Concern Runs Deep Over Florida’s ‘David vs Goliath’ Decoupling Battle
Jan 12th, 2016
by Ray Paulick
The Florida Thoroughbred industry is on a roll. Breeding activity, severely impacted by the 2008 financial crisis and subsequent recession, has stabilized and there are new investors in bloodstock and farms. The Ocala Breeders' Sales Company hit a highwater mark in 2015, exceeding $150 million in gross receipts from six auctions of breeding stock, yearlings and 2-year-olds in training at its Marion County headquarters. Gulfstream Park, the state's premier racetrack, is coming off a year where a record $1.338 billion was wagered on its live races.
But many in the $1.6-billion dollar horse industry face an uncertain future if Florida lawmakers approve legislation in support of a compact between Gov. Rick Scott and the Seminole Indian tribe that has seven statewide casinos, including the hugely profitable Hard Rock properties in Hollywood and Tampa.
The compact, signed in December and pending approval of the Florida House and Senate, is a multi-faceted 20-year deal that, first and foremost, dangles a $3-billion carrot from the Seminoles to the state over the first seven years, provided certain conditions are met.
Among those conditions:
–The Seminoles will be allowed to expand their casinos to include craps and roulette tables (they currently offer slots, poker and blackjack but no other table games). They also can add more slot machines to their facilities.
–With the exception of slots and limited historical racing machines at the Palm Beach Kennel Club in West Palm Beach and one unnamed site in Miami-Dade County, no new casinos will be permitted outside of Dade and Broward counties, where horse and dog racing tracks, along with jai-alai frontons, currently have poker rooms and slot machines. Pari-mutuel operations in Dade and Broward would be able to add blackjack (with limits on maximum bets)
–An expansion of online wagering will not be permitted.
Among the conditions the compact says the Seminoles can live with is the decoupling of existing slot machine and poker room operations from the pari-mutuel licenses in Dade and Broward counties that qualified them for the gambling expansion after a statewide referendum was passed in 2004. (The constitutional amendment, which passed narrowly, required local referenda in each of the two counties.)
Decoupling surely will be the death of dog racing and jai-alai in Florida. It also would give Gulfstream Park and Calder, which currently leases its racing operations to Gulfstream, the option to keep their casino without having to offer any live racing. The same goes for Hialeah Park, which currently offers Quarter Horse racing as a condition of its slots and poker license, and the Isle of Capri Casino, which has Standardbred racing at the former Pompano Park.
The legislature, which began its 60-day session Tuesday, will consider whether to pass, amend, or reject a bill in support of the Florida governor's compact, including the controversial issue of decoupling.
Pari-mutuel operators in Dade and Broward counties, with the exception of Gulfstream Park, openly embrace decoupling, looking at the pari-mutuel license that granted them slots in the first place as a burden.
“There's not enough betting, not enough dollars to support the bricks and mortars currently in Florida,” said Maureen Adams, president and general manager of Calder Casino & Race Course, during a Jan. 7 panel discussion at the Florida Gaming Congress in Orlando. “There's a legislated requirement in Florida that bricks and mortar continue to exist. We are using resources for which there is no customer demand.”
Calder's parent company, Churchill Downs Inc., has torn down most of the track's stable area and is in the process of demolishing the grandstand. Despite the lack of a grandstand for a 40-day race meeting at Calder operated by The Stronach Group and rebranded as Gulfstream Park West, average daily wagering soared by 19 percent in 2015. In fact, wagering was up by 144 percent from 2012, the last year Churchill Downs management ran the Tropical-at-Calder meet without head-to-head opposition from Gulfstream Park.
Those business figures echo the sentiment of Bill White, president of the Florida Horsemen's Benevolent and Protective Association, stated Jan. 9 at the annual awards banquet of the Florida Thoroughbred Farm Managers, during which a panel discussion on decoupling was held.
“Churchill Downs purposely let Calder go down into the toilet,” White said. “They are one of the entities that want decoupling. Racing is an expense to the casinos.”
“Calder lost $5.5 million on Thoroughbred racing,” Adams said at the Florida Gaming Congress. “We cut a deal (with Gulfstream) that consolidated the revenue with the expense.”
Donn Mitchell, chief administrative officer for Isle of Capri Casinos, told Florida Gaming Congress attendees that racing at Pompano Park “loses $6 million a year.”
Partial decoupling – allowing all but Thoroughbred operators to cease live pari-mutuel performances – would only strengthen the position of those businesses against Thoroughbred tracks if they invested the millions of dollars in losses into player rewards programs or facility upgrades that would compete against Gulfstream Park.
“The pari-mutuel industry? That train left the station,” said Dave Jonas, CEO of Casino Miami Jai-Alai. “There is no hope for them to become in 10 years what they once were.”
Isadore “Izzy” Havenick, vice president of political affairs for Magic City Casino, which runs the Flagler Greyhound Track and Dania Jai-Alai, predicts Floridians will force the decoupling of dog racing through a referendum, similar to the one that outlawed the sport in Massachusetts in 2008. “Dog racing will be illegal in the state constitution,” he predicted. “It will be on the ballot and will get 60 percent (of the vote) and be illegal. What's going to happen to our employees and our business? Do I think decoupling makes sense? Yes.
“Pari-mutuels can't survive,” Havenick added. “It's slow. It's boring. Most people under 40 never go outside (Flagler) and look at the racetrack. Most people don't even know we have a racetrack.”
That's probably by design.
Marc Dunbar, an attorney for Gulfstream Park, spoke about Frank Stronach's commitment to rebuild the South Florida racetrack into “something new” when he tore down the old grandstand, downsized it, and surrounded the property with restaurants and shops.
“He was lampooned for being an idiot,” Dunbar said at the winter meeting of the National Council of Legislators From Gaming States in Orlando Jan. 8. “The last five years he's been heralded as a genius.”
Dunbar said doubling purse levels over the last 25 years has not stopped the decline in racing's popularity, calling it a “flawed premise” that tracks need revenue from alternative products to subsidize purses and attract more horses.
“The purses alone have not saved the industry,” he said. Dunbar urged states with casinos or slots at racetracks to “mandate that the tracks invest in the racing facility – not the casino but in the racing facility. Make it be an integrated facility. If you just give them purse money, it's not going to be successful.”
Despite Gulfstream's success and commitment to racing, many people who have invested in Thoroughbred bloodstock or depend on the industry for their livelihoods are concerned. At the Jan. 9 Florida Farm Managers meeting, several speakers talked about the need to contact legislators to express their opposition to decoupling.
“I don't know why they would consider something that would be so devastating,” said George Russell, president of the Florida Thoroughbred Breeders' and Owners' Association.
Tom Ventura, president of Ocala Breeders' Sales Company, pointed out that it's not just the farms and its employees who would be affected, but all the companies they do business with. “We need the mom and pop farm owners, the people who sell supplies, the car dealers, to get the word out on this,” Ventura said.
“Apathy is our biggest problem,” said Dennis Baxley, who attended the meeting as a member of the Florida House and a supporter of the horse industry. Baxley, running for the state Senate in 2016, urged concerned individuals to call friends and business associates outside of the Ocala area to let them know decoupling would do. “This could have a huge negative impact for the state – and not just Marion County,” he said.
The Seminoles have already launched a $500,000 advertising campaign in support of the compact. “This is David vs. Goliath,” said the FHBPA's White.