“The Governor Gets the Last Laugh”
After the Boyd executives departed, we all had so many questions. At the meeting of both the staff and employees, they gave some very “boilerplate” answers.
Employee: “Do we still have jobs?”
Boyd Exec: “At this time, it is business as usual. You all have jobs.”
Employee: “Do you plan on keeping the Jai-Alai operation running even after the slots come?”
Boyd Exec: “Of course! The new law requires Jai-Alai to continue in order for us to have slot machines. We are very excited about improving Jai-Alai.”
Employee: “Are you putting the slot casino in our existing building?”
Boyd Exec: “We have architects designing a brand-new facility for both Jai-Alai and a casino. Right now, we are looking at a $200 million capital expansion here.”
Everything they said was very exciting to all of us. But, none of us really knew Boyd Gaming. My research showed that they were in the expansion mode with part ownership of Borgata in Atlantic City as one of their major assets. But how did they look at their new acquisition of Dania Jai-Alai? How would they treat the existing management and employees in the longer term?
One thing that did comfort me was the requirement to keep Jai-Alai operating. And we knew they didn’t know a pelota from a cesta. John Knox (GM), Clint Morris (CFO), and I felt fairly secure that they needed us. But nothing is certain.
One thing Steve Snyder had told us about Boyd was that they had embarked on a huge project on the Vegas Strip named Echelon Place. Boyd Gaming had purchased the famous Stardust Hotel and Casino. The Stardust was closed in November of 2006 and was soon demolished to make way for the new construction. Plans included 4 hotels, 25 restaurants and bars, and a 650,000 sq ft expo center. The total cost of the project was estimated at $4.8 billion! When completed (projected for late 2010), it would be the largest hotel/casino complex in Las Vegas. And we were now going to be part of the company that owned it.
I could not help but think that this new company offered us new opportunities. At least, it should assure us financial stability since they could afford a $4 billion project. I was excited at the possibility of a brand new, state-of-the-art fronton with plush new seating, no more roof leaks, modern furnishings, new player’s quarters, new scoreboard, the latest technology, and sound system, and on and on.
Blake Cumbers, Boyd’s “transition guy” was left behind to begin the process of making local contacts and to work with the local city officials. I am sure he was assessing the current Dania management, which was us.
Blake was a nice enough guy. We weren’t sure whether he was being groomed to take John’s job as General Manager or even mine. But we always cooperated with his every request. There was no doubt he was the eyes and ears for the execs back at Boyd corporate.
Weeks and months went by as the planning continued. We began to see the first drawings of the new $200 million Dania Jai-Alai building. There were some consultations with some of our personnel about the new fronton. No one came to me. I had hopes it would be designed where customers could play the slots and see the live Jai-Alai action at the same time. But, the Boyd architects apparently had their own ideas.
There were very few visits from any of the initial corporate execs. Blake seemed to be our main contact. I was expecting an invite out to the corporate office in Las Vegas. Or maybe a tour of some of their properties, a possible trip to Borgata? No invite came. Only John Knox was asked to come to a General Manager’s meeting in Las Vegas. Apparently, the Assistant General Manager (my position) did not merit the expense of such a trip. This bothered me a bit.
As we came to the end of 2006, two things had not happened. Construction on the new facility had not begun, and the legislature (and Governor) had not acted on the slot’s amendment at all. Therefore, none of the tracks and frontons in Dade and Broward counties could make financial projections or gauge their capital investment without knowing the tax structure for the slots. Also, would there be a limit of the number of machines or the hours of operations? Boyd Gaming was gambling that Florida would have a reasonable tax, that the state would, indeed, honor the will of the people.
Still, without any legislative decisions, Boyd Gaming and Aragon Corporation (Steve Snyder’s entity) closed the $152.5 million purchase in late February of 2007. It was official. Boyd Gaming now owned us.
Shortly after the closing, under some pressure from the lobbyists and stories in the media of the unreasonable legislative non-action, the Governor released the new slot laws. We quickly realized politicians always find a way to get their revenge. Remember, Bush vehemently opposed gambling and did everything he could to defeat the constitutional amendment. When the Florida voters approved it, he still found a mechanism to make it fail.
Knowing the tax rate averaged about 20% around the country on facilities that offered slots, we had hoped Florida would use that average. Nevada’s slot tax rate is about 7.75%. When explained to me, a slot machine pays out about 90% of what it takes in to jackpot winners. The remainder is subject to taxes by the state or local municipality. The state of Florida decided a whopping 55% tax was appropriate! Not only was this the highest tax rate in the nation, other parts of the new law compounded the problem of making any profits. There was a limit of 2,000 machines in a facility and limited slot operating hours. In essence, it was going to be very difficult or nearly impossible for the pari-mutuels to make any money from slot machines, which assured our ultimate demise.
The Boyd executives were in shock. This huge investment in South Florida gambling was looking more and more like “Snake Eyes.” Were they going to sink another $200 million into a new facility now knowing this unfathomable tax structure? Should they just try and wait out the current legislature, continue to lose money on Jai-Alai, and hope to get the laws changed. It turns out, the Dania investment would be the least of their problems.
