Anti-gambling group says South Florida slots didn't meet $500 million tax revenue promise

Floridians have been duped by sky-high promises from the gambling industry in the past, says No Casinos. And that's why residents should be wary of any promises related to a new proposal for a massive casino in downtown Miami, suggests the group.

Resort operator Genting has proposed a $3 billion project on the current site of the Miami Herald that would include an 800,000-square-foot casino in addition to more than 50 restaurants and bars, hotel rooms, shops and other features. 

An Oct. 11, 2011, press release from No Casinos picks apart a bill in the works by two South Florida legislators -- Sen. Ellyn Bogdanoff, R-Fort Lauderdale, and Rep. Erik Fresen, R-Miami. The press release states that it's a myth that "legalizing casino gambling will generate new tax revenue to meet important state needs…"

"In fact, the last time voters trusted gambling interests, they were promised $500 million per year for schools from taxes on slot machines in Miami-Dade and Broward Counties. Promoters even signed a contract, saying that if the Legislature did not tax slot machines, they would cut a check directly to the school boards. So far, they have generated a paltry 20 percent of this figure – and recently they successfully lobbied the Legislature for a 30 percent reduction in their tax rate. Like the lottery, another promise broken."

In this fact-check, we're not going to wade into whether casino gambling generates enough new tax revenue to meet the state's needs. Instead, we'll check what No Casinos calls a fact: that machine proponents promised "$500 million per year" for schools and only delivered about 20 percent of that.

The root of the $500 million figure

In November 2004, voters statewide voted to allow Miami-Dade and Broward counties to put questions on the ballot about adding slot machines at facilities. The tax revenue from the machines would then go to schools statewide. On March 8, 2005, Broward voters approved the measure. Miami-Dade voters rejected slot machines in 2005 but approved them in 2008.

Then the Legislature, under the anti-gambling Gov. Jeb Bush, had to set the rules. The Legislature couldn't reach an agreement in the regular session and some GOP leaders, including Bush, talked about asking voters to repeal the amendment allowing slot machines. 

But in a special session in December 2005, the Legislature voted in favor of a bill that established the rules for slot machines.

The source of the $500 million figure comes from 2004, when the state was moving toward putting the question on the ballot. 

The state's Office of Economic and Demographic Research prepared an analysis of the revenue that would be generated from slot machines. State officials gathered information about slot machines in other states in addition to information from proponents. 

EDR wrote in a financial impact statement in 2004 that: "If the Legislature also chooses to tax slot machine revenues, state tax revenues from Miami-Dade and Broward counties combined would range from $200 million to $500 million annually." A more detailed financial information statement from EDR stated that, "It is estimated that by the third year of activity, the range of tax revenues raised would be from $250 million to $600 million, assuming that both counties pass the referenda, and that the Legislature taxes the activity at a typical tax rate between 30 percent and 50 percent...Should only Miami-Dade County pass the referendum, the estimated increase would be between $70 million and $200 million. If only Broward County passes the referendum, the estimated increase would be between $100 million and $300 million."

That paragraph alone provides several warning signs: For starters, it explains that the tax revenues would hit the range of $250 million to $600 million by the third year. It also notes that revenues will be on the lower end if it only passed in one county.

But gambling proponents often just used the higher figures in describing the financial benefit.

Jim Horne, a former state education commissioner who became a consultant for a pro- slot-machine group, stated that the revenues would be "roughly $500 million a year" in a September 2005 Florida Times-Union article or in the Sun-Sentinel in 2004 "$438 million after the first year alone."

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A series of ads by pro-slots group Floridians for a Level Playing Field urging voters to support Amendment 4 also used the $500 million figure:

* This ad portrayed a woman as a school teacher saying "Florida schools could get an extra $500 million a year."

* This ad stated that the amendment "could generate $500 million a year for all Florida schools" from seven facilities.

* This ad stated that it was a fact that seven facilities "could provide $500 million a year to supplement not replace school funding statewide."

Some articles raised skepticism about the $500 million a year claim.

The Orlando Sentinel editorial board wrote Feb. 17, 2005 that although gambling interests said schools could reap up to $500 million, "until the Legislature acts, those claims are pure fabrications."

A St. Petersburg Times editorial on Feb. 22, 2005, stated that slots supporters were "wildly" promising up to $500 million for education "In fact, nothing has been decided. If South Florida voters approve the referendum, the Legislature will determine how many slot machines are allowed, hours of operation, how much the gambling is taxed and how the revenue is distributed."

The revenues that were actually generated 

The state's Department of Business and Professional Regulation tracks parimutuel revenues. The slot machine revenue is combined with net proceeds of the Florida Lottery and the Legislature annually appropriates the funds to education programs in school districts, state colleges and universities. 

Here is how much in net slot revenue (rounded) was actually transferred to the state Department of Education:

2006-07: $49.6 million (This wasn't a full year -- facilities opened part way through the year.)

2007-08: $120.6 million

2008-09: $103.8 million

2009-10: $138.1 million

2010-11: $125.1 million 

2011-12 (July - Oct. 2): $31.5 million 

The tax rate started at 50 percent but the Legislature approved dropping the rate to 35 percent starting July 1, 2010.

Looking at the first five years, the revenues add up to about $536.7 million -- or an average of $107.34 million per year. That's close to 20 percent of $500 million a year. If we discount that first year since the facilities were only operational part of the year and look at the next four years starting with 2007-08, it works out to about $122 million a year -- or about 24 percent of $500 million.

So what happened?

Dan Adkins, chairman of the Amendment 4 campaign Floridians for a Level Playing Field, and vice president of the parent company that owns Mardi Gras casino, told PolitiFact that the revenues were not as high as anticipated due to the tax rates, fees and restrictions set by the Legislature.

"Gov. Bush looked me in the eye and said 'you may have won a campaign. I'm going to make sure you fail,'" Adkins said. "The Legislature and the governor wanted us to fail and they were almost successful. ... We were smacked with every possible restriction you can have."

Revenues also were lower because only five facilities opened, not the seven that were planned.

Adkins says slots proponents made a promise on a percentage -- that the parimutuels would provide 30 percent  of their gross revenues to local schools -- but not on actual dollars. "How could you make a promise not knowing what the Legislature would do?" Adkins said. "That's why we entered an agreement based on the percentage."

But what about the repeated claims that the machines could generate $500 million?

"We said under a 30 percent tax plan this is what we could generate based on two counties passing referendums and seven facilities under operation."

Our ruling

No Casinos claimed that slot proponents promised the voters $500 million per year for schools and have generated a "paltry 20 percent of that figure." 

The ads that we saw stated that slot machines "could" generate $500 million a year. But at times Jim Horne, a key slots proponent, said it more strongly: "we're talking roughly $500 million a year for our schools" and "Amendment 4 will inject public education with $438 million after the first year alone. This funding will increase to $2.3 billion over the next five years." 

In reality, the amount of projected revenue at the time was more complicated and depended upon how many facilities added slots and whether it was in one or two counties and the rules set by the Legislature -- and proponents certainly didn't make those caveats clear in the ads we viewed although they did couch it with "could." The amount of revenue generated is about 20 percent a year of the $500 million. We rate this claim Mostly True.