State economists want more data on resort casinos
With preliminary estimates showing only a modest bump in net state revenues from the emergence of resort casinos, state economists are going to gather additional information before analyzing the final economic impact of the controversial bill.
Initial estimates gathered by state economists with the state’s Revenue Estimating Conference Thursday predicted that the proposal will produce a short term budget boost of $155 million in 2012 but result in net benefits of only between $4 million to $102 million a year in new revenue when the casinos are in full operation by 2015.
But House spokeswoman Katie Betta said Friday the group will gather more information and return later for a final consensus estimate.
The conference includes economists from the House and Senate, the governor’s office and state agencies. Their practice is to meet together to review estimated revenue forecasts and come to a consensus on the final numbers.
The preliminary estimates were based on the state losing $99 million in annual revenue-sharing payments from the Seminoles beginning in 2015, and between $10 million and $22 million in lost gambling taxes from the five pari-mutuels that now operate slot machines in South Florida.
“There will be slots tax losses associated with the increased gambling opportunities that cannibalize from existing activity,’’ economists wrote in their analysis of the bills which are designed to bring three $2 billion resort casinos to Miami-Dade and Broward counties by 2015. They predicted that the new casino resorts will draw three percent of the slot machine business from Miami Dade and Broward’s existing racinos and 17 percent from the Seminole Tribe’s Hard Rock Casino in Hollywood.
Those losses would be offset from increases in sales taxes from construction of the resort casinos of as much as $23 million beginning in 2013, forecasters said. By 2015, when the resorts would have to be in operation, the total taxes from them would climb to between $98 million and $210 million, economists said.
The preliminary forecast is based on the provisions in the bill as it is currently drafted. It noted that there will be additional economic development sparked by the so-called “destination resort” casinos, which will include increased local property taxes and taxes associated with land purchases, but it said those estimates cannot yet be determined.
Sponsors of the bill, Republican Rep. Erik Fresen of Miami and Sen. Ellyn Bogdanoff, a Republican from Fort Lauderdale, said the economists based their estimate on provisions that they have already agreed to change.
“The revenue reduction will no longer exist when this bill is passed,’’ said Sen. Ellyn Bogdanoff, the Fort Lauderdale Republican who is sponsoring the bill with Republican Rep. Erik Fresen of Miami. She emphasized, however, that the goal of the bill is not to raise revenue for the state but to establish a “strategic direction” for the state’s hodge podge of gaming policy today. “This is not a budget debate.”
Fresen said he and Bogdanoff plan to amend the bills to give tax rates and games to the five pari-mutuels in South Florida equal to what the resort casinos would get, which will help the racinos better compete with the new casinos, thereby increasing revenue to the tax, not reducing it. The bill currently leaves the tax rate on slot machines at 35 percent for the pari-mutuels while it gives a 10 percent tax rate to the resort casinos. The sponsors also plan to require the resort casino applicants to guarantee that the revenue lost from the Seminole Tribe will be repaid.
Loss of the annual revenue from the tribe was only one of the negative factors cited by state economists. They noted that “there would be significant churning of existing tourist and convention activity” and estimated that about $97 million in activity will be shifted from existing South Florida tourism to the new resorts.
Analysis noted, however, that there will be additional sales tax revenue generated by Florida residents who would have traveled outside Florida to gamble but will now stay here, from U.S. tourists who come to Florida instead of going to other states to gamble, and from new international tourists, particularly from Latin America “who would not have come at all to Florida.”
Economists cited an Oct. 24 report by the Bernstein Research group that predicted Florida “has the potential to pull 15 percent of the business from Las Vegas.” But, they said, they couldn’t predict what that benefit that will be on state tax revenue “because the ultimate business plans and locations are currently unknown, it is not possible to develop a reliable estimate.”
Meanwhile, economists said, the Seminole Tribe will have no obligation to pay anything to the state once the new casinos start operating in 2015. State forecasters also assumed the bill will allow a resort casino to be developed in any county in the state that passes a local referendum, which would nullify the annual tribal payments to the state, the report said.
Under the 2010 compact with the Seminoles, the tribe agreed to pay the state at least $1 billion over five years. In return, the state gave the Seminoles the right to operate Las Vegas-style slots and table games such as blackjack and baccarat in Miami-Dade and Broward counties — where the tribe competes with the racinos — as well as exclusive rights to operate the games and slots in casinos at tribal locations outside of the two South Florida counties.
Their payments began with two $150 million payments in 2010, increasing to $233 million in 2012 and ending with $234 million in 2014, when they will either have to re-negotiate with the state or lose their banked card games. Economists estimate their payment would only have been $99 million in 2015.
“This was a good exercise, but there are at least two or three assumptions that are flawed,’’ Fresen said, noting that the sponsors have no intention of allowing resort casinos outside of Miami Dade and Broward. “They looked at the bill as a starting point, not where it will be.”
The first hearing on the bill is scheduled for Wednesday, when the Senate Regulated Industries Committee will conduct a workshop on it.