State Politics

Florida gaming deal faces uncertain odds in Legislature

Marta Sanchez-Mosquera, left, and Pablo Orlando Alvarez play the slot machines at the Magic City Casino in December 2009.
Marta Sanchez-Mosquera, left, and Pablo Orlando Alvarez play the slot machines at the Magic City Casino in December 2009. pfarrell@miamiherald.com

As Gov. Rick Scott on Tuesday touted the $3 billion agreement he signed with the Seminole Tribe as a way to bring economic stability to Florida’s constantly changing gambling environment, the deal faced an uncertain future in the Florida Legislature.

“I think it’s going to be a really tough road,” said Sen. Jack Latvala, R-Clearwater, noting that its “fatal flaw” is that it benefits only gaming operations in three South Florida counties. “If we’re going to have to close down facilities that have been here 70 to 80 years so the Indians have a monopoly and can continue to expand their offerings, that’s just wrong.”

Even in South Florida, home to eight casinos that compete with the tribe, the criticism of the 20-year deal was strong.

“It’s very impressive that the governor got $3 billion to pick winners and losers and put longstanding family businesses like mine out of business,” said Izzy Havenick, vice president at Magic City Casino in Miami. His company won voter approval in Lee County for a slot-machine license at its dog track in Bonita Springs — something that would be allowed only in Miami-Dade and Palm Beach counties under the deal.

“From our standpoint, we get a new casino in Miami-Dade County — right next to us — and we lose any potential to be able to offer another product at our facility in Lee County,” he said. “We’re getting hit on both coasts.”

Contributing to the negative buzz over the deal was the way the governor handled the announcement. He blindsided legislators by announcing in a letter at 8 p.m. Monday that he had finalized the deal, and gave no warning to the members of the House and Senate negotiating team that he had reached the agreement.

“I had no idea,” said Rep. Jose Felix Diaz, R-Miami, who has spent the last five months as the House’s lead negotiator on the deal, meeting with the governor’s staff, the tribe’s representatives and senators. “My phone started blowing up when I was at the Miami Heat game.”

He said he could support the deal, but it likely would have to “undergo some changes” to make it more palatable to the House.

Senate President Andy Gardiner, R-Orlando, said that Scott had called after signing the pact, but that he also had no warning.

Under the 61-page legal agreement known as a compact, the Seminole Tribe would get the exclusive right to operate blackjack, craps and roulette at its seven casinos in exchange for revenue sharing payments over 20 years. Its payments are made based on a sliding scale that rises the more the tribe makes in profits, and the deal guarantees a $3 billion minimum over seven years, beginning in 2017.

The agreement replaces the compact signed in 2010 by Gov. Charlie Crist and ratified by lawmakers, which guaranteed $1 billion over five years but did not include craps and roulette and allowed blackjack only at the Hard Rocks near Hollywood and Tampa and three other casinos.

But unlike the 2010 deal, this proposal includes a provision that says the Legislature could authorize two new slot-machine permits — one each in Miami-Dade and Palm Beach counties, but only if local voters approve a referendum after the compact is signed.

That is not popular with the proponents who seek the licenses, Diaz said, “but it was important to the Seminoles.”

“The question is whether removal of that language would jeopardize the compact,” he said. “I don’t know how the Seminoles and the governor’s office feel about that.”

While the compact imposes some restrictions on expanded games, it also includes some financial incentives designed to help the tribe’s competitors.

For example, the proposal allows the Legislature to lower the tax rate on the South Florida casinos from 35 percent to 25 percent and to remove the provision that tracks operate a minimum number of races in order to operate slot machines or poker games, a practice known as decoupling.

Decoupling is projected to save the industry millions by allowing it to reduce the number of dog and horse races needed to stay in business but, while it is supported by animal rights groups, it is fiercely opposed by horse and dog trainers.

For Tampa Bay Downs, the only horse track outside of South Florida, the proposal offers the opportunity to enhance its purse pool.

Scott told reporters on Tuesday that he has “been working this quite a while” and dismissed questions that he gave House and Senate leaders little warning that he was signing the final deal.

“This is how it works,” he said. “The governor is supposed to negotiate the compact, then it goes to the House and the Senate, and they get to make their own decision.”

He said he has done his part and now “it’s completely up to them.”

This is the second time Scott has surprised lawmakers in preparing a pact with the tribe. In 2014, he quietly negotiated an attempt at a compact during the legislative session but withdrew it in the face of intensive legislative opposition.

This time, the governor can use the agreement as a counterpoint to his push for a $1 billion tax cut in next year’s budget. But legislators, led by Senate Appropriations Committee Chairman Tom Lee, R-Brandon, have said that the recurring cost to the state of such large tax cuts will hamstring its ability to meet growing budget needs.

Under the proposed compact, the state would reap a minimum of $325 million in the 2017-18 budget year from the tribe’s gaming proceeds, and the minimum amount would rise by $25 million every year until 2023.

But legislators remain wary. Gardiner, the Senate president, repeated his prediction that the Legislature will prepare a budget that does not count on any gambling proceeds from a new compact with the tribe. But he was not prepared to rule out a potential agreement.

“I don’t support the expansion of gaming,” he said. “But I do support the institution of the Senate to make that decision as to what direction they want to go.”

Scott argued that “this puts a cap on Seminole gaming, and it limits the expansion of gaming in the state.”

But while the proposal allows for the tribe to operate as many as 3,000 slot machines on average at each of its seven facilities — and up to 6,000 machines at a single site — it limits the number of machines to 750 at new casinos in Palm Beach and Miami-Dade and restricts the bet limit on them.

“It is creating a sub-class among folks with slots,” said Brian Ballard, a lobbyist for the Palm Beach Kennel Club, which operates the dog track that is seeking a slot-machine license in Palm Beach County. “But this is a beginning point. All the component parts are there. We wouldn’t vote for it right now but we could get there.”

The anti-gambling group, No Casinos, also said it could not support the proposal because the compact was originally sold as a “firewall” to expanding gambling in the state.

“We’re obviously disappointed this provision provides expansion of gambling both on the reservation and off the reservation,” said John Sowinski, spokesman for the group. “Using the compact as a tool to expand gambling runs counter to the entire tenet of having to give the tribe banked card games in the first place.”

He noted that the provision allowing for as many as 6,000 slot machines at a single casino would exceed anything offered anywhere else in the world.

Seminole Gaming CEO Jim Allen said Tuesday that the addition of the roulette and craps games “will allow us to market across the United States” and appeal to players from South America and Eastern Europe.

“We’re appreciative of the governor,” he said, “to allow us to get to this first step.”

No Casinos argues that the provisions allowing the tribe’s competitors to expand blackjack and slot machines violates the Florida Constitution because, it says, the law gives voters, not legislators, the power to authorize casino-style gambling. No Casinos supports a proposal being discussed in the Florida House: putting a constitutional amendment on the ballot to require any gaming expansion to be approved by a statewide referendum.

However, Sowinski also warns that with every gambling deal, the promise of higher revenues has paved the way for a kind of gambling creep, allowing existing operators to use a drop in their sport to help them win approval for additional games.

When revenues were declining at horse and dog tracks and jai-alai frontons 20 years ago, legislators passed a law authorizing poker rooms. Now, new gaming options continue to emerge as South Florida casinos use innovative technology to turn slot machines into electronic roulette wheels and craps tables, and as poker rooms adopt new approaches to games and even the state-run lottery seeks instant ticket machines at gas pumps.

“This is an illustration of how one expansion of gambling begets another,” he said. Rather than expand slot-machine permits, the Legislature should use the proceeds of the compact to buy back gaming permits and allow operators to close down their losing franchises and switch to other businesses.

The issue underscores why reaching agreement will be so difficult.

The House supports a buy-back provision and wants to see a constitutional amendment in any gaming package related to the compact, Diaz said. But Latvala warned that a constitutional amendment is “a non-starter in the Senate — especially when they’ve limited who gets to take advantage of this.”

Mary Ellen Klas: meklas@miamiherald.com; @MaryEllen Klas

Contributors include: Miami Herald reporter Kristen M. Clark, Tampa Bay Times reporters Steve Bousquet, Jeremy Wallace, Michael Auslen, Sara DiNatale

Gambling deal details

The compact addresses some of the concerns raised by other gaming companies in Florida by allowing the Legislature to approve a limited number of games without interfering with the exclusivity provisions of the Seminole compact. Among the proposals:

Seminole Tribe

Authorized to operate craps, roulette and blackjack at all seven of its casinos in exchange for guaranteed payments for the first seven years and a sliding scale thereafter.

Lottery

Lottery vending machines are authorized at convenience stores and gas stations but winning tickets must be presented to a clerk

New sites in Miami-Dade, Palm Beach

A referendum could be conducted to receive voter approval for slot machines

Slot machines would be limited to 750 — compared to the 2,000 allowed at casinos in the other eight South Florida casinos

Bets would be limited to $5 per game, significantly reducing the number of gaming options

Parimutuels in Miami-Dade, Broward

Legislature could reduce tax rate from 35 percent to 25 percent

Legislature could give them the right to seek local voter approval to operate limited blackjack games. If the tribe’s revenues from blackjack exceeds 40 percent over 2017, casinos could conduct a referendum seeking voter permission to operate 15 blackjack tables each with wagers capped at $15 each

Parimutuels outside Miami-Dade, Broward

Legislature could authorize decoupling, allowing casinos to operate poker games without running a set number of dog or horse races, or jai-alai matches

Legislature could authorize popular new poker games that use a designated player in which players compare their hands to the “designated player,” who handles the chips.

The five counties that have received voter approval to seek slot-machine licenses — Brevard, Gadsden, Hamilton, Lee and Washington — would not be able to obtain them or the compact would be violated

Mary Ellen Klas

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