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Monday, December 05, 2005

Slots in Sunshine State Special Session

- The Florida legislature meets in special session this week, and slots in Broward County is one of two major topics, along with the state’s Medicaid program, that will be discussed. However, according to the Miami Herald, the betting crowd is laying odds against Tallahassee coming through with a deal by the end of the session.

Parimutuel lobbyists and many legislators are speculating that election-year politics, anti-gambling idealists and the competing interests of the gaming industry will prompt legislative leaders to pack the bill with so many divisive elements they will adjourn again with the issue unresolved.

''Some people are gunning for stalemate,'' said Sen. Bill Posey, a Rockledge Republican and one of the Senate negotiators on the deal.

The motives of the competing groups are different, but the goal is to sabotage the bill and wait for more industry-friendly regulations at the local level, delay the arrival of slot machines or legislate the industry ''into bankruptcy,'' Posey said.
The pessimism regarding an agreement comes despite the fact that the House and Governor Bush have finally ceded to the Senate’s demand that the slots be the Class III “Las Vegas” type machines that the voters of Broward County thought they were voting on all along. According to insiders in Bush's office and the legislature, attorneys for Bush and House Speaker Allan Bense are convinced that the parimutuels will win a lawsuit challenging what they call "slots lite" — the video slots. [Palm Beach Post]

The remaining major issues to be resolved are those of the tax rate on the machines, as well as the number of machines to be permitted in each pari-mutuel facility. The House is sticking to a 55% rate and a limit of 1000 machines, while the Senate, whose proposal allows for 2000 machines, is at 45%, a rate that the pari-mutuels still think is too high.
The tax rate is crucial to how far and how fast slot machines move into Broward County, local parimutuel officials said. They are ready to move quickly if a deal is struck in Tallahassee but if the tax rate is much higher than 35 percent, it would jeopardize their plans to build new facilities, they said.

A tax rate that approaches or exceeds 50 percent would be ''a disaster,'' said Dan Adkins of the Hollywood Greyhound track. ``You end up with slot barns that generate no economic benefit.''

With a lower tax rate, Hollywood Greyhound could set up a temporary slots operation within three months and have enough money to invest in its 90,000-square-foot, Mardi-Gras-themed gaming center in a year to 18 months, he said.

The same scenario would let Pompano Park harness track build a $150 million, 157,000-square-foot building to house slots, poker tables, simulcasting and restaurants, said general manager Dick Feinberg. Work could be finished in eight or nine months. [Miami Herald]
The pari-mutuels also point to the fact that even the 45% rate in the Senate bill is high by industry standards.
Across seven states that allowed slot machines in 2004, the average tax rate was 35 percent, according to legislative staff analysis. Only Rhode Island, at 61 percent, is higher than those proposed in Florida, though legislative staff have said that Rhode Island isn't comparable because its parimutuels don't own their machines. [St Petersburg Times]
Another little twist, as reported in the Herald piece, is the Indian tribes, who by law will be entitled to install their own Las Vegas-style machines once the pari-mutuels have them.
The governor wants to tax the revenue from the tribes's slots and to regulate the games. To get there, the governor would have to give the tribes something in return. Industry experts said his options are to offer the tribes a lower tax rate than the parimutuels would pay, and a key concession: the exclusive privilege of operating slot machines outside of Broward and Miami-Dade counties.
You can just picture Churchill Downs executives sweating over that, as they hope to eventually win the right to put slots at Calder; but exclusivity for the tribes would kill that for them, as well as for tracks in Tampa and elsewhere. If gambling opponents attempt to insert that into a final bill, you can expect a tidal wave of opposition in an attempt to scuttle it.

Of course, the Broward County tracks won the right in court earlier this year to implement their own rules, a strong incentive for the state legislators to get something done. And Bush and gambling opponents now actually want an agreement -- so that, once they have fulfilled their constitutional obligation to implement the will of the voters, they can then initiate a referendum to repeal the whole thing altogether. Despite the special session this week, it seems we're still a long ways from the finish line.