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Nancy Smith

Florida Race Tracks Are Ripping Off the State for Untold Millions in Tax Revenue

February 22, 2016 - 7:30am

Gulfstream, the same race track leading the charge in the Legislature to collect an additional $45 million in revenue to boost prize purses, is the very track leading the charge among pari-mutuel owners to rip off the state of tax revenue.  

Something, by the way, that's been going on for at least 10 years and probably longer.

And what an easy heist it's been for the tracks.

All they have to do is encourage guests to use the advanced deposit wagering system (ADW) -- something that allows pari-mutuel bettors to deposit funds into an account, then place their wagers through the Internet or over the phone.

Now, there's nothing wrong with ADW. It was devised for out-of-state, off-track betting. But tracks have figured out they can save themselves sizably by encouraging bettors to use the system at the track itself. That is what allows track owners to skirt state tax laws. 

Have a look, at pages on the Gulfstream and Palm Beach Kennel Club websites, for example. You can see for yourself --"fast and easy way to place a bet on your mobile device, anywhere, anytime" -- instructions on how to sign up for ADW and encouragement to set up your account online, zero encouragement for placing a bet at the track. Nothing to stop you (and everything to encourage you) betting trackside on your smartphone.

Florida's horse and greyhound racing industries have been victims of this scam, too. Which makes it an important consideration for Tuesday's revenue estimating conference in Tallahassee on SPB 7072, the sweeping Senate gambling package that would usher in the horse racing industry's demise in Florida.

And before anybody screams, "We don't want more taxes on businesses!" -- remember, this isn't about adding a tax, it's about collecting a tax. 

A little history here: Florida started collecting taxes on horse and greyhound racing in 1931 to help offset budget shortfalls during the Great Depression. Since then, more than $73 billion has been wagered in Florida at pari-mutuel tracks, with the state collecting $4.35 billion in taxes.

Over the last 10 years the reported amount wagered, as well as the revenue to the state from all pari-mutuel activities has seen a significant decline.  But look carefully. A large percentage of the decline looks to be the result of wagers that are being diverted by advanced deposit wagering.

Nothing in the law has changed since 1931 except the tracks are flouting it and the state is getting shortchanged.

Pari-mutuel facilities, including race tracks, that accept local bets through their ADW -- via iPhone, outside the supervision of Florida's regulatory structure -- are explicitly breaking the law, according to statute:

550.155 Pari-mutuel pool within track enclosure; takeouts; breaks; penalty for purchasing part of a pari-mutuel pool for or through another in specified circumstances —
 
(1) Wagering on the results of a horserace, dograce, or on the scores or points of a jai alai game and the sale of tickets or other evidences showing an interest in or a contribution to a pari-mutuel pool are allowed within the enclosure of any pari-mutuel facility licensed and conducted under this chapter but are not allowed elsewhere in this state, must be supervised by the division, and are subject to such reasonable rules that the division prescribes.

Oh, it isn't just people calling in or using an iPhone inside the facility. The bigger problem is people at home or in bars watching races on TV or on their computers and placing bets. If it's a Florida race and the bettor is in Florida, it's all illegal.

Illegal as it is, this ADW scam has hardly been operating in secret.  The 2013 Spectrum Gambling Impact Study prepared for the Florida Legislature spells out how brazen the tracks are: Even "... the television sets at Calder urge patrons to place their bets through an ADW," the report says.

The study covered it all. (See the appropriate page from the report in the first attachment below.) It states that most ADW firms established themselves in Oregon through a hub network which opened in 2000. The amount wagered through the hub has dramatically increased -- get this -- from $2 million its first year to $2.24 billion in 2012.  That's a couple million to a couple billion within 12 years. 

From 2007 to 2012, the amount wagered using the ADW hub increased 47 percent, while at the same time the reported amount of live wagers at Florida’s pari-mutuels fell a corresponding 46 percent. 

It has been conservatively estimated that the currently reported amount wagered is less than half of the actual amount being bet at Florida’s pari-mutuel facilities (ADW accounts for the other half of wagers placed).  That also means the state is not collecting taxes on roughly 50 percent of the money wagered in Florida -- we're talking about $1 billion -- as a result of advanced deposit wagering.

Have a look at the second attachment below, a document from the Oregon ADW hub that shows exactly how much money flows through Gulfstream and Calder race tracks each quarter. Frank Stronach owns Gulfstream -- and he, in turn, owns XpressBet ($180 million in revenue in the fourth quarter of 2015); Churchill Downs Inc., which does business as Twin Spires ($265 million in Q4 of 2015), operates Calder. You can see by the document, between those two Miami tracks alone, there's about $1.6 billion in wagers. 

If any portion of those wagers originates in Florida on Florida races -- and you know they do -- they should be taxed, as Florida law mandates.

Instead, Gulfstream and Calder both claim "wagers are down" and they want the state to hand tax revenue to THEM. 

And, by the way, ADW may also deflect money from the prize pools, so horsemen are getting scammed that way, too. 

Stronach was not available for comment Friday or through the weekend.

Meanwhile, who can blame any of the pari-mutuel industries -- especially the horse racing industry -- for their disillusionment over the phony numbers out there destined to torpedo their lives and livelihood, their heritage and a rural way of life so integrated into Florida's character?

"This (comprehensive gambling bill) is the worst issue I've seen in the Legislature in a lot of years," Jack Corey, Florida Greyhound Association lobbyist told me Friday. 

Here's what folks in the pari-mutuel industries see:

They see a press release from P.J. Campo, Gulfstream's general manager and vice president of racing for The Stronach Group. It says, "Business has been good. 

Randy Soth, Hialeah Park vice president and general manager, was effusive in his praise for the business in another 2015 press release. "Records are meant to be broken," he said. "We extend our gratitude to the horseplayers, TVG and every simulcast outlet that is taking our signal this season. We've picked up right where we left off at the end of a very successful season."

And here's one more pronouncement from Spectrum's 2013 report: "The Legislature needs to have detailed information concerning regulatory costs by sector in order for it to make informed decisions concerning the pari-mutuel industry."

We paid a lot of money for the Spectrum study. Aren't we going to pay attention to it?

The bottom line is, Florida has been asleep at the switch. It just let the race tracks keep our money. I don't know who lost track of the statute and frankly, I don't care. I now care only that we make it right, admitting the state can't afford to ruin businesses and lives by decoupling without first ensuring it has all the facts.

If the estimating conference looks, here's what it's likely to find:

  • All-sources and live wagering and purses increased substantially at Gulfstream Park from 2014.  All-sources' "handle" -- total amount of money wagered -- during Gulfstream's 2015 summer meet grew $32,062,231 to $316,252,302 for an 11 percent boost over 2014 figures.  Total live handle increased $34,163,271 to $243,162,958, signifying a 16.35 percent over 2014 figures. 
  • The daily average handle during Gulfstream's summer meet rose from $3,799,994 in 2014 to $4,421,144 this year for a 16 percent increase and a $621,150 daily boost.
  • Gulfstream purses increased from $14,265,815 last year to $19,125,380 in 2015, with the daily average of $347,739 representing a large increase over the $259,378 average a year ago.
  • In 2015, Gulfstream Park operated 40 race days at Calder with a total handle increase of almost 144 percent over Calder’s most recent unopposed Tropical race meet.
  • A total of $615,279 was wagered on Hialeah Park’s eight-race program on the second day of its 2015-2016 Florida Quarter Horse Racing Association-accredited meet, breaking the track’s and state of Florida’s previous single-day handle record of $597,070 that had been set the previous day.
  • Hialeah Park received nearly 1,200 requests for 600 racehorse stalls during its 2015-2016 American Quarter Horse meet, which opened December 26.   In previous years, more than 800 stalls have been available.
  • For its 2015-2016 meet, Gulfstream Park received more than 4,000 applications for horses vying for the 3,100 stalls under track jurisdiction:  430 at Calder, 1,200 at the Palm Meadows training facility in Boynton Beach and 1,500 at Gulfstream itself. 
  • Oh, yes, and look at harness racing -- thrown away by the Florida Legislature. Yet, Pompano Park's total handle was up 35 percent for the last fiscal year and is up about 24 percent this year over last.

These numbers contradict the fairy tale. Nothing about racing in Florida is dying except the state's will to collect a tax that belongs to the people of Florida and the state's interest in horse racing, an industry lawmakers don't understand and don't, or won't, appreciate.

Reach Nancy Smith at nsmith@sunshinestatenews.com or at 228-282-2423. Twitter: @NancyLBSmith

 

 

Comments

It's about time the ADW issue is addressed. Thank you Nancy!

Case in point - http://www.bradenton.com/entertainment/article61517407.html

Maybe next time you should check your facts with the tracks. They still make more money from an on-track wager vs ADW. The truth is that a lot of bettors are migrating online for the convenience. The same reason why brick and mortar retailers are boosting their online presences...because if they don't, then an online retailer (Amazon) will eat their lunch. Racetracks are faced with the grim reality that less people overall are betting on horse racing, and the ones that are do it more and more online. So they have to adjust. It's not nefarious, it's just capitalism.

You are correct Truth. The track does make a larger amount of money from bets placed at the track. What you fail to realize is that the ADW's the track is advertising is owned by guess who? You got it, the racetrack itself.

Then they should make sure the state gets it tax dollars- and they don't.

Right you are, James. Why can't taxes be collected by the Oregon hub as soon as a Floridian places a bet on a race or game in Florida? Answer: No reason at all.

"The Truth" is that retail giants like Amazon and WalMart don't pay any online sales tax in Florida, either. Sorry, but tax evasion isn't capitalism.

When I buy from Walmart or Amazon in Florida, I pay sales tax... Lets stick to facts.

yes YOU pay the sales tax, but the retailer is supposed to then remit it to the State. . . . but they don't. Or rather, the politically connected retailers don't have to. Best kept corporate secret in Rick Scott's Flor-i-DUH.

Sorry, @subterfuge, but Florida residents absolutely pay taxes on their Amazon orders. Check your facts.

Yes, but do the retailers in turn submit that money to the State? That answer is "no." Check YOUR facts.

Good job Nancy ! Would that such due diligence was also applied to politics & candidates by your media cohorts... by that I mean true "investigative journalism",.. ('facts' & 'truth' & 'all that').

The Headline should read, "The state is ripping off less from the tracks". What has the state done to earn these funds from private industry? They didn't build it, maintain it, advertise for it or support it. They are mere leaches off of the efforts of the owners.

Neither did the liquor companies or cigarette manufacturers or oil companies. Maybe we should all pay higher taxes so racetracks can score bigger profits. This is shameful when their greed is knocking out a whole industry in the state of Florida. Thank you again Nancy for a job well done. BTW if you don't want the tracks to pay taxes on bets you have to change the law in the Florida Statutes.

There, there. Dry your eyes and blow your nose. We know it's hard to stomach when your scam gets exposed.

That is terrific that you have made money.

Comments are now closed.

nancy smith
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