Hidden in Florida's New Gambling Deal Is a Huge Tax Cut for Racetrack Casinos
Isaac Delvalle is pacing in the desolate atrium outside the poker room of the Magic City Casino. The tan 49-year-old takes a few steps, checks his watch, and sneaks a drag from his bummed cigarette. He's practically twitching. It's midnight, an hour till close, and the air reeks of smoke, bad cologne, and desperation.
Delvalle is a Cuban Fredo Corleone, a deadbeat optimist who's been chasing luck ever since he exited one of the last freedom flights from Havana in 1971. Sometimes he gets a break — last year, he won a freak $30,000 bad beat jackpot at the Seminole Hard Rock Hotel & Casino in Hollywood — but he's a professional squanderer. He's blown triple that prize since then, he says. All of it was spent on his two vices: cards and girls.
Delvalle has been trying to avoid card rooms since losing his job as an electrician, but that's not easy. The old dog track on NW 37th Avenue and Seventh Street in Miami that now houses the casino has a poker room that's been busy lately. The 18-table hangar has been filling up early with players in search of the $175,000 Royal Flush jackpot. In April, a man won a Florida-record $195,423 at one of these tables.
Earlier in the night, Devalle sat down at a Texas Hold 'Em table, the kind preferred by serious regulars because the $2 and $4 minimum bets keep out both cheap riffraff and nutty high-stakes gamblers. "I'm unemployed — what else am I going to do?" he asks.
Things started off well after Delvalle cashed in his last $20 around 8 o'clock. He got an ace and a queen on his opening hand. He casually bet two white chips, and sipped from his free minibottle of water. "First rule of poker: Don't drink when you play," Delvalle says, smirking.
All but two players folded, leaving about $16 in plastic gold on the black felt tabletop. An intimidating buddha bet $4, and Delvalle called. The dealer copped a glance at both players, waited a beat, and unholstered an ace of clubs. And just like that, with his queen kicker, Delvalle won a tidy $24. "That asshole tried to raise me with a pair of nines," he hisses.
But at these midstakes tables, money can disappear faster than a shot of cafecito. "Hold 'Em is cards, cards, cards, just throw away cards again and again," he says. "The money is gone faster here because when you start winning, you get cockier and you bet on more hands." Slowly, the neat pile of white chips before him, stacked high like a jenga tower, had vanished.
Four hours after starting, outside the poker room, beneath the klieg lights that illuminate the nearby empty dog track, Delvalle is restless. He asks everyone on a smoke break for change. He's lost all his money. Well, not all. In his hand he has four quarters, which he shuffles like chips. "I just need gas money to get home to Miccosukee, where I live."
Delvalle is in some ways the ideal casino customer. He's single, excitable, and willing to spend money even when he's dirt broke. He stalks poker rooms as furiously as a junkie trawls for his next fix. Lancey Howard from The Cincinnati Kid would describe him as "loose money." The chieftains of Florida's pari-mutuel industry view Delvalle that way too. To them, he's the future. For years, gambling in the Sunshine State meant old-timey pastimes like dog races and jai alai. But the past decade has seen a breakneck race toward Las Vegas-style gambling, with all the major players donating escalating millions to politicians and lobbyists to see who can penetrate one of the country's largest untapped gambling markets.
Last month, those campaign contributions resulted in a $1.5 billion compact with the Seminole tribe that opens the door to expanded gambling for the first time since 1978. The tribe gets a five-year monopoly on blackjack, baccarat, and chemin de fer, while South Florida pari-mutuels, among the biggest campaign donors to state legislators, get expanded operating hours, no-limit poker, and a 30 percent tax cut on their slots revenue that wil likely generate $140 million.
Legislators defend the pact — and the casino tax cut — as a way to plug the state's billion-dollar budget hole and help the struggling pari-mutuel industry. But multibillion-dollar corporations own most of these pari-mutuels, and some people see the pact as the result of an industry with too much influence. Nathan Dunn, a lobbyist for the Christian conservative group Florida Family Action, says the industry preys on the poorest Floridians. "This amounts to a bailout for gambling executives," he says. "The suggestion that we're going to give tax breaks to certain industries in this toughest of economic times while families are struggling is highly irresponsible."
These days South Florida pari-mutuels — including several in Broward County — are staking it out for the long term through lobbying, union-busting, and shady political alliances. No pari-mutuel tells the story of gambling in Florida quite like Miami's Magic City Casino, a glitzy parenthesis in the heart of a working-class neighborhood. Despite irate governors, corporate takeovers, and cultural relevance, one family — the Hechts/Havenicks — has run it since the '50s. They've accumulated a multimillion-dollar fortune and stand to earn much more.
Says Steve Wolf, a former racing director at Pompano Park, "This is what they know. They haven't done anything else for 60 years. They're going to fight tooth and nail and down to the last dime to keep this business going."
Noelia Rodriguez comes to the dog track now just out of habit. She's been betting on the greyhounds here nearly as long as she's been married to Armando, her husband of 55 years. The stooped Cuban couple sits in the air-conditioned clubhouse tracking dozens of races simulcast from places they've never been to: Birmingham, Phoenix, Corpus Christi; even, at midnight, Australia.
These days, they can't muster up much excitement. "It's something to do during the day," Noelia says. Despite the elegant paint job and manicured buffet, the joint has lost luster. It's now just a half-empty amphitheater of hundreds of doll-sized TV monitors, and dozens of weathered faces and guayaberas.
"I remember the first time I came: September 1966. I remember it because it was the month we came from Cuba, and it was my birthday," Armando says. "Three floors, all for dog betting. Races every day, into the night. You couldn't find parking space. They had car giveaways. They did something called a supermarathon sometimes, where the dogs went around for two laps."
"Those were some dogs," Noelia recalls.
Magic City has been around in one form or another since 1931, when Jacob Sher, a thoroughbred horse breeder, opened it as the West Flagler Kennel Club. Back then, South Florida was a cesspool of unregulated gambling. Aside from the greyhounds, there were cockfights west toward the Everglades and roulette wheels in beach clubs. Between 1935 and 1937, slots were legalized and appeared everywhere, from hotel lobbies to barbershops. Gangsters like Meyer Lansky pocketed the profits; they also operated casinos in the free-for-all that was Fulgencio Batista's Cuba. "Gambling was totally wide open," says historian Paul George. "In the words of a sheriff back then, 'Give the tourists what they want.' "
Isadore Hecht moved to Miami Beach around then, and saw the racket's financial potential. The 25-year-old Jewish tomato and banana importer was friendly with Lansky. When Congress clamped down on illegal gambling in 1953, Sher decided to sell, and Hecht bought the track for $2 million. At the time, a day at the kennel club cost a quarter. But the place was so popular the annual handle hovered at $14 million.
The gamble paid off: In the next few years, South Florida solidified its standing as a destination spot with the construction of beachfront hotels. By 1960, Hecht transformed the faded track into an art deco jewel box of a facility with a 5,000-seat auditorium, steam-heated grandstand, and refurbished clubhouse. Time magazine called it the "White House of dog racing."
Flagler soon outdrew the famed Hialeah Park Race Track. Frank Capra's A Hole in the Head, a movie about a down-on-his-luck gambler and his big-shot brother, was filmed here.
By the 1970s, South Florida started to lose its destination status. Walt Disney World was completed in 1972, and cheap airfare to the Caribbean cut into South Florida's tourism revenues. The state asked voters to allow gambling in 1978 as a way to shore up dwindling coffers. South Florida developers spent $2 million, pointing to the success of Atlantic City, but popular Gov. Reubin Askew took issue, claiming the mob would return. Dog and horse track owners — including the Hechts — campaigned against the casinos, believing they would eat at racing's core audience. Armed with just $1 million, gambling opponents won by a whopping 70 percent to 30.
But the Seminoles opened the country's first high-stakes bingo hall in Hollywood the next year and nontaxable "cruises-to-nowhere" from Miami to West Palm Beach appeared around the same time. Tropical Park Race Track closed in 1972, the Miami Beach Kennel Club was demolished in 1980, and Biscayne Dog Track shut down in 1996.
At Flagler, Isadore Hecht died in 1977. Nightly handles declined to $450,000 and the place fell into grimy disrepair. But then Isadore's son-in-law, Fred Havenick, took over. The imposing New York lawyer quickly realized casino gaming and Cuban émigrés were the future. In the mid-1980s, he allowed a flea market, casually referred to as el pulguero de los perros (the dogs' flea market), to set up shop on the weekends in the parking lot.
"I started in Los Perros when it was really something," says Orlando Gay, who opened his seafood stand cum restaurant at the track in 1985. "You couldn't find parking in those days. Business was so good a bum could make $100 just asking for change at the entrance."
In 1994, Fred Havenick teamed with big corporations like Bally's and Harrah's to bring limited gambling to the ballot. They raised $10 million, but the measure failed. Nevertheless, the big companies swooped in to buy out the mostly family-owned pari-mutuels. Isle of Capri bought Pompano Park, Churchill Downs purchased Calder, and Magna acquired Gulfstream. In 2000, the three and Mardi Gras — then the Hollywood Greyhound Track — created a political action committee.
That PAC, Floridians for a Level Playing Field, has spent $14 million on pari-mutuel-friendly ballot initiatives since 2000. In 2004, the PAC backed a complicated ballot initiative that would allow Miami-Dade and Broward counties to vote. If local voters agreed, pari-mutuels, including horse and dog tracks and jai alai frontons, would be allowed to install lucrative slot machines.
That vote was extraordinarily contentious. Religious groups, then-Gov. Bush, Disney, and the Indian tribes spent $6 million campaigning against the measure. The pari-mutuels countered with a $16 million advertising campaign. In the end a slim majority, 50.8 percent, approved it.
But later, 53 percent of Miami-Dade voters rejected the idea while Broward, where the corporations spent more on advertising, embraced it.
Izzy Havenick, Fred's son, says the vote was devastating to his father, who was then battling emphysema. "My father was a boisterous man, and it crushed him to lose something he'd worked so hard for 25 years to get." A year later, Fred died. He remains such a popular figure around the track that his 2006 obituary still hangs in a clubhouse betting window.
For the next election, Izzy says, they were determined to hold nothing back.
At Century Market Place's outdoor flea market on Le Jeune Road in Miami, Orlando Gay stabs his gutting knife into a fresh Ecuadorian blue marlin. He filets the bloody block of fish as one would swipe a credit card.
A stumpy Cuban with a Charles Bronson mustache and booming voice, Gay has been a fishmonger since 1985, five years after he arrived in the Mariel boatlift. For most of the last quarter-century, he worked at the Flagler flea market. The flea market was his only job, lucrative enough that he was able to buy several store fronts and a seafood restaurant in nearby Flagami. "My daughter grew up there," he says, referring to the dog track flea market. "Fish paid for her college education."
But last June, the Havenicks evicted the market. Though Gay and the 400 pulgueros had supported the referendum to allow slots in Dade with sweat and blood, the flea market no longer fit the family's vision for the place.
Gay says he lost "a chunk of my life... I had a cow that gave four buckets of milk a day, and now I got a goat with a couple of broken legs."
After the 2004 vote, the Broward casinos didn't immediately turn a profit. The jai-alai fronton, dog track, and horse tracks invested hundreds of millions in the slots and improving their facilities. Pompano Park dropped a sick $230 million to turn itself into a Valhalla of gambling, and Calder rushed through an $85 million renovation to be ready for this year's Super Bowl. A conservative Legislature set taxes on the new revenues at 50 percent, high but not unprecedented. Pennsylvania's casinos pay 55 percent on slots, and New York's fork out 78 percent.
The Havenicks and other Miami-Dade pari-mutuels such as Calder Race Course and Miami Jai-Alai didn't give up. They continued to invest heavily in lobbying county officials for a new vote and came up with a canny strategy. In July, Izzy approached Miami-Dade commissioners about setting a new vote on the casinos the day of the upcoming presidential primary. When the first ballot was rejected in Dade, turnout had been a measly 14 percent, mostly elderly and conservative die-hards. With the primary, there would be more voter participation. Commissioners approved that date nine to one, with Katy Sorenson the sole dissenter.
Then the slots backers mobilized forces. A few months before the 2008 vote, hundreds of the pulgueros powwowed with Izzy Havenick at a rare meeting below the grandstand. The 32-year-old Flagler vice president talked about the future.
Most old hands had seen Izzy grow up. He was the chubby kid who'd mulched the track when he was grounded, but to the pulgueros he was a cipher. Izzy had spent the track's boom years studying photography at the University of Miami, living in one of the residence halls that bore his grandmother's name.
At the meeting, Izzy delivered a grim prognosis. "We were honest with them," the track owner says now. "I said, 'Unless you help us, come next year you may not be here anymore.' " He said the vote was a make-or-break deal. "If we lost, we'd sell the land," he said.
Flagler was losing nearly $8 million a year, he told the group. The family just couldn't keep the crown jewel of their business (they also owned tracks in Fort Myers and Wisconsin) afloat without help. They needed casino-style gaming.
The meeting was calm. The pulgueros were asked to campaign for the casino and given T-shirts that supported the deal. Someone shouted, "Contract!" but Izzy politely rejected the suggestion. After several meetings, they agreed. "It was like seducing a woman," Gay explains. "First, you promise her the world, and then you ravage her."
The Havenicks didn't stop with the pulgueros. The 2004 loss taught the family to take nothing for granted. They joined with Calder and Miami Jai Alai on a $6 million advertising campaign.
And they enlisted track employees. Back in 2004, Unite Here, the largest gaming employees union, had offered to help. The Havenicks and other track owners accepted, but there was a catch: The tracks would have to allow Unite to speak with employees about unionizing if slots were approved.
Employees had long wanted a union, says Jay Mehta, a Unite Here spokesman. And the pari-mutuels saw it as an opportunity to telegraph to voters that slots would be good for workers. "They thought by signing this agreement they could persuade voters and politicians this had the potential to secure good jobs," Mehta says. "Many companies use that as a tactic when they're negotiating with voters."
Bernie, a track cashier at Flagler since 1995 who asked New Times not to use his last name, saw the election in personal terms. The gray-haired 61-year-old, a regular Willy Loman, has medical problems, so he took the job for health insurance. He and his wife campaigned for the slots and took voters to the polls. "I thought, This will help them make money so they can start offering insurance again," he says.
Voters approved slots 63 to 37 percent.
Two months later, the pulgueros got a jolt: They had a week to vacate the premises. "It was really disgusting what they did to us," Gay says. "They even called the cops."
Izzy Havenick says his family owes the flea marketers nothing. "They've been here for 20 years? Well, we've been here for 58," he says.
But Julio Robaina (no relation to the Hialeah mayor), a Republican state representative from the track's district, says Havenick betrayed trust. "Every local elected official got assurances about not displacing those people," Robaina says. "They didn't keep their promise."
The unionizers also feel deceived. The group sued the Havenicks this past January for failing to honor the 2004 agreement to allow talks with employees.
Izzy Havenick wouldn't discuss that lawsuit, but in court records, the family argues the agreement is invalid for various technical reasons. "Our employees have always supported everything we've done here," Izzy says. "They've volunteered, they've worked poll stations. They wanted to protect their jobs." So far there's been no decision on the suit.
Marlen Cabrera zigzags through the slot machines of the Magic City Casino like a guided missile. She's a dark-skinned, heavyset woman in her mid-40s who plays machine after machine while her husband competes downstairs on the poker tables with $5 and $10 bets. Around her, the joint swings like a kaleidoscopic arcade. Bedazzled slots flash neon lights and trill like overzealous Ataris. Little old ladies pull on levers as excitedly as if they were playing Dance Dance Revolution.
Cabrera arrived at 6 p.m. with $100. She dropped 30 cents on the Treasures of Machu Picchu, and then more on Triple Lucky 7s. "There's a jump at the beginning, and I make a few coins, but it's all downhill from there, and it leaves me pelada [wiped out]," she says. "These machines are thieves. You keep putting money in, out of avarice really, but all you do is lose more."
In two hours, all she had left in her purse were cigarettes and cosmetics. She's not alone. Slots are the most popular attraction at Florida's racetrack casinos, or racinos. In the 2008-09 financial year, visitors spent $2.7 billion playing slots, according to the Florida Department of Business and Professional Regulation, which oversees casinos. Cabrera and her husband come to Magic City three or four days a week. "When the money's good, we stay until dawn," she says. "And when the money's bad, we stay anyway."
After prevailing in the 2008 vote, the Havenicks started looking for capital. Their goal was to raise $160 million for slot machines, a dog track upgrade, and a casino build-out. As the recession took hold and banks began tightening up, the Havenicks had to settle for a $54 million loan from two local banks, which the family declined to name.
"We had to sell a dream to a bank in the worst economy since the Depression," Izzy Havenick says. "We gambled everything on the 2008 election." The loan enabled them to repaint the clubhouse and refurbish the grandstand, which had been closed for a decade. It also allowed for a new 2,000-seat amphitheater, which has hosted Jose Feliciano and the Guess Who, smack in the middle of the track.
The renovated Magic City Casino opened this past November. The slots wing is by far the most expensive part of the renovation, Izzy says. At approximately $10,000 to $15,000 per machine, the games cost $18 million.
There's a stark contrast here. The old clubhouse is a sterile, Muzak-friendly incubator for old-timers, while the casino is like a jukebox that syncopates to shrill computerized noise and a blitzkrieg of lights. This past March, a new wing of electronic blackjack machines opened at a cost of $3.5 million. New ads have appeared all over the city: "Blackjack + Miami = Magic City."
All that work didn't immediately translate to profit. Izzy Havenick claims the track has barely been breaking even. A ray of hope arose, though, when the state reached agreement on a pact with the Seminole Tribe for revenue that would offset deficits accrued because of the real estate meltdown.
Years in the making, the pact allows the tribe to run more card games, such as baccarat, and Vegas-style slots. In return, the Seminoles guarantee the state at least $1.5 billion over the next five years.
A less-noticed part of the pact will mean millions of dollars for the Havenicks and other pari-mutuels. It reduces the tax on slot revenue from 50 percent to 35 percent, rolls back the annual slots license to $2 million a year, and allows no-limit poker. It also extends card rooms' operating hours to 18 on weekdays and 24 on weekends. Just the tax break on the slots will generate at least $138 million, a whopping $32 million more than last year.
How did the deal get done? Lobbying helped. The Havenicks employ three lobbyists — Quinton Greene, Manny Prieguez and Ron Book, or Ronnie, as Izzy calls him, who has been with the family since "I was 10" — for about $200,000 a year. In addition, pari-mutuels gave $1.6 million to political campaigns in 2008, according to the National Institute on Money in State Politics.
Legislators such as state Sen. Dennis Jones and the House majority whip, Miamian Carlos Lopez-Cantera, were some of the main proponents of the tax break. Unsurprisingly, they were among the top ten beneficiaries of political industry contributions in 2008, receiving nearly $100,000, with Lopez-Cantera getting $15,500. "It's not a bone we're throwing them," he says. "If they make money, we make money. It may not be the windfall they're expecting, but if the state doesn't suffer, I don't see the harm in it. If the state makes money and they make money, that's great. That's capitalism."
Because of the money guaranteed for schools, the measure was backed by teachers unions. In fact, the state Legislature's Office of Economic Research forecasts that more people will be playing slots — so the total amount received by the state should grow back to its present level of about $113 million annually by 2013.
Gov. Charlie Crist signed the measure into law last week, and it takes effect in July. He called it "an example of elevating problem-solving over ideology."
The management office at Magic City is Izzy Havenick's shabbier home away from home. The 32-year-old leaves his $1.5 million house in Miami Beach every morning with his bullmastiff, Kitty, and drives to an office that overlooks the now-impressive dog track. He's the opposite of the slender greyhounds that run here weekdays — a chubby poodle of a man with pudding cheeks and a golfer's tan. He walks around in khakis and a Magic City guayabera. Only his hair, which is sooted with grey specks, suggests he's the guy in charge.
On his desk, there are blueprints to develop the track's old racing theater, a soundstage-like facility that's been empty since Hurricane Andrew tore off its roof.
He'd like to bring back the flea market and then build stores and cafes around the building, much as Gulfstream did at the recently opened The Village at Gulfstream Park. "Our family is invested in this project," he says. "We definitely see a future of retail, restaurants, and bars, not just the casino and the dogs."
Those plans will likely work out. Combined with earnings from slots, jai alai, dog tracks, and race tracks, the Florida gambling industry earned a total $1.1 billion in 2009, according to the Florida Department of Business and Professional Regulation.
That will go higher, says Bob Jarvis, a gambling law professor at Nova Southeastern University in Davie. The Seminole compact opens the door to hotels and amusements that have made gaming a $4.3 trillion industry in Nevada. "Eventually the Legislature will decide the horse is so out of the barn we might as well have full-scale gambling in Florida," he says. "And if you have that, prepare to see the Steve Wynns, the Donald Trumps developing all along the beaches."
And eventually, the racing and jai-alai will disappear. "Even the owners don't want dogs," Jarvis says. "Horses you gotta feed and jai alai players can go on strike. If [owners] could just have 24/7 gambling and get rid of horses and dogs, they'd do it in a heartbeat."
A few hours with Isaac Delvalle will convince you Jarvis might just be right. Two days after his first beating, Delvalle is back at Magic City after leaving the Miccosukee casino at dawn. He didn't do well; in fact he was thrown out when he called a dealer a hija de puta. He'd borrowed $60 to play there, and he's at Magic City to recoup the loss.
He spends the next several hours getting gob-smacked and winning small pots. A 29-year-old, curly-haired, pregnant beauty with a nose ring takes him for a $32 pot, but at the end of the night, he leaves with $40 on a $20 investment.
"What do you think I'm going to do next? Of course I'm going to Miccosukee. They have high hands all night long."
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