Mardi Gras: 10 years into racino business, challenges from all sides

In recent years, many pari-mutuels across the country have converted to racinos. Those in Florida did so in 2004, with the narrowest of limitations. A statewide vote that year allowed horse tracks, dog tracks and jai-alai frontons in just two counties, and didn’t allow them for full casinos, just for slots. And that was only when a county gave approval via another referendum.

Despite these strict limitations, voters statewide only barely gave the okay, 50.8 percent to 49.2. A referendum in Broward County (containing Fort Lauderdale) passed the next year. Miami-Dade’s referendum failed in 2005, then passed in 2008.

And, again as with many pari-mutuels across the country, the arguments in Florida for the racinos included revenue projections, based on certain expectations about state regulations, the overall marketplace, and the public’s interest. A consortium of South Florida pari-mutuel owners predicted the state would garner tax revenues of more than $400 million a year. But, as racinos nationwide can attest, reality has presented plenty of challenges. The actual revenues in Florida haven’t been even half of what was predicted.

One such pari-mutuel, Mardi Gras Casino in Hallandale Beach, celebrates its 10th anniversary this week. Many of the pre-referendum expectations have changed greatly, as the casino’s president, Daniel Adkins, will readily tell you. The casino wants to move – and to be rid of its requirement to offer dog racing, a dying sport.

When state voters approved slots for South Florida, one of the people most opposed to gambling in Florida also happened to be the most powerful: then-Governor Jeb Bush. He slapped a 50 percent slot tax on the pari-mutuels. Adkins recalls Bush telling him directly that he would do anything he could to torpedo the industry. (As an aside, Donald Trump also visited the governor, around this time, trying to partner with the Seminole Tribe of Florida, but was rebuffed.)

Mardi Gras is part of a cluster in south Broward County, with Gulfstream Park about one mile away, The Casino @ Dania Beach four miles away, and the Seminole Classic and Seminole Hard Rock are each at about five miles distance. Mardi Gras averages about $4 million per month in slot revenues, which breaks down to about $150 per month for each of 885 machines.

“I’d love to see them all do better, but we can’t do better when we’re beating each other’s brains in,” Adkins said. “So we focus on the locals. That’s the only thing we can do.

“Given the conditions, I am happy with the numbers.”

Now as the 10-year anniversary approaches, the Florida legislature is embarking on its annual exercise: trying to work out a casino bill that appeases the Seminoles, the pari-mutuels, the state, and those against gambling expansion, represented by Disney interests.

“As I often say, everything north is ruled by a giant mouse,” Adkins said, referring to the interests of those in Orlando and northern Florida, which is notably more conservative.

For Adkins, it’s frustrating that a consensus was worked out in December 2015, when Governor Rick Scott proposed plans for a compact from the Seminoles that would also include certain concessions for racinos, most notably the addition of blackjack and a 25 percent tax rate. Scott, who erred by not including the legislature as plans were being made, did not get the backing he needed from that body, and the plan died.

The two legislative actions that Adkins wants are decoupling and portability. He would like to no longer be required to offer dog racing in order to operate slots, and to move his casino to west Broward County, near the Sawgrass Mills shopping mall. There are four pari-mutuel and three Seminole casinos in the county, but none near the western edge, where the population has boomed over the past three decades.

“It makes me very unhappy to be stuck with people who can’t give us the business model we need,” Adkins said. Nationwide, gambling experts note that decoupling questions are being posed in state legislatures across the United States, as racinos compete not only against each other, but against facilities across state lines – which sometimes have more business-friendly rules.

Then there’s another universal challenge U.S. racinos face: competition from Indian tribes, which have certain rights under the Indian Gaming Regulatory Act. In Mardi Gras’ case, the competition is with the prosperous Seminole Tribe of Florida, which can offer blackjack and other table games, and pays an effective tax rate of only about 12 percent.

“If I offer one car in a promotion, they can offer 10,” Adkins said. The tribe made $2.2 billion via gambling in 2015. Mardi Gras made just over $50 million.

“We were Floridians for a Level Playing Field [during the 2004 campaign] and all we did was open the door for the state to put us in a worse position and make a ton of money for the Seminoles,” he said.

Meanwhile, just to the south, Gulfstream Park Racing and Casino competes for the same slot customers, but billionaire Frank Stronach also is focused on horse racing. He has spent money beyond what others would in order to build interest in racing – a rare exception of a racino investing in its pari-mutuel business. The property also has a $1 billion shopping mall.

“If he can afford to do what I would call a hobby, God bless him,” Adkins said. “What he is doing is not my business model.”

As much as he would like to move, though, Adkins knows he has to plan as though he will be staying put a long time. To that end, he is meeting with city officials in the coming weeks to discuss developing existing extra parts of the property for residential use.

“It will have nothing to do with gaming,” he said.

Twitter: @NickSortal