Here’s a Clever Way to Bring Slots to Miami Print
Written by Erik Bojnansky, Senior Writer   
April 2014

Hold a horse race in a parking lot, co-host a nonprofit, hire heavyweight lobbyists

WGambling_1hen executives from the Genting Group announced their intent to build a gigantic casino resort in Miami’s Omni area three years ago, they didn’t mention anything about horse racing.

Yet horse racing is the key to the Malaysian conglomerate’s latest scheme to bring gambling to Miami’s Biscayne Corridor.

No, a racetrack won’t replace the Miami Herald building. Instead, Genting wants to partner with Gulfstream Park in Hallandale Beach and two associations representing thoroughbred racehorse owners in a venture that could enable Genting to open a casino with 2000 slot machines, poker card rooms, and betting for televised racing events.

Such a casino will be far smaller than Genting’s original plan to build a $3.8 billion resort casino on a 30-acre swath of territory that includes the old Miami Herald building, the Omni Mall complex, and the historic Boulevard Shops. Back in September 2011, Genting sought to build a 24-hour mega casino called Resorts World Miami that featured up to 8500 slot machines and Las Vegas-style table games. Unfortunately for Genting, the state legislature failed to pass a casino resort bill in 2012, although Genting hasn’t given up on the idea. (More on that later.)

Actually, casinos of any size are still illegal in Miami’s downtown area, but that might change. Two bills are pending in the state legislature that, if passed before the legislative session ends May 2, could allow Genting to open a Miami casino by the end of this year. How large a casino depends on which bill passes.

Gambling_5Lonny Powell, CEO of the Ocala-based Florida Thoroughbred Breeders and Owners Association (FTBOA), hopes the legislature passes HB 1383, the house bill that would permit the smaller version. His organization is one of two groups partnering with Genting and Gulfstream to set up a 2000-slot casino. Some of the proceeds, Powell says, would help the state’s sizable thoroughbred horse-breeding industry, fund programs for injured jockeys, bankroll a charity that pairs retired racehorses with caring humans and organizations, and enhance purse prizes.

“We’re aiming to get all this done now,” Powell says. “I think this deal is unprecedented in terms of racino deals [combined racetrack and casino], unprecedented.”

The Genting Group and the company’s main lobbyist in Tallahassee, Brian Ballard, didn’t return phone calls from the BT, but if news stories published in local media are accurate, the casino would be set up within the former 600,000-square-foot Omni International Mall. (Three 60-story towers, a bay walk, restaurants, shops, and underground parking are planned for the site where the Herald building, or at least what’s left of it, now stands.)

Even with just 2000 slot machines, the Omni casino would be among the largest in South Florida. Although smaller than the Seminole Hard Rock Hotel & Casino, which claims to have 2600 slots, the Omni casino would surpass the “over 1900” slots at Miccosukee Resort & Gaming and dwarf the slot inventory of legal gambling businesses like Miami Jai-Alai (1000 slots) and Magic City Casino (800 slots). Gulfstream Park only claims to have 850 slot machines.

John Kindt, a professor of business and public policy at the University of Illinois at Urbana-Champaign, says a downtown casino with 2000 slots will rake in hundreds of millions of dollars annually. Kindt, a fierce opponent of gambling who has studied casinos since the early 1990s, says each slot machine would earn at least $300,000 a year.

Gambling_3But a windfall for the casino owners will come at a cost to the downtown area, Kindt argues. The more money slot machines take from an area, the less money its people have to spend on other things -- like entertainment, food, appliances, and rent. That’ll soon translate to closed businesses and lost jobs. “Slot machines aren’t generating anything [for the community],” Kindt asserts. “They’re taking money away from people.”

Frank Nero, a local business consultant who served 17 years as CEO of the Beacon Council, says an Omni casino could kill Miami’s resurgence. “Slot machines aren’t targeting high-rollers from Asia,” says Nero, now president of Beacon Global Advisors, countering Genting’s early claims that Resorts World Miami would attract rich “whales” from Asia. “These slot machines are targeting the elderly, the poor, and the gambling-addicted.”

It isn’t just anti-casino activists who are against such an expansion. Current racino operators like John J. Brunetti Sr., owner of Hialeah Park Race Track, are opposed to Genting’s plans as well. “I think we have enough gaming locations in the state,” says Brunetti, whose pari-mutuel has 882 slot machines. “I don’t think we have to turn Florida into Nevada.”

Kindt agrees that Florida’s existing gambling institutions should be wary of Genting’s intentions. “It’s going to be huge competition,” Kindt says of Genting’s downtown casino. “It’s going to be the 500-pound gorilla.”

Genting hasn’t given up on its mega resort casino either. Neither have other out-of-state casino operators like Las Vegas Sands and Caesars Entertainment, which are still lobbying Tallahassee for the right to build gigantic casinos.

If passed, a new casino resort bill called SB 7052, which was drafted by the Florida Senate Committee on Gaming, would enable gaming companies to compete for the right to build two $2 billion resort casinos -- one in Miami-Dade and one in Broward -- with 24-hour gambling and games such as blackjack, baccarat, and roulette. A proposed five-member Gaming Control Commission, appointed by the governor, would pick the top applicants for Miami-Dade and Broward.

But SB 7052 won’t move forward until after Gov. Rick Scott negotiates a new gaming compact with the Florida Seminoles. Scott hopes to double the amount Florida receives from the Seminoles in a new compact, according to a recent News Service of Florida article.

Gambling_4Under the current deal, which was signed in 2010 and expires in 2015, Florida receives at least $233 million a year from the Seminoles. In exchange, the tribe has the right to operate Vegas-style slot machines and high-stakes poker in its casinos (including the Seminole Hard Rock Hotel & Casino in Hollywood) and the tribe retains exclusive rights to “banked” card games such as blackjack and baccarat. (Horse tracks, dog tracks, and jai alai businesses in Miami-Dade and Broward can have up to 2000 slot machines but are restricted to poker in their card rooms and can be open for just 18 hours on weekdays.) Under the current deal, the Seminoles can cut their payments if new slot machines open in Miami-Dade or Broward.

So Genting went to plan B: This plan meant partnering with a nonprofit that funds adoption programs for retired thoroughbred horses, one that happens to have a transferable gaming permit, and persuading the state’s Department of Business and Professional Regulation to allow the partnership to operate a smaller, 2000-slot casino.

In 2011 the state legislature created a law that allowed racinos to donate their quarter-horse racing permits to a nonprofit group partnered with the FTOBA for “limited thoroughbred racing.” That nonprofit can then transfer the permit’s gaming rights to another location in the same county.

Gulfstream just happened to have two permits: one for thoroughbred racing (used since 1944) and one for quarter-horse racing (issued in 1982).

Soon after the law’s passage, Gulfstream’s owner, the Stronach Group, a Canadian company that owns four other horseracing tracks in the United States, teamed up with the FTBOA and the Florida Horsemen’s Benevolent and Protective Association, to form a charity called Gulfstream Park Thoroughbred After-Care Program.

In July and December of 2013, the charity ran races on a makeshift track within Gulfstream Park. The track (apparently created expressly for this purpose) was located at the southern end of Gulfstream’s property, which is mainly parking lots. That portion of the property actually lies within Aventura’s city limits.

The races were brief, but enough for Marc Dunbar, Gulfstream’s lobbyist, to argue that the nonprofit should be able to transfer its gaming rights 15 miles south for Genting’s Miami operation. This past March 8, the Florida Department of Business and Professional Regulation officially declared that the permit was restricted to Broward County and rejected the request.

Enter Plan C: inserting language into any pending gaming legislation that would make the transfer legal. Here, Genting and Gulfstream found a willing ally in the form of Florida State Rep. Robert “Rob” Schenck, a 38-year-old Republican from Spring Hill who chairs the House Select Committee on Gaming.

Schenck amended the pending HB 1383, which also seeks to create a governor-appointed gaming commission, to allow nonprofit permits for “wagering” and “other gaming” to be moved across county lines. In a likely nod to ongoing negotiations with the Seminoles, the bill states that the permit transfer cannot have a “net negative impact on state revenues, including those generated under gaming compacts.” The permit transfer also has to be approved by the gaming commission.

Unlike SB 7052, the house version has moved forward. On March 19, the House Select Committee recommended its approval.

As of press deadline, HB 1383 doesn’t specifically allow pari-mutuels to lease slot machines to another location. Matt Bryan, FTBOA’s lobbyist, maintains that the nonprofit permit carries with it the right to have up to 2000 slots. But Steve Geller, a Broward lobbyist, pro-casino advocate, and former state legislator, says current state law indicates otherwise. “The way I read the statutes, slot machines can only operate at the actual facility where they have the pari-mutuel,” Geller says.

In other words, Genting might be able to open a card room and televised sports betting on its holdings using the nonprofit’s permit, but not slot machines. “You can make several million dollars off of card rooms and pari-mutuel wagering,” Geller says. But the profit margin for a casino without slots, he admits, won’t be anywhere near as high as a casino with slots.

That could be a problem for Genting Group, a rapidly expanding global gaming empire that already has casinos in Malaysia, Great Britain (40-plus in that country alone), the Philippines, Singapore, the Bahamas, and New York. Besides Miami, Genting has plans to open casinos in Las Vegas, Korea, and Japan.

The publicly traded corporation has taken some hits. Genting reported an 81 percent drop in profits in the last quarter of 2013, partly because of lower profits at its Singapore casino, known as Resorts World Sentosa, and “due to the start-up of leisure and hospitality interests in the United States,” according to The Malaysian Insider.

To raise cash, Genting Hong Kong Ltd., a subsidiary of the Genting Group, is selling its shares of Miami-based Norwegian Cruise Lines, according to Malaysian business news outlets.

Frank Nero is sure the Genting Group is under pressure to build a casino in Miami. After all, the company did spend $500 million buying land and buildings near Biscayne Bay; untold millions in design, construction, and lobbyist fees; and at least $3.5 million in campaign contributions since 2011. According to state campaign reports, Genting entities have so far spent close to $1.5 million on state candidates, political parties, political action committees, and electioneering organizations for just the upcoming 2014 state elections.

Although Genting denies it, some Miamians and Bahamians believe the company bought Bimini Bay Resort in the Bahamas, as well as the Bimini Superfast vessel that ferries passengers between the PortMiami and Bimini, with the intention of establishing a firmer foothold for a casino in Miami. (See “Cruising for Fun and Profit,” October 2013.)

“Genting has a lot at stake here,” Nero says. “They paid a large amount of money for land near downtown Miami, and now they want to see some return on their investment.”

A future gaming commission, as envisioned by both SB 7052 and HB 1138, could interpret state law differently and grant Genting’s request for slots. John Sowinski, an Orlando political consultant affiliated with NoCasinos.org, says leaving casino oversight to a gaming commission would virtually ensure that gambling interests take over the state’s politics and economy. Eventually, he predicts, the commission will be packed with individuals beholden to the gambling industry: “We fear a situation where the legislature cedes authority to a new administrative and strong gaming commission that becomes more powerful over time.”

But the folks who really should be afraid, Sowinski believes, are those with a stake in Miami’s downtown area. “There will be a giant sucking sound of money coming out of local businesses,” he forecasts. “You have a spectacular renaissance going on in downtown right now, built around an arts center, sports, a lot of different things that are going on. You have a lot of cafés, bars, and restaurants. A lot of that around [the casino] will suffer. Some would go out of business. Gambling is a parasitic industry. It’s not an industry that adds value. It extracts value.”

 

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