Gambling on Conventions

REVIEW SUMMARY
What. Destination casino resorts bill revived, but on life support.
Issue. Will Florida's failure to act be a lose-lose for the state?
Impact. Up to 35,000 permanent jobs and 140,000 total jobs.

Jobs, jobs, jobs may be the mantra of the Florida Legislature and Gov. Rick Scott, but the biggest jobs bill in the Legislature — the “Destination Resorts” bill — with a controversial casino component, was withdrawn in the Senate late last month.

Now, with potentially 140,000 jobs at stake, there's a new version bringing it back to life, though it is still faces hurdles.

The sponsor of the new bill is a freshman, Sen. Oscar Braynon, D-Miami Gardens. But he has managed to advance the bill through the first committee stop while receiving some informal, but positive feedback from Scott.

Destination resorts, or destination resort casinos, are mega-centers that feature shopping, conference facilities, restaurants, and live entertainment in addition to casinos.

The withdrawn bill, Senate Bill 1708, sponsored by Sen. Dennis Jones, R-Seminole, like the new one, would have allowed up to five such resorts with limited gaming in five state districts.

Gaming refers to baccarat, 21, craps, roulette and other common casino games. Currently, Florida limits gambling at pari-mutuels, which mostly allow betting on horse and dog tracks, Jai-Alai, and poker games. Pari-mutuels in a couple counties are also allowed to have slot machines.

Jones says such convention, tourism and job magnets could employ 5,000 to 7,000 permanent workers each, cost $1 billion to 2 billion or more to build, and pump billions of dollars into the state economy. The industry estimates that the five resorts could bring 5.26 million visitors from outside the state, including more than 313,000 convention visitors.

Jones calls the destination casino resorts “a golden goose” because his bill provides no tax exemptions or government handouts like other economic development programs. He also points out that resorts pay property, sales and tourist taxes, and boost local economies and schools.

“Nothing comes close to creating as many jobs as this,” Jones says.

Pari-mutuels and the Seminoles

Despite the belief that his bill would create more jobs, Jones postponed his bill twice before withdrawing it after a small amendment filed by another senator changed Jones' intent.

“I don't want my name on something I'm not proud of,” says Jones, chairman of the Regulated Industries Committee. “I'd rather just pull the plug.”

The amendment to Jones's bill by Sen. Jeremy Ring, D-Margate, would have allowed the pari-mutuels to get the same games and the tax breaks without any minimum investment required.

The focus of Jones' bill was to attract more conventions and tradeshows, not to expand gambling at pari-mutuels. That's why Jones limited the number of resorts to five, put a minimum distance between them, and placed a restriction on the amount of space allowed for casinos, limiting it to 10% of the total square footage of a destination resort.

As an incentive to resort developers like Sands, Wynn and Caesar's, Jones' bill also gave a lower tax rate on a three-level sliding scale based on the dollar value of investment in the resorts. The more the investment, the lower the tax rate. The minimum investment required in Jones' bill was $1 billion to get a 20% tax rate on gross receipts.

In comparison, today the pari-mutuels pay 35%. In 2010, the Legislature cut it from 50% to 35% and gave them no-limit poker and longer operating hours. That change was an attempt to level the playing field after the Legislature approved the Seminole Indian gaming compact, a 20-year deal allowing the tribe to conduct gaming at seven tribal facilities. Jones feels the pari-mutuels have been given enough.

The Seminole Tribe guaranteed the state $1 billion in the first five years of the agreement, but those payments can stop if new games are approved in that time for any location outside Miami-Dade or Broward counties. After that, payments are on a percentage basis.

But Jones believes the new revenues from the destination resorts would offset any revenues lost from the Seminole contract, saying destination resorts “have the potential of beating the compact.” He points out that although the state might theoretically lose $150 million to $200 million a year that would otherwise come from the Seminole Tribe, the state could gain perhaps $500 million in annual revenue from the five destination resorts.

Spokesman Gary Bitner summed up the Seminoles' response in an email, writing, “The Seminole Tribe has paid the state $390.4 million to date. If the Legislature wants to allow in new entities, it will have to decide if it's a good tradeoff. Are they going to make enough to make up the assured payments from the tribe?”

Even if the state might be better off without the compact with the Seminole Tribe, that still leaves the pari-mutuels feeling shortchanged.

“It leaves us out and gives our competition a lower tax rate than us,” says Jack Skelding, a Tallahassee lobbyist for Isle of Capri Casinos, which owns Pompano Park Racing in Broward County.

Skelding and other pari-mutuel lobbyists asked Ring for the amendment to secure the same games and tax rates for pari-mutuels that are proposed for the resorts. “We're not opposed to that bill,” he says. “We just want an amendment to it.”

Jones balked. And after the postponements, and failing to get Ring to drop the amendment, Jones withdrew it seemingly ending the effort. “You'd think with 12% unemployment, and no concessions by the state, we'd have a better reception than we got,” Jones says.

Braynon's bill

Enter Braynon, 34, and just elected to the Senate after serving in the House since 2008.

Braynon's bill, SB 2050, combines much of Jones' measure with a few “tweaks,” he says, such as taking out a minimum requirement for 500,000 square feet of hotel and convention space considered too onerous for some parts of the state.

It also removes several counties around Orlando that have historically opposed gambling measures. That appears to be a smart political move.

In the House, Speaker Dean Cannon, R-Winter Park, generally opposes expansion of gaming, especially near his Central Florida home where Disney and family entertainment rule.

With Cannon an unlikely supporter, a House companion measure to the “Destination Resorts” bill has its own set of problems.

After being workshopped in one subcommittee, the House bill fell into limbo when Cannon disbanded his committee without reassigning the bill to another.

But Braynon is optimistic he can get some movement in the House now because, he says: “As a member told me, 'This is the first real jobs bill I've had to vote on.'”

Braynon's bill also includes what Ring wanted: giving the pari-mutuels the same games and the tax breaks as the destination resorts without any minimum investment requirements. Though supportive of pari-mutuels, Braynon had little choice — Ring chairs the next committee getting the bill.

Also, only those pari-mutuels located in a county where a destination resort opens can add games and use the lower tax rates, notes Braynon.

Braynon points out that if a pari-mutuel operation wants to add games it will have to invest to expand its facilities. But he concedes that theoretically a pari-mutuel could invest nothing and apply the lower tax rates.

The tax rates in the bill range from 20% for investments under $1 billion, to 15% for investments between $1 billion to $2.5 billion, and 10% for investments of $2.5 billion or more.

The bill also calls for applicants like Sands, Wynn, or Caesar's to pay the state $50 million for an initial license fee, $1 million for a background check, and a $2 million annual license fee. A seven-member Destination Resorts Commission would oversee the resorts with at least one member from each of the five districts.

The district encompassing the Gulf Coast includes 17 counties extending from Sumter County to Monroe County. County voters would have to approve each resort in a referendum.

Competing for markets

Jones says Florida is limited by the relatively small amount of convention space, especially where destination casino resorts prefer to locate. “We want to compete internationally. You need a huge area,” says Jones. “Some places have 1 million square feet of exhibit area.”

Others nearby, in addition to Mississippi and Louisiana, are already getting the message.

In February, the $3.4 billion Baha Mar destination casino resort broke ground in Nassau, Bahamas. Baha Mar developers estimate their project will raise the average annual income for a Bahamian family from $29,000 to $33,500, involve 11,000 construction workers, create 6,500-7,000 permanent jobs, and generate $1 billion to the local economy in its first year of operation.

Baha Mar includes six hotels with almost 2,250 rooms and condos, the largest convention center in the Bahamas, a Jack Nicklaus-designed golf course, a retail village and the largest casino in the Caribbean at 100,000 square feet.

And it's but 180 miles from Miami, less than a 30-minute plane ride.

Sands Expo and Convention Center in Las Vegas is the largest privately owned tradeshow and convention facility in the U.S. with more than 2.3 million square feet of meeting and exhibit space.

And Las Vegas Sands Corp. wants to bring a destination casino resort focused on conventions to Florida, as it continues to move away from “a casino-centric mentality,” says Andy Abboud, Sands' vice president of government relations and community development.

It's easy to see why the industry sees Florida's potential, especially at each end of the Tamiami Trail: the Miami Convention Center contains just 28,000 square feet of exhibit space, 34 meeting rooms, a 5,000-seat auditorium and a 117-seat lecture hall. The Tampa Convention Center operates with 200,000 square feet of exhibit space and 42,000 square feet of meeting space.

Abboud says there are many good locations in Florida, but the company is targeting the Miami area to go after the South American market.

“It's not just about the casino,” adds Abboud. “It's about all these other sources of revenue and all these other things for people to do.”

And it's also about jobs, which Braynon says he pointed out to the governor after the committee meeting. “Even if this does 100,000 jobs, the governor needs to thank me,” he says. “He's only got 600,000 to go.”