Gaming Bills Floated in Florida

Two bills in Florida deal with gaming machines for pari-mutuel facilities.

by Jim Freer

Two Florida Senate leaders are sponsoring separate slot machine bills, with goals that include increased revenue for the state’s three Thoroughbred tracks and for the Ocala Breeders’ Sales Co. As with previous years’ slot machine proposals in Florida, the bills face opposition from gambling opponents in the legislature.

There also is concern that Gov. Charlie Crist might oppose the bills, which loom as competition to the Seminole Tribe of Florida’s recent agreement to upgrade from Class II bingo-like machine to Class III Las Vegas-like machines at its seven Florida casinos. Under that compact, the Seminoles have begun paying a portion of their gaming revenue to the state.

Senate Minority Leader Steve Geller, sponsor of one of the bills, said the pari-mutuel industry will stress that the bills would help the industry compete with tribal casinos while adding an estimated $350 million or more for education.

One bill would permit Tampa Bay Downs and the OBS racing facility to install bingo-like machines. The other would reduce the state tax rate from 50% to 35% on Class III Las Vegas-style machines at Gulfstream Park, Calder Race Course, and other pari-mutuel facilities in Miami-Dade and Broward counties.

On Feb. 6, the Senate Regulated Industries Committee approved the bill that would allow “electronic gaming machines” at OBS, Tampa Bay Downs, and Florida’s 19 other pari-mutuel facilities outside Miami-Dade and Broward counties. Most of those are Greyhound tracks.

The bill’s sponsor is Sen. Dennis Jones, a Republican who is chairman of that committee and whose district includes Tampa Bay Downs. The machines would be similar to bingo-like machines tribal casinos have had in Florida for almost two decades.

“It is too early to project an economic impact, but this would be a step in the right direction by adding a product that some competitors now have,” said Peter Berube, Tampa Bay Downs vice president and general manager.

The Senate’s research staff estimated that during a first full year with a maximum of 2,000 machines at each site, the 20 facilities would have combined net revenue of about $1 billion from the machines. With a proposed 35% tax rate, the state would receive about $350 million; the money would be placed in a fund for education.

Geller is preparing a bill that would reduce the state tax rate on slots revenue for Broward and Miami-Dade pari-mutuel facilities. Geller, a Democrat whom many regard as a gaming law expert, will leave the Senate at the end of this year because of Florida’s term-limit law. His district includes Gulfstream; Mardi Gras Racetrack and Gaming, a dog track; and Dania Jai-Alai.

Geller said he is preparing for a 2010 run for a Broward County Commission seat.

On Jan. 29, Miami-Dade County voters passed a referendum that permits Calder and the county’s two other pari-mutuel facilities to each install up to 2,000 Class III machines. Calder and parent Churchill Downs Inc. have not announced a proposed start of construction or other plans for a casino.

A report by the American Gaming Association, based on data from state regulators, shows Florida’s 50% tax rate is third-highest among 11 states that had slot machines at racetracks as of 2006.

“We are saying ‘not so’ to those who say a higher tax rate means more (slots) revenue,” Geller said.

Cutting the state tax rate would enable pari-mutuel facilities in Miami-Dade and Broward counties to use higher retained revenue to expand and improve their casinos, and spend more money on marketing and promotions, Geller said. That should result in increased slots play and revenue, to the extent that tax payments at a 35% rate would be higher than payments at 50%, he said.

The bill will include a “hold harmless” requirement that the slots tax payment must be at least as much as what it paid in its first full year at a 50% rate. Gulfstream had $38.5 million in net slots revenue and paid $19.3 million in state slots taxes last year. At 35%, those taxes would have been $13.5 million.

A 35% tax rate would enable Gulfstream to operate in a way that it would increase slots revenue and more than make up the $6 million tax difference, said Steve Calabro, corporate vice president of gaming operations at Gulfstream for parent Magna Entertainment Corp. Gulfstream would increase its advertising and its prizes to slots players, thus helping grow its top line, Calabro said.

“This would give us incentive to move forward with our plans for a new casino building,” Calabro said. “It would put us not on a level playing field (with the Seminoles), but closer.”

The Seminoles’ compact with Crist requires the tribe to pay a minimum of $100 million a year to the state, with the rate rising as high as 25% as gaming revenue rises.

Geller also is sponsor of a bill that would require the legislature to approve any tribal gaming compact negotiated by the governor. The Regulated Industries Committee approved that bill Feb. 6.

The legislature is waiting for the Supreme Court of Florida to rule on its petition that seeks to void the compact that Crist, without agreement from the legislature, signed with the Seminoles Nov. 14, 2007.

Last year, the Senate passed but the House did not pass a bill that would have authorized video lottery terminals for Tampa Bay Downs and other pari-mutuel outlets outside Broward and Miami-Dade counties. This year, Jones and co-sponsors changed the designation to “electronic gaming” because of questions of whether VLTs are Class II or Class III machines.

The Seminoles’ compact enables the tribe to stop making payments to the state if any entity other than Indian tribes or Miami-Dade and Broward pari-mutuel facilities operates Class III machines in Florida.

“The tribe prefers not to comment on ‘what if’ scenarios,” Seminoles spokesman Gary Bitner said. “We are committed to the compact and intend to honor its terms, and we are happy to make payment to help the state.”

The Seminoles will not take a position on Geller’s bill to reduce state tax rates for pari-mutuel facilities, he said.

Gulfstream also pays combined county and city taxes of 3.2%t of slots revenue. Calder will pay combined county and city slots taxes starting at 2.75%. The Seminoles do not pay local taxes on gaming revenue.