the Numbers. Click here.

Florida's gambling industry is entering new, uncertain times in the shadow of the state's Seminole Tribe Gaming Compact.

While the new deal brings some closure to both the state and gaming interests after two decades of talks, economic conditions continue to make the tribe's previously grand expansion plans less predictable, and probably less grand, than a year ago.

And though it's largely a 20-year deal, part of it is up for renegotiation after only five years. That provision makes long-term investing in new or upgraded gaming facilities its own risky bet for the tribe and Seminole Gaming CEO Jim Allen.

A companion piece of legislation is aimed at helping dog tracks, horse racing and jai-alai frontons. Though positive for those long-time taxpayers, it may not be enough to save them should their sports' popularity continue to wane.

“The proof will be in what the handles are,” says State Sen. Dennis Jones, R-Seminole, referring to the amount of total betting pari-mutuels receive for a given race or events for a period of time.

Jones, a compact co-author and pari-mutuel defender (though not a gambler) worked closely with Rep. Bill Galvano, R-Bradenton, who gets most of the credit for negotiating and crafting the compact with Seminole Chief Osceola and the tribe's team.

Jones, who chairs the Senate's Regulated Industries Committee, thinks much more will be known in six months, and certainly after all the accounting for a full year under the compact. The agreement takes effect July 1.

The compact, approved by the Legislature this past session and signed by Gov. Charlie Crist after years of debate and litigation, holds much promise for the Gulf Coast in terms of future economic development.

More hotel rooms, card games and slot machines mean more employment for construction workers to card dealers.

A study commissioned by the tribe more than a year ago estimates 45,000 new jobs and $112 million in direct and indirect construction spending with “billions to come” from a compact.

But much of that economic engine will be roaring loudest near opposite ends of the Gulf Coast, and not so much at the region's four greyhound tracks or Tampa Bay Downs in Oldsmar.

The Seminole Casino Immokalee on the edge of the Everglades in eastern Collier County may now get a hotel to go with it.

And in Tampa, the Seminole Hard Rock Hotel and Casino looks to have a major facelift to go with its planned expansion that could mean 1,000 new hotel rooms.

But according to Seminole Gaming's Allen, just when it all happens, may be determined more by Wall Street than the Seminole Tribe itself.
“We're in the process of evaluating market conditions today,” says Allen, who's concerned with how borrowing might affect the sovereign nation's bond ratings.

In a financial environment that has seen numerous casualties among big players in the gaming industry, Allen has cause for caution. And the compact prohibits the tribe from conducting roulette, craps, roulette-styled games or craps-styled games.

Allen's not prepared to offer specific numbers of investment dollars, new square-footage or jobs until final approval by the feds. After that, Allen says a more concrete plan for expansion will start taking shape as soon as Aug. 1.

“We definitely see expansion, and we definitely see more jobs, and definitely see more amenities and entertainment as part of our whole thought process,” he says.

Pari-mutuel's disappointment
Within an hour's drive of Tampa's Seminole Hard Rock four pari-mutuels — Derby Lane, Tampa Greyhound Track, Sarasota Kennel Club and Tampa Bay Downs — will be trying to hang on at least for five years. The Naples-Fort Myers Greyhound Track in Bonita Springs finds itself in the same boat having the Seminole Immokalee Casino in its backyard.

On June 30, 2015, the window could close on the tribe offering banked card games such as blackjack, baccarat and chemin de fer. Depending how it all works out, the Legislature could reauthorize banked card games or pursue another path.

That could mean all kinds of possibilities, from expanded gaming in the panhandle to stem the flow of gaming dollars to other areas along the Gulf Coast, to expanding gaming to Palm Beach County, to not reauthorizing banked card games.

The Gulf Coast area pari-mutuels are not happy campers despite new legislation that extends poker room hours and eliminates caps on betting. One problem: the extended hours don't help much if alcohol can't be served past 2 a.m.

“It was truly a disappointment for the legislative session for us,” says Richard Winning, vice president of the St. Peterburg Kennel Club, home to Derby Lane. The track also hosts greyhound races run by the Tampa Greyhound Track during a different season. The Tampa track operates a poker room at its own site.

“The new bill didn't do a thing for us being in proximity of the largest Indian casino,” adds Winning, referring to the 178,000-square-foot casino. The casino also boasts 3,400 slot machines, a poker room, a 250-luxury room hotel, restaurants, bars and other amenities.

Tampa Bay Downs shares that geographical disadvantage being just 16 miles from the casino. Peter Berube, the horse track's vice president and general manager says that because of the proximity, “ ... the pari-mutuels in the Tampa area are really suffering.”

Berube acknowledges the Legislature's attempt at equity and is grateful for it. But he knows poker can't trump slot machines for attracting limited discretionary dollars — particularly from women, who generally aren't big poker fans or willing to watch simulcast races while their spouses sit for hours playing Texas Hold 'em.

“The bottom line is that it's not going to mean a great deal of additional revenue,” says Berube. “It's a welcome change, but at the end of the day it's not going to be a great revenue generator for the track.”

And track operators like Berube don't hold out much hope for potential revenues from up to 350 “Historic Racing Machines.” The compact allows the machines for pari-mutuels subject to 13 conditions.

“The problem is those machines are not in existence right now. So no one know if they're viable machines,” Berube argues. “With the Seminoles in the market, I'm not sure if (Historic Racing Machines) were authorized that we would move forward with it.”

Tampa Bay Downs' handle dropped 15% the past year and 40% for the past two-and-a-half years, says Berube. He attributes the fall-off to the Hard Rock casino and not being able to offer a similar product.

The track makes up some of the lost revenue with simulcasting its races to the rest of the country, meaning selling its video signal to other tracks.
For the 10-month period through April, Tampa Bay Downs handled $88.9 million of on-track and off-track wagering, including roughly $39 million in simulcast revenues. Cardroom gross receipts totaled $3.5 million for the same period.

The dog track in Bonita Springs competes with 1,100 slot machines, blackjack and other table games including poker, offered at the 75,600-square-foot Seminole Casino Immokalee. In Feb. 2009, the casino completed a $22 million expansion including a new lounge with a live entertainment stage.

Compact architect Galvano understands the pari-mutuels dilemma, but also the balancing act required and that changes to the compact may be inevitable. “The world has become better for pari-mutuels because of what we passed. But it's not lost on me that it's not the best world for them.”

The bright side
It appears only a matter of time before a hotel complements the casino. And interestingly, maybe by then the Collier Convention and Visitors Bureau or the Greater Naples Chamber of Commerce might add the casino to their lists of things to do in the county.

As if the casino didn't exist, neither business group's Web site mentions gaming or the casino anywhere, something Seminole Gaming's Allen says he will look into, though he suggests the snub may be due to a commonly held opinion that the banked card games operated illegally absent a compact. And that's all about to change.

Collier County Commissioner Jim Coletta, whose district includes Immokalee and eastern Collier, is pleased with the compact.

The county, and so too Hillsborough, get a share of the $1 billion in revenue going to the state during the next five years. The compact calls for 3% of the money to be split by formula among the cities and counties with gaming.

Coletta says estimates for Collier amount to about $600,000 a year, but he says, “The money coming in will be insignificant compared to the cost of infrastructure.” He fears that the casino expansion will consume available road capacity leaving little to nothing for other development.

Still, Coletta sees the bright side, saying, “The good news is the pact has been approved and the casino can go through with building its hotel. It will mean a lot to the local businesses.”

In Hillsborough, the larger, more diverse and busier Hard Rock Hotel and Casino is expected to spin off $2.25 million to the county the first year, according to County Commissioner Al Higginbotham.

That sum gives Hillsborough half the revenue going to the local governments from gaming. Higginbotham is optimistic it could grow to be much larger, perhaps $15-20 million in total for the gaming communities, which translates to up to $10 million a year for Hillsborough.

No one may understand better than Galvano all the issues regarding gaming in Florida, and he remains sympathetic to the pari-mutuels that have paid taxes into the state treasury for about 80 years.

Galvano says his goal was to take the gaming laws and turn them into something “that makes it easier for (pari-mutuels) to survive with hope down the road.”


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