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Florida's Two Seminole Hard Rock Casinos Hugely Succesful;
Developer Cordish Company Stands to Profit More than
 $1 billion During Next 10 Years

By Randy Diamond, Tampa Tribune, Fla.
Knight Ridder/Tribune Business News

Mar. 8, 2005 - TAMPA -- Rock 'n' roll pulsates as patrons jam crowded aisles vying for a slot machine opening. A crowd surrounds the poker area, even though an expansion in November increased the number of tables from 32 to 50. Restaurants buzz, the bars are full -- and it's only Tuesday night at the Seminole Hard Rock Hotel & Casino.

A year after the Seminoles' casino was reborn with a new complex and new name, the Tampa facility is a financial success for the tribe.

However, the economic impact for the greater metropolitan area is harder to assess. The casino complex pays no property or state taxes because it is exempt. It isn't required to pay the hotel tax designed to help local tourism efforts, although it donates a sum as a goodwill gesture. Although the casino has almost quadrupled the number of jobs it offers, most are secondary labor positions that pay middle to low wages typical of the tourism industry.

A referendum today in South Florida could make the Tampa casino even more profitable, allowing it to upgrade slot machines and attract more players. Along the way, though, the tribe faces troubling issues that could take a bite out of its lucrative business.

There's no doubt the infusion of more than $455 million by investors and the tribe has been a good deal for the Tampa casino, its larger sister property in Hollywood and its developer, Baltimore-based Cordish Co.

"It's been hugely successful," said Seminole Gambling Chief Executive Officer Jim Allen. "The Hard Rock brand is magic. It has a large appeal to a wide variety of people."

The two Hard Rock casinos have been netting $50 million to $56 million a month in gaming revenue from October to December and are on track to surpass the estimated yearly $424 million projections made to bondholders.

Each of the 2,500 Seminole Tribe members receives more than $3,500 a month, their portion of the gaming receipts. Tribal leaders make several times that.

The Cordish Co. stands to make more than an estimated $1 billion over the next 10 years for its role in developing the casinos. The company's contract with the Seminoles gives them 30 percent of the casinos' profits over a 10-year period.

However, only a small percentage of those profits ends up in the local economy.

Although the number of jobs at the Tampa casino and hotel has increased, going from 450 in the pre-Hard Rock days to 1,700 now, many are the lower-paid, service industry jobs.

Casino jobs usually fall into the secondary labor market because they offer little pay and little long-term opportunities to build careers, said James Gerstein, a research associate at the National Opinion Research Center at the University of Chicago, who has studied the economic impact of casinos on communities. He said the exceptions are communities such as Las Vegas, where unions have helped casino employees earn high wages and job stability.

However, Gary Bitner, a spokesman for the Hard Rock, said jobs at the hotel cut across economic lines and that many service and casino jobs pay tips. He said most jobs pay at least $7 an hour, competitive for entry-level positions in the Tampa area.

The Hard Rock also seems to be having little impact on helping business in the surrounding area or on increasing tourism to Tampa.

Nearby lodging establishments say only occasionally will they get a bump in room occupancy rates when the 250 Hard Rock rooms are sold out.

Tourists at the casino said they were in Tampa for other reasons when they decided to visit the complex.

Today, a referendum in South Florida could allow seven betting facilities in Miami-Dade and Broward counties -- horse, dog and jai-alai parimutuels -- to offer Las Vegas-style slot machines in the same market with the Hard Rock in Hollywood.

Currently, both the Hollywood and Tampa casinos are allowed to offer only bingo-style, class II slot machines. Although the machines look like the ones in Las Vegas, they lack some of the bells and whistles of the more technically advanced class III machines. Players using the class II machines are playing bingo against each other, not against the house.

Under federal law, Indian gaming venues must be allowed to compete with casino games offered at other facilities in the state.

If the referendum passes, that could force the tribe to share the Vegas-style slot market in South Florida. However, in Tampa, the casino would benefit. It would have enhanced slot machines to draw more customers but no competition from local dog and horse tracks.

The referendum applies to parimutuels only in South Florida.

But it's not all good news for the casinos. In December, the Internal Revenue Service issued a preliminary ruling, saying that $345 million in tax-exempt bonds used to finance the casino projects were not entitled to the exemption. The IRS in February said an additional $124 million in tax-exempt bonds were also being examined.

Under federal law, tribes can use tax-exempt bonds only for "essential governmental functions such as a hospital or a police station."

The Seminoles did not issue the bonds. Instead, a financial team lead by the Cordish Co. found a way around the provision, the IRS contends. The company, which developed Baltimore's Inner Harbor, used a municipal bonding authority in the Florida Panhandle, the Capital Trust Agency, to issue the bond. The Capital Trust Agency then lent the money to the tribe.

Bitner, the casino spokesman, said the ruling is preliminary and is subject to appeal.

The IRS also announced in April that it was examining why some $38.6 million worth of bond money was used to pay fees to attorneys, advisers and other specialists connected with the casino project.

Although the IRS did not detail the fees, a big winner in the project had been Cordish Co., according to the Baltimore Sun. It has reported that the company received a $12.3 million financing fee and a $16.4 million developer's fee in addition to 30 percent of the casinos' profits for 10 years.

In addition, financing fees are lowering the Seminoles' profits on the new casinos. The tribe paid $20 million in such fees to the Cordish Co. and other consultants in the third quarter of 2004, financial filings show.

Although third-quarter revenue for the casino grew from $96 million in 2003 (in the pre-Hard Rock days) to $144.6 million in 2004, profits took a dip. The casinos earned $50 million in the third quarter of 2004, down from $56 million a year ago.

Reporter Sarah Knupke contributed to this report.

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To see more of the Tampa Tribune -- including its homes, jobs, cars and other classified listings -- or to subscribe to the newspaper, go to http://www.tampatrib.com.

Copyright (c) 2005, Tampa Tribune, Fla.

Distributed by Knight Ridder/Tribune Business News. For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com. RANKY, RNK,

 
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