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Gambling Study Raises Doubts

October 7, 2013 - 6:00pm

A massive expansion of gambling throughout Florida could boost state coffers by $1 billion a year instead of a $22 million loss previously estimated, authors of a gaming study told a Senate committee on Monday.

The variance between the original number and the latest ballpark estimate, still not finalized but confirmed by state economist Amy Baker at the Senate Gaming Committee meeting, raised more questions about the integrity of a Spectrum Gaming Group study. Lawmakers paid the gaming industry analysts nearly $400,000 for the study, due Oct. 1 but delayed for a month after Baker raised questions about the findings.

"Instead of (a) $20 million impact, you're looking at, depending on the scenario, $1 billion or more. The numbers aren't complete," Baker told the committee in a room packed with gambling lobbyists.

Legislative staff sent back at least two previous drafts of the report, including one first obtained by The News Service of Florida and released to the public last week that showed that 33 casinos and six destination resorts would cause the state to lose $22 million a year.

But that same scenario -- in which more than 90 percent of Floridians would live within a two-hour drive of a destination resort or pari-mutuel with blackjack and slots -- is now expected to reap more than $1 billion, with estimates going as high as $1.4 billion or $1.5 billion. About half of the state now resides within a one-hour drive of an existing pari-mutuel or tribal casino, according to Spectrum.

An economic model failed to include indirect impacts of turning Florida into a major gambling state, Baker and the hired economists told the panel.

"The main point is it's incomplete," said Rod Motamedi, senior economic associate with Regional Economic Models Inc., or REMI, a subcontractor on the study. The group produced two sets of fiscal impacts: a static model derived from the direct impact of an expansion of gambling and a dynamic model that shows how the expansion affects other businesses and tax receipts, or "induced" revenue.

"If more folks have jobs, that's more consumption in the state. That leads to more sales tax in the state," Motamedi said. "What was missing is the combination of those two analyses in one place."

Lawmakers had planned to rely heavily on Spectrum's analysis of the economic and social impacts a variety of potential gambling expansions would bring. The analysis does not include financial benefits or losses to local governments.

But on Monday, committee Chairman Garrett Richter, R-Naples, said the study is just a part of what he and his colleagues will consider as they explore the possibility of allowing casino-style resorts, something the Legislature rejected outright two years ago.

"This is a resource It's not an end-all," Richter said. The committee will also hear from the public, gambling operators and others at four meetings around the state later this month and in November, Richter reminded the panel.

The wide-open scenario that could bring at least $1 billion would involve six convention center-casinos with slots, blackjack and roulette in Palm Beach, Miami-Dade, Broward counties as well as in the Jacksonville, Orlando and Tampa Bay areas.

The Spectrum study also concluded that even the broadest expansion of gambling likely won't increase the current gross social costs, estimated at $258 million to nearly $1.2 billion per year.

The dramatic swing in the economic impacts -- which more than one gambling lobbyist and one pro-gambling lawmaker characterized as a "cluster" -- coupled with the delay in the release of the report and exacerbated by the failure of Spectrum and REMI authors to give definitive answers Monday cast doubt for some people on whatever the final product concludes.

"I think there's some real issues about credibility of the report given the fact that we've had to delay it. I never got a straight answer to our question about whether or not an expansion of gambling would only moderately increase or impact the state economy. It seems to me they're basically going to come back and say it has greater than a moderate impact," Sen. John Thrasher, R-St. Augustine, said after the meeting. "I think there's some real significant problems to the study and we'll see what happens from here."

Sen. Jack Latvala, R-St. Petersburg, wanted to know how Spectrum concluded that wide-open gambling in Florida would have a "moderately positive" economic impact in the Legislature's study but found that three destination resorts in South Florida would bring $1 billion to the state in a 2011 study conducted for Resorts World, a company linked with the Malaysia-based Genting Group.

"It's the same company making the report and to me, the entire credibility of this report hinges on how you could possibly justify the difference in your projections," Latvala said.

Spectrum Vice President of Analysis Shawn McCloud said the study performed for Genting was based on different assumptions, including a massive marketing plan aimed at Asians and the promise that Genting would hire private planes to ferry customers to the region.

Members of the committee questioned a variety of other findings in the report, including one showing that the state could make more money by increasing the 35 percent tax rate on slot machines at seven pari-mutuels in Broward and Miami-Dade. That's at odds with the tax cut the racino operators are seeking to make them more competitive with the nearby Seminole Hard Rock and Casino in Hollywood.

But Spectrum Managing Director Michael Pollock said increasing the tax rate may be problematic because pari-mutuels would be less likely to invest in capital improvements which attract more cash-spending customers.

But Sen. Tom Lee, R-Brandon, wasn't satisfied.

"Under every scenario in Florida, we would gain much greater economic revenue by having the highest tax rate?" he pressed.

"Certainly, all things being equal, higher tax rate, you do get more revenue," Pollock conceded, prompting Richter to step in.

"A higher tax rate generates more revenue on the dollars spent but higher tax rate could reduce the dollars spent," Richter said.

Spectrum also did not address possible application fees or license fees for destination resorts, which bring up to $300 million in other states.

Establishing requirements for the destination resorts is a "balancing act," Spectrum Executive Vice President Joseph Weinert said.

"You can't say we want a minimum $2 billion destination casino resort that's going to employ 10,000 people, we're going to demand a $5 million license fee and it has to have a 5,000-square-foot convention center. It all doesn't work. It's a balancing act as you press those levers," he said.

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