Ruling over rural racetrack could direct gaming future

The Florida Supreme Court will hear arguments Tuesday over whether a nascent, small racetrack in the impoverished North Florida town of Gretna will turn the tables on the state’s gambling future.

The issue before the court is whether Gretna Racing is entitled to slot machines because voters approved a countywide referendum in 2012. If the court agrees, the ruling will go far beyond rural Gadsden County.

It will have repercussions from Palm Beach and Naples to Jacksonville, and could usher in the explosive growth of gambling across the state. It could also change the terms of the $250 million-a-year gaming compact between the state and the Seminole Tribe of Florida —which is invalidated if slot machines are allowed outside of Miami-Dade and Broward.

At least five other counties—Brevard, Hamilton, Lee, Palm Beach, and Washington — have already voted to bring casinos to their stressed horse and dog tracks and jai alai frontons. They each have already completed applications for a slots license and Palm Beach has announced it could install them within weeks. Other counties, including Duval and Marion, are prepared to conduct a referendum, too, if the court agrees with Gretna.

For Gretna Racing, a favorable court ruling would be the culmination of years of litigation and creative legal footwork by their owners.

If the court rejects Gretna’s argument, however, the pressure will be back on legislators to fix what many consider a porous gaming regulatory structure — rife with room for legal loopholes, pursued by gambling lobbyists to win slots licenses, and subject to inconsistent interpretations by Florida regulators.

In the past five years, often depending on who is giving directions within Gov. Rick Scott’s executive office, the Division of Pari-mutuel Wagering has lurched back and forth about whether “barrel racing” and “flag drops” constitute legitimate pari-mutuel events.

So even as the court rules on whether counties can bypass the Legislature to authorize slot machines, it could leave unaddressed a lingering question that has been looming over the tiny Gretna track for years: Is the racetrack a legitimate pari-mutuel?

State statutes require that for a facility to be entitled to card rooms it must be considered a licensed pari-mutuel. And for it to be granted a slots license, it must have conducted live racing or jai alai events for two years.

“The question is: Can the state arbitrarily overturn the approval of a sham pari-mutuel, even if the approval should never have been granted?,’’ said Steve Geller, former state senator from Hallandale Beach and now a gaming lawyer. “The answer is a firm maybe.”

For Gretna Racing, a favorable court ruling would be the culmination of years of litigation and creative legal footwork by its owners—Tallahassee lawyer-lobbyists Marc Dunbar and David Romanik, who have joined with the Poarch Band of Creek Indians of Alabama to build the facility.

Their goal since they first broke ground on the 100-acre site 25 miles west of Tallahassee along Interstate 10 was to build the biggest entertainment and gambling complex east of Biloxi. The owners envisioned an equestrian center and horse track, with a convention hotel and restaurants.

They persuaded regulators to approve their creative plan for meeting the requirement to conduct live racing for two years. And they earned community support for a referendum by promising that a slots casino would bring hundreds of jobs to an economy struggling with an 18 percent unemployment rate and a median income of its majority black residents of $18,000.

It was an ambitious goal in a state that had not seen a pari-mutuel establishment start from scratch in decades. But before they can declare victory, the court must rule on the questions: Does the Florida Constitution authorize all counties to have slot machines at pari-mutuels, or just those in Miami-Dade and Broward? Must the Legislature approve all gambling expansion or can local communities do it by referendum?

And, if addressed by the court, the question that comes with the most political intrigue and could also have far-reaching consequences: What constitutes a legitimate pari-mutuel eligible for card games and slots?

Gambling opponents, including the anti-gaming group No Casinos and former Gov. Bob Graham, have said, in briefs filed in the case, that Florida’s Constitution limits slots licenses to Miami-Dade and Broward counties, as approved by voters in state and local referendums in 2003 and 2004.

The original referendum was funded by seven pari-mutuels in Miami-Dade and Broward, but Hialeah Racetrack and Palm Beach Kennel Club did not participate so they were not eligible for slots. In 2009, legislators rewrote state gambling laws to allow Hialeah to be included among those eligible for slots. That statute is what Gretna, Palm Beach and pari-mutuel operators in the four other counties are using as their window for expanding gambling — saying that the law allows for expansion by local referendum.

Attorney General Pam Bondi, however, argues that it was never the Legislature’s intent in 2009 to allow communities to bypass the Legislature and let voters authorize slot machines through a countywide referendum.

Unlike the existing pari-mutuels in Palm Beach, Brevard and Lee counties that race dogs and operate card rooms, Gretna is the newcomer with a unique problem: It has an unconventional, short race track.

In 2011, after the Florida Quarter Horse Racing Association determined that Gretna’s track was unsafe, the track’s owners decided to forgo operating industry-sanctioned quarter horse races and instead applied for a permit to conduct “barrel races” as a pari-mutual event.

Regulators had “never seen anything like it,” said Milt Champion, head of the Division of Pari-mutuel Wagering. “It would have been my position not to approve it.”

But in September 2011, Champion was instead asked to resign by Department of Business and Professional Regulation Secretary Ken Lawson.

“He told me Marc Dunbar and the governor’s [then-] chief of staff [Steve MacNamara] and their families are very close and they wanted me to resign, so I resigned,” Champion told the Herald/Times in 2012 and confirmed again last week.

Dunbar said through a spokesman that he would be conducting no interviews before the oral arguments.

With a new pari-mutuel chief installed at the Division of Pari-mutuel wagering in October 2011, state regulators granted Gretna Racing an unprecedented “barrel racing” license. The rodeo-style races continued to operate for the next 18 months until May 2013, when an administrative court judge ruled that the agency had no authority to expand gambling by sanctioning a new pari-mutuel sport absent legislative approval.

Dunbar and Rominik quickly returned with a new, unconventional idea for a pari-mutuel race: Conduct a “flag drop” event in which a cloth is waved and two riders race against each other for a short distance.

The department awarded them a “flag drop” permit in June 2012. A similar quarter horse event was held two months earlier, at Gulfstream Park in Hallandale Beach, for which Dunbar is an attorney. In 2014, the division gave a similar permit to Hamilton Downs, another small race track built by the owners of Hamilton Jai Alai.

The horse racing industry has argued that the flag drop events constitute “phony horse racing” and have stymied the growth of both the thoroughbred and quarter horse racing and breeding industries in Florida.

They, and lawyers for other pari-mutuels, have raised concerns that the Division of Pari-mutuel Wagering has been “acquiescing” to Dunbar and Romanik by allowing illegitimate and unlawful pari-mutuel races.

The questions is: Can the state arbitrarily overturn the approval of a sham pari-mutuel, even if the approval should never have been granted? The answer is a firm maybe. Steve Geller, gambling lawyer and former lawmaker

But in the past year, the division started to reverse course and crack down on the “flag drop” events at Hamilton Downs. It accused the track of violating state horse racing rules because races lacked speed and the track failed to conduct the required number of races.

Hamilton Downs sued, arguing it had violated no rules. Last month, Administrative Law Judge E. Gary Early sided with the flag-drop promoters, saying the division’s vague rules gave regulators no authority to punish Hamilton Downs for the way it was conducting the races.

But Early also acknowledged that he was doubtful the events “could be construed as horse racing.” He described them as “more evocative of an Our Gang comedy short than an undercard at Pimlico.”

Gretna Racing has also watched as courts attempted to interpret other pieces of the state’s laws relating to pari-mutuels.

In 2014, the First District Court of Appeal in Tallahassee ruled that slot machines were allowed because Gadsden County voters had approved a referendum authorizing them. But Attorney General Pam Bondi asked for a rehearing after one of the judges in the case retired and a new, three-judge panel ruled 2-1 against the Gretna track. Gretna Racing appealed and the Florida Supreme Court will decide its fate.

Geller, the former state senator, believes that no matter what happens with the court ruling, legal fights over gaming will continue.

“Any time you have extremely large amounts of money that are in question and an industry that is highly regulated, everyone will try and look for loopholes and vagueness — and exploit them,’’ he said. “As one administrative law judge said, it may be a scam but it’s a legal scam.”

Mary Ellen Klas: and @MaryEllenKlas

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