Casinos are losers, says horse racing industry

Thursday, June 14, 2012

by DAVE PINK

The Ontario government would be giving up on a sure thing and betting on a long-shot if it allows the existing partnership between Ontario Lottery and Gaming (OLG) and Ontario’s racetracks to be scrapped, the Ontario Horse Racing Industry Association (OHRIA) is arguing.

The government is backing an OLG proposal that the Slots-At-Racetracks program be abandoned, and that OLG put a fresh emphasis on opening more urban casinos.

That strategy makes no economic sense, OHRIA president Sue Leslie told members of the government’s standing committee on finance and economic affairs earlier this month. In a submission to the committee, the OHRIA report makes it clear that the Slots-At-Racetracks program generates $1 billion in economic activity in the province each year, most of it in rural areas — and that the annual revenue from the racetracks’ slot machines continues to grow.

Meanwhile, the province’s resort-type casinos have proven to be losers. Their popularity, and the money they generate, has been noticeably declining over the past 10 years. And OLG projections of 2,300 new jobs in the gaming industry don’t add up, the OHRIA report says.

“Our industry has serious concerns that these projections are wildly optimistic and will not realize the contribution to Ontario revenues that is assumed in the 2012 Ontario budget. What is being proposed in the OLG modernization initiative is to end the most lucrative of the OLG business lines (the Slots-At-Racetracks program) to expand (or add) casino-type sites in other locations — lines of business that historically are money-losing for the OLG,” the OHRIA submission reads.

Graphs contained in the OHRIA submission show that the close to $900 million take from slot machines at the 17 Ontario racetracks is the leading revenue source for the OLG, ahead of lotteries and bingos, which generate about $800 million yearly. In addition, the graphs show that the resort-type casinos have been revenue losers since the 2006-2007 fiscal year. Charity casinos, meanwhile, have consistently reported revenues of well under $200 million a year over the past 10 years.

Nevertheless, OLG believes it must move in a new direction to exploit potential customers in Ontario’s urban areas. OLG spokesperson Tony Bitoni said in a telephone interview that gaming facilities must be located close to potential customers in the urban areas.

“Our current business model is unsustainable,” he said.  “Our number one priority is to be where the customers are. Our slots facilities are not close to the customers.”

He said the OLG must compete for the public’s entertainment dollar with everything from movie theatres to restaurants, and that the OLG is constrained by the current agreement that requires it to operate slot machines outside of the large population areas. “We want to end that prescriptive policy that has tied our hands.”

The gaming industry is much different than it was when the agreement with the racetracks was originally reached, he said. Now, with more casinos in the U.S. and stricter regulations for Americans wanting to cross into Canada, OLG must revise its structure.

But OHRIA’s Leslie isn’t buying it.

“How can anyone look at this and think it’s a good idea?” she asked in a phone interview.
“It’s a double whammy. It’s hard to look at this from the racing perspective and know that it will devastate the industry. And then, we are close to abandoning a program that generates $1 billion in revenue,” she said. “As a taxpayer, I’m concerned.”

The Slots-At-Racetracks program “is here, and it’s working,” Leslie said. “Further to that, the casinos are not.”

The racing industry must be saved, for the jobs it provides in rural are and for the economic contribution it makes to the province, said Leslie — and she plans to say that to the members of the panel appointed last week by Agriculture Minister Ted McMeekin  to study the future of horse racing in the province. Former Ontario cabinet ministers Elmer Buchanan, John Snobelen and John Wilkinson form the committee and will hear from representatives from the racing industry over the summer to map out its future and determine where the $50 million transition fund promised by the government will be spent.

The slot machines were moved into the racetracks under an agreement reached in 1998, at a time when the tracks were worried about losing their betting business to the new competitor. Under the deal the province was to receive 75 per cent of the profits, while 20 per cent went to the track and the horse owners and the remaining five per cent went to the host municipality.

OLG has since paid back $3.7 billion to the racetracks and the horse industry. BF