Magic City Casino tops $1 billion a year in slots play

By Scott Blake
© Copyright 2012 Miami Today
Wednesday, February 1, 2012

It's about 2 p.m. on a Friday. For much of Miami, the work week is winding down. But it feels like the weekend is already getting started at Magic City Casino. "Miami's Vice," reads one banner, "Blackjack."

Cars and a few pickup trucks start to fill the front of the fenced parking lot, which covers most of the 32-acre site at 450 NW 37th St., west of Little Havana. Kmart, Blockbuster Video and McDonald's are across the street.

At the casino entrance, men and women, young and old, come and go, decked out in shorts, flip-flops, T-shirts, blue jeans and sneakers. Some elderly saunter in with the aid of a cane. For those who can't or won't make the walk, a Magic City golf cart carries them to the door.

What started as a major threat to business — proposed "destination resort" legislation to permit up to three mega-casinos in Florida — now might turn out to be a boon for Magic City and others like it.

Once limited to betting on dog and horse races and jai-alai, Florida's pari-mutuels have since been permitted to add poker rooms. In recent years, Magic City and seven other pari-mutuels in Miami-Dade and Broward counties have been approved to operate slot machines.

Now pari-mutuels could be given all the same forms of gambling, lower tax rates and nonstop operating hours as the mega-casinos — in essence becoming Las Vegas-style mini-casinos, under an amended bill by state Sen. Ellyn Bogdanoff, a Fort Lauderdale Republican.

Other bills, however, seek to scale back existing gaming, including a similar "destination resort" bill by state Rep. Erik Fresen, a Miami Republican.

"I don't think anybody knows what's going to happen," said Isador "Izzy" Havenick, Magic City's vice president of government affairs, whose job includes regular trips to the state capital in Tallahassee.

"All we ever asked for is parity" with whatever other forms of gambling are legalized in Florida, he added.

Despite taking in more than $1 billion a year, Magic City struggles to make a profit, according to Mr. Havenick.

Mega-casinos aren't the only competition that longtime pari-mutuels need worry about. Just up the street from Magic City, Miami Jai-Alai last week officially opened after an $87 million refurbishment that features more than 1,000 slot machines.

It was the sixth pari-mutuel of the eight authorized in South Florida to add slots, which quickly have become the local industry's big moneymaker.

Magic City, a windowless warehouse-like building attached to the back of a greyhound track grandstand, hardly appears to be a $1 billion-plus operation. But that's what the facility's 796 slot machines took in last year, state records show. Magic City's casino is packed with tightly arranged rows of Las Vegas-style slot machines. Individual bets can range from as little as a penny up to $100.

There's also a separate room with slot machines set up for video blackjack, where customers can try their luck for $5 up to $600 per hand with a virtual dealer appearing on screen as a shapely woman in tight-fitting attire.

Customers can play at almost any time of day or night, seven days a week. The casino's hours are 10 a.m. to 4 a.m. Sunday through Thursday. On Friday and Saturday nights, the place stays open until 5 a.m.

In October alone, Magic City's slots took in more than $100.2 million, paying out $93.4 million, or about 93%. Net slot revenue for the month was $6.78 million, according to figures that Magic City reported to the state Department of Business and Professional Regulation.

Magic City also takes in tens of millions in additional revenue each year from a poker room; a pari-mutuel wagering room, where customers bet on and watch off-site races; and the dog track, the original part of the complex that's now used for races in summer races and concerts in winter.

Despite all the gambling and shows, Magic City makes little, if any, profit, according to Mr. Havenick.

After state-mandated slot winnings for customers called "payouts," state taxes and license fees, payroll expenses, and debt payments from a $60 million renovation in 2008, "we're just breaking even," he said. "Once the slots came, we've been able to pay our debt," Mr. Havenick said, referring to the multimillion-dollar renovation.

Florida's pari-mutuel industry is made up of greyhound and horse racing tracks and jai-alai frontons.

With the addition of slots at Miami Jai-Alai, it joins South Florida's so-called "racinos" — pari-mutuels permitted to operate slot machines under a 2004 state referendum, which also required local consent.

Broward voters approved racino slots in 2005 and Miami-Dade voters, on a second attempt, followed in 2008. Those votes affected seven racinos.

The state also has given permission to an eighth South Florida pari-mutuel, Hialeah Park and Race Course, to have slot machines, but that has been tied up in the legal battle.

Magic City and two other pari-mutuels, Calder Casino and Race Course in Miami Gardens and Miami Jai-Alai, are challenging Hialeah Park's right to operate slots in court. Also, one of the original seven slot-approved pari-mutuels, Dania Jai-Alai, has yet to install them.

In addition to paying a $2 million annual slot machine license fee, the racinos are required to have their slots pay out at least 85%. Mr. Havenick said Magic City's slots have 95% payout rates.

The racinos pay a 35% tax rate on slot revenue left after payouts. In 2010, the tax rate was lowered from 50%, and it would be cut to 10% — the same as the mega-casinos would pay — under the Bogdanoff and Fresen bills.

Also, the racinos pay taxes on poker room earnings, as well as dog and horse race wagering.

"We are the most regulated and taxed industry," Mr. Havenick said.

Despite the costs, the industry stretches from the Panhandle to Miami-Dade and Broward counties, where there is the highest concentration of pari-mutuels.

Magic City is a family-owned business, Mr. Havenick said, and has been that way since his grandfather, Isadore Hecht, bought the property in the 1952.

According to records filed with the state Division of Corporations, Mr. Havenick's mother, Barbara, serves as president of Magic City Enterprises Inc., the casino's holding company.

Mr. Havenick and his brother, Alex, are vice presidents. Alex also serves as the company's secretary. The position of executive vice president is held by Scott Savin, and Leon Reitnauer is the treasurer.

Mr. Savin, previously president of Gulfstream Park, a pari-mutuel in Hallandale Beach, and Mr. Reitnauer, who has been associated with pari-mutuels and related firms, are "like family," Mr. Havenick said.

The family formula seems to be working. Unlike many employers, Mr. Havenick said, Magic City has added staff during the recession. Apart from the executive team, Magic City has about 560 full-time employees, he said.

From top managers to security personnel and cocktail waitresses, the staff's pay averages about $40,000 a year, with benefits such as health care insurance and a 401(K) retirement savings plan, according to Mr. Havenick.

Magic City has another 60 to 70 employees in part-time jobs. The family also owns the Naples-Fort Myers Greyhound Track in Bonita Springs, which employs about 350 people, Mr. Havenick said.

Magic City tries to be a good corporate citizen, Mr. Havenick said, donating the proceeds from eight selected slot machines each day to local charities.

Even without the potential arrival of mega-casinos in South Florida, racinos are at a competitive disadvantage with the Seminole Indian tribe, Mr. Havenick said.

The tribe operates seven casinos in Florida — including two in Broward County, in Hollywood and Coconut Creek — under the federal Indian Gaming Regulatory Act of 1988. In 2010, the state and tribe signed a 20-year agreement.

In exchange for the tribe's exclusive right to operate slot machines outside Miami-Dade and Broward counties, and to offer banked card games such as blackjack and baccarat at five of its casinos, the tribe agreed to make revenue-sharing payments to the state.

The tribe was to pay $150 million annually in the first two years of the pact and a minimum of $233 million or $234 million annually in the third to fifth years, with similar or higher payments each year thereafter, according to a report by Florida Senate's Regulated Industries Committee staff.

However, some state officials are concerned the tribe will withhold future payments under the pact if mega-casinos are permitted in Florida, arguing that it would end the gaming exclusivity granted to the tribe.

If the mega-casino legislation is approved without providing parity for pari-mutuels, Mr. Havenick said, it might force smaller players like Magic City out of business.

"We don't want to leave Miami," he added. "We want to continue to be a successful business here and be good to the community because the community has been good to us.