THIS STORY HAS BEEN FORMATTED FOR EASY PRINTING

Seminole casino holds lessons for Mass.

Under federal gaming law, Florida gets no revenue

Email|Print| Text size + By Matt Viser
Globe Staff / November 18, 2007

HOLLYWOOD, Fla. - Bon Jovi's "Livin' on a Prayer" blares from the speakers, above the din of slot machines and poker chips and an onslaught of neon. There is a couple kissing in an outdoor cafe and a crowd watching football on 70 plasma-screen TVs. A steady stream filters into the Council Oak restaurant, where steaks sell for $40 and bottled water is set in wine chillers beside each table.

It is Monday at the Seminole Hard Rock Hotel & Casino, and the Seminole tribe will reap millions tonight - not a single dime of which will go to the state of Florida.

This massive resort opened three years ago, and because it operates on tribal land, no compact from the state was needed and none of the tribe's estimated $1.3 billion in annual resort casino proceeds are paid to the state.

It is the scenario that Governor Deval Patrick fears will happen in Massachusetts and explains in large part why the governor wants to preempt Indian gaming by setting up a system to issue state licenses for three casinos. The governor wants to avoid Florida's fate and make sure Massachusetts gets a big cut of the action; his plan calls for casino operators to pay the state hundreds of millions a year.

If Patrick fails in his quest, the Mashpee Wampanoag tribe will continue pursuing an independent bid to open a casino using federal Indian gaming laws, with slot machines that are only subtly different from the norm. Under that scenario, it would be highly likely that Massachusetts will have the equivalent of the Hard Rock some day in Middleborough.

"It's going to happen. It should happen on our terms," said State Treasurer Timothy P. Cahill. "Now is the perfect opportunity because we have leverage. In five years we may not have any leverage."

Cahill began discussing in May the strategy of preempting the tribe months before Patrick unveiled his casino proposal. Officials in the Patrick administration declined several requests to discuss the issue.

Failure to get ahead of the tribe's plan also could be viewed as a financial and political blunder by House Speaker Salvatore F. DiMasi, who is seen as the proposal's main obstacle in the Legislature. He declined to comment.

Humble origins

Today's glitzy Hard Rock casino has humble origins. In 1979, the Seminole became the first American tribe to officially open a gambling business when it sponsored high-stakes bingo games in an aluminum building where the only food offered was hot dogs.

A quarter century later, after years of failed negotiations with the state, the tribe opened two Hard Rock Hotel & Casinos, one each in Tampa and Hollywood, near Fort Lauderdale. The projects were co-developed by Suffolk Downs principal owner Richard T. Fields, who wants to develop the racetrack in East Boston with similar offerings, and has cited his accomplishment with the Florida tribal casinos in presentations to Patrick administration officials.

The casino in Hollywood has many of the trappings Patrick would like to see at Massachusetts casinos. In addition to a 130,000-square-foot casino in the center of the complex, there is a gauntlet of outdoor restaurants and retail stores - everything from Brats, a children's clothing store, to Hooters, where chicken wings are served by waitresses in skimpy clothing - and a 5,500-seat theater where big-name artists perform. To attract a wider clientele, there is a European-style spa and fitness center, 50,000 square feet of meeting and convention space, and a 4.5-acre lagoon-style pool where parents watch over their sun-splashed children about 100 feet from the casino hall.

Befitting of the Hard Rock music theme, memorabilia is scattered throughout the hotel, from Buddy Holly's blue knit sweater to a pair of Elvis Presley's corduroy pants. Signs near the pool's stone boulders read, "Rock on, but do not climb on rocks," and the housekeeping staff comes into the rooms several times a day, turning up the stereo volume to rock music.

The tribe's presence is subtle but apparent. The shampoo is made with sweetgrass, which grows in the Everglades. The casino store - where patrons can use their player reward points earned from slots - sells baskets, pottery, and other handmade goods. There is a museum with exhibits tied to the Seminoles.

"We used to be able to live on the game from the land. Now we're living on the gaming on the land," said Max Osceola, a Seminole tribal council member. "It's a different commodity that we now have to manage. We used to hunt deer. Now we're hunting deals."

Expanding the reach

The Seminoles were able to open their casino on their reservation under the Indian Gaming Regulatory Act, a federal law adopted in 1988 that allows gambling on sovereign Indian territory, outside the reach of state regulations. In the nearly 20 years since the act was adopted, Indian-run casinos have sprouted across the country.

The flow of money from these casinos more than doubled in the last six years, from $11 billion in revenue at 311 operations in 2000 to $25 billion at 387 operations last year, according to the National Indian Gaming Commission. The explosion of revenue is forcing states like Massachusetts and Florida to reconsider their previous opposition and confront the idea of getting in on the act, or risk losing a lucrative money source that could support their state governments.

Connecticut established the model when, in the early 1990s, it negotiated with two tribes, the Mashantucket Pequot and the Mohegan, to allow slots and table games at Foxwoods and Mohegan Sun in exchange for a 25-percent share of the slot machine revenue. Similar agreements were made with Michigan tribes in the 1990s, giving the state 8 percent, and local municipalities 2 percent, of net winnings.

When the Mashpee Wampanoag tribe won federal recognition in February, members set out on a path to getting a casino, which made Massachusetts officials wake up to the likely reality of casinos within the state's borders.

"That's the tipping point," said Steven Light, co-director of the Institute for the Study of Tribal Gaming Law and Policy at the University of North Dakota. "Once they achieved federal recognition, it became obvious that something was going to happen. Everyone knew that they were interested in casino-style gaming."

What separates the Massachusetts proposal from other states is that Patrick is willing to work not only with the Mashpee tribe, but to all comers, pushing a shift in public policy by proposing commercial casinos in other parts of the state. Patrick maintains that the casinos could become an economic engine, pumping billions annually into the state economy.

"In other states, it's been, 'Let's expand Indian gaming,' " Light said. "In Massachusetts, it's, 'Let's expand the whole shebang.' "

An incentive for the Mashpee to work under Patrick's proposal would be expediency. The tribe has an agreement to build on land in Middleborough, and three months ago began a federal process to get the land deemed sovereign. But it could take years to complete that process, and there are uncertainties, including a federal probe into the tribe's finances and how tribal members used money paid by its outside investors. The investigation began in September when FBI agents descended on tribal headquarters on Cape Cod.

Under Patrick's plan to license three casinos in the state, which would have to be approved by the Legislature, Indian tribes would get special consideration among bidders, putting the Mashpee on a faster track than if they go it alone.

Another incentive to working with the state is that through negotiations of state licenses, Indians can upgrade their casino offerings and the intensity of gambling activity from what federal law already allows. The Indian Gaming Regulatory Act generally limits tribal casinos to slot machines that pay out based on bingo-style rules, in which all the players in the room are paying to and winning from a single pot.

If a tribe joins a pact with a state to adopt Las Vegas-style rules - which is what happened in Connecticut - the size of the jackpots and payouts are set by the house and can be much larger and more attractive to gamblers. Negotiating with states allows a tribe to offer table games such as blackjack and baccarat that it would not otherwise be able to run.

In Florida, the Seminoles have added new bingo-style slot machines that carry the same titles as the Las Vegas-style machines. To the average user, they look and feel like traditional slot machines, but the machines use a complex computer system to run like bingo games. The tribe has contended that the machines technically are not slots because they do not spit out money, instead making an automated cha-ching sound as a receipt is produced. Winners can cash out at a nearby teller or ATM-like kiosk.

The National Indian Gaming Commission, the federal agency with jurisdiction over tribal casinos, is reviewing its regulations to determine whether it should make a clearer delineation between the two styles of slot machines.

Opening the door

In some states, even if Indian casinos open without a deal with the state, the door has opened for expanded gambling.

Kansas lawmakers approved legislation in March to allow four destination resorts in the state, more than a decade after the Kickapoo Tribe opened Golden Eagle Casino, 40 miles north of Topeka. Governor Eliot Spitzer of New York is pushing to allow the Mohawk Indian tribe to build a casino in the Catskills, 20 miles from the Pennsylvania border, where casinos were legalized in 2004.

Responding in part to the success of the Seminole casinos, Florida voters in 2004 approved a ballot initiative to allow Broward and Miami-Dade counties to decide whether they want to expand gaming at area racetracks. Broward County approved the plan the next year, and several racetracks now have slot machines to satisfy a growing appetite for gambling among retirees and tourists.

"I've done Disney for like nine years - I get bored," said Rita Ruggiero, 63, who last week lost $100 and then won $400 in the course of five minutes at the Isle at Pompano Park, a racetrack that opened its casino in April. "The older generation doesn't have a lot to do. It's here, it's tempting."

In the most recent development, Florida negotiated with the Seminoles for a share of the tribe's proceeds, in exchange for allowing the tribe to adopt the more lucrative Las Vegas-style rules on its slot machines. The talks began after the Seminoles contended they were at a disadvantage to the racetracks. Another reason for the state's sudden willingness to deal is that the US Department of the Interior told state officials that unless they made a pact with the tribe the federal agency would give the tribe a license without Florida's consent.

Governor Charlie Crist announced a 25-year deal last week that provides the state with at least 10 percent of the casino proceeds and up to 25 percent - a smaller percentage than the minimum of 27 percent Patrick would require in Massachusetts.

"To allow the people of Florida to not share in possibly billions of dollars of revenue over time, that is a gamble I am not willing to take," Crist told reporters.

Florida legislative leaders oppose the deal, however, and with federal law ambiguous on whether their approval is needed, they are considering a lawsuit.

Whatever the outcome of the wrangling in Florida, the Seminoles are already thinking bigger. They want to expand beyond their home turf and are looking at opportunities where gambling and hotel ownership could be expanded, a hunt that obviously leads to Boston.

The tribe - which in March bought Hard Rock Cafe International for $965 million - recently opened a new restaurant near Quincy Market, and the company has been exploring sites in the city to open a Hard Rock brand hotel. Company officials would not rule out trying to build a casino, in the model of its Florida operations.

"Massachusetts obviously is a very densely populated state, very strong economically," said James F. Allen, chief executive officer of gaming operations. "If an opportunity came about for a hotel - or a hotel casino - we think it would do well, and would do well for investors."

Matt Viser can be reached at maviser@globe.com.

more stories like this

  • Email
  • Email
  • Print
  • Print
  • Single page
  • Single page
  • Reprints
  • Reprints
  • Share
  • Share
  • Comment
  • Comment
 
  • Share on DiggShare on Digg
  • Tag with Del.icio.us Save this article
  • powered by Del.icio.us
Your Name Your e-mail address (for return address purposes) E-mail address of recipients (separate multiple addresses with commas) Name and both e-mail fields are required.
Message (optional)
Disclaimer: Boston.com does not share this information or keep it permanently, as it is for the sole purpose of sending this one time e-mail.