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Wednesday, Apr 16, 2014

Seminoles take on gambling boosts state revenues


With the expiration of a gambling deal with the Seminole Indians on the horizon, the tribe for the first time has raked in so much money it sent an extra $4.3 million to the state of Florida.

The 2010 deal, known as a compact, guarantees the tribe will make minimum annual payments, totaling $1 billion over five years, to the state. Revenues were high enough during the fiscal year that ended June 30 to trigger the additional payments.

But the annual payments will be cut nearly in half when the compact ends in less than two years unless lawmakers and the governor reauthorize it, according to projections by state economists who met on Tuesday.

The latest revenue estimates came a day before the Senate Gaming Committee holds its first on-the-road meeting in Coconut Creek, part of the Legislature’s scrutiny of potential changes to the state’s gambling scene. Possible scenarios include allowing casino resorts and the addition of slot machines at pari-mutuels outside of Broward and Miami-Dade counties.

Under the current deal with the Seminoles, the tribe makes the payments to the state in exchange for having the exclusive right to offer banked table games, such as blackjack, along with a monopoly on all slot locations outside of Broward and Miami-Dade counties. The Seminoles agreed to pay a minimum of $150 million in each of the first two years, $233 million in the third and fourth years and $234 million in 2015.

But as part of a complicated revenue sharing agreement, the tribe has to pay additional money if revenues exceed certain thresholds. That’s what prompted the additional $4.3 million payment, a portion of which goes to local governments.

Next year, the extra money is expected to more than triple, bringing the Seminole’s total payment to nearly $248 million, with another $20 million on top of that in the following year.

The compact requires the Seminoles to pay 12 percent on up to $2 billion in earnings from slot machines and table games, including blackjack. The payments are part of a revenue sharing agreement because, as a sovereign nation, the Seminoles cannot be forced to pay taxes.

The Seminoles also must pay a higher return to the state as their earnings increase, beginning with 15 percent on net revenue between $2 billion and $3 billion and up to 25 percent of a net win over $4.5 billion. The Seminoles’ net win is expected to exceed $2 billion next year and continue to grow, according to the revenue estimators.

At the same time tribal revenues are growing, slot machine revenue – about $142.2 million this year – from the pari-mutuels in Miami-Dade and Broward counties is also projected to climb at a rate of about 2 percent per year once Hialeah Park Casino, which began running slots in August, and Dania Jai Alai are fully operational.

The all-around growth is an indicator that the gambling market in South Florida is thriving but could be even more lucrative for the state if lawmakers restrict any expansion to South Florida and reject the idea of destination resorts, said Dan Adkins, CEO of Hartman & Tyner, which owns Mardi Gras Gaming in Hallandale Beach. Allowing slots outside Miami-Dade and Broward or any new facilities with slot machines – such as destination resorts – in those two counties would invalidate the Seminole compact.

Adkins and other operators want their 35 percent sales tax on slot machines lowered and are angling for banked table games to better compete with the nearby Seminole Hard Rock Hollywood.

Slot machines anywhere but the existing pari-mutuels in Broward and Miami-Dade counties or on other tribal lands would invalidate the compact and cost the state big bucks. But giving the Broward and Miami-Dade racinos blackjack or other banked table games would only cost the state a portion of the revenues the Seminoles pay on their Broward operations, and only if their net win in Hollywood drops as a result.

Even with the additional games in South Florida, the state could negotiate higher payments with the Seminoles to keep its Tampa casino, one of the most profitable gambling operations in the world, safe from slots competition.

“(Lawmakers) could take advantage of positive growth by putting just these facilities on a level playing field. Don’t create any new facilities in Broward and Miami-Dade, but add more product at the existing facilities,” Adkins said. “You’re not having a geographic expansion of gaming, you’re just getting more bang for your buck.”

Sen. Bill Galvano, R-Bradenton, helped craft the 2010 compact with the Seminoles when he was in the state House.

“The whole idea of the five-year card authorization was so that there was an incentive to come back and revisit that issue with the Seminole tribe and to create leverage with the tribe so there is an opportunity to negotiate additional terms or modify existing terms,” he said.

Senate Gaming Committee Chairman Garrett Richter is playing his cards close to the vest. Like other lawmakers, he’s awaiting a final report from Spectrum Gaming Group, a consulting firm, on the economic impacts of a variety of gambling scenarios. The final two portions of the report were due Oct. 1, but Spectrum asked for another month to complete the analysis after Baker and others questioned some of the economic modeling.