Casino Enterprise Management

Over the past year, the gaming issues in Florida have been carefully followed by the national press corps and extensively reported. There have been so many apparent gains and corresponding reversals that trying to sort them out can be dizzying, and keeping them straight positively maddening. With that said, explaining the current state of affairs in Florida and what has, and has not occurred, requires some perspective.

Any comparison of the current state of gaming in Florida to that of 12 months ago should start by recalling the Grammy-winning song by the great blues vocalist Dinah Washington titled What a Difference a Day Makes. Deemed by many musicologists to be the most “perfectly recorded” song in American music, it offered an uplifting look at what can happen with time, in that case “24 little hours”—sun and flowers where there used to be rain, love instead of lonely nights, rainbows instead of stormy skies and blissful moments. The song’s message was that things do get a lot better, and often in a short period of time.

Optimists might take that message to a higher level, concluding that if change for the better can occur in one day, then things have to get a lot better after 365 days. Those people have not been following the gaming developments in the Sunshine State.

A year ago, the entire gaming situation in Florida was mired in the muck of a political war between former Gov. Charlie Crist and the leadership of the state legislature. However, as often is the case in the political world, some dramatic developments occurred over a few months and many observers concluded that the whole gaming picture had suddenly become much brighter. The Dinah Washington message that things get better ostensibly was becoming reality:

1. As of April a year ago, there was no Class III gaming compact between the state and the Seminole tribe because the legislature had successfully negated through litigation a compact negotiated by Crist. By late June, a compact had been negotiated and approved, both ending that particular political impasse and making provisions for adjusting tribal payments in anticipation of the legalization of intrastate Internet gaming. Through that compact, the state was to receive hundreds of millions of dollars from Seminole’s seven casinos, although the payment amounts would be adjusted downward with expansion of non-Indian gaming, an expansion that the parties seemed to accept as a certainty.

2. While the judicial rejection of the Crist compact invalidated the provision pursuant to which the Seminole tribe had agreed to make payments to directly support the state’s schools, that financial setback was resolved with approval of the second compact last June.

3. A year ago, the speaker of the Florida House was formally demanding that the federal government assess heavy fines against the Seminole tribe for conducting illegal gaming and close all of its Class III gaming operations. The federal government did neither of these things. The June compact also resolved this issue.

4. A year ago, there were proposals that the legislature approve non-Indian casino gaming throughout the state as a push-back to the Seminole’s monopoly on Class III gaming. Sometime after June, the legislature began considering such legislation.

A further development in the efforts to expand gaming was manifested in “anticipatory” intrastate Internet gaming language in the June compact and indications from the legislature that it might be willing to consider such Internet gaming of some type as well as a credible consideration of an expansion of brick-and-mortar non-Indian casino properties.

By mid-summer 2010, the state song easily could have been What a Difference a Few Months Make.

But then, the legislature convened to take up all of the new ideas on how to expand gaming in Florida and produce much needed new revenues. And things went downhill just as quickly as the prospects for expanded gaming had brightened.

First up was legislation introduced by State Sen. Dennis Jones (R-Seminole) to authorize five “destination resorts” within the state. It was described as “clean” legislation designed to both expand casino gaming throughout the state and generate major new revenues for a virtually bankrupt state government. Similar bills were introduced by Rep. Erik Fresen Bove (R-Miami) and Sen. Oscar Braynon (D-North Miami Beach). Financial studies were commissioned and they forecast new annual corporate income tax and sales tax collections of approximately $52 million. The movement was given additional firepower when some of the largest casino companies in the country, including Las Vegas Sands and Wynn Resorts, expressed interest in opening casino/hotel resort properties in the state.

About the same time, other legislators were declaring serious interest in authorizing intrastate Internet gaming—particularly video poker—and a nationally known expert in Internet gaming law was invited to address the issue at a public hearing in Tallahassee. In early 2011, implementing legislation was introduced by Rep. Joseph Abruzzo (D-Wellington) and Sen. Miguel Diaz de la Portilla (R-Miami).

And through it all, the Seminole tribe’s gaming operations continued to generate revenues for the state, earning accolades for the tribe throughout the state.

However, concerns as to each of these new proposals were raised immediately upon their being presented. There are strong political interests in Florida’s already existing gaming world, and they did not intend to allow an undermining of their position in the market.

The state’s pari-mutuel industry—which largely survives because of slot machines and poker rooms—mounted a behind-the-scenes opposition to the destination resorts legislation, and this opposition was described by at least one political writer in the state as “fierce.” While that opposition alone probably meant the defeat of the entire proposal, the Seminole tribe assured its defeat by joining that opposition with the acknowledged objective of preserving its monopoly on the Class III casino gaming authorized by its 2010 compact: slot machines, blackjack and other card games (but not craps). By late March, the legislation publicly was declared dead for the current legislative session.

Meanwhile, the intrastate Internet poker legislation also hit the wall. Although Sen. de la Portilla’s bill sailed through the Senate Regulated Industries Committee by a 10-2 margin, it failed to be approved by the Criminal Justice Committee in the face of opposition by a number of groups including the Florida Sheriffs’ Association, which apparently conducted an aggressive lobbying campaign to defeat it. The intrastate Internet gaming legislation was declared dead by mid-April.

Finally, in a matter unrelated to the gaming battles in Tallahassee, not even the revenue-producing Seminole tribe was immune from attack. The tribe recently found itself involved in a nasty argument with the United States Departments of Justice and Defense after federal attorneys compared its tribal ancestors to the terrorist group al-Qaida. This statement is contained in a brief filed with the U.S. Court of Military Commissions Review, and while the federal government has offered something purporting to be an apology, the brief has neither been withdrawn nor even revised.

Thus, despite all of this gaming activity and the extensive news coverage, the current status is that Florida’s gaming industry is in virtually the same place it was in last summer, despite the expenditures of a great deal of time and money in pursuit of change. As stated previously, a year ago, the entire gaming situation in the state was mired in the muck of a political war involving the state legislature. And that’s the situation today. 

As they prepare for the next round in the legislature, the players probably should start learning the words to Fleetwood Mac’s Don’t Stop Thinking About Tomorrow. The old song didn’t work for them.

Where Does Florida Go From Here?

Intrastate Internet poker is a hot commodity currently. A number of states were vying to be the first to legalize it, including Florida. For a while, it appeared that New Jersey would be the first state to approve video poker, but the effort died when the governor vetoed the legislation at the 11th hour. Florida squandered its opportunity to be first through the legislature’s intransigence, and the political fights there raise questions as to whether it ever will join the club. Meanwhile the District of Columbia is poised to win this particular race, with its Internet poker bill being enacted in early April. Moreover, Iowa and Nevada have been working to enact similar legislation and, by late April, appeared to be on track.

Thus, Florida has fallen behind in its efforts to realize revenues from Internet poker. And, the state has a substantial problem with any attempt to expand casino gaming because of the Seminole compact.

The federal Indian gaming law prohibits state taxation of Indian casino profits. However, states can bargain with tribal casinos for revenue payments if they, in turn, guarantee some form of “exclusive gaming opportunity” to the tribes, an opportunity that the tribes legally can “purchase.” The exclusivity factor is critical to states today as more and more governors desperately seek new sources of revenues. However, the Seminole tribe already has its deal through the June compact and probably sees little incentive to bargain further. This means that any new gaming revenues have to come from non-tribal casino properties. However, if non-tribal concessions infringe on the scope of gaming exclusivity guaranteed the Seminoles, the tribe would be getting less exclusivity than it bargained for, and that development could lead to a determination that the Seminoles can terminate all state payments from its casino revenues. Those payments total hundreds of millions of dollars annually, guaranteed dollars that might not be replaced through non-Indian casino expansion.

The sorry state of Florida’s economic condition was dramatically outlined in an article written by George Packer for the Feb. 9, 2009, issue of The New Yorker magazine. It was titled “The Ponzi State,” and the title probably says all that is necessary for the purposes of this article. In short, Florida was in economic distress and had a shot at some substantial change in its gaming industry and the state revenues to be generated thereby. A year later, it still has not found a solution to the problem.

Dennis J. Whittlesey is a member of the law firm of Dickinson Wright PLLC in the firm’s Washington, D.C., office, specializing in Indian law and Indian gaming law. He is a member of the District of Columbia and Oklahoma bars, and is admitted to practice before a number of federal trial and appellate courts.