The number 35 was on almost everyone’s lips on June 3 when Calder Race Course broke ground for a casino it plans to open next January on its property in Miami Gardens, Fla.
That is the state tax rate Calder expects to pay on its 1,225 Class III Las Vegas-style slot machines. A bill the Florida legislature passed last month sets a 35% rate, a cut from the current 50%, for casinos at horse and Greyhound tracks and jai-alai frontons in Miami-Dade and Broward counties.
Several leaders of the legislature anticipate the bill will become law during this year’s fourth quarter.
With a 35% state slots tax rate, Calder “will have an opportunity to become more creative in our marketing and in positioning ourselves amid the competition,” Tom O’Donnell, the track’s general manager told The Blood-Horse.
Calder and Gulfstream Park have said that increased marketing can help increase their slots revenues--thus raising the share that is available to Florida horsemen’s groups.
The 50% rate, being paid by Gulfstream and two other southeast Florida pari-mutuels, is among the highest of any racinos in the country.
Calder and parent Churchill Downs Inc. are not releasing revenue estimates for Calder’s casino, which has a projected cost of $85 million.
In addition to the state tax, Calder’s combined Miami Gardens and Miami-Dade County taxes on slots revenues will be just over 10%.
Ryan Worst, a securities analyst at Brean Murray Caret & Co., said a state tax rate of 35% should enable a Calder casino to be profitable beginning in its first year.
He projects that the casino would provide CDI about $15 million in annual earnings before interest, taxes, depreciation, and amortization (EBITDA).
Worst said the Calder casino’s performance could depend partly on how quickly the economy recovers from the recession and how successful it is in competing for casino players with the Seminole Hard Rock Hotel & Casino in Hollywood.
The Hard Rock, six miles north of Calder, has Las Vegas slots as well as black jack and baccarat--two table games not permitted at Florida pari-mutuel casinos.
CDI last year opened a casino at Fair Grounds in New Orleans.
“It has operated efficiently for the most part,” Worst said. “If they can bring that kind of discipline to Calder, there can be positive returns.”
Also on June 3, Calder vice president for racing John Marshall told The Blood-Horse that Calder’s handle “looks good” thus far at its meet that began April 24.
Calder does not release numbers. But Marshall said the track’s average daily purses, excluding graded stakes, have been “close to $180,000.” That is above the $160,000 target Calder has for this year.
Calder’s casino will be a 104,000 square-foot facility on the southwest side of its property. It will be connected to the track’s grandstand building by a covered walkway.
The casino will include self-service terminals for wagering on live and simulcast races, and TV monitors that will show races. It also will have three restaurants.
Calder is about a mile north of Land Shark Stadium, the home of the Miami Dolphins and Florida Marlins, which previously was known as Dolphin Stadium.
Calder hopes to open the casino at least a week prior to Super Bowl XLIV, scheduled for Feb. 7, 2010, at Land Shark Stadium. The Pro Bowl will be seven days later at that stadium.
During casino construction, Calder will be “doing our best to minimize any inconveniences” to fans, horsemen, and employees, O’Donnell said.
A portion of Calder’s west side parking lot is cordoned off for construction. The majority of parking spaces remain available.
CDI Chief Operating Officer Bill Carstanjen said Calder is waiting for approval of permits that will enable it to make renovations in its grandstand building this year. That will include a new high-end players room on the second floor.
During the first three full years of its slots operation, Calder will pay a minimum of $14.375 million to the Florida Horsemen’s Benevolent and Protective Association and the Florida Thoroughbred Breeders’ and Owners’ Association for purses and breeders’ awards.
Under a slots agreement signed last July, the two horsemen’s groups are guaranteed a combined 6.75% of pre-tax slots revenue for the remainder of a 10-year term.
Having a state tax rate of 35 rather than 50% should help Calder’s casino operations and produce a higher top-line, thus generating a higher revenue stream for horsemen, said Richard Hancock, executive director of the Florida TBOA.
“This is all about purses and breeders’ fees, and getting this change was our association’s biggest goal with the legislature this year,” said Hancock, who attended the June 3 ceremony.
The bill the legislature passed on May 8 has a compromise on the controversial issue of black jack and baccarat at Seminole casinos. It would permit the Tribe to have those games at only four of its seven Florida casinos.
For the bill to become law it must be approved by Gov. Charlie Crist and the Seminoles. Any changes they propose must be approved by the legislature in a special session in September.
The U.S. Department of Interior, which oversees Indian gaming, would need to approve provisions related to the Seminoles.
O’Donnell said Calder regards the three nearby pari-mutuel casinos as the main competition for Calder’s planned casino.
“The (Seminole) Hard Rock is not our competition” he said, noting that it a “destination” with a hotel and not a pari-mutuel.
Before taking his post at Calder late last year, O’Donnell was an executive for Heller Gaming & Leisure and previously for Harrah’s Entertainment.
O’Donnell said that recent encouraging economic news in areas, including home sales, indicates Calder might be opening its casino at a time when the economy is recovering.
Through April 30, the first 10 months of Florida’s fiscal year, total pre-tax slots revenues were down an aggregate 15% at southeast Florida’s three pari-mutuel casinos.
The combined total was $208.6 million for the first 10 months of fiscal 2007-2008, but just $176.3 million for the first 10 months of fiscal 2008-2009.
Gulfstream’s slots revenues rose 7%, from $33 million to $35.3 million over those 10-month stretches.
But slots revenues were down 23% at harness track Isle Racing & Casino at Pompano Park and 14 % at Greyhound track Mardi Gras Race Track and Gaming.
The change of the state tax rate to 35% could help those racinos and Calder next year, said Robert Jarvis, a law professor at Nova Southeastern University in Fort Lauderdale.
But Jarvis, who teaches a course on gaming law, said those casinos will still have to deal with “the over-saturation of gaming venues we have here in South Florida.”
Calder opened its 2009 meet with all purse, simulcast and advance deposit wagering contracts signed with the Florida HBPA.
Last year, Calder and the Florida HPBA did not sign purse and simulcast agreements until July and several major ADWs could not take bets on Calder races until late December.
Calder’s all-sources handle fell 30% from $923 million in 2007 to $650 million in 2008, according to CDI’s annual report to the Securities and Exchange Commission.
Without releasing numbers, Marshall said that this year “the response of our export audience, including ADWs, has been encouraging.”
Now, he and other Calder officials are hoping for an end to a rainy spell that has kept the track from holding any turf races since May 17.
“Last year at this point, we had taken seven races off the turf,” Marshall said. “This year, it is about 25.”
The Blood-Horse’s review of data from Equibase shows Calder had all sources handle of about $3 million for a 12-race card on Saturday May 30 and about $2 million for an 11-race card on Sunday May 31. Several races were moved from turf to dirt each day.