SOCIÉTÉ DES LOTERIES VIDÉO DU QUÉBEC
ALBERTA GAMING AND LIQUOR COMMISSION
CANADIAN THOROUGHBRED HORSE SOCIETY
ELEPHANT AND CASTLE RESTAURANT
ONTARIO RESTAURANT ASSOCIATION
CITY OF TORONTO PUBLIC HEALTH DEPARTMENT
ONTARIO PUBLIC SERVICE EMPLOYEES UNION
HORSEMEN'S BENEVOLENT AND PROTECTIVE ASSOCIATION OF ONTARIO
NATIONAL BROADCAST READING SERVICE
ASSOCIATION FOR THE NEUROLOGICALLY DISABLED OF CANADA
CONTENTS
Wednesday 14 August 1996
Alcohol, Gaming and Charity Funding Public Interest Act, 1996, Bill 75, Mr Sterling /
Loi de 1996 régissant les alcools, les jeux et le financement des organismes de bienfaisance
dans l'intérêt public, projet de loi 75, M. Sterling
Atlantic Lottery Corp
Société des loteries vidéo du Québec
Alberta Gaming and Liquor Commission
Peterborough Holiday Inn
Canadian Thoroughbred Horse Society
Elephant and Castle Restaurant
Ontario Restaurant Association
Town of Markham
City of Toronto Public Health Department
Ontario Public Service Employees Union
Western Fair Association
Horsemen's Benevolent and Protective Association of Ontario
Concerns, Canada
National Broadcast Reading Service
Association for the Neurologically Disabled of Canada
STANDING COMMITTEE ON ADMINISTRATION OF JUSTICE
Chair / Président: Mr Gerry Martiniuk (Cambridge PC)
Vice-Chair / Vice-Président: Mr Ron Johnson (Brantford PC)
Mrs MarionBoyd (London Centre / -Centre ND)
Mr RobertChiarelli (Ottawa West / -Ouest L)
Mr Sean G. Conway (Renfrew North / -Nord L)
Mr EdDoyle (Wentworth East / -Est PC)
*Mr Garry J. Guzzo (Ottawa-Rideau PC)
Mr HowardHampton (Rainy River ND)
*Mr TimHudak (Niagara South / -Sud PC)
*Mr RonJohnson (Brantford PC)
*Mr FrankKlees (York-Mackenzie PC)
Mr Gary L. Leadston (Kitchener-Wilmot PC)
*Mr GerryMartiniuk (Cambridge PC)
Mr John L. Parker (York East / -Est PC)
Mr DavidRamsay (Timiskaming L)
Mr DavidTilson (Dufferin-Peel PC)
*In attendance /présents
Substitutions present /Membres remplaçants présents:
Mr MikeColle (Oakwood L) for Mr Conway
Mr BruceCrozier (Essex South / -Sud L) for Mr Chiarelli
Mr HarryDanford (Hastings-Peterborough PC) for Mr Doyle
Mr JimFlaherty (Durham Centre / -Centre PC) for Mr Tilson
Mr PeterKormos (Welland-Thorold ND) for Mr Hampton
Mr GerryPhillips (Scarborough-Agincourt L) for Mr Ramsay
Mr E. J. DouglasRollins (Quinte PC) for Mr Leadston
Mr Terence H. Young (Halton Centre / -Centre PC) for Mr Parker
Clerk / Greffière: Ms Donna Bryce
Staff / Personnel: Mr Andrew McNaught, research officer, Legislative Research Service
J-1177
The committee met at 0859 in room M2-17, Macdonald Block, Toronto.
ALCOHOL, GAMING AND CHARITY FUNDING PUBLIC INTEREST ACT, 1996 / LOI DE 1996 RÉGISSANT LES ALCOOLS, LES JEUX ET LE FINANCEMENT DES ORGANISMES DE BIENFAISANCE DANS L'INTÉRÊT PUBLIC
Consideration of Bill 75, An Act to regulate alcohol and gaming in the public interest, to fund charities through the responsible management of video lotteries and to amend certain statutes related to liquor and gaming / Projet de loi 75, Loi réglementant les alcools et les jeux dans l'intérêt public, prévoyant le financement des organismes de bienfaisance grâce à la gestion responsable des loteries vidéo et modifiant des lois en ce qui a trait aux alcools et aux jeux.
ATLANTIC LOTTERY CORP
The Chair (Mr Gerry Martiniuk): Good morning. Via videoconferencing we have Mr Brian Fraser, the senior technology analyst, and Mr Paul Burns, project manager of marketing, Atlantic Lottery Corp. This is the standing committee on administration of justice, as you've probably been advised. We are considering Bill 75, which is a bill that, first, amalgamates the regulation functions of liquor and gambling into one commission, and second, introduces for the first time legally in Ontario video lottery terminals, which are proposed, first, to be phased in at racetracks and permanent charity casinos, and second, to be extended at some undetermined time to liquor licence establishments in Ontario. Would you like to proceed to give us some background of how the operation is operating in Atlantic Canada?
Mr Brian Fraser: It sounds like a good place to start. We haven't got a lot, but we can certainly give you a brief summary of our operations. The Atlantic Lottery Corp operates a video lottery program in the four Atlantic provinces. New Brunswick was the first one online in Canada, in December 1990, and the other three provinces followed quickly, in 1991.
From a technical aspect, which is nearest and dearest to my heart, we have one set of technical requirements and one system that runs all four provinces. We're running a dial-up system; that is to say our system collects financial and statistical information in one day. We do have the capabilities to communicate with the terminals any time we wish through our hotline services group for daily maintenance, changing machines and such during the day.
There are minor variations in the programs within the four provinces, but those deal specifically with things such as the payout percentages of the games and some of the options that are allowed on some of the terminals. For example, New Brunswick allows the use of bill acceptors directly integrated in the machines where the other provinces do not.
The programs themselves, as far as operational is concerned, diverge a little bit, even though the technical aspects are the same. In New Brunswick and Prince Edward Island, the machines are owned and operated by private industry. The dramatic difference from the other provinces is that the machines are offered in convenience stores or corner stores in New Brunswick and Prince Edward Island. In our Nova Scotia and Newfoundland programs, the entire program, including machine operation, maintenance and sales, is entirely operated by the Atlantic Lottery Corp, and we are operating in age-controlled establishments only in those two provinces.
Statistically, our entire network across the four provinces consists of approximately 9,500 terminals. That works out to, ballpark, 3,000 establishments. Again, you have to keep in mind the different programs. New Brunswick and PEI have a higher concentration of machines through the operation in convenience stores. Our average number as far as revenue is concerned is, if we average it out over the four provinces, a net profit per week -- and that's before the split between the operating parties -- of around $550 per terminal.
Right now, just as a little bit on a technical note, although we have several different manufacturers of video lottery terminals approved in our jurisdiction, there are three main ones that are supporting our program that have machines operating and are supplying us with new equipment and software as we go through.
That's it in a nutshell for what we're doing. We weren't sure exactly what sort of questions you had for us, so we thought we'd start with a very brief introduction and go from there.
The Chair: Thank you very much. Excuse me. I did not welcome you and thank you for taking the trouble to be our expert witnesses this morning.
Mr Fraser: Can I interrupt for a second? Loto-Québec is on the other line. Gentlemen, you're aware that Loto-Québec has requested to listen in on this through audio?
The Chair: Yes. We are speaking to them at 10 o'clock, a scheduled presentation.
Fine. Perhaps we can start, and we will rotate through each of the parties.
Mr Jim Flaherty (Durham Centre): Good morning. Just as a point of fact, so I make sure I understand the situation correctly, in the four maritime provinces that you're referring to did each of the provinces amalgamate its gaming and alcohol commissions, or is there just one commission?
Mr Fraser: No, they did not. Each province maintains its own lotteries commission or gaming and alcohol commission, depending on the province. The part that is amalgamated is the operation of it through Atlantic Lotto, but there is another level on top of us, so to speak, that's regulated by each province.
Mr Flaherty: With respect to issues such as restricting access by minors to video lotteries, who's responsible for that regulatory function?
Mr Fraser: The governments of each province, the lotteries commissions.
Mr Flaherty: If you're in a position to answer this, what has been your experience in dealing with that regulatory requirement of minors not being permitted to play the machines?
Mr Fraser: I'm not so sure that we'd be in a position to say absolutely. Since Atlantic Lotto's a very visible organization, when there are problems they tend to phone us first and the calls are forwarded through our public relations department. Without having the actual numbers, I think in general it's been a very minor issue along the way. In Newfoundland and Nova Scotia, where we are in regulated establishments, for the most part there haven't been any issues that I know of.
Mr Paul Burns: No, because the regulations in reference to the liquor licensing would be your limiting factor there. Because they're age-controlled, then minors wouldn't be getting in to begin with.
Mr Fraser: Although it's worth noting that in Nova Scotia they have recently changed the rules for liquor licensing to allow minors in some establishments during the day for the purpose of using the restaurant facilities.
Mr Flaherty: Are there any specific issues concerning the implementation of video lotteries that you've experienced in the maritime provinces that we should be wary of or aware of here as we embark on that process? I realize that's a very broad question, but what we're looking for are some of the things that may be obvious to you that may not be obvious to us, being new to this.
Mr Fraser: Specific to implementation itself, Paul and I were both involved quite hands on when we started. There's obviously the technical logistics of getting terminals out there and approved. Depending on what approval criteria you put in for the establishments, if you go with licensed establishments -- from the preliminary stuff we read, I'm making that assumption -- if you piggyback your approvals of the establishment with your existing liquor licensing, you may not have a problem, but if you're doing any type of separate approval for each establishment -- we've seen this in other jurisdictions as well -- just processing that volume of information through can be a headache at the start. You have to throw a lot of resources at it to just get the paperwork cleared, no other reason.
Depending on the technical aspect, which suppliers you go with, which central system is going to be used, typically it's not the same group of people that have the central system and have the terminals. Sometimes it is and sometimes it isn't. There are some technical challenges there, although from every jurisdiction that it's gone in, they've managed to overcome them, including us.
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There is a lot of work to be done on the startup, but it's all doable if you throw the right resources at it. One of the mazes we saw was technical approval, manufacturers' approval as well, if you haven't started that process already in the background, because that can sometimes take quite a while to actually approve the manufacturers to operate in the province.
Mr Burns: The other issue in reference to establishments is the difference between an establishment that has a liquor licence and an establishment that is age-controlled. That's one of the areas we had to specifically define up front, specifically in restaurants, where they may have a liquor licence or a table licence to serve alcohol with meals but it may not necessarily be age-controlled. That's another aspect to keep in mind.
Mr Flaherty: How did you deal with that situation you just described?
Mr Burns: What we did specifically with the restaurant situation is we had to set measures and ensure that the physical location of the terminals would be secure such that they would be in a separate area other than the main restaurant and that this area would be age-controlled within the location itself.
Mr Bruce Crozier (Essex South): Good morning, gentlemen. I should advise you that I'm a member of the official opposition, although we have many common concerns with the government on the introduction of these VLTs. Is it fair to say that you're better equipped this morning to advise us from a technical standpoint than you are from what I might call the human aspect?
Mr Fraser: That would be correct, sir.
Mr Crozier: With all due respect, I'm not a technical person, so I don't know just exactly what we're going to learn from this this morning relative to what we've been speaking to in our meetings across the province. But to begin with, I'd like to just get a quick overview of security. With reasonable assuredness, I expect, the system is sophisticated and secure so that it can't be tampered with?
Mr Fraser: That is correct.
Mr Crozier: Any problems that you've ever had with them, or is this a case of simply being careful that you get the right manufacturer of machine and those technical aspects?
Mr Fraser: It's primarily with the work you do up front, both in selecting your vendors to begin with and as an ongoing process for approval. My area of expertise is the actual physical approval of the terminals themselves from a hardware and software point of view. That's where the security parameters are tested, from the physical aspects as well as the accounting aspects, to make sure everything is correct, that there are sufficient backup systems in the event of failures to ensure that your accounting security is there.
Our system also has features in place that check to see if anybody has tampered with the machines from a software point of view, if someone has attempted to change the code to alter the play of the games. Most systems have the ability to detect that from an online point of view. So it's primarily work up front.
Any problems we've had with security have been along the lines of the physical aspect. As with any break-in, someone will break into the establishment and physically force the machine open to take money out of it.
Mr Crozier: Where are the machines that you use manufactured?
Mr Fraser: We have several vendors that are approved. Our main suppliers right now who are actively participating in the program, one is a Canadian and two are American.
Mr Crozier: And the Canadian one is located where?
Mr Fraser: New Brunswick. Spiel Gaming International.
Mr Crozier: Thank you. I move on maybe beyond the technical question, but you might be able to help us from your experience. I see that in Nova Scotia they are only in licensed establishments. Is that correct?
Mr Fraser: That is correct.
Mr Crozier: So it's in New Brunwick where they are in corner stores, snack bars and convenience stores?
Mr Fraser: And Prince Edward Island.
Mr Crozier: And Prince Edward Island. How does the commission in all or any one of them determine where these machines are going to be located? Is it through an application, investigation, that sort of process?
Mr Fraser: Yes. The regulations state where the machines are allowed to begin with. In New Brunswick and PEI, where there are private operators, the site will apply for a licence to have the machines, numbers based on what the regulations allow for, and that application is processed through the New Brunswick government.
Mr Crozier: Can you tell us from your knowledge of the operation of it if these locations somehow have to qualify from an amount of business they do, a certain minimum standard of volume?
Mr Fraser: Yes. That is written into all the regulations, from my understanding, that the revenue from video lottery can only be a certain percentage of your overall business. That was put in place primarily for convenience stores so someone didn't open up essentially a store with three bags of chips in a corner and two video lottery machines and try and call that a convenience store. So yes, there are strict regulations. I don't know the exact numbers, but there are strict regulations on that.
Mr Crozier: Thank you. That's good information. Is there also a minimum volume that you're aware of? In other words, you've described where it can't be your total business, but I'm trying to get a handle on, if the number of machines is limited, there must be some way of determining who's going to get those machines.
Mr Fraser: The number of machines per establishment is limited in New Brunswick. The overall number of machines in the province is not limited. It's only limited by the number of signups.
Mr Crozier: So that maximum volume would apply in New Brunswick. In any of the jurisdictions, are the numbers of machines limited, though, or capped?
Mr Fraser: They are currently in Prince Edward Island, yes. That was a recent change to their program.
Mr Crozier: Are you aware of how they determine who gets these machines, the limited number of machines?
Mr Fraser: It was capped to the existing numbers as of, I believe, May or June of this year. There are six or seven private operators -- Prince Edward Island is a small province -- operating in that province. They are limited to the number of machines they physically have as of today. If, for example, a new site opens up, it's the operator's decision to remove machines from an establishment that may not be performing as well revenue-wise to put into a new establishment. That's his business decision, where they go.
Mr Crozier: The private operator makes that decision. Okay.
As far as municipalities are concerned, is there in any of the jurisdictions the situation where it's a local option of the municipality?
Mr Fraser: None that I'm aware of, no.
Mr Crozier: So it's province-wide. The municipalities, if they don't want them in their municipalities, it's tough luck? The province and/or the private operator, through their licensing, determine where they're going to go?
Mr Fraser: Yes.
Mr Crozier: Can you tell us just a bit about payouts? Do the payouts vary by jurisdiction? I'm not very familiar with these, obviously, because of all the thousands of grey machines they say are around the province, I'll be darned if I know the location of one of them. How do the payouts work on this?
I might say the Tories know where they all are, apparently. That's just a little bit of humour.
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The Chair: You'll have to excuse -- we have this unique partisanship in this province, and periodically we will get comments that are not terribly relevant.
Mr Crozier: Yes, you're right. We're back to payouts, if you could help me, please.
Mr Fraser: Payout percentage in our terminals is regulated, set, card-coded and tested in each machine before the machines are approved, so there's no variation. Let me be clear up front that there's no variation on the payout percentage of our games once they're installed. Our payout percentage per province is set. There are some minor variations in the way the regulations read. We are currently operating in New Brunswick at a 90% payout per game, we are operating in Prince Edward Island at 93%, and Newfoundland and Nova Scotia are operating with 95% games.
Mr Peter Kormos (Welland-Thorold): Thank you kindly, gentlemen. You mentioned one Canadian supplier from eastern Canada. Who are the two American suppliers that are being used?
Mr Fraser: IGT, based out of Nevada. They have local distributors here in Canada but the main manufacturing and head offices are in Nevada. I understand at one point they had a manufacturing plant in Manitoba. I'm not sure if that's still operational or not. And Video Lottery Consultants, VLC, out of Montana. They are also the current supplier of our central system.
Mr Kormos: When you speak of operators, you're referring to the people who have ownership of the machines?
Mr Fraser: Yes.
Mr Kormos: How many operators are there in each of the four provincial jurisdictions?
Mr Fraser: There are approximately 90 private operators in New Brunswick, there are seven in Prince Edward Island, and for Nova Scotia and Newfoundland there are none because Atlantic Lottery operates in those two provinces.
Mr Kormos: You made reference to IGT having some sort of relationship as an operator as well as a supplier of machines.
Mr Fraser: No. They have a Canadian distributorship set up; that's the only point. By regulation, they are not allowed to have any involvement at the operator level. There are vertical integration rules in provincial regulations, site to operator to distributor.
Mr Kormos: How does one qualify to be an operator?
Mr Fraser: For New Brunswick, the first piece of the criteria is they have to be a member of the provincial coin operators association, the first step, and on top of that they had to be approved by the security department of the Atlantic Lottery Corp.
Mr Kormos: Surely there was a high level of competition among potential operators.
Mr Fraser: I believe that was the case, and still is.
Mr Kormos: Fair enough. I assume then that some applicants were out of the picture and others received approval for larger or lesser numbers of machines.
Mr Fraser: From the private operator aspect of it, and New Brunswick is your best example, they are limited by regulation, each having 250 machines. One private operator cannot essentially take over the entire province.
Mr Kormos: You spoke about 90% to 95% payout. Is a player playing against the machine or against the pool of machines within the province or within the four Atlantic regions?
Mr Fraser: He's playing against the machine itself. If you take away the security aspects of these machines, which you essentially can't do, but if you could picture it, you're essentially playing against that game on that machine.
Mr Kormos: With the 90% to 95% payout, do you have data or stats on the gross revenue per machine? Obviously you've got to talk about an average.
Mr Fraser: You can only really look at payout percentage of the game. We look to establish that a game is paying out correctly on a province-wide basis even though the player is playing against one game. You have to do that just for the statistical purposes of looking at the game design. A game won't average out to 95%, that we can tell for sure, until there are at least 10 million games played on it.
Mr Kormos: Sure, quite right. But what's the gross revenue, what's the amount bet per machine per annum, say?
Interjection: Per week. Ask him per week.
Mr Fraser: Bet per week? It depends on if you want some debate on what you want to use for revenue. We don't particularly look at gross revenue, although we have cash-in values. Paul, do you have any numbers that ballpark it?
Mr Burns: Not on gross revenue.
Mr Fraser: We track net; cash in versus cash out. Because money is inserted in the machine does not necessarily mean that it's bet, believe it or not. Our players have an interesting way of playing the machines sometimes. For example, I can put $10 in a machine physically; I can play or bet $1 of that and cash out. If I look at what you're calling gross revenue of $10, it's not necessarily the case, because the player just put the money in and took it right back out again. We see a lot of that with our players.
Mr Kormos: You talked about an operator having discretion to pull a machine from a location. I presume the location is licensed as well.
Mr Fraser: Yes, that is correct.
Mr Kormos: An operator has an option to pull the machine out. Is that a totally discretionary option?
Mr Fraser: Yes, it is.
Mr Kormos: If I'm a property owner and I apply for a licence for a machine to be placed in my location, I have to depend upon a willing operator to put a machine there if I want to be a host to a machine?
Mr Fraser: Yes, you have to depend on the private operators.
Mr Burns: In the private operators area. In the other two provinces where it's run by the Atlantic Lottery Corp, then there are set criteria based on minimum coin in. So long as you maintain your level in the other two provinces run by the corporation, then you will maintain your machines. If you drop below the set criteria, then your machines could be removed and given to a higher-volume account.
Mr Kormos: How does the host or the operator submit their revenues to the government? Does it happen on a weekly basis? Is it as a result of a printout that they write a cheque? In addition to that question, who empties the machines?
Mr Fraser: The revenue collected by the Atlantic Lottery Corp is collected from the private operator. For New Brunswick and Prince Edward, where private operators are involved, we do an electronic funds transfer on a weekly basis. The sharing of revenue between the operator and the establishment or the retailer site is between those two groups. Just to make it clear, in Newfoundland and Nova Scotia, where Atlantic Lottery is essentially the operator of the machines, we do direct electronic funds transfer from the retailer's account and the retailer physically handles the money in the terminals; it's their responsibility.
Mr Kormos: In the jurisdictions where you've got governmental control, effectively, of the placement of machines, what is the minimum revenue for a host to maintain a machine in their location?
Mr Fraser: It varies per geographical area, in all honesty. It's a business decision. In general, if you look at something like metropolitan Halifax, we have high-volume accounts, a lot more revenue, so the criteria there are different than when we get out to rural Newfoundland, for example, where we don't expect to have the same volume of revenue from some of these very small clubs.
Mr Kormos: You must have some data on what type of host will generate more revenue, aside from the geographic location and the size of population.
Mr Fraser: I don't know if there's a clear definition of which one in general works better.
Mr Kormos: Clearly there's a distinction between drinking establishments and, let's say, corner stores, where you're not going to see people drinking while they're playing presumably. Is there any distinction there in the types of revenue that are generated, especially when it's adjusted for the population base you're servicing?
Mr Burns: No, because we haven't been specifically at this point tracking the revenue data in the private operator locations to see what areas are doing better. We track that within the governmental locations but not within the private operator areas.
Mr Fraser: And private operators is where you see the difference.
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Mr Kormos: Getting back to a hosting location, does that location apply for a licence for the placement of a machine before any arrangement is made with an operator who owns the machine?
Mr Fraser: I am not sure of the exact sequence of those events, in all honesty.
Mr Kormos: Is there any appeal process for a host whose machine is pulled in any of the four jurisdictions to say: "No, I have a licence. You shouldn't have pulled my machine"?
Mr Fraser: Not to my knowledge, but that hasn't been an issue for us, in all honesty.
Mr Kormos: Because there are more machines than there are hosts?
Mr Fraser: In New Brunswick, for example, where we have 80 to 90 private operators, if one operator makes a business decision -- say for example his local 7 Eleven store is not generating him enough revenue that it's worth his while to maintain it -- if he leaves, there are 80 other businessmen ready to take his place, so that doesn't become an issue for New Brunswick.
In Nova Scotia and Newfoundland, any time we remove a machine because of low revenue -- we're making the same business case -- it's usually a discussion between the establishment and our sales representatives and they usually come to a mutual agreement that the machine is not necessary.
Mr Kormos: You've got three different suppliers currently: one Canadian, two American. Obviously, different suppliers manufacture different machines and one thing involved in marketing a machine is to say, "This machine will generate greater revenues than competitor XYZ." Is there a process whereby the lottery supervision reviews or clears a given type of machine before it's acceptable in one of the jurisdictions?
Mr Fraser: Absolutely, but that clearance is not based on revenue generation.
Mr Kormos: What's it based on?
Mr Fraser: Its technical and security aspects, that it meets our technical requirements, it meets all the regulatory requirements of the four provincial governments.
Mr Kormos: So the issue then is primarily integrity of the system?
Mr Fraser: Yes, absolutely. When we approve machines we set essentially the same criteria for all four provinces. When the technical approval is done, which as you correctly stated is primarily based on the overall integrity, they become available for use. It doesn't necessarily mean that anybody is going to buy them and place them. We have essentially nine different manufacturers approved for our jurisdictions; we've got probably 15 different models of video lottery terminals technically approved. It will be either Atlantic Lottery's marketing and sales department's decision or the coin operator's decision to purchase those terminals and place them. They're the ones who make the marketing decisions. So up front it is an integrity issue, and when it comes for example to Atlantic Lottery purchasing terminals, the marketing and sales staff will do an analysis based on potential revenue, those types of decisions.
Mr Kormos: Thank you, gentlemen.
The Chair: We're going to have to even out. At this moment the government has used five minutes, Mr Crozier has used nine minutes and you have used some 14 minutes.
Mr Kormos: That's hard to believe, Chair.
The Chair: I know it's hard to believe. Time passes when you're having fun, Mr Kormos.
Mr Frank Klees (York-Mackenzie): I have a couple of questions. Do I assume correctly that you would also manage and oversee other charitable gaming within your province such as break-open tickets and bingos and the like?
Mr Fraser: The Atlantic Lottery Corp does not specifically oversee charitable organizations. Break-open tickets are part of our product mix, but they're sold with our other products.
Mr Klees: In that case do you have any experience, since the introduction of video lotteries, of what effect that has had on your other products, specifically break-open tickets and the like? Has there been a direct displacement of sales of that product since the introduction of video lotteries?
Mr Burns: I don't have that information available at this point.
Mr Fraser: I think in general, no, without having the specific numbers available, but I don't believe that was the case in our divisional products, which include 6/49, Super 7, our scratch-and-win products, instant tickets. There wasn't a direct cannibalization.
Mr Klees: So you can conclude that video lotteries would address a different market segment.
Mr Burns: Exactly.
Mr Klees: Okay. Another question: You may be aware that our finance minister indicated in our last budget that 2% of revenues from video lotteries would be dedicated to the development of a problem gaming strategy. Could you comment, in your experience, whether in your opinion that would be an appropriate level of dedication of funds? Also, is there a similar allocation within the Atlantic provinces to the development of such a strategy?
Mr Fraser: There's currently no direct allocation of funds to that. Correct, Paul?
Mr Burns: They're talking about earmarking now, but I'm not sure if it has been implemented yet.
Mr Fraser: Any issues to do with problem gaming are the responsibility of the lottery commissions of the provinces and currently not mandated to the Atlantic Lottery Corp to deal with that.
Mr E.J. Douglas Rollins (Quinte): Do you have bingos down there that you people are running?
Mr Fraser: No. There are lots of bingos here but not under our operation.
Mr Rollins: You have no information on that, after you put the video lotteries in, as to whether they had an effect on the bingo halls or of that nature?
Mr Fraser: No. We would have no information there at all, sir.
Mr Rollins: When your payout is better, when it's at the 95% both in Nova Scotia and Newfoundland, do you feel that there are more dollars being generated through those machines by players with a higher percentage of payout, or have you got any statistics on that?
Mr Fraser: It's one of those age-old things, actually.
Mr Burns: We're working with those numbers right now and it's a big debate of, if the payout goes higher, is there physically more cash in? That's what we're monitoring now because we have two different areas, some variant from 90% to 95%, and that's one of the areas we're looking at. Obviously, if the payout is at 95% we would have more play value or more play time for the amount of money as opposed to 90%. As far as specific information, that's what we're gathering at this point.
Mr Rollins: Have you got any statistics on the number of dollars put into each machine when a player comes in to activate that machine for the length of time the individual plays that machine?
Mr Burns: I think the average from the last research that we conducted was between $5 and $15.
Mr Rollins: Between $5 and $15 per time that a player comes in?
Mr Fraser: That's not statistical information off the system. That's through market research studies.
Mr Rollins: Right. I realize that.
Mr Flaherty: First of all, did the charities in the maritime provinces participate in the gaming revenues overall, not just in video lottery revenues, from the various products?
Mr Fraser: No.
Mr Flaherty: Is there gaming revenue in any way directed towards charities from any sources other than the lottery corporations? Let me ask you this way: How do they raise money?
Mr Fraser: The New Brunswick government directed some money towards an environmental trust fund from videos or scratch tickets, one or the other. In general the answer is no, but there are some specific instances. New Brunswick diverted some funds to an environmental trust fund and there are special arrangements in Nova Scotia to deal with gaming and some issues in some areas there.
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Mr Flaherty: Changing the subject a bit, going back to something that was raised earlier about the application process for video lotteries: In liquor licence applications in Ontario we have a hearing process if someone objects to the granting of a licence. Do you have any sort of similar process, if, for example, a community group or a neighbourhood group would object to the granting or the placing of licensing of video lotteries in a specific location in that community or neighbourhood?
Mr Fraser: No, not to my knowledge.
Mr Flaherty: Is it just an application process? That is, the person or corporation who would like to have the machines fills in an application and sends it in and then there's an assessment process?
Mr Fraser: Yes, there's an assessment process, an investigation. If they qualify, the machines are likely placed.
Mr Flaherty: And where there are competing applications, how do you deal with that?
Mr Fraser: I'm not sure I understand the question.
Mr Flaherty: If there are too many applications for one community, let's say, and you're overseeing the business and you look at it and you say, "This community cannot support too many of these video lotteries," how do you allocate them? Or has that never arisen? I may be asking an academic question.
Mr Fraser: There's no criteria in any province that says that there's -- other than the current cap of overall machines in the province of Prince Edward Island, we have not faced that issue.
Mr Terence H. Young (Halton Centre): I realize this may be a very big question to answer, a difficult question to answer, but if you could just summarize briefly. If you were to do the whole thing over again, what would you do differently? In other words, what were the biggest mistakes that you made?
Mr Flaherty: Nice question.
Mr Fraser: That's a big question.
Mr Young: The biggest mistake.
Mr Flaherty: Those Upper Canadians again.
Mr Crozier: Getting the machines at all.
Mr Young: What would you caution us against?
Mr Flaherty: That's a better question.
Mr Fraser: A lot of our decisions were mandated by each provincial government, so as far as the Atlantic Lottery Corp goes, as it stands, we didn't have control over them. For example, we have some very different models of the program here. We've managed to run both and continue to run both simultaneously. So as far as cautioning what you should or shouldn't do, I don't know.
We've tried two different models as far as operation goes. We had a very quick implementation period from a technical point of view. We did this in three months. That was ambitious. It was doable. Other people have repeated it since, but it's very tough because you find that whoever actually gets the hands-on operation of this thing has an overwhelming number of issues to deal with up front. So it's good to have some time to plan this out correctly. I think that's probably the biggest caution of them all.
Mr Burns: Lead time.
Mr Fraser: Give whoever is going to run this for you the lead time required to do it and not to rush into this helter-skelter.
The Chair: We have now accumulated 15 minutes for the Conservatives, so I think we should move to the opposition, who have six minutes to top it up.
Mr Garry J. Guzzo (Ottawa-Rideau): Don't feel you have to.
Mr Crozier: That's right. I won't necessarily use all my time. But just to continue, gentlemen, on lead time. Again, I guess a broad question, but what are you suggesting? Six months, two months, a year?
Mr Young: We can learn from their experience, obviously.
Mr Fraser: It's going to depend on how your program ends up.
Mr Crozier: From a technical standpoint, initially what's going into racetracks? Help me on that, Chairman. How many VLTs are suggested for racetracks initially?
The Chair: They just talked about four racetracks; I don't know the number.
Mr Crozier: Just four racetracks; 500. So 2,000 machines initially, then another couple of thousand into what will be called "permanent charitable casinos" and then the balance, let's say 15,000 or fewer, into licensed establishments. It's been proposed that it would be in two phases. Let's say the first 5,000 machines go into as few as 60 locations. Then beyond that they could be anywhere in the province. So what kind of lead time, from a technical standpoint, are you suggesting?
Mr Fraser: A couple of months for that would be fine.
Mr Crozier: Pardon me?
Mr Fraser: Two months for actually physically placing the machines and rolling them out is a very rough guess. Where your variables will be is in setting up the technical operation of your operation, whether you go sole source for your computer system and your terminals, whether you're going to buy an existing system off the shelf and plug it in or, as with just about every jurisdiction, buy something that needs to be customized a bit. The best part is to leave those decisions to the people charged with doing it, because they'll be the best ones to put the plans in place for you to do it.
Mr Crozier: Okay. I don't think we've discussed this, but it's proposed in Ontario that the revenue will be divided roughly 10% to the host, to the licensed establishment. I realize that in the case of a private operator, that's negotiable. So let's either look at an average or look at what the province does. So 10% for operating, 10% for charities and let's say another 2% goes to the cause of problem and pathological gambling, and then the remainder, which is 65% to 70%, goes to the province. Can you help me on how that relates to the Atlantic provinces?
Mr Guzzo: On a point of order, Mr Chair: In fairness --
Mr Crozier: There's no point of order; there's no procedure here.
Mr Guzzo: Well, then I offer to help. Mr Crozier has quoted two gross figures and two net figures. I don't know how you're going to calculate those, sir, and I apologize.
Mr Crozier: You let him do it then.
Mr Guzzo: If you knew what you were talking about and asked an intelligent question, it would be a lot easier for him to answer.
The Chair: Thanks for your assistance, Mr Guzzo, but that is not a point of order.
Mr Crozier: I take a little offence at the intelligent answer, but then I consider where it's coming from.
The Chair: Gentlemen, we have these people here to assist us. Let's proceed. Could you answer the question posed by Mr Crozier?
Mr Fraser: We're just having a debate here over our payout percentages, because they've changed since the initial operation. In New Brunswick, for example, when the program initially started 35% went to the government, 30% and 35% each to the establishment and operator, something along those lines. Because of the revenues that were generated, which I think took everybody by surprise as the program went on, the government has since shifted that to where the government now is in a phased-in approach over the next couple of years and is currently taking 50% of net; the operator gets 25% and the establishment gets 25%. Those numbers are shifting in the government's favour, phased in over the next couple of years.
Where the Atlantic Lottery Corp is running the entire operation and a private operator is not involved, Nova Scotia, the government, collects 80% of the revenues. These numbers are ballpark, gentlemen, and they may have shifted a couple of percentages in either direction since I last checked. In Newfoundland, it's around the 80% mark, but it's a tiered percentage based on revenue of the location. But it floats around the 80% mark for the government.
Mr Burns: Presently at 76%.
The Chair: Thank you, Mr Crozier. We are approaching the end of our discussions. We'll therefore go in rotation. Mr Kormos will have three minutes and each of the remaining parties will have two minutes each.
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Mr Kormos: In terms of the winnings, do you have a profile or some understanding of how much of the winnings are reinvested in the machine? That is to say, how much of winnings are simply played out as games as compared to cashed in and taken away in loonies?
Mr Fraser: Fair question. The games pay out at 95%; that's the game design structure. That translates into a net revenue of, what, 50%, when you ballpark it, percent of cash out, 55%. I know we're eating into your three minutes here, sir, but we're just doing some quick averages.
Mr Burns: The average is about 70%.
Mr Fraser: So 70% cash out?
Mr Burns: Yes.
Mr Fraser: So 70% of the cash in is cashed out.
Mr Kormos: So 70% of winnings are taken in cash as compared to played or reinvested in the machine?
Mr Fraser: Yes.
Mr Kormos: What types of winnings are those? I assume there are winnings anywhere from $2 to, I don't know, $2,000. Is there a distinction?
Mr Fraser: The limit in our province is that the maximum win is $500 per game.
Mr Kormos: Is there a difference between a higher win and a lower win as to whether or not that's cashed out?
Mr Fraser: It's a fair question. We've asked that question through our market research, what players consider a win, at what level will they cash out. Some will cash out at double what they've invested. "Invest" may not be the right term. But if they put $20 in the machine, when their cash balance gets to $40 they will cash out. Others will have cash values; like, they'll say, "If I have a win at $50, I cash that out." It varies from player to player. There's no firm, real definition. There are different player profiles on these games. Some like to kill time; some like to go for the big win. So it's real tough to get the right numbers.
Mr Kormos: I understand that at least one province requires by legislation that there be a study of the social, health, justice, economic and environmental impact of the slots. Have you seen any of the results of that mandated research?
Mr Fraser: No, I have not.
Mr Burns: No.
Mr Fraser: That's not being conducted by Atlantic Lottery.
The Chair: Thank you, Mr Kormos. We have two minutes left for the government.
Mr Flaherty: I have just one point to clarify on the plans in Ontario, that the first 8,500 machines would go into racetracks and permanent charity gaming halls; that's a total of 8,500. How do you regulate keeping under-aged persons from using the machines in corner stores where they're allowed in corner stores, which I believe was in New Brunswick and Prince Edward Island?
Mr Fraser: That's the responsibility of the New Brunswick government. They have inspectors, which also come under the liquor licensing act. So they have field inspectors who go out and monitor this.
Mr Flaherty: My other question related to the payouts. I believe we heard earlier that in New Brunswick it's 90%, in Prince Edward Island it's 93% and in Newfoundland and Nova Scotia it's 95%.
Mr Fraser: That is correct.
Mr Flaherty: Thank you. Can you help us as to how those percentages were determined?
Mr Fraser: Since we were the first ones in Canada, we had very limited expertise to draw on about what worked and what didn't. The only American model at the time was South Dakota, and New Brunswick basically copied from South Dakota. The regulations in all provinces state the range, and that allows for some movement for a business case without changing the regulations. For example, the regulations in Nova Scotia state that the games will pay out more than 80%; that's what the letter of the law states. From a business point of view, we are running our games at 95%. New Brunswick has a 10% range; New Brunswick says 80% to 90%. By setting a reasonable range, it allows some flexibility in the operation of the program. But we just took the best guess and went from there.
The Chair: Mr Colle, you have the last two minutes.
Mr Mike Colle (Oakwood): Just a question about what happened in Nova Scotia; I think they put video slots in the corner stores, then all hell broke loose and they took them out. What happened there?
Mr Fraser: That was a government decision to remove them from the corner stores.
Mr Colle: Why?
Mr Fraser: I don't know if I can speak for the government at the time, sir.
Mr Colle: Well, you must know what happened. You're involved in this.
Mr Fraser: Primarily it was public pressure that decided to take them out.
Mr Colle: What happened? What was happening in the corner stores in the neighbourhoods that they took them out? You must know; you're in the business.
Mr Fraser: From a personal point of view, sir, I don't think anything was happening in the corner stores. I think there was a public campaign, a media campaign to --
Mr Colle: So it was the media that caused this to happen, was it?
The Chair: Mr Colle, our guests are technical people, not politicians.
Mr Colle: He should know why they took them out of the stores. Was there something technically wrong with the machines?
Mr Fraser: There was nothing technically wrong with the machines, no, sir.
Mr Colle: So why did they take them out?
Mr Fraser: It was a government decision.
Mr Colle: Based on what?
Mr Fraser: I would assume it was pressure from the public.
Mr Colle: So you have no idea why the government decided to take these machines out.
The Chair: Mr Colle, our time is appropriately up at this moment. Gentlemen, we started exactly at 9. I would like to thank you very much for your presentation. It's been most valuable to us and no doubt we will be communicating in future as we progress. I thank you very much for your assistance.
Mr Fraser: It's been a pleasure. On behalf of Atlantic Lotto, I'd like to extend an invitation, if we can be of further assistance, to please contact us.
The Chair: Thank you. We have a couple of minutes and then we're starting at 10 am. So we have two or three minutes and Mr Guzzo is definitely first on the list; I promised him.
Mr Guzzo: Could we clarify a couple of points? Would it be worthwhile?
Interjections.
The Chair: Yes, Garry?
Mr Guzzo: No, I've just decided it wouldn't be worthwhile. Thank you.
Mr Crozier: Mr Chair, I want to clarify one thing. Mr Guzzo seems to be concerned about the intelligence of my questions. I want to say to Mr Guzzo, I haven't had the experience that you have had at gambling and, quite frankly, there's a hell of a lot about gambling I don't know. So when my question might appear to be not intelligent, it's intended so that I can learn something about this.
Mr Guzzo: I apologize if I offended you, Mr Crozier, but listen. It has nothing to do with gambling; it's a question of whether or not the 2% to charities is a gross figure or a net figure. It's a question of whether the 10% for overhead, to which you've referred, is a net figure or a gross figure. You have to remember that while you didn't get an answer from Mr Sterling the other day with what the payback would be, you have to figure that it's going to be around 90%. That's what it is in Atlantic City, that's what it is in Vegas. That's what it is down there. That's what it is every place except those grey machines that you can't find where it ranges anywhere from 0% to 70%.
Mr Crozier: But I wasn't talking about payout; I was talking about the share that each takes. I think they understood my question.
Mr Guzzo: No, they didn't, quite frankly, because they're --
Mr Crozier: Well, let's just finish the issue.
Mr Guzzo: You asked me a question, let me finish.
Mr Crozier: I didn't ask you a question, I made a comment to the Chair.
Mr Guzzo: Some of the figures you quoted were net and some of them were gross. How does he know? If you don't know, how does he know?
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SOCIÉTÉ DES LOTERIES VIDÉO DU QUÉBEC
The Chair: Bonjour and good morning. First I take the opportunity to thank you for assisting us this morning. Second, I apologize that the proceedings unfortunately will have to be in English. Ordinarily in our Legislature there is instantaneous translation through Hansard both in the House and committees. We as a committee, however, are exploring a new science -- videoconferencing is new to our Legislature -- and we are in a very makeshift room which does not permit instantaneous translation. As a number of our members are deficient in French, including myself, my apologies again. We will be proceeding in English if we can.
Mr Simon Brodeur: I will try to do my best in English.
The Chair: Thank you very much. We have already heard this morning from the Atlantic Lottery Corp. I believe you may have listened in to part of that conversation.
Perhaps to start with I'll just explain to you that Bill 75, which is the bill this administration of justice committee is considering, does two things: (1) It combines the regulatory functions of liquor and gambling into one commission; and (2) for the first time in Ontario it introduces what are termed video lottery terminals as a legalized form of gambling. It is proposed, and this is something we're considering, that first they be introduced to racetracks, horse tracks, and certain permanent charitable casinos, and second, they eventually be phased to the hospitality industry, being liquor establishments only. That's basically what the bill does.
We have in the room members of the government, the opposition and the third party.
I should give you initially an opportunity to introduce the subject as you see it to us.
Mr Brodeur: Thank you very much. My name is Simon Brodeur. I'm general manager of the video lottery corporation in the province of Quebec. I'm with Mme Lynn Roiter, director of legal services at Loto-Québec. Lynn is also a member of the board of what we call SLVQ, which is the corporation within Loto-Québec that operates video lotteries in the province.
First of all, let me take something like five minutes just to go through the operation of the program in the province of Quebec.
We operate in the province 14,500 video lottery machines, which is less than one per 500 population. We operate those video machines in 4,200 locations, which means we have generally an average of 3.5 machines per location. All the games and the monitoring of those games are done through our central system. The central system is located in Montreal and all the equipment is plugged into that system.
Every single equipment receives what we call certification; the equipment is certified to make sure that we offer to the public a fair product. All the equipment receive also an "immatriculation," which means it is government equipment. That is basically what we have in the market.
Various rules and regulations control what we can do with the equipment. The minimum payout to the public is set up at 83%. The current payout is at 92%. The maximum bet a customer can put on a single bet on the equipment is $2.50. The actual bet is around $1.50. The maximum win on specific equipment cannot be higher than $1,000. The current maximum win has been set up at $500 on each equipment.
The maximum number of VLTs that we can install on a specific liquor licence is set up at five. The actual number of VLTs per location averages 3.5 machines. That equipment is installed in bars, brasseries, taverns and three racetracks. Nobody can play on the equipment if they don't have majority, since we are in bars, brasseries and taverns, unless they are 18 years and over.
We cannot promote video lotteries in the province; no promotions, no advertising. Bar owners and staff of the equipment are not allowed to play on the equipment. Naturally, they cannot make any credit to any customer concerning playing on the equipment.
In terms of operational mode, we run the business with only 40 civil servant employees, which are part of the SLVQ. So you can imagine that those civil servants really bring a lot of benefit to the government.
We created around 300 direct jobs. Those people are installing the equipment in the field, doing the maintenance of the equipment in the field, answering the hotlines. They also run what we call central depot, where the equipment is repaired and where the equipment is prepared to be sent to a specific bar in the province. But all the decisions related to the purchasing of the equipment, where the equipment will be installed -- let's say, in which bar it will be installed -- that is a decision of Loto-Québec.
When I say that the private sector is involved in our business, it is not on a commission basis, it is on a fee basis. As an example, every time that a technician goes to a bar to repair a machine, we pay only a monthly fee for that maintenance. The same thing for the operation of the central system: A company here in Montreal called CGI maintains that system and operation, but it doesn't receive any commission to do that; it's all done on a fee basis.
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During the last year of operation we gave to the bar owners the equivalent of $93.7 million in terms of commission, which means around $22,000 as an average per location. The result of our operation for 1995-96, the average revenue for a terminal, which is the net revenue, was $535 per week per machine, which means $76 per day. Among the total revenue of $210 million, there's about $28.4 million which was the operational expense. That excludes the depreciation of the equipment. The net revenue to the government was $140 million during last year. The difference is in tax, depreciation and, naturally, retailers' compensation.
That gives you an overview of our program in the province of Quebec and we are here to answer your questions.
Mr Colle: Thank you very much, Simon, for your excellent overview. You're dealing with cash, I guess. What kind of currency is used in the machines?
Mr Brodeur: When we started the program we started with the quarter and the dollar. Actually, it is the dollar only; no bill acceptor right now.
Mr Colle: No bills accepted? Are you going to introduce any machines that use bills? Is that in the planning stage? Are there plans to introduce paper currency in the machines?
Mr Brodeur: Not right now, but it's always something we are looking at.
Mr Colle: Have there been any problems, when you're dealing with a cash business, in terms of potential theft or robbery if you have so much cash on hand in one location? Have there been any concerns about that? How do you transport the money? How do you ensure that everything is done in a safe and orderly fashion, that there isn't a threat in terms of robbery etc on the premises?
Mr Brodeur: It is done by the bar owner. Most of the bar owners rent what we call a change machine. It's a machine that they install on the wall. Once or twice a day they take the change from the cash box of the video lottery equipment and they drop it in the change machine on the wall. At the end of the day they empty the change machine and put that in a safe or deposit, drop it in the bank.
Mr Colle: There haven't been any problems, incidences of burglaries or robberies on these premises because there's extra cash on hand? That has not really been a problem, has it?
Mr Brodeur: It is not a big problem. It is the same thing as any other business. Those people have already money because they handle a lot of cash since they are bars and brasseries. It is just part of the business.
Mr Colle: You haven't seen an appreciable difference in terms of the fact they have these machines that are related to extra burglaries and stuff like that?
Mr Brodeur: If you want precise information on that, you should talk to the police in Quebec. But my feeling is that I didn't see any.
Mr Crozier: On the 14,500 machines that you have in licensed premises, is that a fixed cap?
Mr Brodeur: It is not a fixed cap. We purchased that equipment to answer what we believe will be the demand for those machines. Actually, with the 15,000 machines that we purchased in the province, based on the regulation we have, which is a maximum of five machines per location, we were able to answer the demand.
Mr Crozier: Certainly, since your average is about 3.5, that would indicate there aren't any plans in the near future for a demand to expand the machines.
Mr Brodeur: No, there is no plan right now. What we do is, let's say, on a weekly basis we look at the worst performers commercially in the province, and with the equipment we are taking off the market from the non-performers or the bars that are closing every week, or a bar in a golf course, for example, that is closed in December, we are taking those machines and inserting them into new bars.
Mr Kormos: I presume there has been a fairly high demand for these machines by tavern owners and bar owners. Is that correct?
Mr Brodeur: Actually, at present there are something like 9,000 alcohol permits, and we are installed in 4,200 locations. We are able to reach 50% of the establishments with those machines, if you call that a big demand; it's a fair demand.
Mr Kormos: Is one of the attractions of these machines -- well, first of all, they provide some straight cash revenues for the bar owner. I trust that it's not labour-intensive, that there's not a whole lot of extra work on the part of the bar owner by virtue of putting these machines in his or her establishment.
Mr Brodeur: There is an administrative aspect related to the operation of the equipment. They have to give change every time the public wants change or whatever. There is that administrative aspect of the equipment. I would say it's probably a couple of hours a day, probably the equivalent of two or three hours a day, something like that.
Mr Kormos: So the labour component here is the 40 civil servants and the 300 technicians and other people who are involved with delivering machines, repairing them, redistributing them. Is that accurate?
Mr Brodeur: Yes. The whole program basically is run with 340 people in the province.
Mr Kormos: Again, notwithstanding the great cash revenues, this hasn't been a major job creation system. Although there are enormous cash revenues for government and tavern owners, we haven't seen a major increase in jobs or employment as a result of the 14,000 slot machines out there, other than casinos.
Mr Brodeur: It's very difficult to answer that question. If you want a figure, we can calculate that there's a certain percentage of the employees in bars who are dedicated to the video lottery, but I don't have any figure concerning that. The only thing I'd say is that direct employment is around 300-some in the province.
Mr Kormos: Are there areas of Quebec where there's a higher concentration or demand for the machines as contrasted to other areas? How do you describe those? How do you characterize those?
Mr Brodeur: I would say that it's equal around the province. Naturally, there are some areas in the province where there are fewer bars, so there is a lower percentage of machines installed, but it's about a 50% penetration of bars across the province.
Mr Kormos: You speak of 14,500 machines. Was there a single supplier for all of the machines?
Mr Brodeur: No. We operate four types of machines in the province. The reason is that we want to offer our customers a variety of games. It's a matter of security also.
Mr Kormos: Why do you say security? Can you explain that to us?
Mr Brodeur: Security in the sense that if you operate just one kind of machine and there is a hardware problem with the equipment, you jeopardize your revenue.
Mr Kormos: Who are the sources of the machines and where are they?
Mr Brodeur: What do you mean, the companies? We operate some VLC equipment, Video Lottery Consultants. We operate Williams equipment, Spielo equipment, and also a Quebec company called ETI equipment, and all that equipment was built in Quebec.
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Mr Kormos: The Williams and Spielo equipment were built in Quebec as well?
Mr Brodeur: Yes, everything.
Mr Kormos: Are Williams and Spielo Quebec-based companies or are they American companies?
Mr Brodeur: Williams is an American company, but there is a subsidiary in Quebec to assemble the equipment. Spielo is a company from Moncton, but the equipment was assembled in Quebec.
Mr Kormos: Do you know how much of the winnings are put back into the machine as compared to being cashed out?
Mr Brodeur: That is a very difficult question because the way it works is, if you put let's say $10 on a specific equipment, you will replay that $10 since it is a rate of return of 92%. So you put $10, you win let's say $9.20. That is just for an example, okay? You're going to play that $9.20 again, so you're going to win $8 and something. So it's really difficult, and those figures are worth nothing. The important thing is what is in the cash box, the net revenue at the end of the day.
Mr Kormos: I'm familiar with the Hull casino and the Montreal casino. I don't know if there are other casino locations in Quebec.
Mr Brodeur: There's another one in Charlebois.
Mr Kormos: How many of the 14,500 machines are in those three casinos?
Mr Brodeur: None of them.
Mr Kormos: Do you have similar types of coin play payout equipment in the casinos?
Mr Brodeur: Yes. Casinos are on the same payout. I think it's 91% or something.
Mr Kormos: But do you have slot machines or video lottery terminals in casinos?
Ms Lynn Roiter: Slot machines.
Mr Brodeur: It's slot machines only in casinos.
Interjection: There is a difference, Peter. We've been trying to tell you that.
Mr Kormos: I'm told they're called distributeurs automatiques.
Interjection.
Ms Roiter: Bank machine? No.
Interjection: They're called slot machines. It's the same in all languages, Peter.
Mr Brodeur: A video lottery machine is not a slot machine.
Interjection: You've got it in two languages now, Peter.
Mr Kormos: Tell us how many slot machines you have in your three casinos.
Mr Brodeur: Yes, slot machines only.
Mr Kormos: How many?
Ms Roiter: They're not on video.
Mr Kormos: I understand they're not electronic video machines. How many slot machines do you have in the three casinos?
Ms Roiter: There are 4,200 approximately, divided among three.
Mr Kormos: Quite right. What are the differences in revenues from the casino-based slots and the video lottery terminals, as you would call them, outside of the casinos?
Mr Brodeur: I cannot answer the question. I don't have the figure with me. But what I can say is, with the video lottery you have mentioned before, you're talking there about $76 per day in terms of net revenue, which is I think a lot less than the casino.
Mr Kormos: How do you determine whether or not a host or a location is going to lose its machine? Where do they have to drop to in terms of revenues?
Mr Brodeur: There is no fixed amount of money or amount of net revenue. What we are doing is looking at the lesser performers in the province. As a good administrator, if a location somewhere is the lowest revenue in the province, we're going to decide, if the guy has three machines, to take out let's say one machine and put that in a location somewhere where somebody waits for a machine. It's more by looking at the revenue of each of the equipment in the province, so it's not like a fixed amount of money where we draw the line.
Mr Kormos: In a city like Montreal with a large casino operation, were the machines in the private locations before the casino or after the casino?
Mr Brodeur: After the arrival of the Montreal casino.
Mr Kormos: Do you have controls about how close machines are to each other within a municipality? Could two operators be next door to each other?
Mr Brodeur: Yes, if there are two bars on the same street.
Mr Kormos: Is there an appeal process for a location that has its machine taken away from it?
Mr Brodeur: Not really, because since we are the owner of the equipment, every single bar signs a contract with us, and on that contract it says it is at our discretion to decide to put a machine in the bar or take it out from a bar for the reasons that we are believing.
Mr Kormos: Some members of this committee have suggested that Quebec is a source of illegal gaming machines in Ontario. Have you had any exposure to that phenomenon?
Mr Brodeur: Not at all. The only thing that I know is, of course, if Ontario doesn't have video lotteries and an illegal machine has to be placed somewhere, it's going to be in your province.
Mr Kormos: How many illegal machines were in Quebec prior to the implementation of yours?
Mr Brodeur: Excuse me?
Mr Kormos: Was there any research done on the presence of so-called illegal machines in Quebec prior to the implementation of these locations?
Mr Brodeur: I cannot answer that question because we didn't do any study on that, so it was prior to the moment that Loto-Québec received a mandate. The police corps and the SQ in Quebec may be in a better position than us to talk about that.
Mr Kormos: Are you aware of whether or not that was an issue to justify the --
Ms Roiter: It was an issue, oui.
Mr Brodeur: It was an issue, and if you read the newspaper at the time, there were a lot of figures going out concerning the number of illegal machines at that time. So, yes, it was a preoccupation. It was not our preoccupation, but a preoccupation of the government.
Mr Kormos: Quite right. When you talk about the payout ranging from 83% to 92%, how does that vary? How is that adjusted?
Mr Brodeur: Just to be clear, maybe you didn't understand well. What I was saying is, on the regulation in the province, we cannot pay below 83%, but the actual payout is around 92%. It varies, let's say, plus and minus 1%. Let's say from 91% to 93%.
Mr Kormos: But who makes the decision as to what the payout is going to be, as long it's not below 83%?
Mr Brodeur: It's us as the operator of the video equipment in the province, and it's done through studies throughout North America.
Mr Kormos: What is going to affect the level of payout? What would affect the level of payout?
Mr Brodeur: On the equipment?
Mr Kormos: Yes.
Mr Brodeur: The payout is fixed on every single game. The only place where it can vary is, let's say on the poker game, if a player doesn't know how to play poker and he chooses bad cards, for example, the payout will be lower. But normally the payout is around the value that has been determined.
Mr Kormos: But what will affect the determination of that by your corporation?
Mr Brodeur: When we started the program in Quebec, we looked at that time at the way it had been decided in every single region in Canada, and also we looked at the States. We looked at the effect of that on, let's say, the net revenue of the equipment, and it was a commercial decision. It was the payout that gave a lot of pleasure to the players and revenue also to the corporation.
Mr Kormos: What's the cost per machine?
Mr Brodeur: It's around $6,000 per machine, excluding tax.
Mr Kormos: Do you have life expectancies for these machines or do they have long life expectancies?
Mr Brodeur: In Quebec we established that life over a period of three years. So the depreciation is on three years, and the reason that you are not operating that equipment on, let's say, a triple A salon, it's in the bar, brasserie and taverne, so there is a lot of humidity, there is a lot of dust there. So we didn't want to take any chance to put that on a longer period than three years. Also, the evolution of technology is very fast in the multimedia business, so we believed three years was more than enough.
The Chair: Thank you, Mr Kormos. We'll do some rotation.
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Mr Guzzo: Sir, I'd like to ask you a few questions with regard to the western part of the province, Gatineau, Aylmer and Hull, in particular the situation that existed there. You've told us you weren't aware of the grey machine market prior to getting in the business. Is that correct?
Mr Brodeur: Not aware -- like anybody who reads the newspaper, so it was a preoccupation, but we didn't make any studies concerning illegal machines.
Mr Guzzo: In terms of your present operation, are you having a problem in the westerly part of the province at this time with regard to those illegal machines?
Mr Brodeur: The only thing I can say is that in the bars where we operate video lottery equipment, normally we don't see any more illegal machines there, but I cannot talk about the convenience store or other types of areas in the province. The police get to know where all the -- maybe they will be in a better place than I am to answer those questions.
Mr Guzzo: Yes, but you're in business, so you know what the competition is doing. I'd like to switch from Gatineau and Aylmer over to the Cornwall area, the Akwesasne reserve. Are you aware of competition there?
Mr Brodeur: Akwesasne, not for the video business, anyway.
Mr Guzzo: Not for the video business?
Mr Brodeur: There's a difference between a casino and a video lottery --
Mr Guzzo: I know. We're just talking to video -- you're suggesting that's not competition. Let me ask you then, sir, about the placements at racetracks. I understand from what I read that it's a gesture being taken by the government of your province with regard to maintaining the viability of the racing industry and the employment that's associated with it. Is that correct?
Mr Brodeur: Yes. In the province, let's say the maximum number per licence is established at five, but that figure of five has been different for the racetracks. There are three racetracks in the province.
Mr Guzzo: Is Connaught Park one of them?
Mr Brodeur: Not yet in the sense that there's no special decision already taken for the Aylmer track.
Mr Guzzo: There's been no decision made there. That's what you're saying?
Mr Brodeur: Not yet.
Mr Guzzo: You know that after two years' hiatus, Connaught Park is getting ready to open again for live racing.
Mr Brodeur: Yes. There has been no decision made on the number of video lotteries they will have at that track, but I can say in Montreal, for example, that number has been established at 125, the track in Quebec at 100 and in Trois-Rivières at 50 machines.
Mr Guzzo: You know that Connaught Park is not going to open unless they get a commitment for machines, don't you? There will continue to be no live racing at Connaught Park unless you make a commitment to them for machines. You're aware of that, are you not?
Ms Roiter: I think we have legislation that provides for the rules to get video lottery machines. In the case of racetracks the provision is that the racetrack makes an application to the Régie des alcools, des courses et des jeux, which is the alcohol, racing and gaming commission. That commission can give a permit and can determine a number of machines and it's submitted, I think, for government approval. So there is a process involved, I imagine. We can't comment on it; it's not our decision.
Mr Guzzo: But you will supervise those machines if they're placed in there, correct? They will be under your jurisdiction.
Ms Roiter: Yes.
Mr Brodeur: The same as all other tracks.
Mr Flaherty: Good morning. I'm one of the members of the government party, and it is our government that is proposing this legislation, Bill 75, which, among other things, would permit the introduction of video lotteries. Our proposal is to introduce them on a cautious phased basis over time, first of all in racetracks and permanent charity gaming halls and subsequently in licensed premises.
You've had experience in this since 1993, I believe, and we have none in Ontario. I'd like to ask you some questions about the controls or regulation that you have, the way of making sure that the video lotteries are run the way you want them to be run, and first of all to ask you, without revealing any secrets that you don't feel comfortable with, how do you control the operation of video lotteries from your head office and also out in the field where the machines are?
Mr Brodeur: In terms of operation? Every single piece of equipment, every morning and any time during the day that we want to make sure it is the right payout or the right equipment that is plugged in, is controlled by the central system. If a bar owner opens the door of the equipment, that is recorded in the central system. So there is a major control right there because everything is plugged into the system. Every time you receive a call that says a machine broke somewhere or a retailer wants to ask us a question or whatever, there is a monitoring also of that system. We know exactly after how many rings a retailer has been answered by our telephone line, and everything is recorded on the tape. There's a lot of control in the operation everywhere.
Mr Flaherty: Do you have a high level of compliance? What sort of problems do you have and what's the incidence of problems you have? How frequent?
Mr Brodeur: I don't see any big problems we have had since the beginning of the operation. Like any computer business, there are sometimes little things, but I don't see any problems that we've had up till now running that program. We were not the first ones to plug into a central system, and the equipment that has been installed in the province was tested in many areas before being installed here. It's not like it was a new product.
Mr Flaherty: If I may just change the subject a bit, in terms of determining where the machines go, in which bars or brasseries or taverns, is there a competition? That is, are there more bars, brasseries and taverns that want the machines than can have them?
Mr Brodeur: They need their liquor licence, first of all. They apply for a video lottery licence. The moment they receive the video lottery licence, it doesn't mean they're automatically going to receive the equipment. We make some kind of evaluation based on experience. Normally what we decide is to put in a specific bar between two and three machines at the beginning. We look at the commercial activity within those machines and, starting from there, will afterwards increase or decrease the number of machines. It's more based on experience, because it would be really difficult to make a real commercial study on each of the sites, when you operate with 4,000 sites in the province somewhere. We do have the experience.
Mr Flaherty: Thank you very much. On behalf of our government, we very much appreciate your participating today because it's helpful to us as novices in the video lottery enterprise to learn from you and try to avoid any pitfalls. Are there any areas that you think are particularly things that we should be careful about, based on your experience?
Mr Brodeur: Since the beginning of the program, I would say that there is enough experience right now everywhere on that deal for your organization, the OLC, to plan the program well and to avoid any problems with that program, basically with the experience of lottery rooms.
The Chair: There's approximately 20 minutes left. The opposition has only used five minutes, so they have at least five minutes, and then we'll do a rotation.
Mr Crozier: Hello again. As you said, this is the official opposition, although in the area where I'm going to ask a couple of questions I think we're all interested, and that is the physical access to these machines. We too are proposing, the government's proposing, that they be in licensed premises only. Do the machines have to be together in a secure area in those licensed premises?
Mr Brodeur: Not really. There are different types of bars in the province, so it really depends on the way the bar is built physically. Normally, it's in the section of the bar that is public, so you cannot put a machine in the rest room or on top of the bar. Normally, it's on the floor somewhere where people have access to the equipment.
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Mr Crozier: Are those areas age-restricted?
Mr Brodeur: Yes, always.
Ms Roiter: It's a bar.
Mr Crozier: What about a licensed restaurant?
Mr Brodeur: There's a difference in the province between a liquor licence for the public served in a restaurant and a bar licence. We are talking here about a bar licence and a restricted area.
Mr Crozier: Video lottery terminals simply aren't in licensed restaurants then?
Mr Brodeur: They are bar-licensed. Normally it happens sometimes that a big restaurant has two licences. They can have a licence for the tables where they serve meals, which is not a licence for video lotteries, and they can have in the centre of the big restaurant a real bar with seating and everything. That's where the video lottery will be installed.
Mr Crozier: I appreciate that. You no doubt have penalties in cases where these laws are not abided by. Can you give us some idea what the penalties are?
Mr Brodeur: Maybe Lynn can answer that one.
Ms Roiter: If there are infractions, the law provides that the person loses his right to a machine. There are also monetary fines. I would imagine it could even lead to his losing his liquor licence, depending on the nature of the infraction.
Mr Colle: I'm just wondering, in terms of the requests for these machines -- you mentioned that there are about 9,000 establishments and 4,000 or so have them -- are there a lot of people who are turned down, or is it fairly automatic that you get video lottery terminals if you have a liquor licence?
Mr Brodeur: First of all, we have in the province 9,000 liquor licences, so the bar owner has to make a request for the video lottery licence. You can imagine that in a hotel somewhere where the bar is not so important the hotel won't request the video lottery equipment. There are some locations that are not really interested in video lotteries. Or social dancing, let's say, Saturday night only; they have a bar there, but it doesn't work well for them to go to all the trouble --
Mr Colle: Yes, because it's an ancillary use or something. But what about a normal brasserie or bar? I mean, most of them who apply get them, I guess.
Ms Roiter: If they qualified for a liquor permit, they would qualify for --
Mr Brodeur: Normally, yes.
Mr Colle: It's fairly routine that they would get a video lottery licence if they had a bar licence in a regular brasserie or whatever, generally speaking?
Mr Brodeur: Yes, of course.
Mr Gerry Phillips (Scarborough-Agincourt): I gather you said that your revenue on these is about $140 million a year, the province's revenue. Was that all brand-new revenue, completely found revenue from somewhere, or was there any aspect of the province's revenue that dropped as a result of $140 million from here? Have you any indication?
Mr Brodeur: That's a very tough question. We are studying. Every time we are asking questions of the bar owner, there is a different answer. Some of the bars will say that they generate new clientele into the bar; some others will say that it is driven by the actual clientele of the bar. There are as many answers as the number of bar owners concerning that question, but one thing surely is that they like those video lottery machines.
Mr Phillips: So does the government.
Mr Brodeur: It gives an entertainment value to their customers, so it does lots for the establishment.
Mr Phillips: Are there any studies in terms of whether the revenue keeps going up in a bar over time, that in the second year or the third year there's more revenue coming in, the same revenue or what?
Mr Brodeur: I don't know yet because we have only two years' experience on that. But what I can say is it's around the same revenue for the past two years. The average was last year, $535, and actually it's around $550 or something, so it's still the same thing as last year.
Mr Phillips: So there's no indication that in any bar where you have three of these machines that in year three they get more revenue coming in, or less revenue, or the same revenue? In an individual bar.
Mr Brodeur: No. It varies from one to the other. You should ask the owners of each of the 4,200 bars to get your answer. I don't know.
Mr Colle: You'd probably get 4,000 different answers.
Mr Phillips: That's 4,000 beers.
The Chair: There's approximately three minutes left per caucus.
Mr Kormos: That survey of Quebec bars is one that I'm prepared to undertake. I suspect some of my colleagues would join with me. What percentage of the net revenues does the bar owner get?
Mr Brodeur: It's 30%.
Mr Kormos: So the bar owner gets 30% and the government gets the rest?
Mr Brodeur: Yes.
Mr Kormos: Nobody else shares in that?
Mr Brodeur: No; 30% for the bar, 70% for the government.
Mr Kormos: You probably know that currently in Ontario charities, volunteer organizations, are saying that these machines are going to take money away from their fund-raising. Were charities concerned, or are they concerned now in Quebec about the machines and the fact that people are spending money on these machines as compared to somewhere else?
Mr Brodeur: I can't answer that.
Ms Roiter: It's not been an issue.
Mr Brodeur: It's not been an issue in the province, you know, at the beginning of the program.
Mr Kormos: Okay. Thank you kindly.
Mr Young: Do you have any problem that you're aware of with illegal machines and, if so, how do you deal with it?
Mr Brodeur: We don't deal with illegal machines. We are there to -- we received a mandate from the government to work the video lottery program in the province. The only thing I can say is from the beginning of the program up to now more than 8,000 equipment has been seized by the police. That's all I can say.
Mr Young: Those 8,000 illegal machines have been seized by the police?
Mr Brodeur: Yes.
Mr Rollins: You said you have machines at three different racetracks. Have the racetracks experienced a better number of people visiting them since the machines were put in or not?
Mr Brodeur: What I've heard from those people is -- naturally it's bringing them better revenue, okay? There's different commentaires concerning those videos within the racetrack, but it doesn't mean that it will increase the betting on the racetrack, and also it doesn't mean that it will decrease the betting on the racetrack. I think it's a separate clientele, video lottery and racetrack. On all the racetracks that will permit video lottery, it's in a specific location. There is a room normally with video lottery equipment. For example, in Montreal they cannot even bet on the racetrack when they play the video lottery machines.
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Mr Rollins: Does the money that they make on video lotteries go back in to the horsemen's purses or just into the overall operation of the track?
Ms Roiter: They get a 30% commission, the racetrack. It uses it --
Mr Rollins: The way they want to.
Ms Roiter: There's no legal limitation on how they use it.
Mr Brodeur: They receive the same thing as any other bar.
Mr Rollins: Okay. Thank you very much.
Mr Klees: You have other forms of gaming in the province. You have lotteries, you have break-open tickets, and that kind of gaming. Do you have any statistics as to the impact that video lottery terminals have had on the revenue that's generated from these other forms of gaming? One of the concerns that's been expressed here in the province is that the break-open ticket industry, for example, is suggesting that this will encroach on their revenue, on their business. Could you comment on that, please?
Mr Brodeur: First of all, we don't have any break-opens in the province; there may be some in a couple of bingo halls but it is not run by Loto-Québec. The three businesses we run are the casino business, the lottery business and the video lottery business. Between the three we haven't seen much effect of one on the other. As an example, when somebody goes to a casino, he's going there to bet. When he goes to a bar, he doesn't go there to play video lottery. Normally he goes there to have a drink and socialize with people. They're different clienteles. It's the same for the lottery.
Mr Klees: You would confirm, then, that a different segment is attracted to video lottery terminals compared to other forms of gaming.
Mr Brodeur: Yes, totally. I was in the lottery business before. We are not the same type of establishment. Lotteries do not usually sell in bars, and casinos are special premises, so they're different premises and they're different clienteles.
Mr Colle: In the two years have you done any kind of follow-up in terms of the impact these machines may have on habitual gamblers who gamble beyond their means and fall into difficulties financially or psychologically? Has your lottery commission looked at that at all? Is that your role or the role of your government?
Mr Brodeur: I'm here to talk about the operation. I'm not really in a good position to talk about the effect on the population. I can tell you the different measures that we take in the province, let's say, to alert anybody that this is gambling like any other form of gambling.
On each piece of equipment there is are two messages inviting players to play with moderation that say, "Play with moderation so the game remains a game," and you can see that message on the attraction panel of each piece. We also distribute pamphlets on each location so that there is a 24-hour-a-day hotline where people can phone if they believe they need help because they cannot stop playing or whatever. We give some support for that.
The equipment is available at locations where the population is 18 years and over, so we are talking here about mature people. We have funded some studies that were done in I think two or three universities in Quebec. Those studies analyse the effects of gaming and ways of treating gambling problems. There are a lot of things we are doing in the province to avoid any potential problems with gambling.
Mr Colle: You're funding those studies with Laval and what universities?
Mr Brodeur: McGill, I think, Laval and Sherbrooke.
Mr Colle: They're ongoing studies, are they, or are they being completed? They're in progress? How many calls did you have on the hotline, for example, last year or the year before? Any approximate idea?
Mr Brodeur: The only figure I remember is that it's approximately 100 calls a month for video lotteries.
Mr Young: If you get 100 calls a month, do you have any idea if it's 100 different people or if it could be the same 15 or 20 calling repeatedly?
Mr Brodeur: I don't have any idea. That is confidential information for those companies. It can be just a question, "Give me the phone number of this or that organization," or sometimes I heard that they phone to get an explanation of the game.
The Chair: Perhaps I could give you one point of information which somewhat astonished me. In Ontario the gross revenues from break-open tickets are calculated to be $1 billion to $1.3 billion, so it's a substantial business in Ontario.
Thank you for the most professional manner in which you have answered our questions. You certainly have added value to our day.
Mr Brodeur: Thank you.
Mr Colle: Merci.
The committee recessed from 1056 to 1116.
ALBERTA GAMING AND LIQUOR COMMISSION
The Chair: Good morning, Ms Grimble. Are you able to hear me?
Ms Muriel Grimble: Yes.
The Chair: I should ask, how is the dry heat in Alberta today?
Ms Grimble: Our famous dry heat is wonderful, thank you. We're proud of it.
The Chair: I apologize for the difficulty in the transmission. This is the standing committee on administration of justice for Ontario. My name is Gerry Martiniuk. I chair this committee. We are considering Bill 75, which is a bill that basically does two things: (1) It places the regulation of liquor and gaming in the hands of one commission rather than two, as we previously had it; and (2) it introduces for the first time legal video lottery terminals into Ontario.
The proposal before this committee is that the terminals would be phased in, firstly being introduced to racetracks and permanent charitable casinos, of which we have a number around the province. These are small casinos with limits on betting; they're not our regular casinos. Secondly, once that was out of the way, we would look at phasing in the introduction of VLTs to liquor-licensed outlets, bars. That's where we stand. We've already heard this morning from the Atlantic Lottery Corp and the Quebec lottery corporation.
Firstly, I would ask you if you could give us a general rundown on the operation in Alberta. I think that would be fruitful before we ask questions.
Ms Grimble: Okay. Would you like to take a little bit of a historical view of the operation?
The Chair: Please. That would be excellent.
Ms Grimble: In 1991 -- I guess we'll go back a ways -- in Alberta a test was approved which Alberta did together with the Western Canada Lottery Corp, which is the corporation which Alberta is a shareholder in that provides our ticket lottery products in Alberta. We started a test of about 30 locations, starting off in our two major fairs in Calgary and Edmonton, the Calgary Stampede and Edmonton Klondike Days. We did it for a couple of reasons: (1) to test the functionality in the operation and (2) to take a look at how the products would do in the marketplace. The test program grew from about 30 locations and we expanded it to about 80 locations.
On March 12, 1992, the government approved the implementation of video lotteries in eight restricted, licensed establishments across Alberta. In August 1992, we launched our new program, where we had procured terminals and a new central system. We launched our first account on August 31, 1992. From there, we actually handled 400 terminals in the network, and we replaced those terminals with the new terminals that had been procured and we expanded the program.
I believe by about March 1993 we had somewhere in the neighbourhood of 1,900 terminals at about 600 locations. At the time that it was approved, the approval was for approximately 1,200 locations and 8,600 terminals. When we got to March 1995, we were at approximately 6,000 terminals in less than 1,000 locations. At that time, the government chose to freeze the number of terminals at 6,000 and a lottery review committee was established that reviewed the gaming environment in Alberta at that time.
This all was done under the operation of Alberta Lotteries, which was an agent of government that was a little bit at arm's length, in March 1995. Also, we were amalgamated with the Alberta Liquor Control Board. As of July 15 of this year, we officially became the Alberta Gaming and Liquor Commission and the video and ticket operations that were currently run by Alberta Lotteries were enveloped into the Alberta Gaming and Liquor Commission, as were the gaming control branch and the Alberta Gaming Commission.
I should tell you also that the lottery review committee resulted in a redistribution of the lottery terminals in Alberta. The initial plan approved up to 10 maximum per location, or per licence. In Alberta we have some facilities that have more than one licence, so if they had three or four licences, they could conceivably have up to 30. I think our highest location had about 30 terminals in three premises. The lottery review committee reduced the maximum to seven, and we completed during the February-to-April time frame in 1996 a redistribution that removed somewhere in the neighbourhood of 400 terminals. Since the freeze of 1995 we also had locations that were interested in participating in the program, so we really redistributed those terminals into new locations that were not participating at the time.
We currently run with about 5,800 terminals today in 1,178 locations, I believe, something like that.
That's our program. That's a fairly brief overview and I probably missed a few things, but it gives you an idea of what's going on in Alberta.
The Chair: Thank you. In Ontario, we have the government members present, the opposition and the third party. We'll start with Mr Kormos, who is a member of the third party.
Mr Kormos: Nobody has to tell you that the third party in Ontario happens to be the New Democrats right now.
Ms Grimble: I think I knew that.
Mr Colle: Why are you laughing?
Mr Kormos: That's where I started and that's okay. In a relatively short political career I've seen three different governments, three different Premiers, and seen them come and go, one as quickly as the other.
What about break-open tickets? That's been talked about by charities and the industry that handles break-open tickets, the tear-off -- you know what I'm talking about, the break-opens?
Ms Grimble: Right. I know what you're talking about.
Mr Kormos: We have break-open ticket sales, we're told by that industry, of $1.3 billion a year in Ontario. What was the effect of the introduction of these machines on the break-open ticket industry in Alberta?
Ms Grimble: I wasn't directly involved in the break-open portion of the Alberta Lotteries Commission. The break-open products in Alberta were distributed through service clubs primarily; I think our largest group would be Legions. At the time video lottery was launched, they were experiencing a decline. At one time I think we sold over $100 million worth of break-opens -- certainly not the size and scope of the business in Ontario -- and that has been reduced significantly. But it was being reduced prior to video lotteries. What I think happened personally, I guess, is that they also had a restricted distribution within service clubs, and those service clubs were also experiencing difficulties in membership and in basic operations. So of course it rippled into their pull-tab sales also, because they were losing members and their locations weren't full.
I guess our analysis of the situation with break-opens is there were a variety of factors that probably impacted to reduce sales in break-opens. We would believe as marketers, which is my skew, that that product is still a viable product, and if we were looking at some distribution, it still could continue to be viable.
Mr Kormos: Is it being used in Alberta? Are break-opens being used as fund-raisers currently?
Ms Grimble: Yes. As I mentioned to you, the Legions are probably the primary service group that generates the greatest revenue from pull-tabs. The Legion obviously is a non-profit organization and they distribute those funds in the communities. But you have to sell pull-tabs in the place in which you deliver your service, so unlike Ontario, we don't have them in the public domain, so to speak. They would be in the Legion Hall; they would be in whatever environment was delivering the service. You have them of course in lottery ticket centres and distributed along with your lottery products. We don't have that here in Alberta.
Mr Kormos: What power do municipalities have in Alberta to regulate or license or forbid the terminals?
Ms Grimble: In the beginning there wasn't really any discussion about that. Clearly, with a lottery review committee, the government has said if a community doesn't want terminals, if they want them removed, they could have a plebiscite or whatever and the government would acknowledge that. I guess the hook would be that then they would not share in the proceeds.
Mr Kormos: Is there any suggestion that municipalities want the power to license these terminals solely as a revenue-generating exercise?
Ms Grimble: Not that I'm aware. Basically, the revenue from our video lottery terminals goes into the Alberta lottery fund. That fund is broken into a variety of good works, and those dollars are available through a variety of application processes for all communities in Alberta to benefit from. So the proceeds are all going to good works in Alberta. Some of the dollars, though, have been allocated to the deficit, but over the years, a lot of dollars from the Alberta lottery fund have gone back -- all the dollars have gone back into the community. So there isn't maybe as much of an issue with that as in an area that's just starting out with videos, the discussions of where the money goes.
Mr Kormos: Who owns the machines?
Ms Grimble: The government in essence owns the machines, the Alberta Gaming and Liquor Commission on behalf of the government.
Mr Kormos: Who are the suppliers for Alberta of the machines?
Ms Grimble: We have had up to five suppliers but we are now reduced to two vendors. One is VLC, Video Lottery Consultants, out of Bozeman, Montana; the other one is Williams out of Chicago.
Mr Kormos: How are the proceeds distributed between the government and the host location?
Ms Grimble: The retail location receives a commission of 15% of net sales.
Mr Kormos: Do you have a maximum number of machines per location?
Ms Grimble: Per licence, yes.
Mr Kormos: What is that?
Ms Grimble: Seven terminals.
Mr Kormos: Obviously we have to deal with averages -- we don't have to but we're going to be inclined to. What kind of take are retailers, the host locations, getting by virtue of their 15% rate or take?
Ms Grimble: The retailer commission in our fiscal 1995 from net sales -- there are net and gross numbers, but the net sales are $452 million, and the retailer commissions were $70 million.
Mr Kormos: And that's among 1,100 locations, obviously.
Ms Grimble: At that time a little less.
Mr Kormos: Who is eligible to request a licence to be a host for a machine?
Ms Grimble: What the criterion in Alberta is -- it was umbrellaed under the existing Alberta Liquor Control Board licences, and they were referred to as a class A licence. A class A licence in Alberta, which was a liquor primary, we called it, was age-controlled. You needed that designation, one of the factors, in order to be eligible.
Mr Kormos: And is that the case now?
Ms Grimble: Yes.
Mr Kormos: That's remained the case. Has there been any --
The Chair: Thanks, Mr Kormos. Perhaps we better do a rotation.
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Mr Rollins: Thank you very much for taking part this morning. You people have seen fit to amalgamate the liquor control board and those groups all together. Was that from strictly a management position or from a government position to run a more efficient place?
Ms Grimble: Obviously, Alberta Lotteries is the agent of government and took direction from government, and the other departments were also government departments and commissions. It was probably in line with the government's mandate to reduce the numbers of agencies and boards and find some synergies. Also, just with the gaming sector and the crossover with what was going on in liquor, it seemed to make sense that those two entities combine forces.
Mr Rollins: We're following probably close to the same track over that proposal.
You have them at racetracks. At how many racetracks do you have machines at the present time?
Ms Grimble: We don't have them in racetracks unless they have a class A liquor primary.
Mr Rollins: That's the criterion?
Ms Grimble: Yes. We actually just introduced slot machines into our charitable casinos, but we haven't done anything with racetracks at this point in time. There is now an Alberta Racing Corp.
Mr Klees: Could you give us a comment, please, on how you control your system currently? I understand that you have a central computer system that regulates it. Could you just give us an outline of the controls you have in place?
Ms Grimble: In 1991, we chose a system that was available from a company which provided our online ticket system. Because video lotteries were relatively new, their system was new, but it was an online, dedicated system similar to the ticket operation in the fact that we would have constant monitoring of our locations, 24 hours a day, in essence. From our central system we enable our terminals at the locations. They are then put on the system and we monitor certain events, so that if there was an opening, let's say, of the logic compartment where the key to the terminal is, where the computer chips are, that would be an event. If that wasn't an authorized entry -- and the only person authorized to enter the logic area would of course be a technician who would have a special key -- then we could respond. We could make a phone call to the site and find out who happened to be at the terminal. There are a lot of events; some we call more significant than others. The cash door can be opened too and we would know. We don't really respond to a cash door opening because that's usually the retailer and he's responsible for the cash. Basically we have full online. We felt at the time, coming from a lottery background, that we would want to have the full, online, dedicated operation.
Mr Klees: You're satisfied that the system has worked well for you. Do you have any advice for us? If you were to do this again, what might you do differently, what might you advise us to be alerted to in this?
Ms Grimble: Doing differently? From a technical side, if I could do it again and there was a machine available that wasn't a 13-inch terminal, I wouldn't buy the 13-inch terminal. There wasn't a 19-inch screen available. Bigger's better, I guess, in Alberta. Those terminals weren't as successful as the large screens.
Our decision to buy the system that we did and our decision to manage the program from sort of nurturing it along and supporting successful retailers -- they were very much a key; the retailers were the key to the success. If you're looking at being successful, then I think you have to develop partnerships with your retailers and ensure they're successful. That also provides the security and integrity of the program that is absolutely critical. They always wanted more money, I suppose. I don't know if that would have helped at all.
I'm not sure there's too much I would say we would do a lot differently. I think we took a fairly good approach and in our eyes were fairly successful. I couldn't really suggest anything in particular that I would do a lot differently.
Mr Klees: You've been helpful. On the issue of enforcement: Could you give us your experience in terms of any difficulties you've had in enforcing the regulations. Specifically, for example, with regard to the age limit of people who have access to your equipment, could you give us some comments, please?
Ms Grimble: Enforcement: As I mentioned, the Alberta gaming control branch, which at the time was a government department -- and we were an agent -- was given the responsibility of the security of our program. We built a fairly good alliance with that group. We tried to educate the regulators and the inspectors on some of the technology so that they would be familiar with the product. We worked very closely with them. They provided the security discussions with our retailers. We provided the technical product type of information for the retailers. We always kept very close contact with them on any issues. They were first in line on issues.
The retailers clearly understood that we had a group of people who would go in, and the word was the word. We had a very good relationship and the retailers respected that. Of course, they respected it because they were also used to being under the umbrella of liquor licensing. They had to respect the rules. We had an agreement with our retailers that is very similar to our lottery agreement, that said that we really can rule and determine your destiny and the fact that if you do not abide by the rules we can take the terminals away. That was probably a significant help.
Mr Phillips: I'm trying to understand the numbers. You said that in fiscal 1995 the net revenue was $452 million.
Ms Grimble: Net sales.
Mr Phillips: Fifteen per cent of that goes to the site. Does the other 85% go to the government?
Ms Grimble: Less the operational costs, yes.
Mr Phillips: What's the government's revenue yield?
Ms Grimble: Our net income for 1995 was $356.7 million.
Mr Phillips: That's on 5,800 machines. Is that right, roughly?
Ms Grimble: Yes, it would be close to that at that time.
Mr Phillips: What is that per machine then, roughly?
Ms Grimble: Our average, at that time, was about $1,500 net sales per terminal.
Mr Phillips: How much per year per machine? Have you got that handy? I'm just trying to get an idea of how much money the government could expect?
Ms Grimble: It was about $1,500 per terminal per week, about the average.
Mr Phillips: So you multiply $1,500 times 52. Quickly, what is that? That's $75,000, is it, something like that?
Mr Crozier: It's $62,000 a year.
Mr Phillips: It seems like more than that.
Interjection: It should be $78,000.
Mr Phillips: Why would you limit yourself to 5,800 machines if these things are each generating $75,000 a year profit to the government?
Ms Grimble: That was a decision the government made. We originally were looking --
Mr Phillips: On what basis did they make that decision?
Ms Grimble: I don't know if you're familiar with the lottery review committee report. Did you receive a copy of our lottery review committee report?
Mr Phillips: I'm wondering what the fundamental reason to limit it to 5,800 was.
Ms Grimble: Well, 6,000 was the cap. I guess the fundamental reason was that the government was taking a look at the gaming landscape at the time. Before they pursued additional locations, they wanted to review the gaming activities in Alberta. They chose at that time to say, "We'll keep 6,000 video lottery terminals in the network and we will also allow slot machines in our casinos to offset and provide more support to charitables." So instead of expanding the video, they approved additional terminals to go into -- we have similar kinds of charitable casinos to Ontario's except that ours are permanent, we have about 16 of them in Alberta and we put slot machines in. It was really a matter of looking at the market, the niches, and trying to give more support to charitables.
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Mr Phillips: The $350 million in new revenue or incremental revenue, are there any studies on who that comes from? Is that from 10% of the population, from 20% of the population?
Ms Grimble: We have taken a look at the various segments of our population. Video, as does lottery product, pretty well crosses all segments, all demographic and psychographic age groups, male, female, that kind of thing. Because they're in licensed premises, video in particular, they probably have some skew. Let's say 18 to 35 is a fair skew, but that's one you would find in a licensed-premise social environment. I think it's about 50-50 male-female and it basically crosses all segments in terms of income and various choices for entertainment expenditure. It crosses all the lines.
Mr Phillips: Would it be 10% of the population playing it or 5% or 20%? I don't know. Any ideas on that?
Ms Grimble: I don't have that exact number of the population.
Mr Phillips: Has the government concluded this is a sustainable, long-term source of revenue? Are they saying, "Listen, we can get $350 million from this forever," or is there some feeling that it's going to increase or decrease?
Ms Grimble: There are probably all schools of thought. Electronic gaming has been around for a long time, so probably there still would be an interest, from a consumer point of view, in playing video lottery as there is in lottery products. I suppose, like anything, if you do not continue to appeal to the player, then your revenue will probably decrease. If you continue to appeal to players, as the players shift and change and grow older and whatever you're going to have to keep up with the market or, like any product, you won't be generating the same revenue. It depends on how much effort is put into it.
Mr Phillips: Is there any evidence of where the $350 million in new revenue came from? Did it take from somewhere else or was it just $350 million that people found that they could afford?
Ms Grimble: That's been asked for five or six years, I guess, which is a question on any new product that comes out: Where were people spending that money prior to this product coming out? I suspect that there is some redistribution of people's entertainment dollars. I think we heard from some players that instead of another beer at the end of the day they put their loonie into a video lottery. One could say that maybe there was a tradeoff in licensed premises between eating or drinking and playing videos, but these are all pretty subjective. I don't have any firm numbers or statistics of where it came from.
Mr Kormos: What type of funding has there been for treatment programs, gambling addiction programs?
Ms Grimble: In 1994 Alberta launched a fairly major study to identify problems associated with gambling. After that study was completed, the government provided, I believe, $3 million to an agent of government, AADAC, the alcohol abuse agency for Alberta. They have centres across Alberta and they use the dollars just to add to the existing services provided for behaviour problems in the general public. So they have those kinds of dollars in a commitment to support the requirements of that agency to support problem gamblers.
Mr Kormos: In jurisdictions in Canada where there's been an attempt to redistribute these machines of course all hell breaks loose and the tavern owner who had five says, "No way are you going to take any of mine," because that tavern owner has become accustomed to the revenue. Is that a fair assessment?
Ms Grimble: Of course. Yes.
Mr Kormos: Obviously part of what you do is planning for the future, and I appreciate what you said about your being capped at 6,000, but surely there have got to be some things going on, maybe at this point purely pondering about what the future is in Alberta for this type of gaming or for expanding it for different types of games. Is one of the options moving beyond licensed premises? Is one of the options offering different types of games?
Ms Grimble: I doubt there would be any impetus to move out of an age-restricted environment. There would be I think zero option to do that. Clearly the mandate at the beginning was absolutely under 18, zero tolerance.
As I said earlier, from a revenue point of view, based on the kind of revenues that are expected, one would look at providing product and games the players want to play. Yes, from a marketing side you're always looking at that. As the player makes changes, as environments change and licensed premises change there may be a requirement to update the games, add more features to the games, more play value, as we would call it, to the games. Those are the things you think about on the marketing side, and it would be determined on the expectations from a revenue side.
Mr Kormos: What has gambling in Alberta done for tourism? Are there more tourists coming to Alberta because gambling is available?
Ms Grimble: I'm not sure that we have any statistics. We've probably always had more gambling than most. In Alberta over the years, I understand from an historic point of view, we introduced different gambling options prior to a lot of jurisdictions. We've always had that. We do not have the tourist-type casino gambling operation you have in Ontario, you know, the big casinos which clearly have more potential to drive tourism. The video lottery has certainly supported the Alberta hotel industry. Clearly they've been able to upgrade their facilities and position themselves to be competitive and more profitable, appealing to their customers.
Mr Kormos: More competitive with whom?
The Chair: Thank you, Mr Kormos. We must move on.
Ms Grimble: In the market.
Mr Kormos: God bless.
The Chair: I'm taking it in order as of yesterday. The government caucus has four minutes and we have Mr Young and Mr Guzzo.
Mr Young: How many slot machines are in the casinos now, what percentage of the revenues do charities get, and do you have a process to get local input from the communities on how the money should be distributed?
Ms Grimble: We will have by October 615 slot machines in 16 casinos. Right now I think we're running about 550, if I'm correct on that. The non-profit that holds the casino -- I'm not sure if you're familiar with our casino, but a non-profit holds the licence to hold a two-day casino -- receives 10% of the revenue, net sales from the slot machines. The opportunity for Albertans to participate in how the money is distributed is actually in process right now. That came out of the lottery review committee, a consultation process.
Mr Guzzo: Ms Grimble, I want to go back to the questions Mr Phillips asked when he talked about the $350 million that went to the government of Alberta. I think we should be talking about $450 million because we've taken out of the economy the $70 million that you've given to the individuals who house the machines for you, plus I think about $30 million in overhead. Correct?
With regard to where that money was going prior to these machines, did you not have a problem in Alberta prior to 1991 with illegal machines, grey machines?
Ms Grimble: We didn't really have a grey machine problem. We weren't aware -- from a security point of view we made sure that there were no grey machines. It's black and white in Alberta; there is no grey. If you look like a slot machine, you are one. So we didn't have a grey machine problem.
Mr Guzzo: I attend the Calgary Stampede almost every year or every second year, and the motel that I stay at happened to have them as far back as 1986. Does that shock you?
Ms Grimble: That's interesting. Yes, it does. Tell me which one it is. We weren't aware. We wouldn't have had any kind of visible grey machine problem in Alberta. I'm certainly not from the security side of it, so I wasn't aware of that.
Mr Guzzo: Let me ask you about illegal gambling in Alberta. Any illegal gambling in Alberta?
Ms Grimble: Oh, I'm sure there is. I'm sure there are a lot of poker games in clubs and basements maybe that go on. I'm not on that sector.
Mr Guzzo: What about bookmaking, for example? The major papers in Edmonton and Calgary carry the lines of every football game in the NFL, every basketball game in the NBA, every hockey game. Why do they carry those lines if there's no illegal gambling?
Ms Grimble: I'm not suggesting there's no illegal gambling.
Mr Guzzo: Any possibility that some of the money that we're referring to now was going to forms of illegal gambling prior to 1991 that's now filtering its way through the legalized operation that you have?
Ms Grimble: That's an interesting question. There's a possibility, sure.
Mr Guzzo: Thank you.
Mr Crozier: Are you aware of any problem that exists now with illegal machines?
Ms Grimble: I'm not aware of any that are played side by side, no.
Mr Crozier: You may be familiar with this. If not, I'm sure you'll tell me: In the area of addiction, do you have any information or does your commission track any statistics on cross-addiction?
Ms Grimble: As I mentioned to you, AADAC is the agency of government that has a program where we work with them and they advise us on the situation. They have statistics that indicate that often they are cross-addictions. I don't have them at hand, but there are statistics.
Mr Crozier: If we needed some information on that, we might be able to obtain it.
Ms Grimble: Yes.
Mr Crozier: With licensed premises, do the machines have to be in a separate, physically secured area of the establishment?
Ms Grimble: We do site plans prior to putting terminals in and the criteria are in secured locations within eye level of the bartender so they can be watched. If they aren't like that, they have to have some kind of cameras or mirrors, but they are within the licensed premise and within the age-controlled environment.
Mr Crozier: You can have an age-controlled environment that doesn't require, say, the restaurant to be age-restrictive? I mean, there's a restriction against playing the machine, of course. Is there a restriction with age in the area of the machines?
Ms Grimble: Yes.
Mr Crozier: Okay. Good. Thank you.
The Chair: I believe it was approximately 9 o'clock there when we started out, Ms Grimble. Thank you very much for your valuable input to the committee's deliberations. We really appreciate it.
Ms Grimble: Okay. Good luck. Thank you.
The Chair: This hearing will adjourn to committee room 228 in Queen's Park at 1:20 pm.
The committee recessed from 1155 to 1319 and resumed in room 228.
PETERBOROUGH HOLIDAY INN
The Chair: Mr Kormos has advised that he may be detained and that we are to proceed, and I shall so do. I understand our 1:20 presenter is not yet here. However, Mr David Smythe, director of finance of the Holiday Inn, Peterborough, is present. Thank you for coming early. You've saved us some time today, Mr Smythe. I would request that you proceed. You have 20 minutes, including questions from the committee.
Mr David Smythe: Very good. Good afternoon, Mr Chairman. Just to repeat what you already said, I suppose, my name is David Smythe. I am the general manager of the Holiday Inn in Peterborough. I would like to thank you and the committee for providing the forum for myself and other industry-related individuals to appear before you today.
I should begin by clearly stating that I am in full support of Bill 75 as it relates to VLTs. I would like to request that the government find a way to implement the bill into the hospitality sector quickly. As you've already heard from our industry, we are in desperate need of assistance. Our industry has been in decline since 1989. Since 1992, we have seen 1,400 bankruptcies and a drop in staffing levels of 100,000.
As an industry, sales are down 20%. I'd like to add that before coming here today, I did make a point of calling some people I know in other communities around the province and, to my surprise, the numbers for this summer are significantly down over the same time last year in resort communities, even north of the Peterborough area.
Peterborough, as a mid-sized community, has experienced numbers considerably higher than the 20%. The hotel that I am representing today has a five-year capital plan that simply addresses cosmetic upgrades. This year, we have already cancelled our renovation plan due to the significant shortfalls in occupancies during the first quarter. You can imagine the sense of disillusionment with our guests, the staff, the owners and the local contractors who were counting on the work. This is an excellent example of what sets off consumer pessimism within a community.
There's no doubt in my mind that the proposed introduction of VLTs into the hospitality sector will provide the much-needed relief that will revitalize our industry. I say this because I came to Ontario from Manitoba in 1993 where VLTs had been introduced. The transformation of marginal businesses into flourishing restaurants and hotels was absolutely astonishing. Many of the renovated establishments are now focusing their resources on cooperative marketing efforts and expansions. This metamorphosis was a direct result of VLTs. In Ontario, the infusion of projected funds will give all of us the opportunity to repair and upgrade our establishments, improving our competitiveness within the national and even global markets that we must now participate in. Without the infusion we will continue to see deterioration of our facilities, ultimately leading to many more business failures.
The province is already far down the gambling highway with many forms of lotteries and now gambling casinos. The casinos have quickly become tourist meccas, leaving other communities reeling in their wake. Communities such as Peterborough will likely never see the approval for a casino, so those of us in the hospitality sector question: How are the small to mid-sized communities to compete with the new entertainment trend? How are we to meet the expectations of the tourists from the rest of Canada who already enjoy gambling in their own communities? The answer is simple. We must have the opportunity to remain competitive. We must have these VLTs.
From my experience and the experience of many tourists, one might think that VLTs are already legalized in our province. There are some 15,000 to 20,000 illegal machines already in operation. Without legalization of VLTs one can only estimate how many more illegal machines will go into service over the next 12 months. Unfortunately, most of the proceeds from the illegal machines are being funnelled through the underground economy. This situation can be easily rectified through the government-controlled video lottery terminals. The proposed system is fair and has effective controls. These controls do not permit manipulation of funds. Once the VLTs are approved, people will naturally migrate to the legal and respectable establishments to participate in the form of entertainment that they already enjoy. Without policing, this will effectively exterminate the illegal machines that are plaguing our province.
I would recommend that the implementation stage for our industry not be delayed and that the timing be soon after the racetrack and charitable casino schedule. Delaying implementation to our industry will mean the government will not be able to receive the benefit of $500 million in VLT revenues. By delaying the implementation, the government will also be giving the grey machines the opportunity to remain untaxed.
On the way here, I was thinking about my presentation as it relates to charity casinos, tracks and that kind of thing, because I often, as a Rotarian, work in these charitable casinos.
Is it all right if I proceed?
Mr Young: We are listening.
Mr Smythe: Okay. I work in charitable casinos often on weekends as a Rotarian and I have noted that the charitable casinos offer a form of entertainment to a particular segment of our society. In the hotels that I've operated, that I've worked in for many years, I haven't seen that kind of element of the market in our hotels, so I clearly see from my perspective that the VLTs going into our establishments will be approaching a completely different segment of the market. I don't see a competitive issue between the charitable casinos and the hospitality sector participating in this.
Opponents continue to comment on the addictiveness of VLTs. Clearly, gambling is already well established in our society. VLTs will not significantly increase the potential for compulsive or problem gambling. Based on the Manitoba experience, VLT players report that the game itself is not addictive. The vast majority play one to two times per week, spending on average $10. They play for social reasons and entertainment. Research does suggest that less than 2% of the population are potential compulsive gamblers. It is for this reason that I support the government's initiative in allocating VLT funds for the education and treatment of compulsive gamblers.
I respectfully request a speedy passage of Bill 75. From my personal experience in Manitoba, I am confident that the bill will give the hospitality industry the desperately needed resources required to ensure our future competitiveness within the national and even global market.
Mr Chairman, I thank you and your committee for allowing me this opportunity today.
The Chair: Thank you very much, Mr Smythe. There are only two caucuses that will be asking questions, so you have a maximum of five minutes each.
Mr Harry Danford (Hastings-Peterborough): Mr Smythe, welcome this afternoon. I appreciate your comments, given your experience with Manitoba in the past and your comments about the hospitality sector, naturally, in particular.
As you're well aware, we had a schedule and we did include racetracks and casinos and that sort of thing first, and then look at hospitality. Given your comment about implementation for the hospitality sector, have you any suggestions, based on your experience, on how that could be done and would be a benefit -- not a benefit to hospitality, but how it would be implemented, I meant to say.
Mr Smythe: Into the hospitality sector?
Mr Danford: Yes. Suggestions how it could be done.
Mr Smythe: Absolutely. Certainly when I was in Manitoba, at that time there was a lot of media coverage of what was going on in Nova Scotia. At that time I certainly followed that and, being involved in the Manitoba situation, the government and the industry really took note of that and made changes to their plans and I believe were quite successful in the implementation.
They installed the units into licensed establishments, so there was a high degree of control. Under-aged people were not permitted to participate. When an establishment has its liquor licence on the line, most, if not all, take that very, very seriously and they will not risk that. So they would follow the guidelines set out by the government.
Based on my experience of seeing that happen in Manitoba, it's been very successful. I continue to be in touch with a number of operators out there and they still feel the same way.
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Mr Klees: Thank you for your firsthand recounting of your experience in Manitoba. I'm a bit familiar with that province in that I've spent a bit of time there. In fact, while I was there on business, I lived at the Fort Garry Hotel and so I'm familiar with the seventh floor.
With your experience in that province, could you give me some sense of where you see the clientele coming from for the video lottery terminals? The reason I ask that question is that there has been concern expressed in this province by some representations that it might draw away from bingo halls, might draw away from the charity casinos and so on. Has that been your experience? Could you comment on that, please?
Mr Smythe: With my experience of participating in organizing bingos for the Rotary Club that I'm a member of, it's a very different segment of society that is using the kind of facility that I'm managing and that I have managed throughout my career. I see that as a real opportunity both for the hospitality sector and the government to approach a different market, if you will. In fact, just Sunday night I was at the local bingo hall, operating it, and it was very evident to me that these are not the same people who are coming into the hotels in Peterborough, both the local people and the tourists.
I'm sorry. There was another element of your question.
Mr Klees: Basically, what I was trying to get at is exactly that, as to what market segment you'd be looking at as frequenting your establishment to play the video lotteries.
What you've just said was confirmed again this morning. We spoke with the Atlantic Lottery Corp, as well as the video lottery association of Quebec, and they also indicated that in their opinion it was a very different market segment that plays the video lottery terminals compared to other forms of gaming. In that particular case I was asking the question about the break-open tickets and whether in their opinion it would take away from that market. Both organizations indicated that, no, that wasn't their experience in their jurisdictions. So you confirmed that, and effectively what I hear you saying is that you believe this would be an incremental growth to the industry.
Mr Smythe: Absolutely. The people who come into our hotel, for example, are dealing with local businesses. They're corporate travellers. They're people coming from the United States and Europe to do business in our community. They would never go into a bingo hall, but for certain they would participate in VLTs if they were installed in our lounge.
The Chair: Thank you very much, Mr Klees. If we can proceed, Mr Crozier.
Mr Crozier: Good afternoon, sir, and welcome. You've mentioned that the industry sales are down some 20% in the hospitality industry. What are they down in Peterborough?
Mr Smythe: I'm talking in general terms. In terms of occupancies in our community?
Mr Crozier: In terms of the decline you've seen in business that you feel you need to recover.
Mr Smythe: Quite frankly, we've been in decline since 1989 and we've never been back at those numbers. In terms of occupancies, as a marketplace for example, last year we fell as low as 47%. Prior to that, in the early 1990s and late 1980s we were almost hitting 60%. So a significant impact is going on.
In speaking with local resort operators in the Kawarthas, I've heard everywhere from a 15% to a 35% drop in their occupancies this summer and, honestly, I wasn't prepared to hear that. I thought they would be relatively stable compared to last year.
Mr Crozier: Do you know why that is?
Mr Smythe: We're still investigating that. All of us were a bit surprised. We certainly had anticipated some change due to the Olympic Games and that kind of thing, but to that degree it very much is a surprise and we don't have the answers yet. We're still really very much in the middle of summer.
Mr Crozier: We've heard a number of representations over the last week and a half. In its own way, yours is one of those that seems to indicate that VLTs will really be the saviour. They're remarkable little machines, aren't they?
Mr Smythe: They are. When I was in Manitoba, I certainly followed it with interest because it was going to impact our industry.
Mr Crozier: How many machines will you need to make this recovery that you say has to be done?
Mr Smythe: I realize that the number of machines being proposed in Ontario is different from Manitoba, so there's a different expectation in terms of what difference there will be. With regard to the number of machines obviously in our establishment, for example, I would like to see three or four machines. I would think that would be ample to entertain our guests.
Based on what's going on in Manitoba, I would see a nice, tidy nest-egg at the end of a year to allow us to make that lounge look tremendous. The interesting thing about what happened in Manitoba was that these people took money and they spent it. They didn't just keep it and put it in a bank account; they put it back into their establishments.
Mr Crozier: Ah, they didn't put in a bank account. Did you know that it was just recently announced that Canadians are by far greater in debt than they've ever been in their history? Maybe it's because they're not putting it into bank accounts.
Mr Colle: Perhaps the VLT is the ultimate solution. We're sort of treating the symptoms rather than the cause in your industry. Would you not like to see perhaps more investment in marketing the Kawarthas, for instance, or Peterborough? For instance, I know this weekend you have -- it's almost world-famous -- the Buckhorn art festival taking place. I'm sure very few people in the Toronto area even know it's taking place, yet if this were in the United States, they'd be marketing the thing in every nook and cranny in the province.
Mr Smythe: No question.
Mr Colle: I think that's what should be done. There's got to be some strategic investment in aggressive marketing. Like the Kawartha area; it's such a jewel that's so close to Peterborough and Toronto, and as I said, people in Ontario don't even know the activities that are there. Obviously you'd want to see more investment in marketing Ontario in this area. What about in the long term a more significant, let's say, earmarking of funds from VLT revenues towards marketing this province and its attractions as a way of solving the real problems in bringing tourists to our attractions.
Mr Smythe: No question. I'd have to agree that we do require more marketing efforts. I'm pleased to say that certainly in the Kawartha area and other areas that I'm familiar with, that I personally know operators in, through the early 1990s we've matured as an industry. I'm now working with the Comfort Inn and Best Western. We're collectively using our marketing dollars, something that was unheard of prior to 1992-93, and collectively marketing the area. For example, the Festival of Lights which takes place every Wednesday night and Saturday night in Peterborough, we're collectively marketing that event into the Toronto market.
The Chair: Mr Smythe, our time has elapsed for the presentation. I thank you indeed for attending today.
Members of the committee should have received the Bill 75: Interim Summary of Submissions document that was requested by Mr Kormos. Our researcher, Andrew McNaught, should be congratulated and complimented for the large amount of work he's put into this and getting this to us so speedily.
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CANADIAN THOROUGHBRED HORSE SOCIETY
The Chair: We will now proceed to the Canadian Thoroughbred Horse Society, Mr Glenn Sikura, president. Welcome.
Mr Glenn Sikura: Thank you very much. First of all, I would like to apologize for our tardiness. We were here on time and went to the other building and are back here now. I'm glad things worked out.
My name is Glenn Sikura. I'm the president of the Canadian Thoroughbred Horse Society. Beside me is Julie Coulter, our regional secretary, and we have two directors in attendance, Karen McArthur and Gillian Luxton.
I don't have any handouts for you with regard to the speech I'm going to make at present, but what you will receive is some information on our society. I would like to elaborate just briefly on who it is we are and what we do. Once again, thank you for providing the CTHS with the opportunity to make this presentation.
We are a non-profit, membership-based organization which represents breeders of thoroughbred horses in Ontario and throughout the country. The CTHS was founded in 1906 and is incorporated under the Animal Pedigree Act, a federal statute, for the primary purpose of maintaining the official registry of thoroughbred horses in Canada.
We have a vision statement, which is short, that I will read to you. We have other information we'll pass on at a future date, but I won't bog you down with that for the time being. The CTHS vision statement is, "We aim to ensure a viable future for our members by providing assistance and representation within the thoroughbred breeding industry."
Now some background on our industry for those of you who aren't aware of it, and I'll relate things specifically to the breeding industry, as I'm sure that's why our group is here as representatives.
Over the past several years, as you may know, we have been an industry in challenge. This is in large part due to a tax rate that was not competitive with other jurisdictions and was not competitive with other forms of gambling, of gaming within the province. A struggling local economy and various forms of government-sponsored and government-promoted gaming have led to the following realities: a decrease in prices achieved locally for our yearlings and breeding stock; a decrease in foal crop, which is the number of foals produced per year, from roughly 1,500 in 1989 to approximately 1,000 in 1996; an increase in horses selling in our competitive markets. This is because other areas haven't been affected the same way we have. Places like Saratoga, New York, and Lexington, Kentucky, at the Keenland sale as a matter of fact, have noted marked increases of late in the sales average of their product. We have not been so fortunate. There has been a decrease in membership of active breeders from roughly 700 to about 528.
I'm sure you've all been made aware of the cycle that exists, but I'll repeat it anyway: On our end, fewer horses bred means fewer horses get to the races. That entitles you, the gambler, the person who goes to the racetrack, to bet on smaller fields. Smaller fields mean smaller handle. That negatively impacts government revenue, that negatively impacts the prices achieved for our racing and breeding stock and that negatively impacts the amount of purse money available for horses running. Therefore, if not corrected, the cycle spirals downwards. We have to find some way to put an end to the downward spiral.
What many people don't understand or may not know about people who breed horses in Ontario -- this is not necessarily the sport or business of kings -- is that most breeders in Ontario, some 92%, own five or less brood mares. Our industry provides an estimated 40,000 jobs, be they part-time or full-time, and an approximate annual payroll of $1 billion.
Some costs that we face on a day-to-day or an annual basis as breeders in the province of Ontario: First of all, we have a stud fee to pay to impregnate our mare. We have the cost of the mare herself. We have services such as blacksmith, veterinary, hay and straw for bedding and roughage -- of which hay is anticipated to go up greatly this year; grain prices already have increased dramatically this year -- costs of vanning, fees to the racetracks for stakes' nominations, payments to make the foals eligible to various races, fencing, construction and repairs, tack and tack repairs, in other words, halter or shanks, things of that nature, outside boarding fees that we have to pay from time to time, salaries that we pay our employees, seed for fertilizer and pastures, training fees -- and that starts a whole new cycle when you talk about horses at the racetrack to be trained that we provide. The training fees then turn around and pay those fees out to jockeys, exercise riders, grooms, hot walkers and agents. We'll also include an et cetera category for anything that I've missed. Clearly, there's a significant financial contribution to the Ontario economy made by people who breed race horses.
This leads us to video lotteries. I guess the question I ask myself is, what does the current state of our industry have to offer myself and people like me who do this for a living? This is all I do for a living. I have an option which I presume is one most of us have in this industry, but it's a distasteful one, and that is to leave the industry and go elsewhere, either seek employment outside the thoroughbred industry or remain within the thoroughbred industry and do it in another jurisdiction, like Lexington, Kentucky. This is clearly not what I want to do. I have my own farm and a young family and do my best to do a good job at doing what I do and earn a living within the province of Ontario.
Video lotteries -- well, they've become more and more prevalent obviously and it seems to us that they can provide an effective means for generating income into the horse industry. In jurisdictions, notably Manitoba, Louisiana and Delaware, we have seen where they've been of positive benefit to the horse people.
Why the racetracks? It seems to me that the racetracks have the experience in the parimutuel wagering field, along with the facilities, technology, security and experienced staff to allow the implementation of video lottery networks and make them available to the population of Ontario.
Rumours abound as to the number of illegal video lotteries currently in use. I would have no access to anything but a rumour. I don't know what that number is. I presume your group would have a better idea, but clearly any revenue generated from these illegal machines has no positive impact whatsoever on government, horse people or charities. There are no tax dollars. Clearly, anybody who would run an operation of that sort, it would seem very easy that the machines would not be necessarily on the up and up, the way they would be if they were government regulated.
One concern that is of grave concern to us is the cannibalization aspect of video lotteries. To have them on the racetrack and generate incremental income would be a significant boon to the horse industry. To have them on the racetrack and merely take dollars away from the money that would otherwise be bet on the horses doesn't do us a lot of good. The experience that I have seen, the information that's been provided, would indicate that it can be worked out such that the cannibalization issue could be dealt with and net income to the horse people could be provided.
At a recent speech made at OHRIA by a government official, it was stated that the intention of the government was to create some $20 million annually in incremental -- and I'd stress the word "incremental" -- funds through the implementation of video lotteries. This is to the horse people. This is the horse people's share of the proceeds. These funds are much needed to grow our industry for everyone's benefit, and I would really like to stress that it's to everybody's benefit.
Obviously we have some personal gain here, but as you can see by the strong employment component and by our expenditure component, I believe we're a very significant industry, what we offer to the Ontario economy, and I believe there are a number of groups that have come before, and probably will come after, that have exact facts and figures, so we didn't provide some of those for you, but I'm assuming you'll be made aware of them if you haven't been already.
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In conclusion, I would like to stress a few things. One is that the horse industry is unified. I think that's something that has been unique over the past year or couple of years. This may not be the experience that everybody in government knows previously, but this is what's happened of late. We are working cooperatively for the enhancement of the industry as a whole and we see government as an essential partner to this end. We have the opportunity to move forward and preserve and enhance this vital agricultural sector. I would also stress that the agricultural component should not be forgotten. Without positive change, what future do we have to offer for the people who do what I do for a living?
CTHS is prepared to take part in discussions in order to assist in the achievement of this objective, which will be the best interests of charities, consumers, government and the horse industry. Thank you very much, and I would entertain any questions.
The Chair: Thank you, sir. We have two minutes per caucus.
Mr Colle: Thank you, Mr Sikura. The question I have is if less and less people are going to racetracks and you put in video lottery terminals in the racetracks, and at the same time you're going to see video lottery terminals I think in the offtrack betting parlours that have licensed premises, isn't the trend going to continue that more and more people are going to go down the street, see the races on television, bet there in the offtrack betting parlour and also play the slots in the offtrack betting parlour? So why should they drive across town when they can just go down the street? Aren't you basically in a no-win situation if the VLTs go into the local bars?
Mr Sikura: Into the local bars or are you saying --
Mr Colle: The offtrack betting parlour.
Mr Sikura: I'm not certain where that stands, whether or not that is exactly where the VLTs will go or not. As far as having them on track, I think it's a very valuable component for us to entice new people to the races. We hope we can offer more than just VLTs when they're there. We hope they'll fall in love with the horse. We hope that new-found revenues will lead to more expenditures in marketing and promotion of our business, and we hope that with things like the Breeders' Cup that we can really grow our business.
Mr Colle: On the other hand, they're going to give VLTs to these licensed premises, and most of the offtrack betting parlours have licences, so how are you going to get your consumers to get in their cars and go to a racetrack when they can go in their own neighbourhood to a betting parlour -- they seem to be all over the place now -- and sit there drinking beer, smoking, playing the VLTs and watching the races from Mohawk or whatever? How are you going to compete with that?
Mr Sikura: Hopefully, the incremental revenues will make our business somewhat more profitable, and we'll be able to offer a better product on the racetrack, and when we do that, we think that the allure of racing, the love of horsemanship will exceed just simply the playing of video lotteries.
Mr Kormos: Look, nobody disputes, and you're one of many participants in the horse breeding, horse race industry who have come here and talked about the role that it plays in the economy and the impact it's been under for a considerable period of time. I suppose my concerns are somewhat along the lines of Mr Colle's. I don't know whether I got accurate information, but somebody told me yesterday that people go to the offtrack betting, the teletheatres here, until whatever time races end, 10 o'clock or so, and then they can move on to bet East Asian horse races after 10 o'clock, and then they move on to bet British races, because of the time gap, once the East Asian races are over. It was the operator of a teletheatre who told me that.
You look at how the jockey club has reduced its number of tracks from two to one here in the Toronto area alone, and threatened over the course of the years to shut down Fort Erie, it seems, on almost a cyclical basis. Is your industry going to be any more secure if at the end of the day -- there are venues like California where you can race seven days a week, 52 weeks a year, because of the climate. At the end of the day, it's the betting dollar that's being pursued, not by you and your people, by the jockey club and betting operators. I don't understand how VLTs, slots, blackjack, poker games, what have you, at the track are going to improve the lot of Ontario horse people. Is there more than one thing going on here at the same time?
Mr Sikura: We share -- when I say "we," both the breeders and horse owners -- share in revenue that's generated, so even if it's generated offtrack, while ideally we would have everybody show up at Woodbine Racetrack and bet the races, that's not the way it is, because of convenience. Who knows what will happen in the future? Maybe you can bet on your home computer.
Mr Kormos: People are doing that too.
Mr Sikura: That's possible. But when we can grow the pie, when we can allow for greater opportunities for people to bet money that we would share in, it should make our business more profitable, it should keep us in business. As far as I'm concerned, if I can produce a horse, now I can take it to the local yearling sale, and if that horse is capable of winning $100,000 instead of $75,000, it ought to mean that they would pay me additional money for my product. That's how I stay in business.
The Chair: Thank you, Mr Kormos. If we can proceed, we have Mr Young and Mr Hudak.
Mr Young: I was very interested in what you had to say about 45,000 -- was that the figure? -- 45,000 jobs in your industry.
Mr Sikura: Forty thousand is what we're told, full- and part-time.
Mr Young: Full- and part-time. So those jobs, a lot of them are trainers, stable workers, hot walkers, grooms, that sort of thing?
Mr Sikura: Yes. A lot of them do not have replaceable skills.
Mr Young: That's what I wanted to ask you. I understand that a lot of these people don't have additional skills or education to take other work. That would mean to me, if they're unemployed, it's extremely difficult for them to get work, extremely difficult to replace those jobs. Is that correct?
Mr Sikura: I would say absolutely.
Mr Young: Not unlike, I guess, the east coast fishery where you have a whole industry that sort of disappears and there's everybody saying, "What do I do next?"
Mr Sikura: Right.
Mr Tim Hudak (Niagara South): You made an interesting statement, sir. You talked about the pie growing, the total pie that's spent on gaming, the total pie that's spent on entertainment in Ontario, something that the opposition in their questions either conveniently overlook or don't understand.
I guess over time, as more gaming products are added to the menu, as more things to do with the entertainment dollar are added, more money in total gets spent on entertainment and on gambling in Ontario, and I think if I'm understanding correctly --
Mr Kormos: Throw in lap dancing.
Mr Hudak: -- in Hollywood Park in California, in Delaware, in Iowa, where they have successfully combined VLTs with racetracks, you have seen that pie grow substantially?
Mr Sikura: I don't have all those exact facts and figures, but I know Delaware, for example, has been absolutely dramatic. If you talk to people from Manitoba, they'll tell you that the VLTs have been in large part able to keep the racetrack open.
Mr Hudak: My understanding too is that in some of these parks, by bringing in new customers and attracting more people to the beauty of horse racing, more money is being spent at the tracks as well on the horses and the purses have increased; in fact I think they've quadrupled, as you said, at Delaware and West Virginia, if I'm correct, as well. Would there be spinoff effects then, if the purse is increased, into the breeding industry?
Mr Sikura: Absolutely. If somebody wants to buy a horse, they have to go through a breeder to buy the horse unless they go through what we call the claiming box, but either way, we are the producers of those animals, so presumably the price for our animals is going to go up.
The other thing is for the past three or four years since our economy has really taken a downward turn, we have been sending the top couple hundred of our yearlings every year, our one-year-old horses, to Kentucky and selling them in Kentucky. Those horses don't come back for the most part. Some of them do but a very small minority.
If we had a stronger local market, if those horses could run up here for more competitive amounts of money in comparison to Kentucky, perhaps they would be sold here, they would be retained here, the level of our racing would increase, the number of horses we would offer would increase, and that's again better for the fan. The more horses in the race, the better the fields are, the more they will gamble, the more your government shares, the more our industry shares.
The Chair: Time has elapsed, Mr Sikura. I thank you very much for attending here today.
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ELEPHANT AND CASTLE RESTAURANT
The Chair: Our next presentation, scheduled for 2 o'clock, is the Elephant and Castle Restaurant, Mr Gordon Josie. Welcome, sir.
Mr Gordon Josie: Thank you, Mr Chairman. My name is Gordon Josie, and I am and have been the regional manager for the Elephant and Castles of Ontario since 1979. Firstly, I want to thank you for allowing me this opportunity to address problems which we have today in our industry.
I want to begin by saying I support Bill 75, the VLTs, because of the necessity to survive in our industry. In the last five years I know we've had some decreases in sales in our industry of around 20%. In our restaurants across Ontario we've experienced a drop in sales of about 25%. That's also related to a drop in our employment of approximately 20%, which is quite significant, because of the lack of sales. We feel that VLTs are necessary, the same as it's necessary to even have liquor available in our restaurants. It enhances the operation.
Alcoholics don't come to our restaurants because we sell liquor. They're going to buy their bottles of wine, whatever it is, and take them home. It's a hell of a lot less money than what we charge for them. People come to a restaurant, they have food and drink, it's for companionship, it's a form of entertainment and it's certainly a form of relaxation. We feel that VLTs lend to this same atmosphere which we're prepared to present to our public. Also too, it's very necessary for us to be competitive today. For example, our operation in Sarnia, if something doesn't happen pretty soon, we're going to be in dire trouble because we're now fighting the casino in Port Huron right across the border. Ottawa is the same thing; we have a casino we're fighting in Hull. Thunder Bay, we have the same problem, all on the Indian reservations.
Having said all of that, we know that it's coming to Toronto and we're just trying to keep on a level playing field with all these other operations. What we have done is try and stimulate sales. In some of our operations, Sarnia for example, we put in billiard tables and things like this to stimulate things and it's helped somewhat. In fact, we showed a bit of a decrease and then you open up a casino across the river and down we go again to the point now we may have to close that operation. It's sad because that operation employed 25 to 30 people. We're now down to 10 employees and they wonder from day to day whether we're going to open up our doors the next day. So this, we feel, is very necessary.
We have restaurants across Canada. We also have them in Winnipeg, we have them in Alberta. Winnipeg is a fairly new operation so we don't have a lot of statistical information, but what we do have, and that is in Edmonton, for example -- and that's a recession-driven city at this point in time. It has generated an additional $100,000 per restaurant; we have three restaurants there. Doing that has certainly increased our benefits to our staff. They've been receiving higher levels of income. What that does, it frees up disposable income which can be spent in our communities. This is really the bottom line. We have to keep the money in our communities so that it can be spent in our communities so we all survive.
Conclusion: VLTs are here and they're not going away. With gambling in many major cities and native reservations across Canada, it becomes a fight to keep money in local communities. VLTs, by funnelling receipts into local and provincial governments, allow taxpayer money to be spent on local infrastructure requirements. It can also help with the fabric required for economic growth and independence. That, ladies and gentlemen, is my submission. Thank you.
The Chair: Thank you very much, Mr Josie. We have four minutes per caucus.
Mr Kormos: Again, very quickly -- and I'm not familiar with Elephant and Castle --
Mr Josie: We're not in St Catharines.
Mr Kormos: Not in St Catharines?
Mr Josie: No.
Mr Kormos: Are they in Toronto?
Mr Josie: Yes.
Mr Kormos: You indicate clearly alcoholics don't come to Elephant and Castle to drink because it's primarily a restaurant and liquor or spirit sales are an enhancement to the restaurant service.
Mr Josie: Exactly.
Mr Kormos: I don't think anybody can quarrel with that. Similarly, the casinos that you're speaking of, the impression that I've had is that people go there primarily to play the games and if there's food and beverages available, they'll avail themselves of the food and beverages. Is that a fair conclusion? I don't know.
Mr Josie: I don't know because I have never run a casino on the reservation. I can't answer that question. I just don't know.
Mr Kormos: But the impression one certainly gets is that, because they talk about food and beverages as a way of fleshing it out. What I wonder is that you, like a whole lot of other people -- listen, you're not alone. There are a whole lot of people who want to get into the gambling business. The hotel-motel association has been lobbying hard, making representations across the province, saying, "We want to get into the gaming business."
Mr Josie: The reason, of course, like I stated, we need to be on a level playing field because of the competition today. We can't afford to just lay back and say, "Oh, well, let them go to their casinos," because they do serve food and beverages there too; you're absolutely correct. We are in competition with them. We've got to keep our bucks in our communities.
Mr Kormos: Would you settle for blackjack and poker games?
Mr Josie: If that's what it takes. I guess we all like to think that it isn't what it's going to take. I suppose tobacco smokers would like to have marijuana, but I don't think that's going to happen either, because I don't think that's what it's going to take.
Mr Kormos: There's a lot of revenue to be made there. Imagine having a franchise for peddling that stuff in your community.
Mr Josie: Peter, let's get back on focus. We are in the food and beverage business and all we want to do is make our customers happy. If coming in and having a cocktail with their meal and putting a few bucks in a slot machine is going to make them happy, so be it. At least it'll bring the traffic into our restaurants and keep them out of the junkets which are heading up to the reservations.
Mr Kormos: But my impression is you want to get into the gaming business too, and that's okay if you want to. Just say so, because a whole of folks do. There's a lot of bucks to be made.
Mr Josie: We just want to survive.
Mr Kormos: Good luck.
The Chair: The government caucus has four minutes.
Mr Flaherty: With respect to the hospitality and tourism industry in Ontario, we've heard here from more than one presenter about the job creation possibilities of video lotteries in the hospitality sector. We also heard this morning, by video conference from the maritime provinces and from the province of Quebec and also from Alberta, about where they have located video lotteries. The provinces of New Brunswick and I believe Prince Edward Island not only have video lotteries in licensed premises but also have them in premises that are not licensed -- in corner stores and that kind of thing. In the province of Quebec, the vast majority of their video lotteries are in what we would call licensed premises -- bars, brasseries and taverns. We've also heard here, in terms of tourism and hospitality, that the bulk of the job creation would be in rural Ontario, in smaller-town Ontario. Can you comment for us and for the committee on the job aspect of the proposed introduction of video lotteries in the hospitality industry?
Mr Josie: You're talking outside of Toronto, are you?
Mr Flaherty: Your operation deals with both, doesn't it?
Mr Josie: Yes, that's correct. There's no question, tourism is a major industry for Ontario. It's the number one industry in Ontario, no question. But we're losing a lot of our tourists, particularly in our operations, only because they're being enhanced to go to gambling casinos and all that, again, because of what I feel is unfair competition to us today, and there's no question. Even dealing with Toronto, and of course, I'm representing Toronto also here today particularly, Toronto is a major tourist attraction and not only would this help keep money in our community, but it would bring additional money into our communities and also into the government funding as well, which is really needed today.
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If we take our rural restaurants -- I alluded to Sarnia. It's on the verge of us having to close that operation down. I think if we were able to add the VLTs there it could salvage that operation and hopefully it could bring us back to our full complement of staff like we used to have before.
Mr Flaherty: In your restaurants do you have other forms of entertainment?
Mr Josie: Yes. As a matter of fact, in London and in Toronto -- in Toronto we had it in our last operation, not in this one -- we actually had the Scratch and Win tickets available at the bars. That was kind of fun for a lot of people who had a drink and played the machines. But we also have, let's see, in three of our operations in Ontario out of five we also added the billiard tables as a form of entertainment.
Mr Flaherty: I ask you that because we've heard various presenters from your industry over the past week and a half here and in Thunder Bay, Fort Erie and Kenora uniformly supportive of the government's approach, but they expressed the concept that to compete for today's entertainment dollar the hospitality industry has to offer entertainment alternatives to try to get people to leave their houses and not stay home and watch videos all the time. They need to have a varied menu of entertainment products, if I may put it that way. Is that the view of your operation?
Mr Josie: That is so true. If we cannot offer any more than what the person can have at home, then we're dead in the water. It's a proven fact that the reason people go to a deli is because they like corned beef sliced thin, which they can't get at home, that type of thing. So we have to supply something a little bit different.
The other thing too, when people are at home they don't have to pay GST, which we have to. That's another barrier we have to overcome, paying that extra tax.
The Chair: If we can move to the opposition, we have four minutes.
Mr Colle: I think I used to eat at your place down there by the Eaton Centre and always found it very active and lively and it reminded me of back in England. I think it's the type of establishment that does credit to the industry.
Mr Josie: Thank you.
Mr Colle: In terms of the industry's problems I'm just wondering, with the VLTs do you see a problem with some of the moneys that may go towards food or beverages being drained over to the machines, or does that make any difference to you because you can still reap the same potential revenues to offset your costs and make your profit?
Mr Josie: If anything, it should enhance our food and beverage sales. We found in our other operations in the western provinces that people traditionally spent maybe an additional half-hour in our premises, and of course with this perhaps a cocktail or something to eat would be appropriate to go along with it rather than just sit there at a machine.
Mr Colle: That was in Alberta, was it? I know you mentioned you had an operation in Manitoba.
Mr Josie: In Alberta, and also in Winnipeg too we find that.
Mr Colle: So the experience there has shown there's been no real negative impact in terms of your revenues as it goes from one activity to another?
Mr Josie: No.
Mr Colle: That is something you've already had experience in.
Mr Josie: Yes.
Mr Phillips: You mentioned that your experience in Alberta was that each of your restaurants increased their revenue by $100,000?
Mr Josie: Per annum, yes.
Mr Phillips: What is that? What is the $100,000?
Mr Josie: Our operations there would do in the neighbourhood of $1.5 million in sales, $1.5 million per unit.
Mr Phillips: What did it increase $100,000?
Mr Josie: This is a combination of commissions as well as our food and beverage sales. It's a combination, revenue and commissions.
Mr Phillips: So your food and beverage sales went up how much?
Mr Josie: No. It's a combination of food and beverage and commissions --
Mr Phillips: Yes.
Mr Josie: -- realized $100,000 per location.
Mr Phillips: But I'm just trying to get an idea of how much your food and beverage sales went up.
Mr Josie: I don't know. I don't have that figure.
Mr Phillips: Isn't there some substantial added expense to you when you have these VLTs in your operation as well?
Mr Josie: What kind of expenses? I don't think so.
Mr Phillips: There's no added expense?
Mr Josie: No. We don't have to buy the units. We provide the space.
Mr Phillips: What about more staff?
Mr Josie: Staff equates sales. If you do $100,000 additional revenues you maybe take 10% of that for staffing. But we're dealing with a 25% to 30% labour cost anyhow. So it has a positive effect: It will actually reduce our total percentage of labour costs by increased sales.
Mr Phillips: I'm just trying to get an idea of how many jobs we may be talking about here. Is there a substantial number of extra jobs involved here or can you pretty much handle these things with your existing staff?
Mr Josie: What it will do with existing staff, it will create the extra hours. We're looking for a bit of a turnaround, hopefully, in our economy, which this will probably help kickstart a little bit to get us back to where we were. Like I said, we've laid off a good 20% of our staff over the last five-year period. We've reduced our staff by that amount. We honestly feel this can create jobs for an additional 10% over what we have today.
Mr Phillips: The estimates I've seen on revenue indicate -- this is the Alberta experience -- that we may be talking upwards of $900 million for the government revenues if they install 20,000 machines and get anywhere close to the Alberta government revenues, which is about what will offset the income tax cut. The income tax cut I think cost about $1.1 billion, and they'll bring in upwards of $900 million in new revenue from the VLTs. Is it of any concern to anybody in the restaurant industry that there's that kind of money being taken back out of the economy into the government coffers?
Mr Josie: In answer to your question, we don't think that money is going to be taken out of the economy itself, because we feel in our industry, at least in our restaurants, that we'll be bringing in additional customers, which will then be additional revenues for our restaurants. If this money, this $1 billion going to government, again goes back into the economy, I would think, "Here we go again." The more jobs we cut and the less income we produce, the less income people have to spend.
The Chair: Mr Josie, thank you very much for your presentation here today.
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ONTARIO RESTAURANT ASSOCIATION
The Chair: Our next presentation will be made by the Ontario Restaurant Association, Mr Lee Recchia, chair, and Mr Paul Oliver, president. Welcome, gentlemen. We've heard from many members of your association, and it's a pleasure to hear from you two.
Mr Lee Recchia: Thank you. Good afternoon. My name is Lee Recchia. I'm chair of the Ontario Restaurant Association. Joining me today is Paul Oliver, president of the association. It is a pleasure to be here today to discuss our association's and our industry's view on Bill 75.
During today's presentation we'll attempt to keep our comments brief to facilitate as much discussion and questioning as possible. During our presentation we will make a few brief comments regarding the introduction of VLTs, but we also want to discuss some other aspects of Bill 75 which have not received as much public scrutiny and interest but have an equally important impact on Ontario's hospitality industry.
Relative to the issue of video lottery terminals, I'm sure that most committee members are well acquainted with the ORA's support for the introduction of VLTs. We believe that the steps being taken by the government of Ontario to introduce VLTs into Ontario's licensed establishments are an important initiative towards combating the underground economy and helping us stimulate some degree of economic stability within the Ontario hospitality industry.
We believe that the government is going about this initiative in a responsible manner and placing adequate and appropriate safeguards in place that will protect all the impacted stakeholders, including consumers, children, customers of licensed establishments, taxpayers and charity organizations.
As well, we would like to commend the government for having the courage of confronting and addressing the issue of gaming addiction by establishing a revenue stream dedicated towards addiction treatment, addictions which we know already exist in Ontario today. This is the first time that the government of Ontario has adopted a dedicated revenue stream to fund this type of treatment and we support the government in taking this unprecedented step.
From our review of the introduction of VLTs in the other eight provinces of Canada we have concluded that the introduction of VLTs is an important initiative for the local hospitality industry. It is particularly important in providing a new entertainment activity which will bring customers into licensed establishments so as to generate enhanced food and beverage sales and in turn create new ports-of-entry jobs. We would be happy to elaborate in more detail on our view of VLTs during the question-and-answer presentation.
Relative to the merger of the LCBO and the gaming commission and other aspects of the bill, I ask Paul Oliver now to comment on these issues.
Mr Paul Oliver: Two particular areas that we'd like to comment on are, first, Bill 75's provision which would place new restrictions on property owners in which licensed establishments are located; and second, the establishment of a new Alcohol and Gaming Commission of Ontario and the moving of regulatory responsibilities currently entrusted to the Liquor Control Board of Ontario within the purview of the new agency.
The first issue I'd like to touch upon under Bill 75 is the power to revoke a liquor licence and to place a special condition upon the owner of the property and the physical property which would preclude a new liquor-licensed establishment from operating in that location for as much as 24 months.
We are extremely concerned about this provision. We recognize and sympathize with the objective of enhancing community input into the liquor licensing process by closing problem establishments. However, we are concerned that this approach is wrongly directed and could inhibit the establishment of new licensed hospitality operations as well as prevent the redevelopment of properties with new and responsible operators.
We feel that this provision unfairly punishes the landlord who in many cases does not have any power or ability to intervene to remedy problem situations. This legislative change will hold landlords accountable for someone else's actions even though they are not a party to them, nor have they control over those actions.
During the presentation by the minister, he indicated that this amendment to the Liquor Licence Act is intended to place more responsibility on the property owner when leasing property for the use of a licensed establishment. We are concerned, however, that this amendment is blind to the functioning and constraints of a landlord-lessee relationship. In many cases a landlord is simply powerless to intervene. On the other hand, the body which has full responsibility and the power to intervene in this area and to prevent situations from going to the critical point is the Liquor Licence Board of Ontario. The LLBO has far more power to place greater and more stringent conditions upon the operation of a licensed establishment than does the landlord.
We would therefore strongly urge this committee to re-examine why this condition is needed, the specific deficiencies or problems with the existing process which are creating the potential for problems, and to address these issues and not shift the regulatory responsibility from the LLBO to a third and often powerless party.
Relative to the merging of the LLBO and the Gaming Commission of Ontario and the moving of regulatory responsibilities from the LCBO to the new agency, the ORA is strongly supportive of this initiative as we believe it will help reduce the red tape as well as eliminate the propensity for a dysfunctional or disjointed regulatory framework.
The association, however, is concerned that Bill 75 does not go far enough in the area of regulatory reform and still leaves a fragmented regulatory structure in place which does not fully consolidate all regulatory power within the new Alcohol and Gaming Commission. We are extremely disturbed by Bill 75's failure to move all the LCBO's regulatory responsibilities into the new commission and instead allow certain responsibilities to continue to reside in the LCBO.
During the presentation by the minister, the minister stated that the government "will ensure that the LCBO does not maintain potentially conflicting roles acting as both regulator and retailer." We support this principle but do not believe that the government has gone far enough in moving all regulatory responsibilities into the new agency.
Currently today, we have products and activities which are regulated by the LCBO in a relationship where the LCBO acts as both retailer and regulator. In particular, under clause 3(i) of the Liquor Control Act, the LCBO is mandated to fix the prices of beverage alcohol sold in Ontario, including the price at which beer is sold. We feel that this is a direct conflict of interest for the LCBO, to act as a retailer of beer as well as the regulator of beer prices. In this situation the LCBO acts as a retailer of beer as well as a direct competitor of the Brewers Retail system and in turn indirectly benefits from product price increases. At the same time, the LCBO is expected to act as a non-biased and fair regulator of beer prices. These activities are diametrically opposed.
We believe that as a result, the LCBO has been woefully inadequate in an exercise of its regulatory responsibilities and has failed to protect consumers in the province of Ontario. We also believe that the LCBO should be stripped of its regulatory role as a result of the manner in which it has gone about exercising or its failure to exercise its regulatory responsibility.
As a regulatory body, the LCBO is required to exercise its power in a manner of fairness, looking at the interests of all stakeholders, including both vendors and consumers. Unfortunately, the LCBO does not look at the interests of consumers and has on numerous occasions even refused to allow input from consumers whose interests will be directly impacted by the board's decisions.
As a regulator, the LCBO has failed in addressing even the smallest of issues in the interests of consumers. The LCBO as a regulator has failed to ask beer manufacturers even the simplest of questions, such as: Why are there, after all taxes are taken off, significant price discrepancies between identical beer products brewed in Ontario and sold in Windsor and Detroit? Why is Canadian beer being sold in the United States at a lower cost? Why are licensees required to pay more for an identical keg of draft beer than special-occasion permit holders or home consumers?
These are relevant and fair questions which we believe the LCBO should be asking and addressing as a regulator; instead, the only answer that comes back from the LCBO is a deafening silence and profound complacency. We believe that consumers deserve and need better.
If these are not by themselves compelling reasons why the LCBO should be stripped of its regulatory responsibilities, we point to a recent action taken by the board at its March 28, 1996, meeting to secretly and retroactively approve beer price increases in the province of Ontario. We do not believe that these are the characteristics of a fair and effectively functioning regulatory body operating in the public interest.
On March 1 of this year, solicitors for the Ontario Restaurant Association wrote to the chair of the liquor control board regarding the simultaneous and substantive beer price increases that occurred last September. At the time of these increases the ORA raised a concern that we believed that the LCBO had not followed its own beer pricing protocol process.
As well, the ORA raised concerns that we did not believe that price increases were valid due to the failure of the LCBO to observe procedural fairness and, most importantly, the board's actions which inappropriately delegated its regulatory responsibilities to civil servants within the LCBO. We suggest that the beer price changes were only being approved by civil servants without the consideration or approval of the board itself. The Liquor Control Act, however, delegates this regulatory power directly to the board of directors, and legal principles would prevent the board from subdelegating power granted to it by this Legislature.
When this issue was brought to the LCBO's attention, rather than acting to protect consumers or address the serious problems inherent in the system, we were shocked when at the March 28 LCBO board of directors' meeting the board secretly and retroactively approved over 1,300 price increases which had already been put into effect over the last year, and we have copies of those if you'd like them.
The ORA does not believe that these types of retroactive approvals and inappropriate delegation of power are the characteristics of any government agency capable of regulating in the public interest, and as such we would strongly urge this committee to amend Bill 75 so that the beer price setting regulatory role held by the LCBO under clause 3(i) of the Liquor Control Act is transferred to the new Alcohol and Gaming Commission of Ontario. Anything less than this would leave consumers in the province of Ontario in a vulnerable situation. This is especially critical, recognizing that two major foreign-owned beer companies now control over 90% of the beer market in Ontario and collectively own 99% of the beer distribution monopoly.
We believe that this important consumer protection power needs to be exercised effectively and in an unbiased manner. In our view, the past track record of the LCBO board of directors demonstrates that the LCBO is incapable of doing that. The committee has the power to protect consumers, and we would strongly urge you to act and make sure that it is done.
In conclusion, I thank you for allowing us to appear here today to re-emphasize our support for the introduction of video lottery terminals and to stress what we believe is the need for the LCBO to be made into a pure retailer and have all its regulatory powers shifted to the new Alcohol and Gaming Commission of Ontario. Thank you.
The Chair: Thank you, gentlemen. We have just over two minutes per caucus.
Mr Hudak: There's one term that I wanted to ask you about. You talked about port-of-entry jobs. Certainly I've heard some criticism from the opposition and from other groups which have come before the committee saying, "Why do we want to create jobs in this industry anyway?" They look down their nose. We call it the neo-prohibitionist stance, if you will: "We should do away with these gambling options because maybe we don't want to create jobs in the charity event sites. Maybe we don't want to create these kind of jobs in the hospitality industry." We're talking about port-of-entry jobs. Is that minimum wage for life? What are you talking about, port-of-entry jobs? What does that mean for unemployed people in Ontario today?
Mr Oliver: From our perspective, a lot of people are out there who are underemployed or unemployed in the province of Ontario. Some people can go back into high-paying jobs because they came from high-paying jobs and they have the skills that are appropriate, but a large percentage of unemployed people have to re-enter into lower-skill jobs where they build skills in the workplace. It's that entry level position which provides them transition back into the workplace, they get on-the-job skills, and they move up continuously.
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If you look at the number of people who enter our industry at minimum wage, three months or six months later a vast majority of them -- I think the number is about 85% -- are well above minimum wage at that point. It's because they're entering, getting that transitional employment position, and then being able to move into a regular work pattern that moves them into higher-paid positions.
Mr Hudak: So it would be like a hand up to move out of poverty and help them move up the ladder of success.
Mr Oliver: It's that entry position. We'd love it if everyone could go from unemployment to being a brain surgeon, but a lot of people don't have those skills. They need to get entry-level positions to get back into the workplace. Our industry, between 1989 and today, has lost over 45,000 jobs in the province of Ontario. Those jobs are critical to bringing people from social assistance back into the workplace, from unemployment insurance back into the workplace, and we need to start restoring those jobs.
Mr Hudak: Is this fictional or can this work? Has this worked in other jurisdictions and, if we pass Bill 75, will it work in Ontario?
Mr Oliver: We believe the introduction of video lottery terminals will create jobs in the province of Ontario.
The Chair: We have approximately 30 seconds, if that's of any value, Mr Flaherty.
Mr Flaherty: Sure. Thank you for coming today. We appreciate it. With respect to the regulatory powers, since you did mention a number of those points here, and I'll be sure to pass this along to Minister Sterling, the regulatory powers that are going to be transferred from the LCBO are not specified in Bill 75, and that is something with respect to which we invite your further advice and consultation.
Mr Oliver: The only reason I raise it today is that it would require a legislative amendment to the Liquor Control Act to move beer pricing responsibility to the new control board. If it isn't done by this committee, it can't be done by ministerial order or civil servant decision. It has to be a decision of this committee.
Mr Colle: Mr Oliver, in terms of section 6.1 that you referred to whereby the province is now going to give itself authority to revoke liquor licences and place special conditions upon the owner of the property -- and I guess these are your licensed premises -- as you know, in my area of the city I've got a horrendous problem with illegally operating booze cans. For every licensed premise, there are probably 10 booze cans that nobody regulates and it's almost impossible for the police to do anything about. Does this bill do anything to put any onus on the owners of buildings who operate unlicensed booze cans?
Mr Oliver: If you're operating an illegal booze can, it's outside of the Liquor Licence Act except that you're breaching it inasmuch as you're selling liquor illegally in the province. But if you're operating illegally, whether you put a restriction in place or not doesn't really matter because the person is, quite frankly, operating illegally, and they're going to continue to operate illegally.
The concern we have, if this type of restriction goes into place, is we'll find situations where if someone found out that an illegal thing was operating and they wanted to get it licensed or move into a regulated stream, this potentially could be a barrier to that. As well, we're concerned that if the onus is then placed on the landlord to put in a condition to break the lease when he doesn't like the licensee, this would put a normal operator in a vulnerable position because they could say: "I just don't think you're following the Liquor Licence Act properly. You're going to threaten my establishment, therefore I'm arbitrarily going to break your lease because I've got another operator that will pay a bit more rent."
Mr Colle: So the landlord of a licensed premise is going to be treated differently than one who has an unlicensed premise that is operating illegally, totally outside the law. There's no way the government is going to try under section 6.1 to put any onus on these landlords of the booze cans.
Mr Oliver: Using the Liquor Licence Act, the provisions in that only apply to licensed establishments. So if you're saying, "You're operating an illegal club. We won't allow you to operate a legal, regulated place there for the next two years," the illegal club is going to continue to operate there.
Mr Kormos: Thank you, gentlemen. I know you were involved in the hearings back in -- what? Jeez, it was 1993, the casino hearings.
Mr Oliver: Yes.
Mr Kormos: And I know I talked to you at several of those venues. I think you were in Windsor, weren't you?
Mr Oliver: Yes.
The Chair: Excuse me, ladies and gentlemen. I cannot hear Mr Kormos.
Mr Kormos: It's okay, Chair. Just add a couple of seconds.
The Chair: I can't hear you, Mr Kormos, and I'd like to.
Mr Kormos: I appreciate that.
You recall the lineup of downtown Windsor business people, including restaurateurs, who, by God, wanted that casino lickety-split. Am I correct in my recollection of it?
Mr Oliver: Yes, my recollection was that there was a large representation from the hospitality industry in Windsor that supported it.
Mr Kormos: Because that was going to be the economic boost that downtown Windsor needed. But then I recall the ORA did an analysis -- was it fall? When was your paper released analysing the impact of the casino?
Mr Oliver: I think it was about a year after.
Mr Kormos: Yes. The ORA -- and again, I'm not disputing what the ORA said, because it confirmed what my suspicions would be, other than Tunnel Bar-B-Q, which has always got a full house -- but the ORA indicated that there wasn't the sort of economic spinoff to downtown businesses as the advocates of that casino predicted.
Mr Oliver: Yes. When we looked at the impact of the casino, we were concerned that, if I remember correctly, 50% of the operators that were surveyed enjoyed a benefit and 50% didn't. The surveyed also probed into why they had seen a benefit or why they hadn't and looked at marketing practices, hours of operation, a variety of different things.
We are actually going back to resurvey in Windsor now because what that study did was it stimulated further discussion between the local business community and the casino operators to try to draw people out of the casino into the hospitality operations. But that's very different than video lottery terminals, which draw people into the hospitality establishments.
Mr Kormos: Exactly, which is why -- this is the final question. I know the Chair is going to allow me to ask it because he used up some of my time. Do you see a distinction between the role of slots in, let's say, restaurants in non-casino communities as compared to the role and impact of slots in restaurants in casino communities?
Mr Oliver: I don't think we have done enough analysis, because we only have the two casinos now in the province of Ontario.
Mr Kormos: Number three's coming.
Mr Oliver: Number three is coming, yes.
I think it's a bit of a different clientele, because what the hospitality operator is targeting is, this is an entertainment vehicle to bring people in, but most importantly keep them in the hospitality establishment longer. That's what you actually notice in other jurisdictions. It's not only that the number of people going to the hospitality establishment increases, but the length of time they stay there, hence the amount of food they buy and consume. Because often it's one person in a party who will play the machine, but the rest, three or four others in the party, will stay there at the same time. So instead of going for an hour, they may go for an hour and a half, and therefore the spending increases during that period of time.
The Chair: Gentlemen, I would like to thank you for your excellent presentation on behalf of your association.
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TOWN OF MARKHAM
The Chair: Our next presenter is Mr Don Cousens, mayor of the town of Markham. Welcome, Mr Cousens. We are only hearing from two heads of municipalities, surprisingly, out of the 200 presenters we have. We heard from the mayor of Thunder Bay, and you are the second head.
Mr Flaherty: Kenora.
The Chair: Was that Kenora? I'm very sorry. So I congratulate you for caring and coming here today.
Mr Don Cousens: Thank you very much, Mr Chairman. It's a pleasure to be here and to see so many faces that I once sat around with.
Mr Kormos: He's collecting a pension.
Mr Cousens: It's not part of this bill, though, is it?
I thank you for the opportunity and for the welcome. There are a number of issues, I think, on the positive side. I haven't got verbatim; my background doesn't allow me to write every word I'm going to say. So I listed four points in general on the front of my presentation where I personally see good support for the regulatory framework that's being described for the bill and can support that and I think that some good thinking is going on there.
My second point, the moneys coming from Casino Rama, with the percentage being paid back to first nations, I think is quite something when the government is now recognizing that community and doing something for it. I see that as more than a gesture, but as a recognition and something that I think the public as a whole would support, and I certainly do. I don't know the people there, but I think it says good things.
I also think that by coordinating the casino charities across the province, there will be a coordinated policy. There is quite a large number that I know go on within our own community, the twelfth largest in Ontario, 170,000 population, and there are many different casinos going on. Now with this program we know that there will be more controls in place. Some of them put out all the work and energy and they don't make any money. This way, if you're going to have a limited number, those that are in business will actually have some success to show for it.
My final point -- there are many other things I could say of a positive nature, but the last one is that 2% of the gross revenues of the VLTs, that really is precedent-setting. Wouldn't it be something if they did it with tobacco and with some other forms where government takes the tax dollars? I think it's significant that they're doing this and support that initiative.
On the other side, I'd like to touch on my concerns. The first one has to do with -- and I'll just read it -- "There needs to be an interim control bylaw to allow municipalities to look at implications of casino activity in the municipality. Zoning bylaws never did address this planned use." So whatever can be done, whether it's under municipal affairs, municipal act -- there are a few other former mayors in this room -- to look at just how, either through regulation or through other changes, that is possible. Certainly as community we've had many people suggest, "Oh, we'd like to have a casino," here or there, but it's not within our present zoning guidelines whatsoever. So that, I think, needs to be addressed, and it might well mean there is some interim control bylaw to assist us in doing that.
My second point as a concern is the role the municipality should have in selecting the site and the circumstances of a casino. I believe that local government, in consultation with neighbourhoods and communities and the people nearby, knows best what their interests and their concerns are. So you're looking at, as we would be in my new role as mayor with our council, what are the parking requirements? What is the neighbourhood going to think and what are the future steps within that neighbourhood? Are there plans that could change the location that's being selected now that several years or a short time later might no longer make it as good a location as is being suggested? And all those zoning matters that come into it.
The municipality, I believe, has to have a very, very strong role to play in the selection of a site and also what the size and scope of that facility is going to be. I think the people within a municipality want to have that choice through public meetings, through their council, so their voice is heard.
My third point, and recently -- I don't think Mr Phillips would have heard it, but there's a party going on that used to be in Scarborough. It's now up in Markham. A group get their licence for the weekend for a social club. It's not just 30 or 40 people; it's 500 or 600 people gathered together. I don't know where it came from, Gerry, but it's really an intrusion into the community.
Through the present licensing systems they can get a license so that they can have their little social party, but it's far bigger than small and it's very intrusive to the whole community and yet we're stymied. We're now putting every effort we can on the police and the licensing board to do something about it, but it's tremendously difficult, it's aggravating, and the noise carries such distances.
The municipality has to have more of a role to play in the whole licensing that goes on. At a hotel in Richmond Hill there's been a strip joint for years. They've tried to get it closed down without success. Somehow or other, I'd like to see some of the decision-making ability passed down to the local level so that the municipal councillors, on behalf of the ratepayers and the people who are close to them, can have some level of input, guidance and responsibility for what's happening in these facilities.
My final point may seem small but there are so many charities. I haven't got the number -- you may have through your research -- of how many registered charities there are in Canada and how many of those charities are really as relevant as certain ones that you would want to have within your community. If the community is able, through its municipal council, to have some input in helping select that charity of choice -- which isn't the sole charity; it would be the one through which other charities work. There is a revenue generation of funds there that is so significant that I would like to see it as something you know is going to flow back into the community. That is going to be the advantage of this legislation, where it brings these casinos into regulated mode within the communities as we have them defined in the province of Ontario.
Those are some thoughts I had that I wanted to share. I've gone a little faster than usual, but it leaves some time for questions or for you to get on with your agenda.
The Chair: Thank you, Mr Cousens. I must congratulate you on your brevity and conciseness. It's something I'm not really used to around this table with these experienced members on occasion.
Mr Phillips: I'm interested in whether the council has any views on the VLTs. They are a very seductive form of revenue for the government. We heard this morning from Alberta that with 5,000 machines they generate, I gather, to the Alberta government somewhere around $350 million. If you extrapolate that to Ontario, the government would get around $1 billion out of this. It is very intriguing as a revenue source. It looks like an average outlet yields the government $350,000 a year in revenue. If you think of Markham and a variety of locations there, each of them would be generating $350,000 for the provincial government. It's very attractive. The restaurants get 10% of that, so they're very happy with it.
To me, it's one of the least productive uses of people's money: the government getting, as I say, $1 billion of brand-new tax revenue, the restaurants getting 10%, but that amount coming out of the economy and relatively little for the municipalities other than helping some restaurants stay or grow their business. An enormous amount of money; the tax cut is about $1 billion this year, and this is going to take $1 billion out of the economy.
Has your council had any discussions on VLTs? Have they expressed any opinions on that?
Mr Cousens: In short, the answer is no. I'd have to give you my own opinion, and it's kind of a confused one in some ways. Number one, I personally have never used one and I've only been in a casino a couple of times. I think it's a matter of freedom of decision. It's unfortunate that many of the people who do fall prey to these types of machines really don't have the money for them. It is something that is worrisome within society, and yet you wonder how far society has to go in regulating everything. To the degree to which we're going to have them, let's hope that we control the numbers, that we control the age. I think the circumstances and the environment around it have to be looked at carefully.
I don't celebrate the thought that we're moving into them. They're going to be there and I realize that enough other provinces have been using them and that there is a sense of it. Maybe we'll have a big caution sign around them, as you do with cigarette packages, that says, "Hey, be careful, because this may be something you start to like too much and you can't afford." I'm not just sure. Our council has not expressed an opinion on that particular issue.
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Mr Kormos: Mayor Cousens, it's always a pleasure to see you. You bring back a recollection of May 1993 when Mike Harris said in the Legislature: "As Donald Trump says, `Gaming doesn't come cheap.' I have to agree with a lot of the critics on that. It brings crime, it brings prostitution, it brings a lot of the things that maybe areas didn't have before. There is a big cost to pay." I don't know if you recall being in the Legislature in May 1993 when Mike Harris said that. Do you recall it?
Mr Cousens: I think I was.
Mr Kormos: You know Ernie Eves; he's the current Treasurer.
Mr Cousens: I remember him.
Mr Kormos: In the Legislature he said:
"Governments of all political stripes and all provinces in Canada seem to be becoming more and more addicted themselves to the revenue that's obtained from gambling; Nova Scotia...with respect to its video machines. We have seen recently, in the last few months, where the province of Nova Scotia indeed has pulled the plug, I believe, on some 2,500 video slot machines. They said that they were too easily accessible and they said that they had quite a few instances of people becoming addicted to them."
I don't know if you remember Ernie Eves's comments in that regard in 1993. If you don't remember them, I hope my quoting them --
Mr Cousens: It brings it all back.
Mr Kormos: Thank you, Mr Cousens.
Mr Cousens: Mr Chair, was he looking for a comment or was it just a matter of using the time?
The Chair: Most of Mr Kormos's questions are rhetorical, I've found. In any event, you have one minute left, Mr Kormos.
Mr Kormos: You wouldn't believe how little things have changed. As soon as you get close to a nerve, you'll hear the squealing start.
Mr Cousens: I know the feeling.
Mr Kormos: The absence of Novocaine results in great cries of anguish.
Your comments reflect some of the concerns that AMO has raised as well about this and I suspect will be reflected in more than a few amendments being offered by the opposition parties.
Mr Klees: Your worship, good to see you. As usual, you are eloquent, reasoned and convincing. I just wanted to compliment you. For the first time ever, I've heard you be brief.
I've got a couple of questions I'd like to get some clarification on from you. You referred to the municipal control that should be in place so that the municipality can react to any specific concerns. I think it's a reasonable request. Do you have some specific circumstances in mind so that we can perhaps have some food for thought on that?
Mr Cousens: There are two or three points. In choosing a location, an applicant may well prefer to have it in a facility that is close to residential. You're just looking at the total zoning requirements around possible sites. Are you going to want them where there's going to be minimal traffic, lots of residential? What's the future of planning for it? In selecting a site, it's going to be long-term, because of the investment by the proprietor. Whoever instals it all for the long term really doesn't want to think, as the previous speakers were saying, of a broken lease and having to move. The upfront, advance work that goes into it is a prerequisite to a successful program, and I think the municipal council is best suited to putting together that kind of framework. They say, "Hey, we don't even have a framework at all, because we don't have any kind of planning processes for casinos." It would begin with having the community participate and think it through.
Mr Klees: I'd like to follow up on one other item. The Ontario Restaurant Association was here just prior to you. They put forward an objection to the provision of Bill 75 that gives the province the power to revoke a liquor licence and place a special condition on the owner of the physical property itself that would preclude a new liquor licence for up to 24 months for problem facilities. As I said, they objected to that. They felt that was putting too much responsibility on the owner of the property, yet I know you've got a problem in York region with at least one facility that's in the news a lot. I'm wondering if this salting-the-earth provision would help you. Do you have any further perspective for us on that?
Mr Cousens: I would support that kind of strong, stringent, tough measure so that whoever is running a facility has a sense of great responsibility and accountability to the whole community, and in that regard they wouldn't be frivolous at all, whatsoever, in how they dealt with that facility. That would have to be the case. If they're going to treat it lightly, then they would lose their licence and no one else would move in there for a while. They might have to find a new purpose for the facility, but that shouldn't be our worry. Our concern has to be the community, and this kind of provision does strengthen the community spirit. It says, "Okay, we're setting rules; you're going to live by them," and that makes it meaningful.
Mr Guzzo: Mr Mayor, thank you. It is good to see you here. I want to ask you first of all, are you aware of any machines that are presently operating in your municipality at the present time?
Mr Cousens: Some illegal ones? No, not at all.
Mr Guzzo: I played golf in Mr Tsubouchi's riding the other day.
Mr Cousens: The same place as my home town.
Mr Guzzo: Yes, I know. I had occasion to stop in your beautiful city and eat that night. The restaurant we chose had not one but three of those machines. I want to tell you that after we spent our money there, the proprietor was willing to tell us, when we inquired, that the machines in question were actually owned by some people from Buffalo, New York. Would that surprise you, by any chance?
Mr Cousens: No, nothing surprises me any more. I've got to find out where this place is.
Mr Guzzo: I come from Ottawa. In Ottawa we have lots of machines, and the closer you get to Parliament Hill the more you see them. But the people from Buffalo don't own them; the people from Quebec do.
I want to go back to Mr Phillips's question because I think Mr Phillips has made another good point here this afternoon. If the OPP are accurate, if the government's estimates are accurate and there are 15,000 machines in operation, then presumably there may be as much money being bet right now on those machines illegally as Mr Phillips projects would be bet. But the government's not getting its $1 billion. Does that trouble you?
Mr Cousens: It troubles me when you start having anything that's illegal. The law shouldn't be flouted by someone anywhere. What concerns me immediately --
Mr Guzzo: But if I'm correct --
Mr Cousens: Absolutely, but your point is very deep as to what's going on within our society. There seems to be an underground out there. We know, having seen just how much is going on with the illegal transfer of cigarettes and jewellery and people skipping their sales tax and other forms, this is just another way of escaping responsibility. That is not good.
Mr Guzzo: Of course, it solves the problem or the issue that Mr Phillips raises, because if the money's already coming out of the economy and everybody's getting their slice but the government, then there will be no economic impact by legalizing machines if it pushes the illegal machines back to Buffalo and Montreal.
Mr Cousens: Did you help us out by reporting to the police that these existed?
Mr Guzzo: Just like that strip club you referred to. Is that not a police issue?
Mr Cousens: It sure is and we've been trying without success --
The Chair: Sorry, Mr Cousens, we're running over time. Thank you very much for your attendance here today. It was very valuable to this committee.
CITY OF TORONTO PUBLIC HEALTH DEPARTMENT
The Chair: Our next presenter is the City of Toronto Public Health Department, Dr David McKeown and Councillor Peter Tabuns. Welcome.
Dr David McKeown: Thank you, Mr Chairman. Good afternoon. I was going to address the members of the committee as ladies and gentlemen, but I see that wouldn't be appropriate. My name is David McKeown. I'm the acting medical officer of health for the city of Toronto department of public health. Accompanying me today are, as the Chairman has indicated, Councillor Peter Tabuns, the chair of the Toronto board of health, and Elizabeth Kruzel, who works with the department in the area of alcohol policy. I appreciate the opportunity to address the committee and to share some of our views on proposals under consideration. This presentation, unlike many of those which the committee has heard, will focus on alcohol-related matters.
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One of the principal functions of Bill 75, as we understand it, is to establish the legislative framework for the creation of the Alcohol and Gaming Commission of Ontario through the merger of the LLBO and the Gaming Control Commission. At the same time, the legislation does provide for the transfer to the new commission of off-sale regulatory functions presently under the exercise of the Liquor Control Board of Ontario. In consequence, the legislation has relevance to both on- and off-premise sales. What I'd like to share with you is a public health perspective on some specific aspects of the legislation and its implications. Following my remarks, Councillor Tabuns will comment on Bill 75 as it relates to off-premise retailing of alcohol.
In thinking about a change in public policy on alcohol, one must understand both the social and economic benefits of alcohol consumption and the potential harm to individuals, groups and society. Population surveys indicate that alcohol consumption continues to decline in recent years, both in terms of the proportion of Ontarians who drink and per capita consumption. Nevertheless, alcohol continues to be associated with significant costs to individuals, families and society as a whole. A joint Addiction Research Foundation and Canadian Centre on Substance Abuse study released this past June estimated that the alcohol-related costs to the people of Ontario amounted to $2.86 billion in 1992.
In considering alcohol-related harm, I would urge you as policymakers not to limit your focus to the very small proportion of the population, less than 5%, who are physically dependent on alcohol, in other words, who are alcoholics, as alcohol dependency explains only one part of the harm to individuals and society. Alcohol use operates along a continuum of risk. People can migrate between risk categories, and as the amount consumed increases, so too do the risks of health, family, social, legal and economic problems. Consumption of a large volume of alcohol at a single sitting carries significant potential risk, as does even drinking moderately when circumstances would indicate that no alcohol should be consumed, such as during pregnancy or before driving.
A comprehensive prevention, health promotion and risk reduction approach is required to change risk conditions and risk factors at both the individual and population level. Policy and legislation are essential to this comprehensive approach, and the primary goals of public policy regarding alcohol should be to protect the public health and reduce alcohol-related harm.
With this in mind, let me consider certain features of Bill 75. The legislation states that "The commission shall exercise its powers and duties in the public interest and in accordance with the principles of honesty, integrity and social responsibility." I think we can probably agree on what "honesty and integrity" mean, but concepts of social responsibility and public interest are open to different interpretations, and neither the legislation nor the supporting explanatory notes define them.
From a public health perspective, social responsibility should encompass three different levels of action; the first has to do with awareness in education, to inform people about and assist them to voluntarily follow low-risk guidelines. The second level of action in this area has to do with service and sales practices which promote low-risk use in all venues, ranging from home hosting, office functions, special-occasion-permit events through to formally licensed premises. Public policy is a third level of action in the area of social responsibility. While Ontario does have the essential features relating to service and sales to minors and the intoxicated, prohibitions on happy hours and drink discounts, mandatory server and sales training as a widespread public policy is not yet in place. The LLBO currently does require server training in a variety of instances, but training should be mandatory overall.
Achievements in the state of Oregon point to the value of mandatory server training. Evaluations there of that policy revealed that single-vehicle, night-time crashes, as one indicator of the harms associated with alcohol use, had decreased by 23% after three years of the policy being in place.
At the policy level, for example, social responsibility also means placing limits on the range of venues which are approved for sales licences. From a public health perspective, for example, licensing dressing rooms in sports stadiums is not very helpful to ensure low-risk service and use of alcohol.
In relation to social responsibility, the Alcohol and Gaming Commission will find many partners at the first and second levels of action, both in education and in good sales and service practice. However, as the regulator of on- and off-premise sales, the commission will carry responsibility for being the primary actor in the area of public policy.
In order for the commission to be successful in its social responsibility mandate with respect to public policy, it must be sufficiently resourced. Consider, for example, that in Ontario at the end of 1995 there were over 15,000 licensed premises and over 80,000 special-occasion-permit events. Serving these establishments and events was an inspection force of 38 liquor inspectors. The number of establishments continues to increase -- in 1995 there were another 1,300 or more new sales licences approved -- however, the number of inspectors does not and in fact we understand has decreased.
With the current mandate of on-premise liquor inspection, staffing is clearly not sufficient. Bill 75's proposal to combine and increase responsibilities therefore raises concerns. Keeping in mind that inspection is presently understaffed, the main liquor act infractions reported by the LLBO in 1995 were overcrowding, intoxicated patrons and service to minors, all infractions with potential public health implications. So an overtaxed inspection capacity, and local police are really not in any better position to help, leaves the burden on the local community both to police and provide evidence of problem practices.
The provisions of Bill 75 also raise questions in respect to hearings. At present, the LLBO, which consists of the chair and 11 board members, holds over 400 hearings annually regarding the issuance, transfer, suspension or revocation of liquor licences. While Bill 75 does make it clear that a hearing requires the presence of only one board member, and this may help in expediting the work of the commission, the legislation is not clear about the eventual size of the proposed board of the Alcohol and Gaming Commission, save for setting a minimum of five members. If the board were to be this small, at the minimum size, even with some initiatives like the field-initiated notice-of-proposal process, which has the potential to reduce the need for hearings, I'm concerned about to what extent the board could effectively handle hearings for liquor, let alone for gaming.
A matter of particular concern to public health, which I'll speak only briefly about, pertains to alcohol advertising. As members of this committee heard on Monday, I believe, in the presentation by the Association to Reduce Alcohol Promotion in Ontario, of which the department of public health is a member, it is essential that the product advertising, sponsorship and promotions review and approval functions, which are currently carried out by the LLBO, be preserved and preferably strengthened in this or any reorganization. This role will be of even greater importance in the future, given that the alcohol industry has publicly stated that the kind of aggressive marketing techniques used in the US will be increasingly employed in Canada.
In relation to alcohol, public interest at present is embodied only within the Liquor Licence Act. In that capacity, it has recently been subjected to some court challenges, which have been successfully defended, fortunately.
In relation to on-premise sales, public interest requires that the needs and wishes of the residents be taken into account on new licence applications, conditions on a licence and hearings but not on renewals or transfers of a licence. Although not formally articulated beyond "the needs and wishes of the residents," public interest is understood, we believe, by the LLBO to deal with community atmosphere and there being no negative effects from the operation of an establishment. Residents should be able to enjoy the peace and quiet of their homes, and their children should not be negatively affected by patrons' consumption of alcohol. Furthermore, businesses in the neighbourhood should also not be negatively affected.
The proposed change within this legislation to allow a two-year limit on applications to locations where a licence had been revoked for public interest will, I hope, provide relief to neighbourhoods that have been adversely affected by problem establishments. This has been a problem in some parts of Toronto. Once again, though, this provision rests on the commission having sufficient resources for inspection and hearings.
There are further changes that could be made in this direction which have not been proposed in the legislation, including extending public interest as a criterion to transfers of a licence, which would help address some problem situations.
To facilitate public input and public interest, the commission should consider establishing a responsible sales and service hotline, as was recently proposed to the LLBO by the Ontario Public Health Association.
To support public interest deliberations, the commission, as a regulator, should continue the LLBO-initiated risk assessment study, which gathered information on factors which led to high-risk premises being established. The commission should also support research into issues of density and saturation that incorporate population measures, premises capacity and the overall commercial mix in a given geographic area. Research which has been conducted in the United States and Australia shows that higher numbers and densities of on- and off-premise outlets are associated with increased levels of health problems.
In relation to the proposed commission and its responsibilities for both on- and off-sale regulation and gaming, the department of public health endorses the Addiction Research Foundation's recommendations, which I believe you have heard, concerning the way in which public interest should be explicitly defined within the act.
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The third duty of the commission should read as follows:
"The commission shall exercise its powers and duties in the public interest and in accordance with the principles of honesty, integrity and social responsibility. The primary public interest with respect to alcohol and gaming is to manage sales in the province in such a way as to reduce and hold to a minimum all harms to health, safety, work and family life as a consequence of consuming alcoholic beverages or engaging in gambling."
Thank you very much. I'll pass you over to Councillor Tabuns.
Mr Peter Tabuns: Good day, Mr Chair and members of the committee. Thank you for this opportunity.
Earlier this year the proposed further privatization of alcohol sales in Ontario was considered at city of Toronto board of health, and the board's position, which was in turn endorsed by Toronto city council and most recently by the Association of Local Official Health Agencies, is one of strong opposition to any further privatization or liberalization of the sale of alcohol in Ontario.
Consequently, the proposed transfer of off-sale regulatory functions from the Liquor Control Board of Ontario to the Alcohol and Gaming Commission of Ontario raises particular concerns. While the Minister of Consumer and Commercial Relations has positioned this as removing a conflict of roles for the LCBO as both a retailer and a regulator, this development may be interpreted as setting the stage for increased privatization of alcohol sales.
Given time constraints, I'm not going to enumerate the available research on which the board of health's position is based, nor the full range of recommendations advanced by the board. I have, though, brought along copies of a relevant report which I will pass on for your review, and I believe that's already been done.
I would, however, like to make a few points with respect to the Alcohol and Gaming Commission as the sole regulator of the current system of sale and distribution of alcohol.
Though not specifically noted in the documentation available concerning the proposed commission, it may be presumed that it would assume LCBO functions such as minimum price-setting. In this capacity the commission acting in the public interest would need to ensure that no decrease in the price or taxation levels of beer, wine or spirits occurs.
In his remarks to this committee last Tuesday, the minister stated that the commission would have authority over the establishment, location, size, hours and other conditions of operation of retail outlets.
In relation to this function, and following from the deliberations at the city of Toronto board of health, I recommend that a public interest provision similar to that of the Liquor Licence Act be added to the Liquor Control Act. Local residents must have the opportunity to actively participate in decisions as to the existence, location, size, days and hours of operation of LCBO outlets, Brewers' Retail and wine stores.
As to "conditions of operation," presumably an example might be the recent proposal for drive-through service at beer stores. Under no circumstances should off-sale outlets expand in this manner because services of this kind would not allow retail staff the ability to observe for signs of intoxication or approaching intoxication.
The minister also identified regulation of private delivery services as another function to be transferred to the AGCO. I recommend that the commission require that the staff of all liquor delivery services take the LCBO's strategies on managing age- and alcohol-related troubles, the SMART training program. Indeed, as recommended by the board of health in March of this year, responsible sales and service training with periodic refreshers should be a requirement for all people involved in the retailing of alcohol.
Further, I'd like to express support for the Addiction Research Foundation's proposal that the province's approximately 250 you-brew operations be brought under the regulation and control of the proposed commission.
The city of Toronto shares the concern voiced by the Addiction Research Foundation that Bill 75 carries the potential to permit government directives to significantly change alcohol control policy in Ontario without recourse to the Legislature.
In closing, while the city of Toronto welcomes this opportunity to comment on Bill 75, the issues raised by Dr McKeown and others from the public health field attest to this being a limited exercise, given that the legislation is not accompanied by comprehensive implementation plans and options. Consequently, I would strongly urge this committee to hold public consultations this fall, once staff from the two liquor agencies, the Minister of Consumer and Commercial Relations and the Ministry of Health, working in collaboration have developed several possible implementation plans.
Bill 75 should not be brought back to the Legislature until there's been an opportunity for public examination and discussion of the possible blueprints for the amalgamation and operation of the Alcohol and Gaming Commission of Ontario.
Those are my remarks, Mr Chair, and Dr McKeown and I are available for questions.
The Acting Chair (Mr Frank Klees): Thank you, Mr Tabuns. We have about two minutes per caucus. We'll start with the NDP caucus.
Mr Kormos: You talk about the issue of advertising, and it certainly was addressed recently not only by the group that appeared here but by a plethora across the community, which raises a concern then about gaming advertising.
I don't know whether Mr Flaherty can comment on this, but there don't seem to be any effective guidelines or any articulated ones for the OLC currently, and they engage in a veritable orgy of advertising, very glossy, very expensive, using incredible themes like freedom. "Buy that lotto ticket and get freedom." You also get a red Ferrari. It couldn't be a North American car. It had to be a Ferrari.
One can anticipate similar sorts of promotions. Just look at the stuff the casinos are doing, Casino Rama, Windsor obviously, Niagara Falls and again the press releases indicating the winners at Casino Rama after the first week -- no press releases about the people who walked out with empty pockets and who didn't know how to explain to their kids or their spouse what happened to the paycheque.
Some have advocated a prohibition on advertising of slots. There are 20,000 slots that are non-casino slots. What would your position be? I'm asking you for one. Obviously a prohibition on advertising means you wouldn't have to worry about interpretation of guidelines.
Dr McKeown: Neither the department of public health nor the board has taken a formal position on this issue. I shared with you the approach we've taken with respect to advertising about tobacco and alcohol, and that is to look at the evidence for a relationship between advertising and undesirable health effects arising from the use of both of those products.
We have taken a position against advertising entirely with respect to tobacco and a position which would place very careful controls on advertising in the area of alcohol so that it clearly isn't associated with desirable activities in a way which can't be substantiated. Without going into the kind of research that would need to be done to support a formal policy position, I think that approach makes sense for gaming as well.
Mr Flaherty: Thank you, gentlemen, for coming this afternoon. With respect to the issue of awareness and education, the history of gambling in this province, dealing with the video lottery aspect of it, is that governments have permitted first of all Monte Carlo nights to develop which are now thousands of nights per year, then the most recent government of Ontario, the NDP government, introduced casino gambling in the province with more than 2,500 slot machines in Windsor, all that having been done without large sums of money being set aside to deal with awareness, education, therapy and so on.
I'm sure you're aware of the commitment of our government of 2% of video lottery revenues, exclusive of the video lotteries at the racetracks, estimated to be in the area of $9 million or $10 million to that exclusive use, which has been lauded not only by the organizations that service persons with gambling addiction problems but also by the Addiction Research Foundation when they were here.
I'd like to make the note that this government does not avoid the problem. It doesn't seek to hide it under the rug or sweep it under the rug but to face it head-on and commit large sums of money to deal with the 1% to 2% of the population that will have an addiction problem.
With respect to inspections, which you raised on the alcohol side, you're correct that there are some 30-odd inspectors right now with the liquor licence board. With the amalgamation with the gaming commission, the gaming commission will have 75 people in the regulatory and enforcement area by the end of this month, which will mean that there will be more than 100, approximately 108, inspectors upon amalgamation.
Of the 15,000 or so licensed premises in the province of Ontario, 7,000 approximately are spot-checked each year by the LLBO. I think that the LLBO should get credit for the work they do and I think you should be aware of the complement of inspectors that will be available with this combination creating the Alcohol and Gaming Commission; and more so, that these inspectors in licensed premises that have video lotteries will not only have their gaming responsibilities, they'll have their alcohol responsibilities. What greater penalty could be imposed on someone who operates licensed premises than to have the threat of their liquor licence going on them and basically putting them out of business if they act improperly on the video lottery side? That's my question. Thank you.
The Acting Chair: Thank you, Mr Flaherty. We'll move now to the Liberal caucus.
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Mr Crozier: In the limited time we have I'd like to get your opinion, if you have the information at your disposal, with regard to cross-addiction and what influence that may have under these circumstances.
Dr McKeown: I'm afraid we may not have much to say on the subject today. We'd be happy to pass on to you any information we do have. I think the expertise in this area probably lies with the Addiction Research Foundation and other treatment-oriented organizations. I can say that cross-addiction certainly exists. We see this and try to account for it in the design of educational programs, not only in the addictions field but in other health behaviours where we see a relationship between tobacco use, alcohol use, not wearing your seatbelt and a lot of other behaviours which pose a risk to health.
Mr Crozier: I appreciate that. Perhaps before we're done all this exercise and before we debate it again in the fall we will have some more information on that. If you do have any, I wouldn't mind if you could pass it on to the committee and perhaps the clerk could distribute it for our benefit.
Dr McKeown: Certainly.
Mr Crozier: In your presentation today and your presence here -- of course in these committee hearings it's on a first-come, first-served basis and we don't always hear, I think, a balanced presentation overall because of the luck of the draw. I appreciate the fact that you have pointed out something that I don't think a lot of us and/or the general public understand: that there are significant health costs to this. We think more in terms of a bottom line, what it does for the province, what it does for those who will have income from these and also what it does to those who simply lose money. Then we drift away from there and don't realize there are significant health costs. I appreciate the fact that you've pointed some of those out today.
The Acting Chair: Unfortunately, time is up. I want to make the members of the committee aware that the report that Mr Tabuns referred to is available from the clerk. If you're interested in receiving a copy, she can get that to you.
Thank you very much for your presentation today.
ONTARIO PUBLIC SERVICE EMPLOYEES UNION
The Acting Chair: The next group is represented by Mr Bryan Mayes, and it is OPSEU. Welcome. Your title, I understand, is negotiator. We're pleased to have you with us. You have 20 minutes for your presentation. That can be divided up into questions and answers, or if you prefer to take the full period of time, that's up to you. Please go ahead.
Mr Bryan Mayes: Thank you, Mr Chair, and members for attending the hearing. I doubt that I will take the full 20 minutes to make my presentation. I'll try to limit it to about 10 minutes. I suspect that OPSEU's presentation will be somewhat different in tone and content from many other presentations.
I've been asked by the board of OPSEU to make one brief reference to the issue of video lottery terminals. Basically, my feeling is that this is a safety issue primarily, particularly in regard to younger people. This is an encouragement of under-aged people to partake in gambling and to start establishing that lifestyle. For those of you who find that hard to believe, I invite you to go to Manitoba some time, which is my home province, and check out the situation for a few hours there in any one of a number of clubs that offer video lottery terminals.
Leaving that issue aside, I want to focus primarily on the issue around the employment status of the roughly 77 members that OPSEU represents at the Gaming Control Commission. As most of you probably know, the LLBO is represented by the Ontario Liquor Board Employees' Union. The Gaming Control Commission has, I believe, seven members of AMAPCEO, which is in essence the supervisors' union in the OPS, and OPSEU has roughly 77 folks at the Gaming Control Commission, ranging from economists to investigators to clerical staff.
What I want to highlight in my remarks is not so much to issue a nine-minute-long polemic about why there shouldn't be a merger. There's clearly legislation on the table that calls for a merger. In talking with our members, they've said, "Don't focus on that." What I want to focus on is who is that new commission going to employ and some of the history around what led us to this point.
The handout that I've provided is an extract from the Hansard of June 12, 1996, in essence a series of questions from Mr Crozier to Minister Sterling. I highlight this not so much to denounce the minister in any sense; what I think we have here is some sort of misunderstanding about what took place in the months leading up to June in terms of the discussions that went on among the parties.
Just to highlight three comments, the minister states that there were negotiations with the unions, and I would beg to disagree with that. I believe there were two meetings. Negotiations, in my experience, tend to produce a collective agreement, and that's the 98-page beast that came of the OPS negotiations. That is the entire content of the negotiations, a single page, one-sided, that took place between the parties around this issue. It really wasn't a set of negotiations; it was that the government, to its credit, did advise the unions in advance that there was a merger being proposed. We were discussing basically the issue of severance there, and I want to come back to that.
The other issue I would take exception to in Mr Sterling's comments, and I think this gets to the core of my presentation, is at the top of the second column. In response to a question from Mr Crozier, the minister states: "We asked them if they could decide among themselves on one bargaining unit. They could not decide on one bargaining unit, so they left us with no option with regard to that because we prefer to have one bargaining unit to deal with."
There seems to be some misunderstanding here. The offer the government put forward was: If we could defer the severance liabilities that will come from people moving out of the Ontario public service, they would be willing to give a guarantee of employment.
I want to reiterate that we are still interested in talking with the government. We may be willing to defer severance so there isn't a big front-end-loaded severance obligation on the new employer. What we would expect, though, is a guarantee of a job offer to the current folks at the LLBO and the Gaming Control Commission and some sort of provision that the current collective agreement could remain in place for a limited period of time.
What I think we were being offered was in essence, "You'll get some six months of employment if you defer your severance, but we're not going to tell you how much that employment's going to pay or what it's going to look like or who will get it."
The Acting Chair: Mr Mayes, if I might, the purpose of this hearing is specifically to discuss Bill 75. You're bringing into discussion around the table here matters relating to negotiations that have gone on or perhaps have not gone on. I ask you if you would mind keeping your comments specifically to the topic for which this hearing has been called. Would you kindly do that?
Mr Kormos: What the hell is the Chair talking about?
Mr Young: It is outside the jurisdiction of the committee.
Mr Mayes: Mr Chair, I believe the committee is able to introduce amendments to any legislation. Perhaps that's the intent of the committee, to hear from the public and to hear suggested amendments.
The Acting Chair: It is indeed. I just want to remind you that the purpose of this hearing is specifically related to Bill 75, and it would be very helpful to this committee if the discussions that went on and your presentation were focused on that subject.
Mr Mayes: I would suggest that the only reason I'm here is that Bill 75 will merge the two agencies, and as a result some 77 of our people are out there wondering if they'll be employed. What I'm trying to suggest is a scheme by which we can avoid some of the severance liabilities that might arise and possibly avoid some future labour relations problems at the new commission.
Several people who sat in on the initial talks are seated behind me. Certainly, if ministerial staff wants to direct them coming out of this, that would be a productive result of this; or if some sort of amendment could be introduced, that would also be productive.
The Acting Chair: We're happy to hear any recommendations you have regarding changes to Bill 75, if that's what you have. Again I would ask you not to make this into a negotiating session, please.
Mr Mayes: That's quite clear. I am trying to suggest possible additions or amendments to Bill 75. I don't claim to be a legislative draftsperson. I know there are people employed here who do that job.
The Acting Chair: I think you heard my comments and I would ask you to comply.
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Mr Mayes: Very good.
What came out of the discussions that took place, what we had difficulty with, of course, was the legal provisions that govern who would represent the employees of such a new agency. It wasn't up to us, the unions, to decide if that would be one or two unions. It's possible that we could have gone in and signed up the full-time workers while the OLBEU could have signed up the part-time workers. That certainly takes place at various places throughout the province.
What we suggested was to give us a few months to try to sort out which group will represent these workers or if there will be two bargaining units, and at the end of that, if that can't be sorted out, we'll have a winner-take-all vote and get on with bargaining. Our proposal here is not that the current collective agreement for the OPS, which runs to end 1998, or that the current collective agreement for the LCBO, which runs to end 1998, would govern this new agency. The new agency may want to have all sorts of flexible arrangements of its own. Whichever union is in place I'm sure can negotiate that with a group of people elected from the membership.
What we were unable to do is decide in advance necessarily what the bargaining units would look like or if there'd be one bargaining unit or two. My point, perhaps to refer to the Chair's earlier comment, is to suggest amendments. I do not have specific drafting; as I've said before, I'm not a draftsperson. The amendments would be in the nature of having the parties return to real negotiations to see if we could come up with some sort of timetable or, alternatively, putting some sort of timetable around how long the current collective agreement would remain in place.
What you're going to have is, say, a mix of clerical staff from the LLBO and OPSEU moving in together. I can imagine that if I were the employer, I wouldn't want two different unions with two different sets of rules for the same sort of worker. Nevertheless, it is possible you might have one union representing the investigators and a different union representing the clerical staff, for example. I think we could work that out in short order.
Part of the difficulty we encountered in the discussions was that nobody knew the time frame, nobody knew when the legislation would come down. We now have that in front of us. If part of that legislation is a time frame around sorting out representation issues and sorting out if the collective agreement's going to stay in effect, that would be helpful. Part of the difficulty here is that all we were told was that these will be crown employees. We don't know what pension plan they'll be under. We don't know what the severance obligations would be.
As we get closer to this commission being introduced, what you face is 77 or more people being given notice of layoff and all of the attendant bumping difficulties that's going to create. We have people who would be eligible for early retirement as of February 1 of next year. What if they're offered a job with the new employer? All of those sorts of logistical details. If we can bridge with the existing collective agreements for, say, a few months into the new regime, that'll sort out a lot of these problems. We could then have the elected bargaining team go forth and bargain a new collective agreement with the new employer. It may be OPSEU, it may be OLBEU, it may be the Teamsters. These people will have the right to vote on these things.
The point here is that we were trying to defer the severance, defer some of the bumping madness that might take place, defer some of the other difficulties that would arise if you switched pension plans on these people. It will take the new gaming control staff about four or five years, in my experience, to work out a shift from one pension plan to another.
My sense is that if we can sit back down at the table, we can probably sort out a lot of these problems. With due respect to the Chair's comments, that may not be a legislative provision, but we are here to indicate that the legislation itself is clearly causing this difficulty. The point is not to try to scuttle the merger at this point, from our perspective; it's to try to get the best arrangements possible for the 77 people we have.
I have some other comments but perhaps I can defer those in case there are any questions or maybe try to get across some of that in the answers to those questions.
Mr Flaherty: Thank you for coming this afternoon, sir, although Bill 75 perhaps doesn't deal specifically with the matters you've raised. As I understand it, meetings were held in May with representatives of both unions and the MCCR and Management Board. The parties were unable to reach agreement on bargaining agents and the ultimate resolution of that is that the employees will be selecting their own bargaining agent. Is that correct?
Mr Mayes: No. Actually, what we were told was that the people at the table had no authority over what arrangements would take place with the new commission. So even if Mr Coones had said, "Let Mr Mayes represent all these folks," I believe the MCCR people had the view at that stage, before the legislation, that they couldn't speak to the new agency.
Mr Flaherty: Well, the bargaining agent is not going to be chosen by the government; it'll be chosen by the employees. The government does intend to honour its collective bargaining agreements in terms of severance, seniority and reasonable efforts to seek job offers for employees. I might also mention, and you would know this, that the Gaming Control Commission in Ontario has a history of expanding its workforce as gaming activities in the province have increased, because of the increased supervisory and regulatory obligations that are put on what is presently called the Gaming Control Commission and what will be the new Alcohol and Gaming Commission of Ontario.
Mr Mayes: If I could respond to that, you mentioned that the government will honour its commitments around "reasonable efforts," which is the wording found in the new OPS collective agreement and with AMAPCEO and with the liquor board employees' union. That's part of my point, this wording that the crown will make "reasonable efforts" to find alternative employment with the new employer. That wording is already being litigated in a different setting. I hope we could sit down and settle these issues in the manner I suggest rather than potentially having all three unions try to litigate. Were your efforts reasonable for AMAPCEO, OPSEU, OLBEU? It's the same wording in all three places.
Mr Phillips: I appreciate your being here and highlighting for us a very human concern around the implications for people. The challenge that we may face here -- I listened carefully to you -- is that if we involve ourselves in this specific instance, is there not a risk we run of being accused of meddling in the affairs of the employees, which bargaining unit they would in the end want to take and how they want to structure their affairs? Maybe you can respond to that.
Mr Mayes: The government, in inviting us in, talked about deferring severance as part of a solution it saw to avoiding some front-end costs. That's what I'm talking about too, if they want to load all the costs in the front end in terms of severance and in terms of possible litigation. That's certainly the road down which we're headed. My proposal, the proposal we talked to them about, was a limited period during which people would be given a guarantee of employment and the current collective agreement would take place. If the unions can't sort out who the bargaining agent is -- or if the Teamsters come in and sign up 55% of the folks, they're going to get the unit. In response to the question, no, we're not trying to determine who's going to get the group. The issue is, who's going to be working there and under what conditions are they going to go over?
Mr Kormos: I note in the excerpt from Hansard from June 12, 1996, "Hon Mr Sterling: We asked them if they could decide among themselves on one bargaining unit. They could not decide on one bargaining unit, so they left us with no option..." In your comments today you indicate that it could well be a choice, in view of the various job roles, that there be bargaining units representing one sector with common roles and another sector with a distinctive role.
Mr Mayes: That's certainly possible. At Metropolitan Toronto Housing, OPSEU has the inside workers, CUPE has the outside workers. Due to the provisions of Bill 7, you can now certify full-time workers without the part-time workers, so theoretically one union could go in and sign up the full-time workers and there'd be a separate bargaining unit.
Mr Kormos: What kind of time frame were you speaking of?
Mr Mayes: Let's say January 1, 1997, is the implementation date, which is going to be difficult in that you'll have to give a whole lot of people six months' notice and the attendant difficulties there. If the collective agreement were to stay in place at the new agency for, say, six months, that would give people time to elect a new bargaining team with whatever union is going to represent them and start bargaining with the new employer to set up a collective agreement that would be applicable to that employer.
The Chair: Time is at an end for this presentation. Thank you for your presentation on behalf of OPSEU.
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WESTERN FAIR ASSOCIATION
The Chair: Our next presentation will be the Western Fair Raceway, London, Mr Hugh Mitchell, assistant general manager. Good afternoon. How was the traffic from London today?
Mr Hugh Mitchell: Excellent, actually. Good afternoon. Thank you, Mr Chairman and committee members, for this opportunity to present to you the Western Fair Association's position on Bill 75 as it pertains to the introduction of VLTs into Ontario.
The Western Fair Association supports the establishment of a tightly regulated, government-controlled network of video lotteries for a specified period of time at racetracks. Under these terms of machine introduction, the government will have time to measure and analyse both the social and economic impacts of VLTs in Ontario.
First, some background on Western Fair Raceway and the scope of our operation before I offer some supporting rationale for our position on VLTs.
The Western Fair Association, which owns and operates Western Fair Raceway, located in London, is an agricultural society whose mandate is to support and provide for the ongoing development of agriculture. We consider live horse racing an integral component of the agricultural industry we serve. As such, we feel we have a responsibility to support the horse racing industry.
Western Fair Raceway currently operates some 95 live race dates through the fall, winter and spring, which dovetail into summer meets at a number of smaller area racetracks, namely, Woodstock, Sarnia, Clinton, Hanover, Dresden and Elmira. An estimated total of 550 to 600 race horses are required to support these 95 live race dates. The costs of feeding, caring for and training a horse in our market has been estimated to be about $13,000 per horse per year. This $13,000 in horse ownership expense has a far-reaching effect on the local and area economy. This ownership expense, multiplied by the 600 horses required to support 95 days of live racing, represents some $7.8 million in industry spending in the London and area market.
Further, we estimate that the racing industry in our market represents over 4,000 full- and part-time jobs. Western Fair Raceway's $1.5-million payroll in itself is significant for our market, as is the more than $2 million in purses paid to our local horsemen.
In addition to our 95 days of live racing, we offer multiprogram simulcasting daily onsite and offsite at select teletheatres, producing an overall handle of some $27 million and entertaining more than 200,000 racing fans annually.
All this is to say that our racing operation, as well as the 18 other racetracks across this province, has a vast trickle-down effect on the local and area economies that each of us serves.
Why is a racetrack like Western Fair Raceway the most appropriate site for introducing VLTs into the marketplace? Listed are a few key reasons why racetracks are best suited for VLTs:
(1) Horse racing no longer enjoys the gaming monopoly it once did. The introduction of lotteries, casinos and other forms of legal gaming in the province has whittled horse racing's share of the gaming market to an alarming 11%. As an industry, we believe our future rests on our ability to expand our gaming products and to re-establish ourselves as sports, entertainment and gaming destinations.
Parimutuel wagering is a skill game that requires a player to invest some time in handicapping the horses. Currently the product's customer base is predominantly male, middle-aged and older. By contrast, VLTs are a fast-paced game of chance with a much broader gender and age range appeal. However, as much as we believe these products can complement one another, we also know from the experience of other jurisdictions that VLTs have the potential to cannibalize parimutuel wagering. This cannibalization issue should be considered when the stakeholders are developing a business plan and marketing strategy for introducing VLTs into Ontario.
(2) Racetracks operate under very strict government regulations and licensing procedures, and as such are accountable to the government for protecting the public's wagering interests. Our facilities are easily secured and entrances controlled. Racetrack officials and many key staff are required to be fingerprinted and licensed by the Ontario Racing Commission. Many racetracks already have ample climate-controlled floor capacity and lots of public parking. We have the infrastructure and experienced staff in place today to handle large amounts of cash and online wagering.
(3) By tradition, racetracks are established as publicly acceptable venues for legal gaming. The public would have to make a conscious and concerted effort to attend a track to play VLTs, thus impeding the impulsiveness of their play. Racetracks have a built-in adult customer base and are strategically located across the province in larger urban centres.
(4) As I understand it, the grey market is very large and growing fast. By putting VLTs into racetracks, government and other stakeholders are assured their revenue share. Further, racetracks will become a formidable competitor to venues now housing illegal machines.
(5) A good many racetracks are either non-profit community-based entities or agricultural societies whose success is not measured on profits alone. Most of Ontario's racetracks are accustomed to working with volunteers and actively involved in fund-raising for many local charities. These reasons alone make racetracks excellent sites for permanent charity gaming halls.
(6) Finally, as indicated in some of my earlier comments, horse racing is an extremely labour-intensive industry. This industry employs a good many people who, because of their lack of technical skills and formal eduction, might otherwise be on government-sponsored social programs. Our industry generates a vast amount of economic activity, which will be further enhanced with VLT revenues being channelled through the industry.
In closing, for a good many decades the racing industry and government have enjoyed an excellent working relationship. Based on this history, our industry is confident we will prove a worthy partner of government in video lottery gaming. All we ask for is the opportunity.
Thank you, Mr Chairman and committee members. I'd be pleased to answer questions if there are any.
The Chair: Thank you, Mr Mitchell. We have three minutes per caucus.
Mr Crozier: Good afternoon, Mr Mitchell. I want to say at the outset that I'm supportive of your submission and those of others who have taken the same view, as well as horsemen and their associations who have been here.
There is no mention in here of the extent to which you support Bill 75. It covers a wide range of areas, but you have mainly centred on the VLTs. Of course, beyond racetracks and fixed charitable casinos, Bill 75 would also enable the introduction of some thousands of VLTs in bars and restaurants across the province. How do you feel about that specific part of it?
Mr Mitchell: The first objective for us is to hopefully end up in a strategic alliance with the government, work through a business plan, set some goals and objectives, and then at some point in time, at that deadline, re-evaluate the situation. I'll be frank with you. As a racetrack operator, I'm not supporting the further expansion of VLTs outside racetracks. However, I think it's premature for us to try and analyse what that situation will be and the impact there. The first order of business is to go through phase 1 of the introduction with some goals established in trying to evaluate ourselves on both the social and economic impact at the end of that time frame.
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Mr Crozier: Thank you. Mr Phillips has a question.
Mr Phillips: I used to be a parimutuel clerk at your raceway at one time, probably before you were born, though. What sort of revenue does the Western Fair Raceway see from these?
Mr Mitchell: What sort of revenue?
Mr Phillips: Yes. What are you estimating your revenue would be from the introduction of VLTs?
Mr Mitchell: I guess from some of the other jurisdictions we know that average machine income per week ranges from some $500 to $1,200. We do not know to this day what our split might be, so again it's only speculation as to how much money we and our horse people will actually earn from the introduction of each machine into our plant. Suffice it to say that we comfortably can handle anywhere from 150 to 300 machines from a floor capacity standpoint. What the market will bear, time will tell.
To answer your question directly, until we know what split we're assured of in this equation, in the formula, it's premature for us to estimate what that revenue back to Western Fair Raceway will be. That's a good question that we hope we'll have answered by government in due time.
Mr Kormos: Thank you, Mr Mitchell. You sat through the last presentation?
Mr Mitchell: Correct.
Mr Kormos: If you hadn't been aware before this afternoon, you're at least more aware now of the government's abandonment of the LLBO and the Gaming Control Commission and the creation of a new agency, the liquor and gaming authority of Ontario, and a number of rationalizations for it, among them being that gaming locations will be concurrent with drinking locations and why have two different bodies visiting the same places. You heard that public sector employees of what is now the Gaming Control Commission have acknowledged that that's the way it's going to be.
If the government were to next propose the elimination of the Ontario Racing Commission, because what we're seeing is the development of -- your industry has made strong representation to the government about being first in line, because it's already a gaming venue, right? It's already a gambling venue. That's part of why your industry has indicated that it's capable of accommodating slots. In most cases I suspect racetracks are licensed under the Liquor Licence Act.
Mr Mitchell: Correct.
Mr Kormos: And gaming is gaming. What would your industry's response be, or at least your response? You probably don't want to be in a position to speak for the industry. What would your response be to the elimination of the Ontario Racing Commission and indeed having the liquor and gaming authority of Ontario overseeing liquor licences and gaming licences, including all sorts of gaming, including horse racing?
Mr Mitchell: First, let me deal with the question of the Ontario Racing Commission. I for one am very supportive of the commission and the regulatory function. I think they've served the industry well. But I am not of a mind not to accept change if it's appropriate. They are objective, if you will, and they're an independent body that I think polices racing extremely well. So I would continue to support the racing commission as a body unless there was another plan put forth that for economic reasons possibly achieved the same result but for less money.
Second, the whole issue of amalgamating the two boards was a question. Yes, you're correct; we do serve liquor and are licensed, hold a major licence in the city of London for the serving of liquor, spirits and beer. As well, of course, we're in the parimutuel wagering business. I guess we live in a day of consolidation and rationalization, and if it best serves and streamlines the regulatory function, I would support that.
Mr Kormos: Okay. That's all I wanted to know, because there's more coming down. This is the beginning.
The Chair: The government caucus has three minutes.
Mr Guzzo: Thank you, Mr Mitchell. A couple of quick questions. How many live dates of racing will Western Fair have this year, roughly?
Mr Mitchell: We will apply for, I believe, 95.
Mr Guzzo: How many horses does it take to put on a live racing program?
Mr Mitchell: Ideally, we like to run 11 to 12 races a night, which we call a full card. Ideally, we like to have eight horses carded in each race. So eight times 12, you're over 100 horses -- quick math.
Mr Guzzo: How many horses are stabled at your track?
Mr Mitchell: Currently none, sir. We race from the fall through to the spring. We have a ship-in facility, which is rather unique in this jurisdiction, not so much unique across North America. We're located very close to a number of training centres within 15 or 20 minutes, at least a half-hour drive from our racetrack. If you were to fly, on a clear day like this, over the city of London at low altitude, you'd see a skirting of training centres across southwestern Ontario not unlike how you might see a skirting of outdoor pools across subdivisions. I guess what I'm telling you is that we've established with our horsemen under agreement that we wouldn't provide stabling facilities and they would ship in from their respective training centres.
Mr Guzzo: So if you run four nights a week in summer, 400 horses a week, those horses are being trained, groomed, fed in small-town Ontario surrounding London?
Mr Mitchell: Correct. They are.
Mr Guzzo: The employment those horses provide for the grooms and for the hotwalkers etc, those low-paying jobs in the rural community are located in small-town Ontario and filter through the small cities and training centres. Correct?
Mr Mitchell: You're correct.
Mr Guzzo: The other point I wanted to zero in on, because in my opinion that employment -- not the people you hire at the racetrack. They're important too, but many of those jobs are part-time, they're students and they're part-time, housewives who work at night and punch tickets. But those other people in those farming communities might not have an alternative to employment if those training centres had to close.
Mr Mitchell: That's correct.
Mr Guzzo: The other point you make I think is very, very valid. My colleague picked up on it and it's something that has always been a problem for horse players. When you go to a casino to gamble, be it in Ontario or Las Vegas, you don't pay to go in, but when I go to your place to play the horses, I have to pay to go in.
Mr Mitchell: Correct.
Mr Guzzo: For that very reason alone, people are not going to go to the track just to play VLTs. I mean, why would they?
Mr Mitchell: Under that scenario there are some access costs to our plant that are, yes, unique to the gaming industry. I might offer you, though, with the VLT revenues, we might have a strategy -- and with the tax reduction that's come forward -- maybe our strategy in the future is to have no admission charge.
Mr Guzzo: There are some people who are knowledgeable in the horse community who think that you should have done that years ago. Whether you could or not is questionable. I'm not criticizing you for doing it. I mean, that's common throughout the industry in North America.
Mr Mitchell: It is.
Mr Guzzo: You pay to go in. I'm just suggesting that in terms of the individuals who would go there making the conscious decision --
Mr Mitchell: It's a barrier to entry.
Mr Guzzo: And it's also a situation where sometimes the spouse of the horse player might not be interested in doing the handicap but the VLT might be an alternative form of entertainment for the spouse, might it not?
Mr Mitchell: That's how we see it.
The Chair: Thank you, Mr Mitchell. We appreciate your attendance here today.
HORSEMEN'S BENEVOLENT AND PROTECTIVE ASSOCIATION OF ONTARIO
The Chair: Our next presenter is the Horsemen's Benevolent and Protective Association, Mr Carmen Di Paola and Mr John Whaley. I believe, Mr Whaley, you attended before us on behalf of the Fort Erie branch.
Mr John Whaley: No, I did not. I was not able to make that appearance.
The Chair: But someone did.
Mr Whaley: Bert Simon appeared in my stead.
The Chair: Okay. That was the branch. This time, are we hearing from the overall association or a particular branch again?
Mr Carmen Di Paola: No, Mr Chairman, you're going to be hearing from the total HBPA of Ontario.
The Chair: I just wanted to clarify that. Thank you. Please proceed.
Mr Di Paola: Thank you very much, Mr Chairman and members of the committee. My name is Carmen Di Paola and I am president of the Horsemen's Benevolent and Protective Association of Ontario, which we refer to as the HBPA. Thank you for the opportunity to appear before you today on behalf of the thoroughbred horsemen and horsewomen of Ontario.
The HBPA is the association of owners and trainers of thoroughbred racehorses which is recognized by provincial and federal regulators. We are one of a number of HBPAs throughout Canada and the United States. Currently we have approximately 2,700 horsemen and horsewomen in Ontario who are our members.
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The objective of the HBPA is to look after these horsemen and one of our main objectives is to support live thoroughbred racing in Ontario. The horse racing industry in this province is still a significant agricultural business and generates over 40,000 full- and part-time jobs with $950 million in labour income.
We at the HBPA are concerned about the future of racing. We recognize that Ontario has the potential to remain an important player in the horse racing industry in North America. It was the fifth-largest wagering jurisdiction in North America in 1994. However, we have seen a steady decrease in the handle and revenue from live racing since other forms of gaming have been introduced into Ontario. I won't go through the history of development of alternative forms of gambling in Ontario; however, the impact has been dramatic. We now see a threat from the introduction of casinos, with Casino Rama having opened and the Niagara casino on the horizon. Both of these are likely to draw significant numbers of bettors from the Toronto area.
We have seen attendance and the live betting handle fall this year from 1995. Although our customers are finding teletheatres to be an attractive option, many of these customers are drawn from the track itself. In any event, wagering on live racing from Woodbine Racetrack and Fort Erie Race Track is down approximately $13.8 million overall. The simulcasting from other tracks, mainly from the United States, is substantially up over 1995, but this does not provide as high a level of revenue for Ontario horsemen and horsewomen as does live racing and it takes funds out of the country.
The decrease in revenue over the years has hurt the industry and led to a drop in the number of owners and the number of horses. Many owners have just dropped out after continuing to sustain losses. Quality horses are being lost to those operating south of the border. We must have sufficient quality race horses to compete with the American simulcasts.
The government of Ontario in its budget has indicated a change in the tax levied on horse racing, which should ease many of the inequities which have made it difficult to compete with the other forms of gambling. To take advantage of this tax relief, we need to bring people back to the tracks. We of course thank the government of Ontario for these initiatives that they have brought forward for horse racing in Ontario.
It is our understanding that the government intends that video lottery machines be brought into the racetracks in Ontario. We favour this proposal as an attraction to bring people back to the tracks, and also, it is proposed that one half of the tracks' share of the revenue from these VLTs will be distributed to the horsemen and horsewomen in the form of purses.
It is our view that the racetracks are uniquely able to provide a secure betting environment, staffed with experienced staff. In Ontario, thoroughbred racing is available only through the Ontario Jockey Club tracks at Woodbine and at Fort Erie. The Ontario Jockey Club is a long-established track operator with an excellent reputation for professionalism in handling wagering. They are used to providing controlled access while at the same time providing customer amenities, including lots of parking. We do feel that a review of the VLTs at the tracks after six months would be advisable to determine what effects they have on our racing.
We believe that the introduction of VLs at Woodbine and Fort Erie racetracks will attract new customers to the track and that they'd, to a large extent, be people who otherwise would not have an occasion to go to the track. By providing these people with exposure to thoroughbred racing, we think that they will find our sport to be attractive and give wagering on racing a try. We are of course concerned about the cannibalization of our existing betting revenues by VLs. It is our view that we are better to have them at the racetracks than competing with us elsewhere. It is hoped that they will earn more revenue than will be lost through cannibalization.
We also believe that the revenue these machines will provide will help us maintain our purse structures. These revenues will go directly to owners and trainers of thoroughbred race horses and from them through the rest of the agriculture economy racing supports. It is estimated that horse racing generates 33 person-years in employment for every $1 million of incremental industry expenditure. The industry employs a labour force which is generally classified as having low skill levels and can therefore offer employment to people who cannot be marginally employable in other businesses. These people labour in the love of horses and racing and do an excellent job of looking after these expensive and finely-tuned athletes.
In conclusion, we of the HBPA support this government initiative to introduce VLs into the racetracks. Thank you very much, Mr Chairman. I'd be happy to answer any questions.
The Chair: Thank you very much for your presentation.
Mr Young: I have a question and it's almost of personal interest. I haven't been to the racetrack in years, but apparently the turnout for the recent major races, like the Queen's Plate etc, has been disappointing. Can you expand on that and explain that to me.
Mr Di Paola: On the Queen's Plate day, I think you'll find that the number of people in attendance at the teletheatres and at the racetrack was pretty well about the same as the year before. It's just that with the teletheatres that we have and the convenience that it offers our bettors, they don't have to come to the racetrack to participate and enjoy horse racing.
Mr Young: Can I ask what other initiatives in concert with the potential for VLTs you're bringing forward to get more people interested? Really, it is the sport of kings; it's an exciting sport.
Mr Di Paola: I think we in the thoroughbred horse business have done a very poor job of marketing the excitement, the pleasure and the thrills that there are with horse racing. I believe one of the reasons we haven't been able to do that is that there have been no funds available in marketing budgets. Thanks to the government and the tax break it's giving us, I believe we will have the marketing moneys to be able to sell our stories and to show people the excitement and thrills that there are in horse racing.
The Chair: Did you wish to ask a question, Mr Guzzo?
Mr Guzzo: Do we have more time?
The Chair: We have more time. Actually we've got a lot of time because I don't believe Mr Kormos is going to be here.
Mr Guzzo: I think it would be helpful if you explained what exactly your organization does for the people who are members and the horsemen of the community.
Mr Di Paola: Our membership is owners and trainers. It totals about 2,700 people. We handle all negotiations with the Ontario Jockey Club as to contracts. We handle benevolence on behalf of our people. We have all kinds of programs. We have a supplemented insurance policy and benefits, medical and dental plans. Basically we look after the interests of our horsemen.
Mr Guzzo: We've heard from the Ontario Harness Horse Association. It's unfortunate Mr Kormos isn't here. I've described the agreement that you negotiate with the track as a collective agreement because my socialist friend understands that kind of language and he would then suggest that you're really the shop steward, and that's basically what your job is in terms of getting the best deal in those contracts for the people who put the show on. Correct?
Mr Di Paola: Absolutely.
Mr Guzzo: You mentioned the word "benevolence." I think you'd do yourself a favour if you'd just outline your business. We've known jockeys to lose their lives. We've known Mr Turcotte, for example, to end up in a wheelchair. Your organization is the source for support for those people who suffer the type of tragedy that Ron Turcotte did.
Mr Di Paola: We will support any of our members in any of their hardships, getting them over their hardships, whether it's drug problems or health problems. We have with our people -- because of the income level, their families don't have enough money to bury them, in some cases, so we will put the moneys to bury people. From A to Z, whatever it takes. We have educational programs for them. John, do you want to answer that.
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Mr Whaley: Yes. We have employee assistance programs. Many of the employees who work on the track do not work for, of course, our organization. Our organization's made up, as Carmen said, of owners and trainers. The trainers generally employ these people. So we have made employee assistance programs and supplemental insurance benefits available to these people at subsidized rates.
We also have a fairly large incidence of alcohol abuse on the track, and we assist these people, the people who are employed back there, many of whom are not skilled and would not be employable in other industries but are very loyal employees in our industry.
Mr Guzzo: I thank you, and I have to tell you that throughout North America your organization is considered one of the exemplary operations. For that, the people of Ontario and this industry should be indebted to you, and I commend you for it. Thank you for coming today.
Mr Crozier: Welcome, gentlemen. Thank you as well for your presentation. There are only two areas that I want us to be able to discuss for a few minutes, and one is more of a comment than anything.
Of the number of presenters that we've had, it's interesting to me that you're the one industry that puts itself down. I think of the phrase, and it's been in a number of the presentations, "The industry employs a labour force which is generally classified as having low skill levels and can therefore offer employment to people who could be considered to be marginally employable in other businesses." It's too bad that you have to say that -- albeit, frankly, I've never been to a thoroughbred track, although we had a standardbred track in my own community and we have a large facility in Windsor Raceway near my community. I find a number of people at those tracks, both in the parimutuel area and in the racing and the training area, to be highly intelligent people and I wish we could give them more credit than they're being given and that it's not an excuse for your industry to exist.
Mr Di Paola: If I may answer that, we have some horses that could be worth anywhere from $3,200 to $10 million to $15 million, and I'll tell you that the job these people do is unbelievable. You would not want to have -- the life and safety of these very expensive animals are at the disposal of these individuals, and they are very, very capable individuals. In training, when you have someone like D. Wayne Lukas, who used to be a basketball coach, go into training and is one of the best trainers in the world today -- the calibre of people is unbelievable.
We're saying that these people, the aptitudes that they have, are not employable in a high-tech business per se, or office work. They're basically outside workers and for other businesses they might not be adapted to it, but for our business you couldn't find any better-skilled individuals and professionalism in these people. It's there. We're not trying to degrade our people. Our people are some of the finest in all of society, believe me.
Mr Crozier: I'm glad you took the opportunity to say that, because I frankly think in some cases the aptitude that's required for your business -- well, you take the business that we're in. I haven't seen any list of aptitudes we have to have for it. Keep up the good work.
The other comment that was made too, and it's very definite, you said, "It is our view that we are better to have them on the tracks" -- that is VLTs -- "than competing with us elsewhere and it is hoped that they will earn us more revenue than will be lost through cannibalization."
It is the location of these video lottery terminals that I'd like to ask your opinion on. Are you saying they should be -- and I realize where you're coming from -- only located at racetracks?
Mr Di Paola: We're not saying that, but what we're saying is that if the racetracks were not to get video lottery terminals, the case in point of Manitoba and some of these other jurisdictions, our tracks would close. If they're coming into the province, I believe that one of the first places they should be is at the racetracks.
Mr Crozier: I'm reasonably sure they will be. Thank you, gentlemen.
The Chair: Gentlemen, thank you very much for your presentation on behalf of the association.
Mr Di Paola: Thank you very much for having us.
CONCERNS, CANADA
The Chair: Our next presentation will be Concerns, Canada, Rev Karl Burden and Mr Keith Farraway. Welcome, gentlemen. All members of the committee should have received a handout with part of the presentation. I'd ask you to proceed.
Rev Karl Burden: Thank you very much. On behalf of Concerns, Canada we would like to thank you for this opportunity to give our response to Bill 75. First let me introduce our organization.
Concerns, Canada is the oldest not-for-profit organization dedicated to the prevention of addiction in Canada with roots going back into the mid-1800s. Our mission is to promote and encourage positive lifestyles free from dependence upon alcohol, tobacco and other drugs. While our primary focus is the prevention of chemical addictions, we are nevertheless concerned with the growing problems of gambling addiction in this country. By 1993, the incidence of problem and pathological gambling in Ontario had grown to 8.6%, putting Ontario in first place in Canada. It goes without question that this number has grown even more with the introduction of casinos and the proliferation of other gambling opportunities over the last several years.
Although there are many similarities and crossovers between alcohol abuse and gambling, the differences are what make it a more difficult problem to treat. Gambling is a strictly psychological phenomenon that builds a fantasy life for the abuser who gets hooked on the belief that his or her problems will be solved by gambling. One of the major differences between gambling and substance abuse is that gambling can be hidden far longer. Gambling is not an addiction for which there is a breathalyser.
In its present form Bill 75 affects two areas of our organization's work: fund-raising and social action. After a careful review of the bill, we have two major concerns to present: the first is with the combination of the Liquor Licence Act and the Gaming Control Act and the Wine Content Act under one commission; the second is with the proposal to introduce VLTs into the already crowded gambling milieu.
With respect to combining the three acts into one, our concern is that two separate and distinct issues are being bundled together. The fact that ethyl alcohol consumption and gambling may take place in the same premises or that both may lead to addiction is, in our opinion, insufficient reason for monitoring them under one governing body. Ethyl alcohol involves health and safety issues, while gambling is a moral and financial concern. We believe it would be a major mistake to merge the boards which currently oversee ethyl alcohol issues with those monitoring gambling. The resulting mammoth organization would constitute far too much for one commission to handle, particularly given the present administration's difficulties in monitoring the distribution and sale of ethyl alcohol. The LLBO is severely underfunded and understaffed. It has far too few inspectors to efficiently monitor the thousands of restaurants, bars and other establishments which hold liquor licences, let alone ensure the enforcement of regulations pertaining to special-occasion permits.
Since we suspect the amalgamation of these acts is a prelude to the merging of the LLBO, the LCBO and the Ontario Gaming Commission, we wish to go on record as in opposition to such a merger. In making this objection, it should be noted that in earlier presentations to both the LCBO and the Ministry of Consumer and Commercial Relations, we had proposed the blending of the LLBO and the LCBO. There is logic for this amalgamation since both are concerned with the same product. The introduction of gambling creates a very broad and, in our opinion, unmanageable mandate and will prove to be ineffective in dealing with the key issues of ethyl alcohol and gambling.
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The other problem with Bill 75, from our perspective, is with the proposal to introduce VLTs into Ontario. Our objection here comes from our long experience with addiction. To put it bluntly, we are deeply concerned that the government of Ontario would even entertain the idea of introducing VLTs, which are considered the cocaine of gambling, into an already overcrowded array of gambling opportunities that are available. We are particularly troubled by the suggestion that not-for-profit agencies should be implicated in this form of gambling by making them beneficiaries of moneys so raised. In our mind, this is akin to legalizing cocaine and then granting profits from the sale of this potent drug to organizations that benefit from addictions, for example, by creating job security for addiction counsellors.
Surely the standing committee on administration of justice is aware of the power of VLTs to addict users. VLTs marry the rush of old-fashioned one-armed bandits with the bells-and-whistles reinforcement of video arcades, making VLTs the cocaine of gambling. They are highly addictive because they provide an immediate rush which is similar to that experienced by cocaine addicts. An experienced player can complete a game cycle in as little as one and a half seconds. This gives them the rush of excitement and the feeling that they are constantly in action.
Ontario, I think, should learn from the experience of other provinces. A recent study of the effects of VLTs in Saskatchewan, for example, found that 77% of problem gamblers considered VLTs their favourite form of gambling, with casinos taking a distant third place. More gambling clients, that's 84%, played VLTs than participated in any other form of gambling in their 1994-95 study. What is most startling, however, is the amount of money lost in a single day by addicted gamblers. The average was just over $1,000, with a few attaining losses as high as $20,000. And remember, that's just one day's loss. These losses have significant impact for the health and wellbeing of society. One example would be a man in Pictou county who in 1992, in Nova Scotia, walked into a store and began smashing VLTs because he was at his wit's end with his wife's gambling that was devouring his family income.
Although the average age of gamblers in the Saskatchewan study was 38 years for men and 40 for women, 19% of those studied began their gambling careers before the age of 15 and 46% started gambling by age 19. Unfortunately, VLTs appeal disproportionately to young people and women.
Although Bill 75 proposes to restrict VLTs to adults 19 years and older, our province's experience with alcohol suggests that this may be extremely difficult, if not impossible, to enforce. Even if not directly involved, it is apparent that adolescents and children can be implicated in their parents' gambling, as has been demonstrated already at the Rama casino.
Wayne York of the department of health in Nova Scotia warns that computers and video games and arcades all promote an alignment with self and the machine that results in avoidance of socialization, leaving adolescents either devoid of social skills or having delayed development. In the case of VLTs, we would add perhaps devoid of their financial resources as well.
It's important to mention that in Alberta bar owners have been forced to increase security because of a rash of armed robberies attracted by the large amounts of cash that bars are required to keep on hand in order to pay out VLT winners.
As more and more people spend larger and larger amounts of their discretionary income on regular gambling, less discretionary money is available for donation to not-for-profit charities through the normal channels of fund-raising. This erosion of donations has been further complicated by the Ontario government's decision to allocate profits from specific lotteries and other types of gambling to charities. The result over time is that charities are becoming more dependent upon gambling revenue. This puts charities dedicated to improving the health and wellbeing of society in a position of abetting financial problems that can play havoc with individual and family life. As an organization which has been forced to accept revenues from break-open tickets because of a serious decline in our donor base, we know of what we speak and have struggled long and hard with this dilemma.
The Ontario government needs to realize that VLT revenues won't magically appear out of nowhere. The millions expected to be raised will result in losses in purchases of other goods and services in our economy. VLT profits will simply mean less to be raised through sales taxes and more paid out through welfare and social assistance. Isn't it time that we looked at the bigger picture and realized that when millions of dollars are being thrown away on gambling, which really creates few winners and many losers, our whole province will ultimately suffer negative consequences? Even if only 5% to 7% of the population become compulsive gamblers, this is an added burden on our economy since these are people at high risk to write bad cheques, embezzle money, declare bankruptcy and then clog up our court system, to say nothing about the suffering they may cause their own families.
To summarize, we object to the amalgamation of the lottery commission with the current boards governing ethyl alcohol because we fear that very quickly gambling issues will overload the new body, leaving ethyl alcohol control further eroded. If there is to be an amalgamation, we would suggest it be the combining of the LLBO with the LCBO.
Secondly, from the experience gained thus far with VLTs and other areas, it is obvious that this instant gambling will increase problem and pathological gambling, along with multitudes of social and family problems. As with substance abuse, it will be the Ontario taxpayer who foots much of the cost of rehabilitation.
Your committee is no doubt aware that the province of British Columbia, faced with a backlash from 40 communities when it proposed introducing VLTs in 1995, decided against them. Nova Scotia, aware of serious problems among many of its gamblers, shut down two thirds of the VLTs that were operating in 1992 and established the first treatment program for VLT addicts in Canada. Alberta, responding to its many problems, is attempting to limit the number of VLTs.
Although the possibility of the millions of dollars that the Ontario government hopes to realize from the introduction of VLTs is very attractive to a cash-strapped administration, it must be remembered that this revenue will significantly be offset by the high cost of picking up the pieces after families have been ruined financially, crime escalates and addicts are forced into long-term rehabilitation.
If VLTs are permitted in the province, at the very least they should be governed by the same strict rules and municipal involvement attributed to break-open tickets.
It is hoped, however, that Ontario will have the wisdom and foresight to call a halt to the escalation of gambling in this province by voting against the introduction of VLTs.
The Chair: Thank you, sir. We have three minutes per caucus. We have Mr Guzzo and Mr Young.
Mr Guzzo: Sir, I'm going to be very brief with regard to the issues here, and I guess it's a bad news-good news situation. I don't agree with you; I don't think we're going to introduce VLTs. I can take you to numerous spots within blocks of here, right now, tonight, where you can play them. The money goes to Buffalo, New York. In my own home town of Ottawa, I can take you to numerous spots where you can play them. We're not going to introduce them. The money there goes to Quebec; they're owned by Quebeckers. Tonight, when the Jays are at home, there'll be more money bet with illegal bookies on the Jays game tonight than will be bet legally at Woodbine Racetrack on those nine races they're going to run tonight.
But that's not what I want to tell you. I want to tell you where I do agree with you, and I commend you, and it's very, very gratifying to see you here because I'm familiar with your program. I spent 11 years as a youth court judge, and I've dealt with some of the most tragic situations of youth. I'm familiar with the youth for youth, by youth program. That's your program, is it not? I can't remember the name of it.
Mr Burden: We have a PLUS program that's not quite the same but it's similar. We have a program for convicted impaired drivers, though, that you may be familiar with, called SIPIT.
Mr Guzzo: The youth program to which I've had a name that I can't --
Mr Burden: Toc Alpha.
Mr Guzzo: Yes. That's you.
Mr Burden: Yes, that's right.
Mr Guzzo: Sir, in my experience on the bench it was the most successful and finest program we had available for youngsters in trouble. I commend you for it and I'm very pleased to see you. Thank you.
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Mr Young: I have a question. These tickets, Lottario, keno, Super 7 and 6/49, are for sale in virtually every corner store in the province, and people buy millions and millions of dollars worth of them. We know people gamble in card games, and there are billions of dollars bet on football and baseball, and the sport the most money is bet on is basketball, I found out, because they play the most games throughout the year, and people gambling at offsite casinos; there are millions and millions of dollars. I guess it's impossible to measure. They go to Atlantic City and Las Vegas etc.
We know that people want to play these games, that they want to gamble and that the noble experiment with alcohol, where 6% of the people have a problem, Prohibition, didn't work. There are 15,000 to 20,000 of these machines out there now, and I don't believe that prohibition will work with these machines. Doesn't it make sense to get control of them, get some revenue to the charities and get 2%, up to $10 million, to help the 1% to 2% of people who have this problem?
Mr Keith Farraway: I'll take that up, Mr Young. First of all, prior to becoming involved with Concerns, Canada as a volunteer board member, I was a police officer for 34 years. I was a past chairman of the Ontario Association of Chiefs of Police organized crime committee.
You're quite correct when you talk about gambling being very lucrative. In fact, without gambling you would not have the old-style organized crime that we have today. I'm talking about -- people don't like to say the word -- the Mafia. The new organized crime people today are the outlaw motorcycle gangs that deal in drugs.
I've had some experience with gambling. I attended at course at the Quantico, Virginia, headquarter of the FBI on the topic of gambling, especially the cheating aspects. I've also been a member of the Law Enforcement Intelligence unit of the United States and I've attended at Atlantic City, where they predicted that organized crime would not be present, but it sure as heck is present. I've been to Reno for a conference with the same topic.
I'm not against gambling. I think if it's controlled as the act states it will be controlled, it will work. If you're going to go ahead, I would just say this: Every once in a while, stop and take a look at the red lights. Do it easy; do it in steps. Don't jump in there with thousands of video machines, because you may find you're going to have to find a very big storeroom to keep them in if the social impact is so great that it can't be handled by your social services. I don't know whether I answered your question or not.
Mr Young: Yes, you did. Thank you.
Mr Crozier: I'm sure glad that there are people like you in this province. One statement you made in your conclusion, that if VLTs are permitted in this province -- and they are going to be, without any question -- at the very least they should be governed by the same strict rules and municipal involvement attributed to break-open tickets, and I agree with you there.
I'd like to ask you what the difference is, because I have my own opinion, between a problem gambler and a pathological gambler.
Mr Burden: I think the answer to that would be similar to the answer if you had asked about alcohol: There is no one point at which you pass over the limit. I think it's a matter of some opinion and it depends upon the consequences of the individual's gambling as to how seriously it is affecting the lifestyle.
I imagine that if you had three or four people involved in the counselling of these people, they would all say an individual passed over that point, from problem gambling into compulsive gambling, at slightly different points, because it's really a guess. We do know, though, that problem gambling and moving on into more serious pathological gambling have tremendous effects on the individual. A pathological gambler in the extreme is a person who lives, breathes and exists for the sake of gambling and believes that all the problems they're going to have will be solved simply through the next win. It doesn't matter how many losses they've had before; the next time they crank that lever or whatever it is, they're going to win and they're going to win big. The impact of that on the individual, from a financial and from a psychological point, is horrendous over time.
I have talked to many people who are directly involved in counselling, and they indicate that it's very difficult sometimes to get a pathological gambler back on the straight and narrow path after he's had the problem.
Mr Kormos: You may know that I endorse the position you come here with. The argument that prohibition won't work, I appreciate that. In gambling there are biblical references to gaming and gaming activity. I reflect on my lifetime. I grew up in the 1950s, a working-class family, where a bottle of Seagram's VO probably lasted two and three years and where gaming consisted of an oh-so-illicit Irish Sweepstakes ticket and all the thrill and mystery associated with it. Perhaps part of the problem is what we've done. You see, all this illicit gambling has always taken place but you had to seek it out; you had to be part of that subculture; you had to know where it was going on. Most people didn't want to go to where it was going on and participate in it.
I think we have a chance now as a Parliament to reflect on the fact that what began as a relatively benign lottery promotion by the province -- how long ago was that, 20 years now? -- has flourished to the point where we see the glossy ads and the illusion, the language that's used in OLC's ads, "Win freedom," the red Ferrari, the attractive mate, the whole nine yards.
I spoke today -- because we've been referring to his work from time to time -- with Professor Derevensky from McGill University; I spoke today with Professor Frisch from the University of Windsor because we had been referring to his research. Both of them confirmed what I think some of us had reached after reading a whole lot of the studies, that we're in interesting and strange times in our social development. Both of these, along with other researchers, anticipate that we are at a cusp, because we've got a generation of young people who display a potential for addictiveness to gambling that their parents and no generation prior to them ever did.
I hope you're wrong. I hope that five years from now I can reflect on this and say, "Boy, these guys were wrong"; I hope that I can reflect five years from now and say, "I was never so out of touch before in my life." But the data are there. I understand that this is so high-risk because we've got this generation of people nurtured on video games and electronics, growing up in difficult economic and social conditions, and the slot -- don't tell me that somebody wasn't sitting there with all the skills to know how -- is designed to say, "Walk this way."
One newspaper reporter today in the St Catharines Standard called VLTs "vulgar little thieves." Interesting.
Again, God bless. Good luck.
Mr Burden: May I just make one comment? I can't let the statement go by that Prohibition didn't work, because it depends on what you're looking for in terms of working. If you're looking at the incidence of addiction, it probably did work. Sure, there was crime and so on, but I think most of that was south of the border. I don't think you can honestly say, if you look at the stats in terms of whether or not people were addicted, that it didn't work. We're not suggesting that we go back to those days -- we can't -- but it isn't correct to simply say it didn't work.
The Chair: Thank you very much, Rev Burden and Mr Farraway, for your very thoughtful presentation.
NATIONAL BROADCAST READING SERVICE
The Chair: Our next presentation is the National Broadcast Reading Service, Bob Trimbee, executive director. Good afternoon. I see you have someone accompanying you. Perhaps you could identify that person for the purposes of Hansard.
Mr Bob Trimbee: Good afternoon. My name is Bob Trimbee. I am the executive director of the National Broadcast Reading Service. We are a national organization with head offices at Toronto dedicated to making visual media more accessible to blind, low-vision, senior and print-restricted Canadians.
With me today is Heather Lusignan, director of VoicePrint. It operates a free, around-the-clock audio news and information network. The network is licensed by the CRTC and is available throughout Ontario, in the main through cable television. VoicePrint programming is based on volunteer readings of full-text news and features published by Canadian daily and community newspapers, magazines and specialty periodicals. Though VoicePrint has been in operation for less than six years, it now is the largest national reading service in the world. As described in our written submission, we have two other divisions: AudioVision Canada and AlternateMedia Canada.
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Our interest in charitable gaming flows from the fact that it is one of several fund-raising initiatives by VoicePrint. We are involved in third-party sales of VLTs and have staged a number of three-day casino charities. Our net income from charitable gaming represents about 10% of our operating budget. Specifically, we hope to generate sufficient income from charitable gaming to allow us to expand the local news component of our Ontario service, especially in northern Ontario.
While we are a national organization, we really are a small charity even by provincial standards. There are many charities involved in Ontario gaming whose take from charitable gaming in dollar value is more than four or five times the combined size of the operating budgets of our three divisions.
We receive no operational funds from any level of government. We would not refuse it if it came our way, but we do not go out and seek it. We believe that to the greatest degree possible, charities should earn the bulk of their income. That is one of the great attractions of charitable gaming to us. Government has provided us with an opportunity to raise the money we need, but we have to work to get it. The recommendations in our written brief reflect that view.
They also address another salient factor tied to gaming: Just as large corporations tend to dominate various fields of business, large charities tend to dominate charitable gaming. In principle, that is not a concern so long as the regulatory regime does not ensure this domination in a systemic way. For example, it's unlikely that a small, anonymous charity would be able to stage a mega-lottery such as the current Mount Sinai lottery and the recent Sick Children's hospital lottery. As well, larger charities tend to have greater political and business clout. Either inadvertently or overtly, this power base can produce regulatory benefits which tend to entrench this power base through opportunities and awareness not available generally to all charities at the same time.
I am uncertain whether other delegations follow us today, but if we are the last, and I now see we are not, we hope what we have provided today will help you finish your hearings in a positive and upbeat fashion. If it is your wish, we are available to answer any questions you may have. If there are none, we thank you once again for this opportunity to be part of this process.
The Chair: Thank you very much, sir. I use your service when I'm watching my video terminal, being the stock market quotations. I also listen to your very worthwhile service. We have quite a bit of time, and I'm sure there'll be a number of questions.
Mr Crozier: I don't have any. I want the opportunity to read this. I listened carefully to what you said. Excuse me, I shouldn't say I don't have any. I can't let that go by. In point 2.5 on page 5 of your document you say, "It is not our view that the introduction of video lotteries should be delayed until completion of a comprehensive review of gaming," yet you're concerned about the effect video lottery terminals will have on your ability to fund-raise. Can you help me to understand that when I get it in context?
Mr Trimbee: In our written brief we have said that there are a lot of questions on both sides, either that it's not going to be harmful or that it's going to be the end of charitable gaming, but it's all subjective. There is no really positive evidence one way or another. Our view is that there needs to be a general study of gaming, especially charitable gaming, and how it operates. Because it's going to be in a restricted way, ie, racetracks and perhaps permanent casino sites, it will be fairly well under control. That can be timely to say, "Okay, what is happening?" and if there is a problem that has to be resolved, it has not gotten out of hand; in other words, the fire hasn't gotten so big that you're never going to put it out until it burns itself out.
Mr Crozier: If I understand and you would concur, there's quite a significant lobby that has said in the hotel-restaurant-bar industry, and I will paraphrase, "Introduce VLTs beyond the first step as quickly as possible." To me there's a tone of urgency, and I think legitimately. As far as their business experience is concerned, there is a tone of urgency. But what you're saying is, "Introduce them in racetracks and permanent charitable casinos and don't rush into anything beyond that, but take some time." Is that correct?
Mr Trimbee: That's basically correct. Our view is that when you go to a racetrack, when you go to a charity casino, when you go to a restaurant, when you go to a bar, you're going there for a specific purpose. When you go to one of those establishments and there is a video lottery terminal, that's not the reason you go there; you go there for another reason. It's a very subconscious pressure that leads you into that gambling.
We don't know the effect of that. I'm not a sociologist and I'm not going to pretend I have all the definitive answers. All I'm saying is that there is a good time to take a look and ask: "How did it affect parimutuel betting? How did it affect the take at permanent casinos?" At that point we have some real, empirical evidence that says, "Here is what happens," and you can extrapolate what would happen if it was extended throughout the province in other areas outside those jurisdictions.
Mr Kormos: Your concerns are raised obviously by you here and now, and have been over the course of these hearings, and indeed were anticipated when the minister, in making this announcement, indicated that $180 million is going to be available to charitable organizations.
I'm from Welland-Thorold. When the Thorold Community Activities Group held its Monte Carlo nights, part of the work of organizing it would be to get on the phone, on your telephone tree, and get people out there for that Friday night or Saturday night. The supporters of the Thorold Community Activities Group went there expecting to lose money, wanting to lose money, because they knew it was a fund-raiser for that group. There's an example of a very regionalized group, the Thorold community activities group. They don't have a parent organization; their work is restricted to that one small community.
We heard from B'nai Brith here in Toronto, which spoke about being attracted to a model that was based on historical precedent. In other words, if they were able to raise $1 million a year -- they didn't give us numbers -- in the previous year before slots, they should get the same proportionate amount of global money out of the overall slots revenue. Then you have folks up in Thunder Bay who may well say, "If it's Thunder Bay people blowing their money on the slots, why shouldn't the proceeds that are coming from Thunder Bay go to Thunder Bay organizations?"
We haven't had access to any model that's been anticipated by the government for the distribution of these moneys. You've got organizations that are local only, unique to one region; organizations that are local with a parent organization like Kiwanis, Lions, what have you; organizations like yours that service a community which may even well go beyond the border in theory, such that people are availing themselves of your services who aren't necessarily Ontarians. In anticipation of drafting amendments to try to give some structure to this thought about the creation of a board of charities to help set up the model -- but then of course not all charities are going to have access to the board and there are going to be players who are left out -- have you got any ideas for the type of model the government should be looking at?
Mr Trimbee: If I had the answer, I would be making a lot of money from government right now.
Mr Kormos: Well, they don't have.
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Mr Trimbee: I would say this: In our recommendations, what we have suggested, which probably will make some charities blanch, is that all the revenue from VLTs -- all of it -- should be poured back into the provincial government. None of it, other than the sales fee that a local sales agent would get, would go to the operator; the rest would come into a pool. At that point, we also believe there is a need in the legislation to decide what's a charity, what's a charitable activity. Those are very important. At that point you know who is going to benefit from whatever amount of the proceeds the government determines should be allocated to charitable activities.
Beyond that, as to what they should get, personally and in our organization there is the strong feeling that charities per se should not be allowed to generate more than a percentage of their income, and something sharply less than half, from charitable gaming. We think that to do otherwise is no different than in years past when things weren't quite so tough economically; you just relied on the government and the government would provide everything. We think that's not the way to make sure that charity and the service the charity provides have any stability or long-term viability. There has to be some onus on the charity to find revenue other than through something that they don't physically go out and earn.
But how much should go to each? First of all, you have audited statements that say how much you raise yourself. There is an obvious opportunity for government to take a look at this and say: "If the percentage is now going to be a maximum of this, these are the dollars we've got. We've got this many charities that are eligible. Here's how we'll do it in a very simplified way."
Mr Flaherty: You just touched on that point. I was reading through it fairly quickly; I'll read it more thoroughly later. I noticed the point at the top of page 8, "A charity would be eligible to receive funds generated by video lotteries only if its income during the preceding year from all forms of charitable gaming did not exceed 30% of its gross revenues as recorded in its audited financial statements." I understand the point of not wanting charities to become dependent on government for their funding. Is there any magic to the 30%?
Mr Trimbee: No, I had to pick something. The point I'm making is that something sharply less than half of your revenue should be generated by charitable gaming. We picked that number, but that's just to give us some sort of a guideline. That's not a magic number.
Mr Flaherty: This really goes to implementation rather than the enabling legislation, but do you have any idea how many of the charities in Ontario would qualify if you had that 30% requirement or something along those lines?
Mr Trimbee: No. As I say, I have our definition of what we consider to be a charity, but I certainly have to recognize that in Ontario charitable gaming today there are many organizations that we would consider, for example, not-for-profit, that would be to, say, raise money to send the Peewee hockey team over to Scandinavia for a tournament. In one sense, to us, that's not a charitable service, but it depends on what definition the government of the day wishes to attach to that.
That's why I say it's very important, first of all, to come up with all the guidelines. Then, once we've got the framework, we can take a look at what should be done in terms of distribution of the funds that are raised. To try and solve the distribution problem before you know what you're standing on I don't think makes a heck of a lot of sense.
Mr Flaherty: A number of the items that are in your list of recommendations relate to the implementation stage. The government is committed to further consultations about implementation matters, and I'll certainly make sure this is passed along. I look forward to your organization participating in those further discussions.
Mr Trimbee: I'll be very frank with you: The fact that this hearing was held gave us an opportunity to touch on a number of things that affect charitable gaming, not just the introduction of the bill. That's one of the reasons why we stepped forward to take advantage of that opportunity.
Mr Flaherty: We appreciate it. Thank you very much for your help.
The Chair: Thank you, Mr Trimbee. We've been having these hearings for a little while and you've raised some interesting points for the committee to consider.
ASSOCIATION FOR THE NEUROLOGICALLY DISABLED OF CANADA
The Chair: Our next presentation is from the Association for the Neurologically Disabled of Canada, the executive director, Ms Kathleen Haswell.
Mr Kormos: Chair, if I may, I did note that the Association for the Neological of Canada was scheduled. I was looking forward to their presentation because the neological society, as one which is committed to neologisms -- and of course the Chair knows what a neologism is -- undoubtedly would have explained to us the neologism, Orwellian as it is, of video lottery terminals from mere slot machines. A video lottery terminal is in fact a neologism, but none the less the --
The Chair: Thank you, Mr Kormos. The first question I was going to ask was, as a matter of fact, what is it? I'm too old to hesitate in asking stupid questions.
Welcome. I'd ask you to proceed with your presentation.
Mr Flaherty: Chair, what is the correct name of the association?
The Chair: The Association for the Neurologically Disabled of Canada.
Mrs Kathleen Haswell: Thank you, Mr Chairman. The Association for the Neurologically Disabled of Canada and approximately 25 smaller charities that are operating Nevada ticket sales through municipal or provincial licences wish to thank you for allowing us the opportunity to speak regarding the implementation of Bill 75. All the charities I represent are also conducting bingo venues in their local areas.
AND is a national, registered charitable association that has been operating in Ontario since 1983. We provide in-home therapy programs for individuals who are brain-injured, family support programs and community workshops. AND offers a substantial subsidy for families who cannot afford the expenses of a daily therapy program. We treat children and adults who have a neurological disability through brain injuries at birth or are head-injured later in life.
The Association for the Neurologically Disabled of Canada and the other smaller associations have not received any information from the government about the impact video lottery terminals may have on our existing funding. The introduction of this legislation is also void of any provincial policy or gaming strategy. Charities First has shared with us its report on VLTs and its recommendation for further studies. We need to know what ramifications the introduction of VLTs will have on existing gaming.
Our associations are relieved that the government will be introducing VLTs in a controlled fashion. We wish to express our appreciation for the commitment to help charities through revenues generated. However, bingo revenues for most of our associations have been sliding to 30% to 40% of income generated in 1993. Over the past three years, Nevada ticket sales have allowed us to maintain our fund-raising projections and we have been able to continue to offer our quality programs to the communities in Ontario. If VLTs have a negative impact on Nevada ticket sales, which is what we have heard has happened in other provinces, then this will mean another avenue of potential funding will dry up and we will be faced with cutting our programs to the community.
Our association and many charities do not rely on any government funding to sustain their programs. We are not looking for handouts and we would appreciate some consideration when you do introduce another gaming opportunity that has the potential to take funds away from us.
We respectfully recommend the following:
(1) That after the implementation of stage 1, the government undertake a study of the impact of VLTs on bingos and Nevada ticket sales before stage 2 is introduced.
(2) That this report be shared with all charities and non-profits that currently are operating bingos or Nevada ticket sales.
(3) That the government establish criteria for distribution of VLT revenues to charities that is fair and equitable.
(4) That the committee recommend to the government that charities that can document losses of Nevada ticket income after the introduction of VLTs be given priority status with their application for VLT disbursements to charities.
As with the government of Ontario, this is a very difficult period for charities that rely on their wits and building their expertise in fund-raising to help the disadvantaged, the disabled and vulnerable Ontarians through charitable purposes.
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If you introduce legislation that may have a negative impact on the services we currently provide to our communities, then at least help us to maintain our programs through opening up the other avenue of allocation of gaming revenues for charities.
The Chair: Thank you very much. Mr Kormos.
Mr Kormos: Thank you, ma'am, again. You heard the previous comments by the previous group, and this has been problematic. Again, I think all of us support the proposition of intensive scrutiny of the impact of the slots on fund-raising. It was presented to us by a Mr Pollock, who used to be with the Ontario Lottery Corp and is now heading a consortium that wants a piece of this in terms of a privatized operation of it, that in Alberta the dropoff in sales and break-opens couldn't be attributed to the slots because the dropoff had begun prior to the implementation of the slots. This morning in a conversation with some of the Alberta officials they tended to confirm that same thing, although not being able to indicate whether the continued dropoff was just part of -- again, no real handle on it. One can only respond instinctively and say a buck is a buck, and if it's being spent on a slot it's not necessarily buying a Nevada.
Getting down again to the models of distribution -- because again there are things like snowmobile clubs, and the previous presenters spoke about what might be in the grey areas of charitable organizations. Snowmobile clubs don't do the same work you do, yet down where I come from, and I suspect in other people's communities, they're as much a part of the community and the volunteer component of the community as any other.
I appreciate the need for scrutiny of what's happening here and I think that's incredibly important. I'm confident there are going to be amendments produced making it legislatively necessary. But how do you go about designing a model? This could become like applying to the OLC, the Ontario Lottery Corp, or the trillium fund for funding, and that's nuts. How do you build a model that's accessible to the little organizations and the big ones?
Mrs Haswell: I can only speak for my experience and our association, but certainly getting registered charitable status is not easy, and most sports clubs and your snowmobile club would not be able to get it because you're issuing income tax receipts for charitable donations and therefore there's a much higher scrutiny level. So it might be that the government may wish to look at that as an area of scrutiny.
As far as the dropoff is concerned, and I can only speak for our association, but in the last three years, as bingo revenues have dropped off, we have built increased revenues from Nevada ticket sales. We've exerted quite a lot of energy and changed our whole bookkeeping system and bought a new computer accounting system just so that we would report effectively to the government, and all that work and groundwork in building that up. Consequently in the last three years our income has increased with Nevada ticket sales. So if there was a dropoff, then we would definitely attribute it to VLTs.
Mr Kormos: We're covered on this one.
Mrs Haswell: Yes.
Mr Kormos: This isn't going to be Alberta.
Mr Flaherty: Thank you for coming and making the presentation this afternoon. I realize the important work that your association does for brain-injured persons, who certainly need the financial support.
With respect to the ramifications of the introduction of video lotteries, one of the realities is that there's a substantial amount of illegal video lottery activity in the province of Ontario today. So accurately, I suppose, the government, through Bill 75, is not introducing video lotteries but rather legalizing an existing situation where we have by estimate 15,000 to 25,000 illegal machines, which at the present time aren't benefiting the people of Ontario, through the government, and they're not benefiting the charities of Ontario either.
I take your advice about going slowly and monitoring carefully and being analytical in the process. I heard Mr Kormos's comments about what we heard this morning from some of the other provinces and the information we have from them, and certainly our government wants to learn from the positive and some of the negative experiences that other jurisdictions in Canada have had. We're not proposing what happened in some other jurisdictions where these machines were introduced in corner stores, for example, which is not the government's plan here.
There will be further consultations with respect to the implementation of video lotteries in the province, and I hope that your organization will participate in those.
From a statistical-analytical point of view, it looks like, based on the limited experience we have in Ontario at Windsor, after a reasonable period of time, a year or so after the casino had opened, the bingo facilities and charity associations bounced back, not to what exactly they were before, but they did bounce back revenue-wise. Again, we're dealing with a theory about different clientele and different locations, and I'm not all that comfortable with limited studies, and I think I accept your advice that we have to be careful and monitor this situation on a phased basis carefully as we go through it, and I thank you for bringing that message to us.
Mrs Haswell: Mr Chairman, I would like to just make another comment. I was in Regina this weekend, and in the hotel there was a card there that gave you information about their Regina casino. I would like to say I'm a person who's never ever been in a casino, so I really don't know what they're like, but I was really interested to read that there were 40 tables and 500 VLTs there. This sort of gave me a little bit of a grasp of when you're introducing VLTs. As somebody who is inexperienced in this area, I imagined five or 10 machines, and there is Regina apparently. In the local Regina paper for the weekend -- in fact I brought you a copy of it -- there is quite a discussion in the newspapers about the income that was projected to be generated from the casino was $8 million to $10 million and the realization at the end of the year totalled $3.8 million, and there was $37 million in expenditures to get it open. It just might give you an idea. I don't know how many you're suggesting opening in a year, but it might just give you an idea of one, what to expect for revenue.
The Chair: Thank you for bringing that to our attention. We've heard from three provinces this morning -- actually seven, but we did not hear from Saskatchewan.
Mr Crozier: Just to respond a bit to what was said about illegal video lottery terminals, we would all wish that the illegal gambling in this province were all brought under strict regulation and control, and I suggest if it were and the government got its share, that we might virtually eliminate tax, but that's not going to happen. The legalization of VLTs in the province of Ontario is not going to eliminate the illegal VLTs, because right now those who have been operating outside the law are no more or no less afraid of the law than they were before, and they're going to continue to exist because they don't have to share any of those revenues with the government or charity or anyone else. So if that were the only reason to introduce these VLTs, I would support it wholeheartedly, if it were going to get rid of all the illegal stuff.
You have made a couple of good points. One is that the government should certainly not proceed in any event, but certainly not beyond very strictly controlled areas, without sufficient study, and they have none. The government of the province of Ontario has not submitted one piece of evidence as to how VLTs are going to affect charitable gaming in this province. You not only don't have it; we don't have it.
I'm certainly in favour of strategic planning, because that's the only way that I think you can reasonably project and be prepared for the future.
I think those points that you've made are certainly well taken. My gut feeling is, Mrs Haswell, that when it comes down to dividing the spoils, your organization is going to have to fight tooth and nail with some who are much, much larger than you. Certainly I, as well as you and others, hope that this will all be done equitably and fairly, but my gut feeling is that it's going to be a struggle and that we certainly should watch to see that smaller organizations, if I could compare you to some of the giant ones, fare well in this. So thanks for your presence here and your presentation.
The Chair: Mrs Haswell, I thank you for attending and your presentation here today.
The plane, by the way, leaves at 8:50 am tomorrow morning at Pearson International for those who are flying. The hearing is adjourned to 11 am at the Holiday Inn east meeting room in Sarnia.
The committee adjourned at 1712.