Economic Impact of Gambling from Miami Herald

Florida economists: Casino revenue would be mild boost to state coffers

State economic forecasters issued an analysis of the financial impact on Florida if three resort casinos open in Miami-Dade and Broward.
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TALLAHASSEE — Resort casinos would boost state coffers next year by about $155 million, mostly from licensing fees, but the net benefit to the state once the resorts are in full swing in 2015 would be only between $4 million and $102 million a year, according to state economists.
The first analysis of the financial impact of resort casinos was performed by state economists trying to forecast the effect of legislation on state finances. Two South Florida legislators have filed a bill that calls for allowing three giant resort casinos in Miami-Dade and Broward counties.
The state’s chief economist said the financial estimates are only preliminary, and that economists with the state’s Revenue Estimating Conference want to gather additional information on how much gambling the South Florida market can sustain.
They also will take a closer look at the impact on Florida’s existing pari-mutuel “racinos” before deciding on the final economic impact of the controversial proposed bill.
“There are definitely offsets’’ to the revenue generated by the casinos, said Amy Baker, director of the Legislature’s office of Economic and Demographic Research. “It’s not a one-way street. You have to look at the impact it will have on the other gambling facilities in the market.”
The conference includes economists from the state House and Senate, the governor’s office and state agencies. Baker said she expects the group to meet one or two more times before agreeing on a final number for the bill designed to bring three $2 billion resort casinos to South Florida by 2015. A Malaysian company, Genting Group, plans to build a major resort in Miami, which would include a casino if the legislation is approved in Tallahassee.
The preliminary estimates assume the state will lose $99 million in annual revenue-sharing payments from the Seminole Tribe beginning in 2015. That’s because at least one county outside South Florida would be expected to approve a resort casino, invalidating the state’s compact with the Seminoles that gives the tribe exclusive rights to offer gambling outside South Florida.
“This was a good exercise, but there are at least two or three assumptions that are flawed,’’ said state Rep. Erik Fresen, the Miami Republican who is sponsoring the bill in the House. Fresen said the bill 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.”
If no resort casino is built outside South Florida, the revenue loss to the state would be smaller, Baker said.
The analysis said the state would lose some revenue from taxes now paid by the five pari-mutuels that operate slot machines and poker rooms in Miami-Dade and Broward, because the new resorts would “cannibalize” business from the racinos.
The analysis predicts that the new casino resorts would draw 3 percent of the slot machine business from the racinos and 17 percent from the Seminoles’ Hard Rock Casino near Hollywood.
The economists predict the state will lose between $10 million and $22 million yearly in gambling taxes from the pari-mutuels, but Baker said that number could be higher if the Seminole Hard Rock shifts its marketing strategy to try to capture more of the local market to compete with the resort casinos.
Those losses would be offset by increases in sales taxes from construction of the resort casinos of as much as $23 million a year beginning in 2013, forecasters said.
By 2015, when the resorts would be in full operation, the total gaming taxes from the casinos would climb to between $98 million and $210 million, the economists said.
The preliminary forecast is based on the provisions in the bill as it is currently drafted. The analysis noted that the resort casinos would spark additional economic development, which would include increased local property taxes and taxes associated with land purchases, but the analysis said those estimates cannot yet be determined.
The sponsors of the bill, Fresen and Republican Sen. Ellyn Bogdanoff of 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,’’ Bogdanoff said.
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 hodgepodge gaming policy. “This is not a budget debate.”
Fresen said he and Bogdanoff plan to amend the bill to give the five South Florida pari-mutuels the same tax rates and games the resort casinos would get, which would help the racinos compete and increase the state take from gambling.
As currently written, the bill leaves the tax rate on slot machines at pari-mutuels at the current 35 percent, while giving the resort casinos a 10 percent rate. The sponsors said they also plan to require the resort-casino applicants to guarantee that they will make up to the state the revenue it would lose from the Seminole Tribe.
Under the 2010 gambling compact with the Seminoles, the tribe agreed to pay the state at least $1 billion over five years, beginning with two $150 million payments in 2010, increasing to $233 million in 2012 and ending with $234 million in 2014, when the tribe will either have to renegotiate with the state or lose its table games such as blackjack and baccarat. Economists estimate the tribe’s payment would only be $99 million in 2015.
Loss of the revenue from the tribe was only one of the negative factors state economists cited. They noted that “there would be significant churning of existing tourist and convention activity” and estimated that about $97 million yearly would shift from current tourism venues to the new resorts.
The analysis noted, however, that there will be additional sales-tax revenue generated from three sources: Florida residents who would have traveled outside the state to gamble but would now stay here, out-of-state tourists who would come to Florida to gamble, and new international tourists, particularly from Latin America, “who would not have come at all to Florida.”
Economists cited an Oct. 24 report by Bernstein Research, a gambling analysis group that predicted Florida “has the potential to pull 15 percent of the business from Las Vegas.” But the economists 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.’’
The first hearing on the bill is scheduled for Wednesday, in a workshop in the Senate Regulated Industries Committee.

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