Florida Gaming - Seminole Blues

Posted At : March 23, 2009 7:57 AM | Posted By : James Karmel
Related Categories: Florida, 2008 top ten stories, Gulfstream Park, Seminoles

More bad news for the Seminoles out of Florida: late last week the legislature's chief economist reported that the existing compact would take approximately $95 million from the state's tourist & convention business. As well, the analysis estimates that the Seminoles will gain a substantial advantage with slots via their compact, over the pari-mutuels.

Basically, the report is another blow to the Seminoles' hopes to maintain their current compact. It is especially negative with regard to the tribe's economic projections, in terms of wages for example, and the amount of Seminole-generated revenue that will stay in the state. On this point, Seminole CEO Jim Allen was dismissive, he defending the tribe's projections.

The main effect of the report is political: more reason for the select committee to recommend something other than approval of the existing compact. This is becoming a foregone conclusion.

The analysis also focuses on the current credit market and suggests that the planned Seminole expansion would take place regardless of the compact being ratified. Yet, conversely, it also notes the likelihood that the poor credit market would suppress the tribe's planned $3 billion expansion, but also that it would not necessarily be reliant on the existing compact's terms:

In any event, it is not clear how much (if any) of the $3 billion resort expansion would have taken place in the absence of Class III slots and table gaming. Attributing 100% of anticipated future activity to the compact's approval likely overstates the reality. Significant expansion has clearly taken place in the absence of the conversion. For example, the Seminole Tribe opened another facility in 2006 when viable gaming was Class II electronic machines. In addition, all Indian gaming facilities in Florida had 7,700 machines in 2004 (a 69% increase over the prior year), and 8,641 machines in 2006.2 During this period, the Seminole Tribe also acquired the Hard Rock business, including the licensing agreements related to Hard Rock Casinos.

Here's where the report runs into problems: the compact for table games and slots expansion for the Seminole Hard Rock casinos is a far cry different from the Class II expansion that took place all over the state between 2002 and 2006. While the projections viz the existing compact may indeed be rosy (they always are), there's a good chance that it could pay off dramatically the way the Seminoles indicate.

While political momentum is leaning the pari-mutuels' way, economic momentum is not. The bankruptcy of Magna Entertainment a couple of weeks ago (Gulfstream's parent company) emphasized that. To the north, the Connecticut gaming tribes seem to be faring better than their commercial counterparts. So, a good question is whether in the absence of the Seminoles' compact-driven expansion, will Florida's commercial operations likewise develop Florida gaming? Meanwhile their tax rates are likely to drop (which I support), thus bringing in less revenue for the state. Allowing the Seminoles' their existing table games monopoly outside of south Florida may not be very tangible or politically tenable anymore, but the prospect of a guaranteed revenue stream should still have some appeal to lawmakers. The recession economy's impact on the gaming industry only serves to emphasize this point.

Comments (2) |

Print |

Send |

Linking Blogs |

del.icio.us |

Digg It! |

facebook |

reddit |

StumbleUpon

GA's Top Ten Stories for 2008

Posted At : December 30, 2008 12:38 PM | Posted By : James Karmel
Related Categories: 2008 top ten stories

The focus here is clearly on east coast and, especially, mid-Atlantic gaming. So, I haven’t included big news from Las Vegas, Macau or Sheldon Adelson in sticking with Gaming Atlantic’s theme.

10. Delaware moves towards sport betting: In a sign of increasing mid-Atlantic competition, the governor of Delaware and state legislature put sports betting on the table for potential implementation in 2009. Delaware is the only east coast state that can offer sports betting, with a waiver from the 1992 federal law that banned it nationally in places where it didn’t already exist. However, Delaware’s proposal is quirky – with the current proposal only allowing wagers on combination bets. It is also unclear whether this will run through the existing gaming facilities in the state or separate sites. Nevertheless, if Delaware gets this done, it will be the only venue for legal sports betting in the US outside of Nevada and have a lucrative potential. Its also reminiscent of when Resorts opened in Atlantic City in 1978, giving New Jersey a monopoly on legal casino gaming outside of Nevada at that time.

9. The Atlantic City Council’s smoking ban follies: A serious issue that devolved into something of a farce. The city council voted to completely ban smoking from the Atlantic City casinos, extending the state’s partial ban already imposed. The council responded to an activist group of casino employee constituents, but drew heavy criticism from casino executives and others who were quick to blame the partial smoking ban on Atlantic City’s 2008 nosedive. It denigrated to farce in October when the Council gave in to pressure and relented on the ban after lots of uproarious back-and-forth in Atlantic City. The total ban did actually go into effect for a few weeks. At one point, the issue was held up in the city council when a council member was on vacation.

8. Pinnacle & eminent domain in Atlantic City: Pinnacle convinced the city’s planning commission to use eminent domain to sieze one nearby business, but didn’t get all that it wanted. In the meantime, Pinnacle’s efforts to expand its domain to Atlantic Avenue faced opposition from a mobilized group of business owners. The story is interesting because it wrote another chapter in a long-running story of gaming development in Atlantic City, in which there’s often been conflict between local interests and outside casino firms. Of course, the contretemps over Pinnacle’s use of eminent domain lost attention when the casino officially suspended its Atlantic City project in November. (see #4)

7. Aqueduct gaming approved & New York gaming makes progress: After some wrangling, New York legislators finally achieved a deal that will allow Aqueduct racetrack to develop into a large-scale gaming facility. Buffalo-based developer Delaware North won the contract to make Aqueduct into a major facility, with hotel, retail and convention space, along with 4,500 VLTs. Located in New York City and easily accessible through various means of public transportation, Aqueduct could prove to be a real blockbuster for east coast gaming. The green-lighted project also signaled the Empire state’s new momentum for gaming expansion that coincided with new partisan dynamics in Albany subsequent to the 2008 election. With Democrats attaining control of the state senate, a pro-gaming Democratic governor and a Democratic Assembly, political obstacles to New York gaming appear much less formidable than in the past. In the meantime, Long Island’s Shinnecock tribe also moved affirmatively towards a big tribal casino in eastern Long Island, and legislators pushed forward on allowing electronic table games at the state’s existing racinos.

6. Pennsylvania gaming continues its hot streak: In sharp contrast to Atlantic City, Pennsylvania gaming operations continued to bring in tremendous revenue throughout the year. From November 2007 to November 2008, revenue was actually up 13% in PA, despite the recession. Indeed, the recession and gas price spike didn’t appear to impact Keystone state properties nearly as much as elsewhere. As well, the Foxwoods and SugarHouse casino projects won their legal and political battles to move forward in Philadelphia with a victories in the Pennsylvania Supreme Court and in the Philadelphia city council. Yet—SugarHouse and Foxwoods now have to contend with another legal action – this time a suit filed by Trump Entertainment to halt their development. In addition, Foxwoods is still dealing with a fired-up local anti-gaming movement, now seeking to block its casino planned in its new location in downtown Philadelphia. Whether novelty, good locations or a general trend towards non-destination gaming, Pennsylvania was a major bright spot for east coast gaming in 2008.

5. Massachusetts legislature rejects Governor Patrick’s casino plan: After lots of study, planning and legislative work, the Massachusetts legislature killed the governor’s plan for three full-scale casinos, an estimated $1 billion in state revenue and 20,000 new bay state jobs. This was a huge defeat for casino backers who had sought to open up the lucrative New England marketplace with strategically–placed casinos in 3 different regions around the state: Boston, SE Mass and western Mass. The casinos would have undoubtedly drawn a significant amount of patrons otherwise headed for Foxwoods and Mohegan Sun in Connecticut. The failure of the Patrick plan also provided an opening for the Mashpee Wampanoags to move forward on their plan to establish a tribal gaming operation in eastern Mass., not far from Boston and Cape Cod.

4. Atlantic City projects put on hold: In 2008, MGM Mirage, Gateway LLC and Pinnacle all suspended their projects in Atlantic City due to the collapse in the capital markets and their own troubles due to gaming’s recession. Within a few months (between August and November), approximately $8-9 billion in development capital was taken off the table in Atlantic City and the town’s dreams of a glamorous, rejuvenated future put on hold. Further along, the Revel project was the only one that moved forward. While any of the projects could be re-started at any point, the suspensions were a big blow to the AC psyche and its gaming community.

3. Maryland legalizes gaming: In a November referendum, Maryland voters finally legalized gaming as voters approved the establishment of five VLT casinos and/or racinos with 15,000 VLTs around the state. However, the price to get this accomplished was high in terms of gaming, with future Maryland VLT operators subject to a 67% tax on gross revenues from the VLTs. Yet, with the two biggest properties slated for the Baltimore-Washington area, gaming interests across the mid-Atlantic took note and the two states most directly impacted (West Virginia & Delaware) reacted quickly by looking into ways to maintain their Maryland customers – estimated at 30-35% of their gaming base.

2. Seminoles expand to table games in Florida: Without lots of media notice outside Florida, the sunshine state’s unfolding drama involving the Seminoles, the tribe’s Hard Rock casinos, racinos, the governor, state legislature and FL Supreme Court is very interesting. At stake is nothing less than the independence of tribal gaming itself: that is whether it is truly not subject to state regulation via the Class III compact system of the Indian Gaming Regulatory Act (1988). After striking a deal for a table games monopoly with Governor Charlie Crist in late 2007, the tribe found itself in a the midst of a huge controversy. The legislature pushed back against the deal and the state’s Attorney General successfully sued in the FL Supreme Court to nullify the state-tribe compact negotiated by Crist. But, the tribe refused to buckle, expanded its casinos anyway and won in a US district court to keep the table games going at the Hard Rock casinos and another site. The battle pits the tribal casinos against the legislature and the state’s racinos (called “pari-mutuals”) which strongly oppose the monopoly given the tribe on table games in exchange for a set amount of annual revenue to the state. Meanwhile, the AG has appealed to the National Indian Gaming Commission and a US district attorney to enforce the FL court’s action – to no avail. There are lots of interesting angles to this situation: tribal vs. commercial gaming, federal vs. state authority over tribal gaming, and the viability of the Class III regulatory system. Florida’s large population and huge tourist industry also make it very significant. The drama is still unfolding: the legislature has established a sub-committee to re-do the compact, but whether it will be acceptable to the Seminoles and eventually replace the original compact is an open question. This could be resolved easily with a new compact accceptable to all parties by January or March of 2009. Or not.

1. Atlantic City’s revenue decline: 2008 was a terrible year for Atlantic City gaming. At the end of November, the city was down 6.7% in gaming ‘win’ from 2007, and 2007 was the first year ever in which gaming revenues declined from the year before. The casinos have laid off thousands of employees, and total casino employment is about 39,000 –the lowest number in 20 years, down from a high of over 51,000 in 1997. Recently, two major AC operators—Colony Capital and Trump Entertainment missed bond payments. Pennsylvania competition, the gas spike, recession economy, project suspensions (see #4) and partial smoking ban created a perfect storm for AC and has cast a major pall over the town. Basically a one-industry region, Atlantic City and Atlantic County circumstances rise and fall with the casino industry and this year they have fallen a lot. As the region’s leading gaming destination, Atlantic City’s troubles are very significant and bring forth various questions. For example, could Atlantic City’s problems be opportunities for other gaming destinations? Does Atlantic City’s downturn (& Pennsylvania’s rise) signal a major shift from destination to non-destination gaming on the east coast? Amidst the decline, there’s been some good news for AC: Borgata and Harrah’s maintained a modest level of success with creative gaming strategies and the new ‘Chairman’ tower at Trump Taj Mahal appears to have had the desired effect of reviving that casino’s prospects. Meanwhile, the legal obstacles to the Tropicana bankruptcy sale are mainly gone, meaning that the Trop should have a new owner soon and move on from the troubles that have beset the property since 2006. Finally, the city at least has a stable political structure for the time being. Amidst the gloom at Resorts (one of the worst 2008 performers), a bright spot has been the success of its 1970s-themed ‘Boogie Nights’ disco. People have been flocking to it on weekends when it opens in a banquet room above the driveway arcade. In fact, people are partying there like its 1978, and I’m wondering just how and when will that 1978 spirit really return to Atlantic City?

Comments (0) |