Saturday, May 26, 2018

Gov. Rick Scott's negotiations with Seminole Tribe could be blueprint for gaming's future

TALLAHASSEE — Gov. Rick Scott, who made a career out of negotiating hospital mergers, is now applying his negotiating skills to a deal with the Seminole Tribe that could singlehandedly dictate the future of gaming in Florida.

The legal agreement, known as a compact, could open the door to swanky resort casinos in Miami-Dade and Broward, or force them to remain off limits indefinitely. It could allow for dog racing to be replaced by arcade-style games, or close loopholes in state gambling law. It could allow for lower tax rates at the state's horse and dog tracks and jai alai frontons, or force them to remain at a competitive disadvantage with the tribe.

Or it could do nothing, leaving in place the status quo.

Like any good negotiator, Scott is keeping his cards close to the vest and neither he nor the tribe is talking.

Records show the governor's general counsel, Pete Antonacci, hired two Minnesota law firms in December that specialize in tribal law to "provide advice and assistance on tribal-state compact negotiations." Antonacci traveled to Fort Lauderdale recently to meet with the tribe's top lawyers.

And the most potent sign that the governor is talking: his office asked legislators to stop discussions of its gambling bills to avoid losing his leverage in the deal. That prompted House Speaker Will Weatherford last week to officially declare "lights are out" on gambling legislation for the session.

"The compact truly has become the cornerstone of gaming policy in the state of Florida,'' said Sen. Bill Galvano, R-Bradenton, who helped negotiate the current compact but has not been invited to be part of this year's discussion.

The tribe's right to operate blackjack and other card games at five of its seven Florida casinos expires next year, and the tribe wants the compact to renew those games. But the agreement must be ratified by the Florida Legislature, where pro-gaming Republicans have joined with pro-gaming Democrats to push for expanding gambling options at Florida's pari-mutuels and to bring resort casinos to South Florida.

Many legislators say that to get the votes for a compact, the governor will have to find a way to help Florida's gaming establishment compete with the tribe — or unify the anti-gambling lawmakers to support a compact that is close to status quo. For most of his term, the governor has not been an aggressive negotiator in the face of a divided Legislature.

"I will lead the effort to defeat ratification of the compact if it's a sellout to the Indians the way the last one was,'' said Sen. Jack Latvala, R-Clearwater, who supports expanded gambling. "We penalized a lot of other facilities that had been in business in Florida for 60 and 80 years and gave the Indians a monopoly. I think that's wrong."

House Democrats, many of whom represent South Florida pari-mutuels, are also considering voting together to defeat any compact that doesn't either lower tax rates or expand gambling options for pari-mutuels.

The pari-mutuels and casino companies have invested heavily to help their cause. They contributed $572,000 in the first quarter of this year to the Florida Democratic Party and $682,000 to the Republican Party of Florida over the same period. The Seminole Tribe gave each party $150,000 as session began and negotiations were underway, and gave the governor $500,000.

Also absent from the negotiating table is one player that overshadows anything the governor agrees upon: Charlie Crist, the former Republican governor turned Democrat, who is likely to win the party's nomination to face Scott in November. Crist negotiated the current compact in 2009; the Legislature approved it in 2010.

Under the agreement, the tribe agreed to pay at least $234 million a year in exchange for the exclusive right to operate slot machines at four casinos outside of Miami-Dade and Broward. The tribe also got exclusive rights to blackjack, chemin de fer and baccarat at the Hard Rock Casinos near Hollywood and Tampa, and three other casinos.

The force behind the compact is money. As long as the state agrees to give the tribe something of value — such as the exclusive right to operate games — the tribe pays the state a share of its revenue. If the state does something to reduce that value — such as approving the construction of additional casinos — the tribe can stop its payments, according to the terms of the deal.

The threat of the state losing that money has worked to keep competitors at bay and gaming expansion off the table.

"The compact is the primary brake on the expansion of gaming, ironically,'' said Barry Richard, a lawyer for the Seminole Tribe who helped negotiate the current deal.

Even skeptics of the original compact are now supporters. John Sowinski, director of the Orlando-based No Casinos organization, said that his organization would like to see the compact renewed, but "would oppose anything that gave them more."

"The revenue arrangement serves as a useful deterrent,'' he said. "It's like mutually-assured destruction from a gambling standpoint."

The current agreement has produced more than $1 billion in revenues for the state over the past five years and, while the compact lasts for 20 years, the card game provision expires on Aug. 1, 2015. Scott is widely expected to want to improve on Crist's compact by doubling the guaranteed revenues to at least $2 billion over five years.

An analysis by Spectrum Gaming Group, commissioned last year by the Legislature, estimated that the Seminole Tribe makes about $2.06 billion a year from combined slot and card game revenues at its seven casinos.

By contrast, Spectrum estimates that the eight casinos in Miami-Dade and Broward make about $2.7 billion from their slot machine revenue combined, prompting many legislators to demand that the governor shift state policy to favor the pari-mutuels.

Five years ago, the state "didn't have a whole lot of leverage," Galvano said. The tribe was illegally operating blackjack already. The Legislature was in the throes of a recession and was eager to get the revenue from the tribe and negotiators had to work out every detail — from the placement of ATM machines to smoking rules.

"Now, the negotiating posture is so much better,'' he said.

Public attitudes about gaming have also changed. Numerous polls show Florida voters broadly support the expansion of gambling in every region of the state; casino giants like Las Vegas Sands and Genting's Resorts World are eagerly investing in lobbying lawmakers to bring resort casinos to Florida, and the sentiment among legislators is that private-sector gambling should expand.

Another recent development is the Poarch Band of Creek Indians, a federally recognized tribe that owns a one-acre parcel of land in northwestern Escambia County. They have asked the governor to negotiate a state compact to allow it to operate slot machines and table games. The governor has not yet responded.

Both tribes are sovereign nations that cannot be forced to pay taxes and, under federal law, the state may only accept payment from a tribe if it gives it something of value in return. To make sure the state complies, any compact must be approved by the U.S. Department of Interior.

No one expects Scott and the Seminole Tribe to complete a deal before the legislative session ends May 2, but some lawmakers say there's a chance that the governor may be on track to announce a deal in the next month.

Under that scenario, the governor would call a special session to ratify the deal, presumably after he receives the state budget, and then would strategically use the power of his veto pen to help win approval from reluctant lawmakers. The most politically powerful time for a governor to have a special session is before he has issued his vetoes.

But to do that, the governor would need an assurance that he could get the votes and avoid an embarrassing defeat on a controversial issue. That has prompted many to suggest he will wait to announce a deal until November, thereby postponing the sensitive issues and avoid antagonizing the powerful interest groups that have spent millions on state-level campaigns.

Said Latvala: "I'd like to see this Legislature do the deal, but there's a lot of uncertainties in people's minds. I think the Indians are holding out for the guy who gave away the shop the last time. I don't see why they would necessarily be enthusiastic about making a deal now."

Las Vegas Sands, which was the first to present the idea of bringing a resort casino to Florida when legislators were negotiating the compact in 2010, is losing patience.

"The ball's now in the court of the Legislature and governor,'' said Nick Iarossi, who represents Las Vegas Sands.

If compact negotiations don't keep destination resorts alive, he said, "we won't continue past the end of the year. ... We're not interested in becoming a negotiating chit to get a better compact."

Resorts World Miami, the Genting company that has already heavily invested in downtown Miami, is prepared to wait it out, said Brian Ballard, the company's lobbyist.

"We always thought the compact was central to our opportunity to bring a destination resort to Florida,'' he said. "We were hopeful it would get done this session but there is no good public policy argument why it had to get done now. There are a lot of people who think this will get done after November."

Contact Mary Ellen Klas at [email protected] and @MaryEllenKlas

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