A future in the cards?
By Fred Hiers
Ocala Business Journal
Sunday, December 28, 2008There was a time when betting on a horse was enough. You slid a $2 bill across the counter to the cashier at a racetrack and two minutes later you'd either collect on your bet or tear the ticket in half and let it fall under foot.
Twenty minutes later with the next horse race, another procession would head to the betting window, and the process would repeat itself over again.
But now, about 90 percent of horse racing bets are made away from the track at pari-mutuel facilities like the one at the Ocala Breeders' Sales Co., and they are scrambling to stay financially afloat in today's economy.
The majority of Florida's pari-mutuel facilities no longer consider their live sporting events such as dog racing or jai alai enough of an attraction to pay the bills.
Of the 27 pari-mutuel facilities and racetracks throughout Florida, 21 now offer card rooms to try and entice people through the doors. But it's uncertain whether card rooms will be enough and some predict that unless betting facilities get help in the form of lower taxes on their revenues or are allowed slot machines, many will close their doors.
"We're sinking right now," said Bill Liberty, the manager of OBS' pari-mutuel facility. "We're down 22 percent."
"We were set up to service the thoroughbred industry here. and it was profitable, but there comes a point in time if it starts losing money, business sense has to prevail."
The facility is making enough now to keep going, but Liberty says he couldn't bet whether he will be able to say that a few years from now.
"It (betting and revenues) have gone down a lot," he said. "Always in bad times gambling flourished, but not this time."
Two years ago, OBS's pari-mutuel facility oversaw $30 million in bets, with the vast majority going to the racetracks where the races were held, Liberty said. In 2007, that dropped to $28 million.
As for 2008, Liberty said "I'd be happy to make $26 million."
After expenses, the facility's profits are in the low six figures, according to Liberty.
Other facilities taking bets on horse racing are seeing a similar trend. Wagering on U.S. races in November was down nearly 10 percent, according to Equibase Company. Some racetracks are showing even greater declines.
Ocala Poker and Jai Alai, which began as a jai alai facility with horse race betting, now looks to poker for its future. Horse racing has taken a back seat, said the facility's manager Brian Matthews.
"We're a card room first," he said, adding that most of his patrons come to play cards rather than study racing forms.
And if Matthews had to rely only on horse racing?
"I don't think we could exist," he said.
The data collected by the Florida Department of Professional Regulation shows how pari-mutuels are flocking to something other than their live sporting events and simulcast betting.
In fiscal year 2006/2007, wagering on jai alai, greyhound racing, horse racing and card rooms in Florida was $1.6 billion. Of that, gross receipts from card rooms was $44 million, or 3 percent. The handle from live sports betting includes the amount that still has to be distributed to purses and winning betters.
In 2008, wagering in Florida dropped to $1.4 billion, but receipts from card rooms climbed to more than 6 percent of revenues.
Beginning June 2008, the trend appeared to continue. Since the summer, Florida gambling facilities reported $368 million in wagers. Card rooms accounted for nearly 9 percent of that money.
And even though card rooms are making up a bigger portion of the wagering dollar, Steve Geller, gaming advocate and former Florida Senate minority leader, said the real issue is that betting is down and pari-mutuel facilities need help.
One cure to help stop the financial slide could be slot machines, in addition to cards, Geller said.
Geller said OBS' situation isn't unique. OBS' pari-mutuel facility is an example of what happens when betting is restricted to only horses.
Card rooms are only allowed at facilities that already hold live sporting events. OBS does not.
But Geller predicts card rooms are not the answer and without lawmakers allowing slot machines for pari-mutuel facilities, "it's doubtful that pari-mutuels can stay in business."
"And I don't need to tell you what would happen if the industry disappeared," he said.
Currently, only three facilities have slot machines and Florida law restricts them to Broward and Miami-Dade counties.
Voters approved slot machines at race tracks in Miami-Dade in 2008, but none yet have started using them. Broward County has had slot machines since 2006.
The three racetrack casinos in Broward that operate slot machines are Gulfstream Park (whose casino area opened in late 2006), Pompano Park (whose casino area opened in mid 2007), and Mardi Gras Racetrack and Gaming Complex (whose casino area opened in early 2007).
Geller has proposed cutting Florida's tax share of slot machine revenues and wants to allow any pari-mutuel facility that wants slots to be allowed to operate them, as long as the county they are in agrees. Florida currently collects 50 percent of slot machine net revenues. But racetrack casinos must also use their remaining slot revenues to pay for incentive programs for horse racing and any other local taxes. Geller said that all told, racetrack casinos generally keep only about 35 percent of their slot machine revenues.
Geller's proposals have made their way through the Florida senate, but never made any headway in the House. He said that none of the changes in the law that he's proposed are likely.
Meanwhile, racetrack casinos in Florida paid nearly $124 million this past fiscal year in slot machine revenues to the state, according to Florida Department of Business and Professional Regulation. Indian casinos in Florida do not pay taxes on their slot machine revenues or card rooms.
Geller thinks if slot machines were allowed in counties with pari-mutuel facilities that wanted them, Florida could raise at least $500 million in taxes annually from the machines.
One of the major reasons pari-mutuels even still hold live sporting event, such as dog racing and jai alai, is because it's required to get a card-room license and any chance that one day they'll be allowed slot machines, Geller said.
Richard Hancock, executive director of the Florida Thoroughbred and Breeders Association also predicts some greyhound tracks and jai alai frontons "won't be around much longer."
Hancock also doubts whether lawmakers will allow slot machines in more counties and almost certainly not at pari-mutuel facilities outside racetracks.
"You've got to have a pari-mutuel owner that is invested in dog racing and horse racing and that's their passion," he said.
The trend in card rooms shows that it's popularity is growing and lawmakers are responding, allowing the nature of pari-mutuels to change.
Florida lawmakers first allowed pari-mutuel facilities card rooms in 1996, but with minimal $10 pot limits. In 2003, the law was amended to allow for as much as $2 bets and three raises. Three years later, the law was again changed to allow $5 bets and three raises.
Alexis Antonacci, spokeswoman for the Department of Business and Professional Regulation, said her office has seen the interest in poker only increase, along with its popularity on television.
But former House Speaker Marco Rubio, R-West Miami, opposes expansion of gambling and filed the lawsuit that stopped an agreement between the Seminoles and Florida over slots and blackjack, complaining it served to expand gambling.
In a letter to Gov. Charlie Crist, Rubio and his leading lieutenants wrote last year, "because of our opposition to the expansion of gambling, we believe that the pursuit of increased revenue for the state should be of secondary importance in Florida's negotiations with the (Seminole) tribe."
He wrote, "For us, money is not and never will be the primary consideration."
Rubio's successor, Ray Sansom, R-Destin, has also been an opponent of more gaming. As recently as September, he has worked to shut down the Seminole Tribe's table games and slots.
Meanwhile, Liberty says he'll just keep hoping business picks up. If the law allowed pari-mutuels without live sporting meets to have card rooms, Liberty said he'd be the first to open a card room to survive.