BREAK OPEN TICKET PROGRAM MANAGEMENT ALLIANCE
COUNCIL OF CHRISTIAN REFORMED CHURCHES IN CANADA
WOODSTOCK AGRICULTURAL SOCIETY
ONTARIO HARNESS HORSE ASSOCIATION
ONTARIO HOTEL AND MOTEL ASSOCIATION
STANDARDBRED HORSEMAN'S ASSOCIATION
B'NAI B'RITH YOUTH ORGANIZATION
HEALTH PROMOTIONS STRATEGIES INC
CONTENTS
Wednesday 7 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
Addiction Research Foundation
Dr Robin Room, vice-president, research
Break Open Ticket Program Management Alliance
Mr Ron Callaghan, president
Mr Craig Hurst, past president
Council of Christian Reformed Churches in Canada
Mr Reinder Klein, communication associate
Classic Canadian Group
Mr Fernando Di Carlo, president and CEO
Ms Paola Commisso, national sales director
Woodstock Agricultural Society
Mr John Gee, general manager
Barrie Raceway
Ms Jane Rees, general manager
Days Inn
Mr Jonas Vaskas, general manager
Ontario Video Gaming Corp
Mr Marshall Pollock, president
Ontario Harness Horse Association
Mr Earl Lennox, director
B'nai Brith Canada
Mr Frank Dimant, executive vice-president
Mr David Colodny, financial management chair
Racetracks of Canada
Mr Roland Roberts, executive vice-president
Ontario Hotel and Motel Association
Mr Rod Seiling, president
Canadian Casino News
Mr Ivan Sack, editor
Standardbred Horseman's Association
Mr Lou Liebenau, representative
Big Sisters of Peel
Ms Eileen Moore, director of development
Ontario Jockey Club
Mr Helmut Biemann, vice-president, business development
B'nai B'rith Youth Organization
Mr Gary Gladstone, director of charitable gaming
Health Promotions Strategies Inc
Mr John Iverson, president
Ontario Arts Network
Ms Pat Bradley, executive director, Professional Association of Canadian Theatres
Ms Anne Kolisnyk, executive director, Ontario Association of Art Galleries
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:
Ms IsabelBassett (St Andrew-St Patrick PC) for Mr Doyle
Mr BruceCrozier (Essex South / -Sud L) for Mr Chiarelli
Mr JimFlaherty (Durham Centre / -Centre PC) for Mr Tilson
Mr GerardKennedy (York South / -Sud L) for Mr Conway
Mr PeterKormos (Welland-Thorold ND) for Mr Hampton
Mr E. J. DouglasRollins (Quinte PC) for Mr Leadston
Mr Terence H. Young (Halton Centre / -Centre PC) for Mr Parker
Also taking part /Autres participants et participantes:
Mr TonyMartin (Sault Ste Marie ND)
Clerk / Greffière: Ms Donna Bryce
Staff / Personnel: Mr Andrew McNaught, research officer, Legislative Research Service
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The committee met at 0920 in room 151.
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.
ADDICTION RESEARCH FOUNDATION
The Chair (Mr Gerry Martiniuk): Good morning, ladies and gentlemen of the committee. I see a quorum. I hope everyone who is proceeding to Thunder Bay later in the day has brought their bags this morning, which you will need in the afternoon.
Our first presenter is the Mississauga Newnorth Gymnastics Club, but it would seem they're not here. Fortunately, Dr Robin Room of the Addiction Research Foundation is present. Dr Room, could we proceed with you? Please sit down. You're the vice-president of research, I understand, of the Addiction Research Foundation of Ontario. We have 20 minutes. Please proceed.
Dr Robin Room: Thank you for this opportunity to comment on Bill 75. I've already been introduced.
The Addiction Research Foundation is a knowledge-based organization engaged in research, treatment, education and programs, with the primary mission of working with others to prevent and reduce the harm associated with alcohol, tobacco and other drugs in Ontario communities. We are also authorized by our board to work on gambling problems as support allows and as compatible with our primary mission.
My testimony today is from the perspective of a public health agency with specific responsibilities for reducing harm in the area covered by Bill 75. My suggestions will focus on specific aspects of the bill, but the foundation's overall concerns about alcohol and gambling problems are shared by many others in the public health field.
Bill 75 concerns the regulation of two popular commodities: alcoholic beverages and gambling. Both are sources of substantial revenues for the province, and a primary purpose of Bill 75 and the acts it amends is to ensure that revenue flows to the province effectively and without corruption. Alcohol and gambling are also sources of pleasure to many people in the province. The province can derive substantial revenues from these commodities, in fact, precisely because people are willing to pay substantially more than the cost of production and distribution for these pleasures.
Both commodities, of course, also bring pain and harm to many people in Ontario. In conjunction with the Canadian Centre on Substance Abuse, the Addiction Research Foundation recently carried out a study of the economic costs of alcohol-related problems in the province. The study was conducted with state-of-the-art methodologies, applied conservatively. The estimated cost to society of alcohol-related problems in Ontario for the year 1992 was $2.9 billion. This is about twice the total revenue to the province from alcohol sales.
This cost estimate includes health costs and conservative estimates of policing costs and productivity costs, but it by no means includes all the harm from drinking. Behaviours related to drinking -- not only drinking-driving and alcohol-related violence but also less dramatic and more everyday behaviours -- have a devastating effect on many families in Ontario. In a survey conducted last year by the Addiction Research Foundation, 9% of all Ontario adults reported that their own drinking had had a harmful effect on their home life or marriage at some time, and 3% reported such a harmful effect within the last year. Similar or higher percentages reported that their own drinking had harmed each of four other important life areas: their friendships or social life; their work, studies or employment opportunities; their physical health; and their financial position. From another perspective, one quarter of all Ontario adults report that in the past year a member of their family or a friend had had a problem with drinking.
We presently have no estimates to match the ones I gave you for alcohol of the economic costs to society of problematic gambling, but we do have data on the harmful effects of gambling on these life areas from a 1994 survey: 4% of Ontario adults reported harm to their family's financial position from their own gambling in the previous 12 months and about 1% reported problems in each of the other life areas: their home life or marriage; their friendships or social life; their work, studies or employment opportunities; and their physical health.
These data underscore the fact that both alcohol and gambling behaviours have externalities, as economists would term them; that is, in addition to the potential pleasure or pain for the drinker or the gambler, there is also much potential for harm to others.
It is largely for this reason that both alcohol and gambling have in the past been the subjects of stringent and indeed swingeing legislation by the province. The sale of alcoholic beverages was totally prohibited for several years in the 1920s and most forms of gambling were prohibited for many decades. For both commodities, the eventual decision by the province was against prohibition and instead the province eventually adopted for each commodity a strong control system, involving a combination of provincial operation of production or sales and a well-enforced licensing system for private retailers.
Ontario still has some elements of a strong control system for alcoholic beverages, but over the decades the alcohol control system has been considerably loosened by successive governmental decisions. In these decisions, the convenience of the drinker and the interests of those involved in the industry have often been stronger considerations than the countervailing interests of public health and public order.
At the technical level, we may cite two reasons for this: that there has not been a clear and explicit standard in the legislation defining the public interest in terms of the reduction of alcohol-related problems and that the ministries responsible for dealing with the problems from drinking -- for instance, the Ministry of Health and the Ministry of the Solicitor General -- have no formal role in the regulatory process. The same point applies to legislation on control of gambling.
This brings me to my first recommendation. Bill 75 does not include in its language any guidance as to the purpose of the regulatory machinery for which it provides. An answer should be given to the question the bill invites: Why is the province interfering so forcefully in the free market for these two commodities? My suggestion would be that subsection 3(3) of the bill should be amended to remedy this, so that it reads as follows.
First, the existing sentence: "The commission shall exercise its powers and duties in the public interest and in accordance with the principles of honesty, integrity and social responsibility."
Then the second sentence: "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 and work and family life as a consequence of consuming alcoholic beverages or engaging in gambling."
The second point to make concerning the bill is that it might be literally described as enabling legislation. It considerably increases the latitude for any future government to make substantial changes in both the alcohol control and gaming control systems without further recourse to the Legislature. The extent to which it continues down the path of turning alcohol and gaming controls into a matter of governmental decision rather than legislative action is illustrated by the fact that many of the major initiatives in the ministerial announcements of June 13 concerning the legislation are nowhere spelled out in the act.
There is no provision in the bill concerning a "comprehensive strategy of research, public awareness and treatment to deal with problem gambling," to quote from the press package at the time of the announcements. Instead, there is only a provision that video lottery proceeds may be paid out as the government of the day may direct. The restrictive guidelines which have been announced on the location and number of video terminals in the province are a matter of government policy rather than being spelled out in the legislation.
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The subsections which provide that powers and duties may be transferred from the Liquor Control Board of Ontario to the new commission do not in any way restrict the nature or extent of such transfers. This ambiguity opens the possibility that some future government could use these provisions to eliminate the LCBO in all but name without further recourse to the Legislature. This is a major concern, because the LCBO is an important partner with other agencies in controlling alcohol sales and promoting the wise use of alcohol.
In principle, the bill thus opens up alcohol and gaming controls, areas with substantial public interests at stake, to unforeseeable actions by future governments for which there would little immediate accountability. The committee may wish to consider whether it would be in the public interest to amend the bill so that important substantive aspects of the alcohol control systems and the gambling control systems, aspects which potentially affect the rates of harm from drinking or from gambling, cannot be altered or eliminated without further legislative action.
The third point which I wish to make concerns the issue of the division or combination of functions in government regulatory bodies. Both those concerned about alcohol problems and those concerned about problems from gambling may well worry that combining the regulatory agencies will dilute the attention to each problem. This need not happen with proper staffing levels and organization and appropriate regulatory provisions, but it will be a matter for watchful concern in the coming years. The LLBO is already overburdened in terms of its regulatory responsibilities.
On the other hand, I'd point out that the approach of Bill 75 might well be pushed further. The functions of the Ontario Racing Commission with respect to the regulation of gambling, for example, could be brought into the new commission. In addition, the government's perceptions of "a potential conflict of interest" between sales functions and the regulatory functions of the LCBO, as described in a recent news release, potentially applies also to the Ontario Casino Corp and the Ontario Lottery Corp. The regulatory functions of these two gambling corporations could also be transferred to the new commission.
A further suggestion in the interests of public health would be to consider bringing sales of tobacco, another legal commodity with great potential for harm to health, within the jurisdiction of the new commission. A system to license sellers of tobacco parallel to those for alcohol and gambling has the potential to reduce sales to minors and to reduce opportunities for illegal untaxed tobacco products to be sold in stores.
Lastly, a couple of specific points. The provision for the potential allocation of revenues from video lotteries, which the government has put forward to support the establishment and operations of a comprehensive gambling strategy, might appropriately be expanded so the burden is shared among all modes of gambling, and parallel provision might be made for support for a comprehensive strategy to deal with alcohol problems.
Also, an amendment to Bill 75 could stop a new and unrecognized erosion of the provincial alcohol control structure. A recent review of unrecorded alcohol consumption in Ontario using three sources of estimation found that beer from you-brews and wine from you-vints account for between 2.5 million and 3 million litres of pure alcohol consumed in the province, or about 5% of the recorded alcohol consumption in the province.
It's clear that this segment of the alcohol market is not under effective controls. The number of you-brews and you-vints advertising in the yellow pages exceeds the number which are paying the provincial tax on their products. Many outlets have progressively reduced the effort required by the customer to make the beer or wine so that the distinction from a wine or beer store has become smaller, and there's reason to believe that underage customers are not effectively screened. To avoid a further erosion of the control system, we believe that the you-brews and you-vints should be brought unambiguously under the jurisdiction and control of the Alcohol and Gaming Commission.
Again, I thank you for the opportunity to discuss this bill. In the coming days, as you hear testimony from a variety of parties and consider possible amendments to the bill, I would urge you to keep a focus on attuning the legislation to the purpose for which alcohol and gambling controls exist: not only to secure provincial revenue and to provide for an orderly market, but also to reduce to a minimum the very substantial health and social costs which alcohol consumption and gambling entail.
The Chair: Thank you, Dr Room. We have approximately two minutes of questions for each caucus.
Mr Peter Kormos (Welland-Thorold): The province is proposing 20,000 slot machines throughout the province. That translates to one slot machine for every 550 population. I come from small-community Ontario --
Mr Jim Flaherty (Durham Centre): On a point of order, Mr Chair: Mr Kormos is referring to slot machines. There are no slot machines in Bill 75.
Mr Kormos: Cut the crap.
Mr Flaherty: The definition --
Mr Kormos: I come from small-town Ontario, Welland, which has a population of 48,000 people.
Mr Flaherty: Calling them slot machines is inaccurate.
The Chair: Please proceed.
Mr Kormos: At one slot for every 550 in the population, that means 87 slot machines in a small-town community like Welland. That's an incredible exposure.
People like Mark Griffiths from the University of Exeter have done a lot of research about slots as being the most addictive form of gambling, as being the entry point, especially for adolescents, and especially now the electronic slots and the way they are akin to video games. Research has been done into the addictiveness of video games.
I appreciate you're talking about a regulatory body and the need to give it the tools to properly regulate. Should we even be considering introducing slots at the rate of one for every 550 population in view of the incredible strength of the research that indicates they're incredibly addictive and that they draw people who might otherwise not be drawn into gambling regimes? They draw people into gambling lifestyles. Shouldn't we be rejecting the proposition of slots?
Dr Room: The province, in common with many North American jurisdictions, has been increasing the availability of gambling in general. The research that's been done on the video machines has primarily been done in Britain where there are no effective age controls on access to them. That's been the focus of the literature in Britain. I guess this is a decision essentially for the polity to make about how much gambling they want to have, how much available in the province. From my point of view as a researcher, I would focus on the availability of gambling as a whole. This is one more form of availability, but it's already possible to gamble in any town in Ontario in a number of different ways.
Mr Kormos: Should we be increasing the access to it? That's the real question.
The Chair: Thank you, Mr Kormos. Mr Flaherty. We do have a plane to catch today, gentlemen. If I'm perceived rude, I don't mean to be; however, we do have a timetable.
Mr Flaherty: I take it, sir, your statement about the province increasing the availability of gambling doesn't take into account the illegal gambling of which we're aware. You are aware of the existence of 15,000 to 20,000 illegal VLs in Ontario today?
Dr Room: Yes. I'm not personally --
Mr Flaherty: So the reality is we have these machines in operation today where persons acting illegally are profiting from people in the province of Ontario. Correct? My point is, we have to face up to the reality, don't we, of the existence of this social phenomenon that some people do enjoy this form of entertainment. In that regard, I want to ask you about the level of funding that you view as sufficient in terms of dealing with alcohol and gambling addiction difficulties in Ontario. What has been your experience that way?
Dr Room: We have an alcohol and drug treatment system in Ontario that I think is very cost-effective in comparison to other jurisdictions. Someone from Sweden, for instance, made the calculation that they have about the same population, about the same level of alcohol and drug problems, and spend about six times as much per capita on their treatment system. It's a stretched system already. The tendency is to talk in terms of treatment of gambling problems being added to the duties of that system. I think there will be a need for an allotment of extra resources for them to take on that task.
Mr Flaherty: You're aware of the commitment on the part of the government to contribute 2% of the gross revenues towards this addiction, towards the education and treatment?
Dr Room: Yes, I'm aware of that. That certainly is a good start. We can only work in sort of rules of thumb until we've actually got more experience with the system, but that certainly is a good start on provision of the extra resources that are needed for gambling.
Mr Bruce Crozier (Essex South): Thank you, Mr Room. You've given us some good information and some good comments, so in the very short time we're given I don't want to dwell on those. I do want to give you an opportunity, though, to point out what I perceive as the position of the Addiction Research Foundation -- if you agree with me, you may want to elaborate -- that is that you're not here to have everything eliminated, but you serve a much better purpose than that. Could you define it for us, because some people think that you're against gambling, you're against alcohol, and that's not the case.
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Dr Room: No. First of all, we're an agency of the province of Ontario. We accept that it's properly a policy decision by the people and by the Legislature about the availability and the degree of availability of alcohol, and gambling for that matter. Our efforts are devoted to reducing the harm that goes along with that availability. We are in no way arguing that there should be a great change towards greater restriction in these areas; we're arguing to you that we need to face up to the fact that there are problems associated with both of these commodities and that the control system actually has a function in holding down the level of those problems. The control system itself is not sufficient to deal with alcohol or gambling problems, as we were just discussing in this colloquy, but it is an important component of the public health approach to these issues.
Mr Crozier: Therefore, if you were to warn the government about some of the very harmful aspects of this type of gambling -- and I'll still continue to call them slots because I think people understand what we're talking about when we say "slots." I'll give you an example. We say saw-horses in the carpentry business. We don't call them fixtures for holding wood on which to cut. People understand some of these things. All we're trying to do is use a term that everybody understands. Would you think the public understands what a slot machine is?
Dr Room: I expect so, but I have no data on that.
The Chair: Thank you, Dr Room, for your very thoughtful presentation.
Dr Room: Could I just add that we asked Professor Usprich from the faculty of law at the University of Western Ontario to give a commentary. It has some technical points that the committee may wish to take into consideration, so I'm leaving it with the committee.
The Chair: Yes, we have that. Thank you very much indeed.
Mr Kormos: If I might, Chair, while we're waiting for our next presenters to seat themselves, here we are on day two. I anticipate that we have very limited time as often as not to interact, exchange questions and answers with presenters in view of the tight time frames.
The Chair: That's correct.
Mr Kormos: I acknowledge and understand the tactic of raising points of order while somebody is attempting to utilize their time in the way they best see fit as a way of reducing the time available to them. In fact, I am probably as good at it as anybody else is. I would please, Chair, call upon you to show some leadership to control that sort of stuff. I know how the game is played. If people want to play that game, by God, I'll play it, but I'd rather the government --
The Chair: Thank you, Mr Kormos. If the right becomes abused, I will certainly correct it.
BREAK OPEN TICKET PROGRAM MANAGEMENT ALLIANCE
The Chair: Our next presentation is from the Break Open Ticket Program. Could you please identify yourself for the purpose of Hansard and then proceed.
Mr Ron Callaghan: Good morning. My name is Ron Callaghan and I'm the current president of the Break Open Ticket Program Management Alliance. With me is Mr Terry Sisson, the past president, and Mr Craig Hurst, another past president of the organization.
It's an industry organization that represents 32 Ontario companies that provide products and services to Ontario charities, raising funds through the sale of break-open or Nevada tickets. For those of you who are unfamiliar with Nevada tickets, they're a form of charitable gaming lottery which has been permitted in the province since the 1970s.
Nevada tickets are sold in many types of locations. They were originally in non-profit clubs such as the Royal Canadian Legion and other facilities owned by a charitable or non-profit organization for the purposes of supporting community and charitable activities. In 1987, the Minister of Consumer and Commercial Relations further permitted the sale of Nevada tickets in third-party locations such as convenience stores and liquor-licensed establishments. This action was taken in order to allow a greater number of charitable and non-profit associations to benefit from this gaming activity.
A tremendous expansion in the break-open ticket market took place between 1990 and 1995 as thousands of retailers, under regulation of the Gaming Control Commission, began to support community organizations by providing retailing opportunities for these publicly demanded lottery tickets.
Today Nevada tickets generate an estimated $1.3 billion in sales, with $960 million paid out in prizes to the players, at least $200 million going to charities and non-profit groups to support their causes, approximately $28 million to municipalities and the provincial government in the form of licence fees, and approximately $112 million going to the retail and commercial sectors for their support of this activity. This economic activity supports thousands of jobs in the charitable, government and commercial sectors of the Ontario economy.
The budget put forward by the Ontario government on May 7 outlined a three-stage implantation of video lottery terminals in the province. Phase 1 would see their introduction at racetracks, phase 2 at charity casinos and phase 3 would further the expansion of video lottery terminals by introducing them to liquor-licensed establishments across the province.
The Break Open Ticket Program Management Alliance is adamantly opposed to the introduction of video lottery terminals, but most particularly to the phase 3 implementation. The impact of phase 3 will be devastating to our industry and will cause a negative impact on related industries, but first and foremost will cause tremendous financial hardship on the charities and non-profit organizations we represent. Losses to these community associations will mean a reduction in community support services they provide. Experience in other jurisdictions indicates that the introduction of video lottery terminals to licensed establishments has impacted Nevada sales by up to 60% in some areas.
We'll look at a breakdown of Nevada sales and the impact on each sector. We'll be conservative and take a look at just a 40% drop in sales. Current sales are around 1.2 million units per year, but we'll be conservative and just look at one million units per year.
Each unit or deal contains 2,184 tickets selling at 50 cents each, producing a total of $1,092. Prizes of $800 per deal leave a gross profit of $292, a 73% payout.
Deductions from gross profit:
First is licence fees of 3%, or $24 per box, revenue to provincial and municipal governments totalling approximately $24 million. A 40% reduction would mean a loss of $9.6 million from government coffers. I know that many municipal governments factor this income into their budget calculations. Municipalities which are already facing cutbacks from transfer payments and tax losses due to high unemployment can ill afford another cutback.
Sales commissions and allowances paid to retailers and club sellers are to a maximum of 5% or $54.60 per unit, or $54.6 million. Reductions here would amount to close to $22 million. This reduction will most certainly create job losses in the retail sector.
Product sales of up to 4.5%, or $48 million: This accounts for a large number of jobs in the manufacturing sector as well as the gaming equipment supplier and distributor sector. In fact, market pressures and competition keep costs well below this maximum, which creates more funds for the charities. A 40% reduction in this would be $19.6 million.
Management or service fees of up to 4%, or $43 million: 40% of that costs $17 million. A complete industry has been created in the last few years, creating employment for over 1,000 people in this sector.
This is another sector which does not always collect the whole 4% fee because of market pressures and also because many licensees sell their own Nevadas and manage their own programs. For example, approximately 80% of my sales represent self-managed groups.
The resultant net to charity: Although the minimum net to charity is $120.58 per box or $120 million a year, reduced expenses as previously mentioned probably mean the realistic net to charities is closer to $200 million per year -- a 40% loss meaning a reduction of $80 million to the charities and non-profit organization in your communities.
A large portion of our clients are charitable and non-profit organizations which rely almost entirely on the sale of Nevada tickets to fund the programs that are so necessary in our communities today. Many have already suffered due to government funding cutbacks and would be devastated by a loss of 40% to 60%.
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Let's review these potential losses based on conservative estimates of a million boxes and a 40% reduction: licence fees of $9.6 million, retailer commissions of $21 million, product cost to equipment suppliers and manufacturers of $19 million, management fees payable to gaming service suppliers of $17 million -- a total loss of $68 million -- and a minimum loss to charities in Ontario of $120 million. This does not even mention or take into account volunteer hours donated by community-minded citizens dedicated to their cause. Thousands of volunteers spend time each year managing Nevada programs in order to maximize profits for their charities. The break-open ticket industry and the charities of Ontario cannot afford any loss of this kind, especially in today's economy.
It is estimated that each video lottery terminal will take approximately $25,000 a year from a community. If a small community has 20 machines, its economy will lose approximately $500,000 per year. Think of each of the small communities in your ridings. This means $500,000 will not be spent on local goods and services. How many people will lose their jobs because of that decreasing economy? Ten thousand machines will remove $250 million; 20,000 machines, $500 million. Ontario cannot afford these losses. Considering what's happening in Alberta, where the provincial government is taking a long look at the impact of moving too quickly on video lottery terminals, perhaps the Ontario government would be wise to heed its warning.
The hospitality industry claims to create thousands of jobs with the introduction of video lottery terminals. What will these people be doing? How many people does it take to serve a person sitting on a stool stuffing coins into a machine?
In closing, we urge you to closely examine the impact of phase 3 of the introduction of video lottery terminals in your communities. You will most certainly realize that Ontario communities will be best served by not allowing video lottery terminals into licensed establishments.
Mr Flaherty: Mr Callaghan, thank you for coming today. I gather that your concern is really a concern related to market share for Nevada tickets and break-out tickets and the preservation of that market share for the benefit of the charities that do benefit from those sales. Is that fair enough?
Mr Callaghan: That would be fair.
Mr Flaherty: The intention of the government, as I'm sure you're aware, is to take a controlled, staged approach -- you've referred to stage 3 -- so that with the introduction of video lotteries, one would first see the racetracks and the charity gaming halls, and then have an opportunity to analyse that impact. Is that an approach with which you agree?
Mr Callaghan: Yes, we would agree with that.
Mr Craig Hurst: To the extent that there's a need to support certain types of gaming activities in the province, we have no opposition to the introduction of video lottery terminals to racetracks and other established gambling locations.
Mr Flaherty: If we look at the overall concern, I'm sure you'll agree with me that your concern and the concern of all those involved in raising money for charities is to increase the funding for the charities in the province. This legislation has the commitment of the government to increase that funding by up to $180 million, and I'm sure that's a goal with which you would agree.
Mr Hurst: That would be an agreeable goal if indeed there was a guideline in place that was understandable in terms of how those dollars were to be divided among the charitable organizations currently receiving gaming funds.
Mr Flaherty: I understand your concern. Your concern is more along the lines of how this is to be implemented to make sure there's fairness and balance.
Mr Hurst: That's clearly a concern, not only of ours as the commercial side of the industry, but certainly of our charities that we represent as well.
Mr Terence H. Young (Halton Centre): I know a little bit about your industry, because I worked with Crime Stoppers and we did fund-raising through Nevada tickets. I wanted to ask you two questions. Are these assumptions based on video lotteries being placed in the same places that people buy Nevada tickets? That's the first part of the question.
I don't know if you know that the finance minister committed $180 million -- and it's hard to estimate exactly what will come out of it -- of new money to charities in Ontario. With your figures you're predicting an $80-million loss. Why couldn't the new money address the loss in the communities? It's a lot more money.
Mr Hurst: Again, there's not a clear indication as to how those dollars would be allocated. There are some other subsidiary concerns as well. The introduction of video lottery terminals will do considerable damage to the commercial investment that the industry has made, particularly as it has grown rapidly over the course of the last five years. Millions and millions of dollars and thousands of jobs have been invested and created in the province for which there's no clear-cut vision of the future.
Mr David Ramsay (Timiskaming): Thank you for your presentation. I'm very sympathetic to the job loss that's going to happen in your industry and I don't see any replacement, because we were told yesterday that VLTs and slots are not made in Ontario. So whenever this happens, we will have to go out of the province, maybe out of the country, to buy these machines.
What really concerns me, though, and you've mentioned this very well in your presentation, is that with the Nevada-style ticket, what governments in the past have done is given directly to charities the tools to raise their own money. What this government is going to do is make charities dependent upon government handouts again, rather than allow the baseball team, the figure skating club, the Legionnaires, to do the work that they do in the malls and in their organization clubs to raise their own money. It's like a big step backwards. Why take the tool away directly from those groups that are there working with your product and working towards self-sufficiency?
Mr Callaghan: Exactly, and one of our concerns is not necessarily the large, well-known charities, but the small, community-minded charities that are in the small towns out there that are making maybe $500 a year or $1,000 a year through the Nevada program that would probably not be available for any money coming down from the video lottery terminals.
Mr Gerard Kennedy (York South): I think people don't realize, as someone who's been involved with a charity that didn't use tickets but knows very well how it operates, that it's a very simple process that exists now. I think what we're looking at are layers and layers of government being added on here. If you look at the path, it goes through the Ontario Lottery Commission, and economic development is involved and so on that will change the whole nature of this. The participatory part also you've mentioned is a loss. In other words, people are involved right now in the community in terms of raising the money.
I wonder if you have any comment about the distinction between the hard gambling -- and the gambling industry is known to be represented by slot machines and the electronic versions -- versus the softer gambling that is with breakaway tickets, in other words, more restraint that people can exhibit with lottery tickets and breakaway tickets. Do you have a comment about that?
Mr Hurst: Certainly, the indication from Alberta in particular, where a major public inquiry was conducted last year, and work done by Angus Reid, has indicated that the softer forms of charitable gaming and government lotteries are far more acceptable to the public than the electronic form. According to Angus Reid, only 29% of Canadians are in favour of video lottery terminals, and 54% clearly oppose, with the remainder being undecided. I think that spells out the public attitude towards the electronic form of gaming.
Mr Kormos: Hell, Mike Harris was opposed to it until he made his commitment to a tax break for the very rich, which created a revenue problem, so he's got to raise money on the backs of little people now by way of slots.
You make an estimate, gentlemen, of $25,000 a year being taken from a community for each slot machine. I come from Welland and I represent the communities of Welland and Thorold. Welland has a population of 48,000 people. On the ratio proposed by the government of 20,000 slots for the province, that would mean 87 slot machines in the city of Welland alone. At the rate of a mere $143 a day in each slot, you're talking about $1,000 a week from each slot, $87,000 a week from 87 of them, almost $500,000 a year from a small community like Welland, already facing desperate levels of unemployment.
That's almost $500,000 a year that ain't being spent in supermarkets, that's not being spent in shoe stores, that's not being spent on household supplies, that's not being spent on clothing for your kids. We're talking far bigger bucks. I appreciate your efforts to estimate this, but my anticipation and our growing familiarity with the insidious addictiveness of slots indicates that we're talking about sucking far more than $25,000 a year per machine from each community. We're talking about crippling a whole lot of small business people, along with fund-raisers like yourself, by virtue of the money that the slots are going to suck out of the pockets of hard-pressed people in communities like Welland and Thorold and across this province.
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Mr Hurst: Those numbers do not reflect the loss of licensing revenues being paid to the municipalities at the rate of $24 million a year either.
Mr Callaghan: The other comment I would make is that I've done some reading on what's happened in Alberta, and to my knowledge there has been no one who has robbed $100,000 from their company to play Nevada tickets, as an illustration.
The Chair: Thank you very much, Mr Callaghan and your associates. Did you mention when Nevada tickets were introduced?
Mr Callaghan: In the 1970s.
COUNCIL OF CHRISTIAN REFORMED CHURCHES IN CANADA
The Chair: Our next presenter is the Council of Christian Reformed Churches in Canada, Mr Klein. Welcome, Mr Klein. We have received your written presentation, and you have 20 minutes to make an oral presentation. If you would proceed.
Mr Reinder Klein: Esteemed committee members, I must acknowledge, before I start reading my text, to feeling a little bit out of place as a representative of a Christian group. Churches are also apparently charities, and it seems remarkable to me that we have an opportunity to have some of these VLTs now in our churches and we can benefit from the largess of the general public.
Mr Ramsay: How many do you want?
Mr Klein: On behalf of the Council of Christian Reformed Churches in Canada, representing some 150 congregations in Ontario alone, I thank you for granting us the opportunity for publicly expressing our profound concern about the expected passage of Bill 75. We strongly oppose this bill.
My name is Reinder Klein. I serve the CCRCC as communication associate. It may interest you to know that the Christian Reformed Church is a Protestant denomination in the Presbyterian-Calvinist tradition. Many of our members, though by no means all, trace their roots back to The Netherlands, a nation small in size but large in affection for Canada.
On August 25, 1993, our national council's executive secretary Rev Arie VanEek and I appeared before the standing committee on finance and economic affairs for a hearing on Bill 8. That bill sought to approve the licensing of casinos in Ontario. The brief that we presented at that time included this statement: "We oppose the passage of this bill because we consider the proposed legislation it contains to be morally unconscionable, ethically reprehensible, philosophically indefensible and economically irresponsible." A copy of that brief is attached to some of the briefs that you have before you. With your permission, I would like to read two paragraphs from that earlier brief.
"Gambling," in our view, "be it by way of lottery or casino," or VLTs, "we consider to be an increasing blight in society, a celebration of a way of life that ultimately leads to death, morally and spiritually. This growing preoccupation with gambling we see as symptomatic of the sterile materialism that fuels the rapacious consumerism of our day. For a government blatantly to exploit the common delusion of the quick fix, to base major fiscal policies on a distortion of the truth and to give in to the special-interest groups' selfish demands for a further broadening of the unproductive gambling industry is, in our view, a cynical miscarriage of public justice. For that reason, we hold that to introduce, support and pass legislation allowing the establishment of" VLTs "in Ontario is morally unconscionable and therefore unacceptable."
Our response to the intent of Bill 75 now under discussion differs little from the thrust of our earlier brief. Consistent with what we said then, we hereby once more express our deep dismay about the government's active and ongoing involvement in the sorry business of gambling. That a conservative administration should introduce legislation aimed at inflicting VLTs on the citizens of Ontario is the more perplexing given the sad and widely published experiences with the pernicious instruments elsewhere.
We see Canada generally and Ontario in particular as extraordinarily blessed. The envy of the world, our great country is rich beyond compare, stable and peaceful as few other nations. Yet our society is undeniably materialistic; its guiding principle appears to be the notion that a person's ultimate worth resides in the abundance of his or her possessions. In such a context aspirations towards financial growth and material security are naturally high, while the influence of moral considerations and of ethical standards would tend to be lower. In consequence, any scheme that holds out the promise of considerable gain against comparatively small expense will have great appeal. Thus it is in Ontario and indeed in many provinces, states and nations.
In everyday life our society is also largely areligious; the predominant allegiance seems to be to the self and to the security of the person. Whatever gods this society might yet choose to serve, the dollar is certainly high on its short list. In consequence, values tend to be flexible and principles remarkably elastic. I don't come here today with vast figures, but I would like to focus on principles and values.
We in the Christian Reformed Church believe in and accept a God-ordained role for governments. We believe that role to be a redemptive and protecting one, a positive influence to establish, maintain and uphold public justice for all with discrimination towards none. For that reason we find it most discouraging that even the governments of Ontario seem quite ready to abandon traditional values and sound principles in favour of mere financial gain and narrow political ends. Indeed, we find it distressing to see our political leaders, whom we honour and wish to respect, choosing in the matter of gambling to be a corrupting influence rather than a protecting and a healing one.
We see our society as richly blessed, yet also as ethically bewildered, morally at sea and politically bereft of abiding principles. Its primary value would appear to be power however defined, as long as it somehow translates into control. The rich here still grow richer, with a little help from friendly governments, at a time when abandoned wretches freeze to death in the streets. While crushing levels of unemployment continue to wreak havoc in the lives of countless thousands, the government cruelly holds out the vain promise of financial salvation by VLT. A Charles Dickens might have called these the best of times, and the worst.
We believe video lotteries to be socially corrosive and highly toxic for several reasons. First, they are highly addictive. In part, this is because their outcome is immediate. Whereas in lottery gambling there is a time lag between a ticket purchase and the announced results, the outcome of a VLT play is instantaneous. This makes another try possible at once, and highly enticing.
Second, their wide and easy accessibility encourages broad participation. This is no doubt the government's intention, the objective clearly being enhancement of its own fiscal situation rather than assisting the general public. However, given the highly addictive nature of video gambling, wide participation is bound to result in extensive and ultimately very expensive levels of addiction.
Third, VLTs are user-friendly. Their considerable allure is hard to resist. Especially with the action occurring strictly between player and screen, external constraints are minimal while the activity itself suppresses ethical and other private considerations.
Fourth, computers appeal to the young. It stands to reason, therefore, that VLTs will sucker-punch especially the upcoming generations. Young adults raised on computer games and arcade activities will quickly be roped into extremely addictive, lose-lose patterns of behaviour.
Fifth, VLTs feed the hunger for quick-fix solutions to complex problems. This can only make citizens even more insistent that governments should provide all the solutions to grave social problems.
Sixth, VLTs democratize gambling. Acting much like financial vacuum cleaners, VLTs indiscriminately nibble at or suck up the disposable earnings of those who cannot afford even to play the casinos. Thus, passage of Bill 75 will ensure that all sectors of Ontario's society, without discrimination in terms of income, bank balance or even geographic location, can be induced to part with some or all of their money, and they will do it in ways that create nothing of value and in an atmosphere of increasing disaffection, frustration and cynicism.
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Seventh, VLTs also denigrate honest work. They do so by encouraging people to consider money a mere plaything while at the same time signalling that money need not be earned through diligence, skill and commitment; just play the VLT game.
In short, we do not see anything positive, constructive or even remotely helpful to the people of Ontario in the proposed introduction of video lotteries. Quite the contrary. We consider the government's participation in gambling, including its involvement in VLTs, to be essentially deceitful and fundamentally unjust, for gamblers invariably lose. The odds are stacked against them. In order to sell such a losing proposition the government has little choice other than to delude its citizens, to dupe them through the false promises of deceptive advertising.
Even Bill 75 itself is misleading. While its stated intent is, in part, "to fund charities through the responsible management of video lotteries," it would take an unusually alert person to find even one reference to charities in the text of the bill. Its title notwithstanding, this bill is not about funding charities; it is about securing legislative approval for yet another highly questionable way used by the government of Ontario to raise money.
We would make this final observation: Public hearings on contentious pieces of social legislation are being viewed today with growing cynicism. How sincere, one wonders, can a government be in conducting public hearings when some of its own actions appear so disdainful of public opinion? On the other hand, how sound can a government's policies really be when they are shaped according to the passing whims and fancies of the day? Have we arrived at what Jonathan Schell, in the August issue of the Atlantic Monthly, calls "hyperdemocracy," which he defines as "a systematized abdication by the élite in obedience to every passing gust of public opinion"?
What does it mean to govern wisely? What of values and moral principles, rooted perhaps in religious belief systems? What indeed of justice? There was a public hearing once, some centuries ago in Jerusalem. A muddled politician named Pontius Pilate found himself in a bind. He let the shouting masses have their way, even though he found no guilt in the bleeding wretch before him. He washed his hands and nailed Christ. That may have been a politically inspired, pragmatic example of Roman conflict management techniques, but it did not serve the cause of justice. It was a cowardly way out.
Will that be your way on Bill 75? Or will you face up to the unpalatable realities and govern justly, for the people's good, if not your own? We plead with you: Do not lead your people into destructive ways. Desperate times may call for desperate measures, but these are hardly such times. Think of the excruciating plight of peoples elsewhere -- in Burundi and Rwanda, for example, or in Bosnia. In the light of so much grief and despair, the idea of comfortable Canadians bleakly aspiring to get something for nothing, to get rich quick by irresponsibly playing silly and dangerous games with their abundant possessions seems somehow repulsive, even obscene.
That is why we urge you to withdraw Bill 75 or to seek its defeat in the Legislature. Do it for the people of Ontario, for the people of Canada. Do it for the sake of your own personal and political integrity. Do it for justice. But do it.
Mr Kennedy: Mr Klein, I want to first commend you for the quality and the excellence of your presentation, the obvious preparation and deliberation that you've done in terms of considering this issue. I want to focus on what you're talking about by way of the existence of a public secular morality and how you might characterize for us the type of milestone or the type of step that this type of measure, this type of choice, as you've so clearly outlined, being made by the government on behalf of society represents. I think the temptation for people is to say, "Well, our society is making all kinds of choices that take away from any kind of public morality." I'm wondering if you could tell us what you think the overall consequentialness of this is in terms of the things that are happening publicly.
Mr Klein: Mr Kennedy, I'm really sorry. I'm not sure that I understand your question fully. It's a long question.
Mr Kennedy: I'm really asking how you regard this in terms of the change in public morality as exhibited by governments. How major a consequence do you see with the introduction of VLTs?
Mr Klein: Oh, I see. We consider the introduction of the VLT as the next logical step in a very cynical way of fleecing the public. We consider this to be an exceedingly dishonest way, a manipulative way, an ignoble way. This is not a way for a government to behave. Gambling ultimately costs vast, vast riches in terms not just of money but of social contentment, of all kinds of intangibles. So for a government to focus so specifically and exclusively on raking in money in these subtle and, in our view, dishonest ways sets a tone in the culture that is bleak, that suggests a level of moral bankruptcy that we abhor and that we feel a government may not do. But government needs --
The Chair: Thank you, Mr Kennedy, if we may move on.
Mr Kormos: Mr Klein, I join with my colleague in indicating that I find your submission here to be an enlightened one and one that has a great deal of integrity. I caution you, and I have no doubt that the members of the government caucus will treat you with great kindness here today and great respect, but at the same time I suspect they'll probably dismiss your comments today with a flick of the wrist.
This thing is being so skilfully done. I mean, this is slick. We're talking about a slick operation here; talking about 2% of the proceeds will go to treating gambling addiction where that acknowledges that they're addictive.
Mr Klein: Indeed.
Mr Kormos: It's like telling drug dealers, "Give 5% of your proceeds to addiction programs for drug addicts and we'll let you traffic cocaine and heroin."
The government talks about how they're only putting these slot machines in licensed premises, right? Oh, to control access to the people over 19. Well, most licensed premises in this province now admit people under 19. So the government now says: "But we'll exclude them. We'll put them in a special area." There's more to it than that. You see, the reason casinos serve booze, especially to people who appear to have money and appear to be eager to play, is because a drunk bettor is a far greater sucker, far more susceptible to being fleeced, than is a sober bettor. There's a very special connection between booze and especially this type of gambling, which doesn't require any assessment of the odds or those sorts of things. This is insidious.
Mr Klein: Mr Kormos, with respect, if I may, I'm not here to speak from a partisan political position. I fear that you are playing a kind of opposition game, if I may, with respect.
Mr Kormos: I am very partisan, sir.
Mr Garry J. Guzzo (Ottawa-Rideau): Where do you think he stood in 1993 when you were here?
Interjections.
The Chair: Order, please.
Mr Kormos: Where did I stand?
The Chair: Excuse me. Mr. Klein is speaking.
Interjections.
The Chair: A little courtesy, please, to the presenter, Mr Kormos, please. Mr Klein.
Mr Klein: It is this very, if I may, unprincipled kind of conduct that we must not allow, that we must not accept from our elected political leaders. We are not here to play games, and pardon me if I sound lecturing here or pastoring. I'm not a pastor, I'm a teacher. But there is something far more elevated at stake here. There is something at stake here that has no monetary value. That is the import of our submission. We presented to your government our brief on casinos, so I want to make it very clear that we are here addressing all parties.
Mr Kormos: And I agreed with you then.
Mr Klein: Right on.
The Chair: Thank you, Mr Kormos.
Mr Kormos: I wish these people would agree with you now.
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Mr Flaherty: Thank you, sir, for the presentation. One of the issues that was raised yesterday, and the minister, Mr Sterling, responded to a question posed by one of the members opposite, had to do with whether he would play a slot machine or a video terminal or whatever, and he said, well, perhaps it wasn't his favourite form of entertainment.
One of the realities that I guess government has to deal with over many years is that there is not a uniformity of opinion on this issue in our society. There are many who enjoy bingo. Mr Ramsay, the member for Timiskaming, was just supporting break-open tickets and Nevada tickets as opposed to video lotteries when the last witness was here. Mr Kormos's government supported slot machines, which take up more than half our casinos now, and he calls them invidious and something else.
Mr Kormos: Insidious.
Mr Flaherty: He shouldn't be so hard on his own government, his former government, in that way, or on himself.
Mr Kormos: It would be nice to see some of you with the integrity to stand up for what you told your constituents you believed in when you ran for office.
Mr Flaherty: My concern, sir, is entering into a discussion with you on grappling with the obligation of government to deal with the demands placed on government by all of the people in the society and how one grapples with that. If government is to embark on attempting to control gambling within the society, then is it not incumbent on the government to proceed cautiously, in a staged way, to make sure there are controls throughout the process, which is what is contemplated in this type of legislation?
Mr Klein: To be sure, we are not objecting to controls. We don't object to police forces and such. That is not the issue here. The issue is governments seeking to make vast amounts of money in deceitful, dishonest and unacceptable ways, thereby setting the tone for a culture that is already rather bleak and, as you indicate, highly pluralistic.
Your task is awesome and very difficult. I grant you that. But in a pluralistic context, we have not only the right as a church but even the obligation to remind the state of its proper function, which is to uphold, maintain and establish public justice. It is not in the first instance to be in the gambling industry. So we have a real problem with that.
The Chair: Thank you, Mr Klein. You have the last word, and I thank you for your thoughtful presentation and taking the trouble to come before us today.
CLASSIC CANADIAN GROUP
The Chair: Our next presenter is the Classic Canadian Group. Welcome. Could you identify yourself for the purposes of Hansard.
Mr Fernando Di Carlo: Good morning, ladies and gentlemen. My name is Fernando Di Carlo and I am the president of the Classic Canadian Group. With me is Paola Commisso, our national director of sales. We appreciate the opportunity to speak with you regarding Bill 75. Knowing that the time is limited, I will keep my comments brief and leave time to answer any questions you may have.
The Classic Canadian Group is a 100% Canadian-owned, Toronto-based company which supplies gaming machines, roulette wheels and gaming tables and accessories to the gaming industry. Through our gametronics division we are also finalizing the development and manufacturing of a multigame video lottery terminal which goes far above and beyond any VLT currently on the market in terms of value added entertainment. To our knowledge, we are the only Ontario-based manufacturer of VLTs. We know the gaming industry across Canada well and believe we can add our knowledge of it to provide constructive input into the various aspects of gaming in Ontario.
First of all, we support Bill 75. We believe it makes sense to combine the functions of the Liquor Licence Board of Ontario and the Gaming Control Commission into one body. We expect this will help reduce and streamline the regulatory process in Ontario and bring us more in line with the direction being taken by other provinces across the country. As such, we have little concern with the overall direction of the bill. However, I would like to offer a few brief comments on particular sections of Bill 75.
We support the changes to the Gaming Control Act with the addition to section 4 requiring the registration of suppliers of lottery schemes. It will help ensure that only reliable, aboveboard suppliers are selected to provide products to the Ontario Lottery Corp. Given the sensitivity towards gaming in Ontario, we believe this will help lend more legitimacy to the industry.
We are also supportive of the addition of section 8.3 to the Ontario Lottery Corporation Act. We believe that a five-year review will ensure the act remains current with the VLT policy as it is implemented in the province. Up-to-date legislation and regulations are crucial to ensuring a successful industry is developed in Ontario.
Having said that, I would also like to comment on one aspect of gaming in Ontario, and that is the cost of registration for suppliers. In Ontario, the fee for a casino-gaming-related supplier is $15,000 annually, much higher than the fees in any other province. For example, in the province of Alberta, under the newly constituted Alberta Liquor and Gaming Commission, the registration fee authorizing the applicant to deal in VLTs requires a $5,000 deposit to conduct a background check. This, in our view, is much more reasonable.
This government has clearly articulated its vision and desire to harmonize with other provinces in terms of regulation and to create an environment which encourages business development and growth of jobs in Ontario. Keeping this in mind, Classic Canadian believes that Ontario's registration fee should be in line with those in the other provinces, if not lower. A new clause should be added to Bill 75 amending the Gaming Control Act to require this, and the cost structure in the regulations should be amended accordingly.
The opportunity exists to develop a new VLT program which provides a unique and value added gaming experience more oriented towards having fun and being entertained than simply winning or losing. As a leader in high technology, Ontario has the ability to demand more from VLT manufacturers and set a new benchmark in the implementation of VLTs.
As I mentioned earlier, Classic Canadian is developing a state-of-the-art multigame video lottery terminal. It is designed to take VLTs to the next level in providing a complete value added entertainment experience and is a product that the gaming public will be excited about. Not only is it fun to play, but we have been successful in sourcing most of our component parts right here in Ontario.
Our meetings with government to date have indicated that the province seems committed to taking a methodical approach to implementation. We strongly support the province's course of action, as the jobs of my employees and those in our supplier companies depend upon the stability of the VLT placement and acceptance. We therefore believe we have a strong stake in how VLTs are implemented in Ontario and would like to show our commitment by offering our assistance as needed.
To accomplish this, we believe the government should pursue three basic principles: The government should support Ontario business by choosing qualified Canadian companies to be the suppliers of VLTs; the VLT program should be developed to promote VLTs from the entertainment aspect and less focused on the gambling aspect; and the government should develop and put in place programs to offset issues such as compulsive gambling and underage gambling.
We believe very strongly in the last point. We are an active member of the Canadian Foundation on Compulsive Gambling, and in fact we were the first VLT manufacturer to commit to devote 2% of our gross sales to the foundation. The foundation works towards prevention and treatment of problem gambling and the implementation of community awareness programs.
Future plans for the foundation include the creation of a toll-free help and information phone line. In light of recent government funding cutbacks in supporting such programs, we believe it is important for industry to step in and fill the void. However, we are pleased that the government will also be devoting 2% of revenues towards problem gambling.
To help the government achieve its goals and objectives in introducing VLTs in Ontario, we believe the government should consider putting in place an advisory board to complement this implementation. In our view, an advisory board of five to eight people with expertise and representing the lottery and gaming aspects of the industry -- possibly including other provincial government lottery corporations with experience in VLTs -- financial experts, casino operators, tourism representatives and technical experts would be an excellent source of advice for the government. Whether this is a mandatory board legislated under Bill 75 or organized by the government in advance of developing VLT policy, we believe such a board would be an invaluable resource. I urge you to give it serious consideration.
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The implementation of VLTs in Ontario will permit the government to capitalize on its investment by providing a number of opportunities and benefits to the province by providing a number of opportunities and benefits to the province, including the creation of new, high-tech, direct and indirect jobs, the development of export markets for Ontario-based companies, increased revenue for a variety of Ontario-based companies and the corresponding increase in provincial tax revenue, the development of Ontario-based technology and heightened social acceptance of gaming, which goes hand in hand with the regulation of the industry.
The creation of the Alcohol and Gaming Commission is a good step towards putting in place a responsive, flexible legislative and regulatory framework as gaming becomes more widespread in Ontario. Of course legislation can always be improved, and we encourage the government to ensure that a focus is placed on keeping this legislation and the regulations current with acceptable industry and social practices.
Once again, thank you for the opportunity to speak with you today. I look forward to answering any questions you may have.
Mr Kormos: I have no doubt that you support Bill 75. You're in the business of manufacturing this equipment and there's the potential to put 20,000 of them here in the province of Ontario. When all is said and done, it's a done deal. This committee isn't about to decide whether slots are going to be introduced to Ontario's communities. It's going to happen. So rest assured that that is a done deal. That having been said, yes, when the day is done, I think all of us will be supporting the proposition that if you're going to suffer slots, at least make sure you buy them from here in the province, and whatever modest benefits are going to be derived, let Ontario workers manufacture the darn things.
I read, though, in your background, the addendum to your submission -- you talk about providing "a total entertainment experience." I understand that. I was exposed to the more primitive versions of it, I guess, video games, Pac-man, that sort of thing, as being the genesis as this type of phenomenon, until I realized that, heck, this is somewhat mundane entertainment. But that's individual opinion; I appreciate that. But you talk about the need to create a total experience which is enjoyed by women, men and couples alike, so you do the kind of research that's going to make sure that whatever your machines do draws the broadest range of consumers. That's fair, isn't it?
Mr Di Carlo: Yes.
Mr Kormos: And you talk about the need to make sure you do it without slowing down the game for more experienced players. The goal in this business is to get as many coins or tokens pumped into that machine in as short an order as possible. Isn't that fair to say?
Mr Di Carlo: I disagree. That line was actually put in because we expect to eventually make a slight modification to our machine to be able to sell it to casinos, as opposed to the VLTs, and that speed is there because casino operators will demand that the game is not slowed down for the entertainment of the player because that's what they like in their casinos, and we can't argue with slot managers.
Mr Kormos: Why would the rationale be different for the 20,000 slots that are being distributed to licensed premises here as compared to casinos? At the end of the day, the operator of that machine wants to maximize profits, right? So the goal is to get as much money pumped into it in as short a time as possible.
Mr Di Carlo: If you were to play our machine and spend $20, we would want you to walk away from our machine feeling that you were entertained for your $20 and you didn't lose it, and if instead you won money, then that's a bonus. That's where our philosophy's been since the start of this process.
Mr Kormos: So you want to convince people that spending $20 and getting nothing in return over the course of, let's say, five minutes was a valuable experience for them and worth that $20.
Mr Di Carlo: Well, when you go to the movies you don't get anything in return either. You get entertained. Right?
Mr Kormos: You're comparing -- well, I suppose Robert De Niro is appropriate. He could probably play Mike Harris in the upcoming movie The Godfather of Gambling in Ontario.
Ms Paola Commisso: I think the point here is that gaming is a form of entertainment. We seem to be losing sight of that. It is a choice you make, to go in and play a gaming machine. All the people who play video lottery terminals are not compulsive gamblers. They've made a conscious choice to go in and spend their money on that form of entertainment.
Mr Kormos: But there are higher rates of compulsive gambling with this type of machinery than with any other gambling form, according to the research.
Ms Commisso: There is a rate, that is true, that is a little higher.
Mr Kormos: The most addictive form of gambling.
Ms Commisso: Indeed it is, and we've gone to great lengths to make sure that we are going to address that problem as well. There is compulsive gambling for every type of gambling, not just with video lottery terminals.
Mr Kormos: A higher rate with this machinery than with any other form of gambling. That's why it's called the crack cocaine.
Ms Commisso: I'm not disputing that with you, Mr Kormos. I'm saying that indeed that may be. Video lottery terminals are a form of gambling that is going to have to be addressed, and that is why we work with the Canadian Foundation on Compulsive Gambling here in Ontario.
Mr Flaherty: Just a quick point. We heard this morning from one member opposite that there is no company in Ontario that can make video lotteries, therefore there would be no jobs created in Ontario.
Mr Kormos: You heard it from the ministry yesterday.
Mr Flaherty: I gather that your company is an Ontario company based here --
Ms Commisso: Yes. We are right up the street, actually.
Mr Flaherty: -- and that there are at least one or two other Canadian companies, not in Ontario, that manufacture the --
Ms Commisso: They're component suppliers. They would supply the different components: the monitors, various parts of the machines.
Mr Young: The gaming part of the terminal, how does that work? Mr Kormos was talking about a machine that takes as many coins in five minutes as possible, in a short period of time. We see teenagers playing video games, and a game might last 20 minutes or half an hour. Are you trying to make a machine closer to that? Is that what it is?
Mr Di Carlo: To give you an understanding, what we've done is married two parts of an industry, one the gaming industry and one the travel industry. When you play our game it's actually a travel experience; you get to visit different places and play at different locations and so on. It's really more of a form of entertainment as much as it is a game. We expect that you would have enough enjoyment from the travel and from that whole experience with the surround-sound and things that it doesn't become strictly a box to put coins in.
Mr Young: So it's closer to a computer game or something.
Mr Kormos: "We've taken all your money, now hit the road."
Mr Crozier: Mr Di Carlo, let's assume that the people of Ontario just didn't fall off a turnip wagon. You're trying to convince them that this is an entertainment experience. You said this opportunity exists to provide "a unique and value added gaming experience more oriented toward having fun." Why don't you then try and convince the province that it should put your soon-to-be-developed machine on every street corner and in every bar but not gamble with it; just let people put money in it and have fun? Why wouldn't you do that?
Mr Di Carlo: I guess they could do that. I guess the province has decided to implement a VLT program.
Mr Crozier: Why won't you try to convince them of that?
Mr Di Carlo: They have video games at every corner already.
Mr Crozier: Could it be that if you can gamble on them they'll be played more?
Mr Di Carlo: That's possible.
Mr Crozier: Come on now, give me your professional opinion. Do you think they will be played more if they gamble?
Mr Di Carlo: I don't have numbers from Sega's machines in bars or pinball places, so I really can't tell you.
Mr Crozier: I suggest that if you're an expert in the business and you want to deal with the province, you should have an opinion on that and you should have some background, because my uneducated opinion, and that's why we're looking toward people like you to advise us, is that if it were merely in a bar for fun, hardly anybody would play it. Let's face it; it's because you can gamble.
Mr Di Carlo: Would you buy lottery tickets for fun?
Mr Crozier: Lottery tickets are totally different. I don't get instant gratification from them. I don't buy them, by the way. There's a time from which you put your money down to when you could win, unlike these machines you're developing where it's an instant win, or an instant lose in more cases than not, therefore you can put more money into it. Is that not correct?
Mr Di Carlo: But you still buy lottery tickets to eventually win. You don't buy them to lose.
Mr Crozier: Trying to compare this to lottery tickets is like comparing movies to this. Please, sir, give the people of Ontario the right to at least acknowledge that they can tell some of the difference.
Mr Di Carlo: I'd ask you to come up to our office and I'll do a full demonstration for you.
Mr Kormos: You might get addicted.
Mr Crozier: I wouldn't mind doing that at all, but it would certainly convince me that it's not just like a lottery ticket but that I can put a lot more money into it in a lot bigger hurry and get my answer back more quickly and lose my money more quickly than I can with a lottery ticket. And they're right that not only may I be convinced; I may become addicted as part of the problem.
Mr Kormos: On a point of order, Mr Chair: Yesterday --
The Chair: I hope you're not misusing the point of order, Mr Kormos.
Mr Kormos: Yesterday the Minister of Consumer and Commercial Relations related to us that the only Canadian manufacturer of VLTs was perhaps, he thought, in the province of Quebec. Today we learn that there indeed is a Toronto-based company. I am calling upon the Chair to address this issue by virtue of recalling the minister to ask him to clarify why he was not aware of a Toronto-based manufacturer of so-called VLTs which suggests that it has been involved with the government. There appears to be a complete lack of control on this issue on the part of the minister.
The Chair: Thank you. That is not a proper point of order, Mr Kormos. It just goes to show you that this committee is providing a useful purpose after all.
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WOODSTOCK AGRICULTURAL SOCIETY
The Chair: If we could proceed, is there a representative of the Woodstock Agricultural Society present?
Mr John Gee: My name is John Gee. I represent the Woodstock Agricultural Society.
The Chair: Welcome. If you would proceed, sir.
Mr Gee: Honorable Chairman, members of the committee, ladies and gentlemen, I am general manager of the Woodstock Agricultural Society, which owns and operates the Woodstock Raceway, which at any given time on a race night would employ anywhere from 45 to 50 people. During the regular course of the year we employ five or six full-time people and up to 10 or 12 part-time over the rest of the year. My purpose in appearing before you today is to lend support to the legalization of video lotteries at racetracks in Ontario.
As gaming has become a sociable, acceptable form of entertainment, legalization of video lotteries would provide a legal and controllable alternative to the grey market of gaming, which is a concern of the horse racing industry. In addition, legalization would provide revenues for government, revenues for legal businesses, revenues for charitable organizations and revenues to support programs for compulsive gambling.
In the case of the Woodstock Agricultural Society, revenues would be directed to maintenance of the racetrack and maintenance of our horse barns. We have several exhibit buildings on the property; we have several halls we rent out which require constant maintenance and upgrading; we have grounds. We have 30.4 acres to maintain, which is an ongoing, never-ending project. This must be upgraded and maintained on a continuing basis.
Reasons for believing that racetracks are an ideal location for video lotteries would be that people who go to racetracks make a conscious decision for that type of entertainment. It's not something I believe they do on the spur of the moment. Watching people at the track I see the same faces over and over, so I feel they make a conscious decision for that type of entertainment. Also, the location of lotteries at racetracks I feel would create employment. As I said previously, we employ anywhere from 45 to 50 people on a given race night. If we had the lotteries, obviously that would increase and our regular, year-round employment would increase.
Woodstock Raceway currently has facilities which could be utilized plus ample parking and a central location within the city. Along with this, Woodstock Raceway has been operating since 1951, which is a good, long length of time. The racetrack was started in 1950, finished in 1951, initially was used during the fair and in a few years was run on a regular basis.
As raceways are licensed by the Ontario Racing Commission and we must adhere to its rules and regulations to receive and maintain our licence, horse people -- or horse persons, if you wish -- are continually stimulating the economy. They're buying feed for their animals. They're buying medication for their animals. In our case, we have stall rentals. We have 85 animals on the grounds at the moment that we are receiving rental income from; I believe we have room for seven more. They have to have equipment, they have to have transportation for these animals and they have to pay various fees for racing etc. That's just to name a few ways they contribute to the economy.
We also feel local businesses are benefiting by the races and would benefit from the lotteries, such as service stations for gasoline. We have restaurants close by there, coffee shops, fast food outlets. All of these would reap benefits of increased business from people attending there.
One major concern has been the growth of the gaming market over the last few years, which has cannibalized the revenues of racing. The location of video lotteries at the racetracks we feel would allow recovery of all or a portion of this lost revenue. As video lotteries are new and the impact they would have on parimutuel wagering and the social issues involved is unknown at this time, we also feel a review after six to eight months of operation may be in order to ascertain the degree of cannibalization and its effect. Woodstock Raceway has been competing with the gaming market for many years. When I say "gaming market" I'm talking about bingos, lotteries etc, this type of thing.
Also at this time I'd like to say something on the charity halls and make the suggestion that they also be located at the racetracks. This, again, is a socially acceptable form of gaming entertainment available today. Along the line of charities, we support many local organizations, such as the Victorian Order of Nurses; we have a VON night at the races. We have an MS night at the races -- multiple sclerosis. We have a United Way at the races. We contribute to St John Ambulance. We contribute to the Shrine Clown Unit, which supports the burn hospital. We contribute to charities in various ways over the year.
Location of permanent charity halls at racetracks we feel would be beneficial for a reason very similar to the lotteries. Again, they would create employment. Video lotteries and charity halls on the same location along with racing would provide more than one type of entertainment at a central location. We also have the facilities, as I said before, to set up a permanent charity hall, ample parking, a central location within the city -- one block from the main highway, so it's not very difficult to reach for anyone coming from out of town. I also feel that it facilitates planning for charities and it provides a consistency for patrons of the charity halls.
In conclusion, I would like to say that the Woodstock Agricultural Society would act in a socially responsible manner in the implementation and operation of video lotteries and charity halls at Woodstock Raceway, and also that the Woodstock Agricultural Society would cooperate and work in partnership with all levels of government to ensure successful implementation and operation of video lotteries and charity halls at the Woodstock Raceway. Thank you very much for your consideration and time. I'll try and answer any questions I can, if you wish.
Mr Tim Hudak (Niagara South): Thank you, Mr Gee, for your presentation. The opposition has made a few points just in a day and a half of hearings. One of them has tended to be that video lotteries will not result in jobs. I think they would probably maintain there'll be a loss of jobs, but your feelings are directly the opposite, sir. I think I gathered from your presentation that the introduction of video lotteries will mean a significant number of jobs at the Woodstock track, in agriculture and in that community as well.
Mr Gee: If you're asking exact numbers --
Mr Hudak: I don't need exact numbers. Their feeling is zero or no jobs, but your presentation seemed to indicate that video lotteries will put up track, will provide jobs in Woodstock, at the raceway, in agriculture.
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Mr Gee: My understanding on the lotteries is that they would be running weekly or at least once or twice a week. Nobody seems to know at this point, I don't believe. However, the reason I say it would create employment is that you would have to have someone onsite as a cashier, I presume. I'm speculating here, I don't know the exact setup of them, but we would have to have at least three people onsite at the video lottery location at all times. At present we don't have full-time staff that we could allocate to that location, which means we would have to hire full-time people to run this. I say three people; I don't know. That's an unknown figure at this point in time.
Mr Hudak: Let me ask you this way too, because you brought up this take on the issue: Video lotteries, the machines at the tracks, put together with horse racing you seem to indicate are going to be an improved package, that they're going to be a new entertainment centre. My understanding is that this has worked very well in other jurisdictions like Winnipeg, like Dover Downs in the United States and other racetracks. It seems to me the racing community is very excited because they're going to have a new entertainment centre that's going to attract not only their traditional customers but an increasing number of customers and tourists to the racetracks once more. Is that a fair assessment of the way the industry feels?
Mr Gee: I'll speak on behalf of Woodstock, if that's okay.
Mr Hudak: Sure.
Mr Gee: There has been some discussion, there have been write-ups in the paper etc on the cannibalization issue, and if the lotteries are located offsite our feeling is that cannibalization would remove income from the raceway much the same as lottery tickets, bingos etc over the years have taken patrons away from the raceway by cannibalization. We feel that if they're onsite we would retain some revenues, maybe not all, that we could possibly lose through a cannibalization of the races.
Mr Kennedy: Thank you, Mr Gee. I'd like to follow on the point you've been making and what you term "cannibalization," which is part of the byproducts of what Bill 75 clearly enables: the large-scale proliferation of these particular gambling machines and activity to licensed establishments across the province. You perhaps are familiar with the experience in other provinces of that application. I wonder if you could comment on how much of a concern it would be to your raceway if there was in your local community what seems to be a potential doubling of the other gaming activity, which is what VLTs can conservatively represent, in other words the VLTs at the bars and so on. What could the potential impact be, given the experience you've had already with the gaming market competition?
Mr Gee: What would it be if they were located offsite? Is this your question?
Mr Kennedy: Yes, which is the plan under Bill 75.
Mr Gee: Our feeling is that we would lose revenue from racing. We're basing that on the history of other gaming forms of entertainment that people have available.
Mr Kennedy: Do you have any sense of how substantial that might be?
Mr Gee: I wouldn't want to guess at this time.
Mr Kennedy: In terms of some of the scope, we're looking at each machine having average net revenues of $25,000, probably gross revenues in the order of $50,000.
Mr Gee: Per machine?
Mr Kennedy: Per machine. Everyone I think has some appreciation for the agricultural and horse appreciation and other implications of raceways, but this clearly is a plan to introduce the majority of these machines outside of controlled environments and into the community because of the very sizeable revenue projections this government needs from this particular form of gambling. I wonder, on balance, what the Woodstock Agricultural Society would say to the government. If the choice is to do Bill 75 and have more and more of the gambling market out there competing with raceways or not to do it at all, what would be your recommendation?
Mr Gee: Whether you compete or whether you don't or not have them at all, is this your question?
Mr Kennedy: Or not have them at all, in other words, because of the potential damage to the raceway.
Mr Gee: In that case I would suggest possibly not to have them at all.
Mr Kennedy: Not to have them at all because of the damage they would cause.
Mr Gee: Not to have them at all. Your question regarding a possible loss of revenues: I've heard various figures and I can't substantiate anything I've heard, obviously, but I've heard possibly as high as 25% cannibalization.
Mr Kennedy: How impactable would a 25% cannibalization be for your local raceway?
Mr Gee: Of revenues?
Mr Kennedy: Yes.
Mr Gee: I did some number crunching the other day. Based on our 1996 budget, 51% of our revenue is from racing. If you reduce that by 25%, obviously your expenses won't be reduced totally by the same amount. It could have a very drastic effect, maybe even to the point where we may look at not having racing.
Mr Kormos: Gosh, with all due respect, I don't know why you're here. You're okay. The minister has already said that racetracks are going to be the first locations of these slots, and far be it for him to change his mind, I'm sure of that.
What's interesting though is that, as I recall back in 1993 when the casino proposition was being floated here in the province, the racetrack industry, maybe not your racetrack, by and large was opposed to casinos. They appeared at hearings and rejected casinos. Then they said, "Well, casinos are okay as long as they're at the racetrack." Remember that stage of the argument?
Mr Gee: I must apologize but I've only been with the agricultural society since January 29 this year, so if you start talking history --
Mr Kormos: Okay, fair enough. In 1993 the OJC at first said, "We're opposed to casinos because casinos will detract from the horse race industry," which I understand. I come from down in Niagara, along with Mr Hudak. The Fort Erie Race Track employs far more than just the personnel at the track; it sustains an agricultural industry there that at the end of the day employs a whole lot of people.
The horse race industry by and large was opposed to casinos, but when it saw the writing on the wall it said, "Well, okay, casinos are okay now but only if they're located at racetracks." Of course that didn't happen; it didn't happen in Fort Erie as contrasted to the city of Niagara Falls although they're a short distance apart. Now the horse race industry is here saying, "But we think it's slick that you put slots at our track."
There is such a thing as a better and worse horse player, isn't there, in terms of a bettor?
Mr Gee: Better or worse as to whether they are winners or not?
Mr Kormos: Better or worse as to whether or not they can read a racing form --
Mr Gee: That's true.
Mr Kormos: -- as to whether or not they know the qualities of a horse that would put that horse in a better position to win.
Mr Gee: There are people who know horses and how to read a program much better than others, yes.
Mr Kormos: And drivers and jockeys.
Mr Gee: True.
Mr Kormos: Then there are some people who bet their house number.
Mr Gee: And the colour of the horse.
Mr Kormos: You got it, and the colour of the horse and the day of the week.
Mr Gee: Right, no question about that.
Mr Kormos: Can you think of any such thing as a better or worse slot machine player?
Mr Gee: Better or worse? No. While there will be people who will not be acquainted with them and obviously will have to learn or follow the instructions, once they learn they know how to do it.
Mr Kormos: Learn? The hole where you put your money in, that's all there is to learn, isn't there?
Mr Gee: Could be. I'm sure there are instructions other than that.
Mr Kormos: You learn, you push the button.
Mr Gee: Okay, to answer your question, probably not. There probably is a slot machine player and that's it; there's no better or worse.
Mr Kormos: No skills required other than being able to place the coin?
Mr Gee: One skill would be a conscious decision whether or not you want to do it.
Mr Kormos: When you're playing the game, is there any skill required other than placing the coin?
Mr Gee: No.
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Mr Kormos: Any logic or rhyme or reason to the process of playing the game?
Mr Gee: That I don't know the answer to. I've never played the machines so I can't answer that one. I don't know. As a matter of fact, I've never actually been that close to a machine.
Mr Kormos: How would you anticipate isolating slot machines, one-armed bandits, at the racetrack from the general population so that you can control people's access to them in terms of age?
Mr Gee: We would locate them in a room by themselves. There would be no parimutuel betting, no other activities in that room, and there would be controlled access at the door.
Mr Kormos: In other words, there'd be no television screen broadcasting the race at your track or at any other track?
Mr Gee: I wouldn't think so, no. They would be in a separate location.
Mr Kormos: So you're looking for people who have no interest in the horse races but who want to play slots?
Mr Gee: I'm sure there will be people go back and forth. I don't know the answer to that. My understanding is that they are to be located in their own location, with controlled access, with a 19 years age minimum.
Mr Kormos: You talk about small business. My problem is that at a rate of a mere $143 a day into each machine, with the ratio the government is proposing -- one machine for every 550 population -- in my community of nearly 48,000 people, Welland, at the rate of $143 a day, 87 machines, you're talking about almost half a million dollars a year being pumped into those machines, which isn't being spent at the corner service station, at the local restaurant, at the local supermarket, at the small-town retailer or the small-town business provider. How does that type of siphoning of money out of people's pockets support small businesses in the community?
The Chair: Thank you very much, Mr Kormos. Mr Gee, the time is up for your presentation. You won't, unfortunately, be able to answer that very interesting question from Mr Kormos. I thank you very much for attending here today.
Mr Gee: Once again, I thank the committee for their time.
BARRIE RACEWAY
The Chair: Is there anyone here from the Barrie Raceway or the Days Inn?
Ms Jane Rees: I'm from Barrie Raceway.
The Chair: Welcome. You're Ms Jane Rees?
Ms Rees: Yes.
The Chair: You're here early. That's very conscientious of you.
Ms Rees: Not as early as I thought I was.
The Chair: Thank you for being here early, in any event, and I ask you to proceed, Ms Rees.
Ms Rees: Members of the committee, I appreciate the opportunity to appear before you today in support of Bill 75, as it provides for the legalization of video lotteries at racetracks.
I manage Barrie Raceway, a harness track at the junction of Highways 400 and 27 in Barrie, Ontario. The racetrack opened in December 1973, and last year had total wagering of $14 million on 66 days of live racing and the year-round operation of offtrack or teletheatre wagering.
The track itself has 14 full-time employees and 130 part-time, and thousands of others are employed in the racing industry in our area, helping to make up the 40,000 people employed in the industry in the province of Ontario. Most of these jobs are not in urban centres where the racetracks are located but are instead agricultural in nature. Video lotteries, we feel, will help to preserve these jobs as well as creating new ones as our facilities are upgraded and new employment opportunities are provided.
We support the legalization of video lotteries at racetracks for several reasons. At the present time, an estimated 20,000 to 25,000 illegal machines of this nature are operating within the province with a loss of $2 billion in revenue to the underground economy, or grey market. Horse racing has not been involved in this activity and remains an ideal launching ground or controlled test market for these machines.
Horse racing is the longest-running gaming industry in the country, totally regulated in all aspects by both provincial and federal levels of government. Participants and staff are licensed and background searches are done into their histories. Issues of security are commonplace in our industry.
We have sophisticated gaming technology which has been in place for years and is state-of-the-art. We are totally familiar with online gaming and have been operating almost 100 remote offtrack teletheatres over the past three years. These sites have worked very successfully. We are responsible for the security and the transportation of large sums of money, and we have in place systems and physical facilities which are totally adaptable to this new use.
Originally, racing had a monopoly on legalized gaming in Canada, but this situation has not existed for many years now, with the advent of bingos, lotteries, sports betting and casinos of all sizes. Gaming has become a socially acceptable form of entertainment and the competition for the gaming dollar is very tough.
Just last week, Ontario's first native casino opened outside Orillia. Casino Rama, the largest casino in Canada, is less than half an hour from Barrie Raceway, and its effect on our operation is uncertain at this time. Historically, casinos have negatively impacted racing by upwards of 35%.
Racing is willing to compete with these other forms of gaming, and in fact tracks are becoming sports and gaming centres, offering the public many choices of activities on their entertainment menus. Racetracks are particularly well suited, we feel, to activities such as video lotteries. We are located in urban centres throughout the province, we have ample parking, and we are largely still an adult activity. Only those who come to the track are exposed to this activity; we're a limited-access environment.
Our staff are trained in the service of alcoholic beverages. They are accustomed to screening young customers for proof of age for the purchase of liquor as well as for the purchase of parimutuel tickets. We have a history of being socially responsible and our association, Racetracks of Canada, supports the Canadian Centre for Compulsive Gambling.
We at Barrie have an excellent reputation with our local charities, as do most racetracks. We hold fund-raising evenings for many groups in our area. Promotions with the Children's Aid Society, the Lung Association, the Heart and Stroke Foundation, the Share the Light campaign to bring children from Chernobyl, the Epilepsy Foundation, the Red Cross, the Barrie food bank, all of these activities continue to contribute back to the community through our fund-raising at the racetrack.
We have a built-in customer base, expanded recently through intertrack gaming, which is predisposed to enjoying gaming as a leisure activity. The racetrack is the perfect place to implement this new form of gaming in a responsible supervised setting.
We are not without concerns about this step. We worry about the cannibalization of our own wagering dollars by this new activity. We do not know what the impact of video lotteries will be, but we're prepared to move forward. Just as there were with the onset of teletheatre wagering, there are unknowns that we must face as racing continues to evolve, but we are prepared and eager for the challenge. Our industry continues to work in partnership with government, and we suggest that an extension of this partnership to ensure successful implementation of video lotteries would be appropriate. We further suggest a period of controlled operation at racetracks, after which a review could be completed to examine the impact of video lotteries on the racing industry as well as other issues of public concern. Thank you.
Mr Crozier: Thank you, Ms Rees, and welcome to the committee. Has the Barrie Raceway had a race date since the opening of Casino Rama?
Ms Rees: We had one on the opening day, on Wednesday last, and one on Saturday night.
Mr Crozier: How has your handle been affected?
Ms Rees: We were not significantly down from previous live nights this year.
Mr Crozier: You still, though, feel uncertain about the long-term effect it might have?
Ms Rees: Two nights are not a very long period to assess it. As well, we have a seven-day operation of intertrack wagering and I think it'll take some time before we find out what the effect of that is. We're also very positive about it. We know the numbers of people the casino will bring past our door. We're very well situated to take advantage of that on Highway 400, and we're working in partnership with the casino on some initiatives. We're not entirely negative about the casino.
Mr Crozier: That's great. I just wondered what your limited experience might be to date. You support, obviously, VLTs at the track, but you've raised concern beyond that about the cannibalization of revenue to the track if there were these video form of slot machines in all the bars and licensed establishments. That's where your concern lies.
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Ms Rees: That's a concern to us.
Mr Crozier: So could you tell us to what degree you either oppose or support the third step of the government's proposed plan, that they be in licensed establishments?
Ms Rees: Obviously racing has to compete with other forms of gaming in other places and we're prepared to do that. We would obviously prefer them to be at the track in order to draw people there, in order to perhaps also wager on horse racing. We would be the last people to deny others the right to do the same thing. Obviously it would be much greater competition for us than if they were at the track. That's clear.
Mr Crozier: You may not want to deny it, but does that mean you support it?
Ms Rees: It's my understanding that is the government plan.
Mr Crozier: Yes, and as others have alluded to, we're not very optimistic that the government plan is going to change, because they need the money. Really the only reason for this type of gambling being introduced is for the money, because as the title of the bill says, they're reorganizing the Gaming Control Commission, or at least that's part of the title of the bill, to regulate alcohol and gaming, but it goes on to say "to fund charities." If they really wanted to fund charities -- you might agree with this -- they wouldn't take most of the money then, they'd probably give it all to charity.
Ms Rees: I think the need is definitely there, as it was there with the last government and the implementation of casinos. I think that grew out of the same need probably.
Mr Crozier: But I'm trying to get your feeling one way or the other about the extension of these gaming machines beyond racetracks. You say you don't want to deny anybody, but I'm trying to understand whether you support it or not.
Ms Rees: We would prefer that they be at the racetrack but people who are involved in horse racing respect the public's right to choose their source of entertainment and what they do with their entertainment dollars. I wouldn't deny that.
Mr Kormos: Thank you, ma'am. I noted that you referred earlier on in your comments -- because this is all part of the new spin. The horse track industry is under real pressure. It has been for a good chunk of time and I'm told it is across North America. There's simply no two ways about it. It has to find some way to pull itself out of the doldrums. I suppose any number of things have impacted on that. Who knows?
It was just interesting because you described gambling as a leisure activity. I appreciate that's the message, but I've been to enough horse races and racetracks -- palms are sweating, blood pressures rise, people are praying to gods they wouldn't otherwise acknowledge, they're throwing programs down on the ground in disgust.
Ms Rees: That's part of the excitement.
Mr Kormos: They're anthropomorphically talking to horses that don't even know what their names are. They're cursing the gods. They're searching through wallets for another 20 bucks because they got a triactor that they know is just going to do it. They're prevailing upon people they've only met once or twice to "Please spot me $50 because there's only one race left and I know I can pull it off on this one." Whew. That's not a very leisurely environment. But none the less, having said that --
Mr Guzzo: He's never been to your track. He goes to Fort Erie.
Mr Kormos: And I understand why the racetrack industry wants a piece of this action. I understand that, because the racetrack industry, the horse race industry, is in trouble, it's seriously in trouble. The smaller community tracks are in bigger trouble by and large than mainstream tracks.
But you talked about legalization of these slots as a way of getting rid of the illegal machines, because the estimates range anywhere from 15,000 to 25,000, as you've indicated. When I reflect on the fact that there's already all sorts of -- they call them poker games, they call them any number of machines that pay off only in extra games to play but can similarly be adapted to pay off in a voucher so the bar owner or tavern owner gives you cash.
Ms Rees: I think we're naïve to assume that they pay off in points only in most of those places.
Mr Kormos: They don't cough up coins, you see. This is the whole secret. The new technology permits slot machines to simply spit out a voucher.
Ms Rees: That's right. The voucher is good for --
Mr Kormos: That's what happens, or to identify a voucher, so you can either play the games or you can cash the games in. That's the 1996 version of slots.
In view of the fact that an operator who has an illegal slot or a grey market or a black market slot gets to keep 100% of the take, doesn't have to pay taxes on it, doesn't have to share it, how is the introduction of legal machines going to displace illegal machines when in fact the motive for having an illegal machine is pretty substantial cash-wise?
Ms Rees: Certainly it is, but it's not impossible to eradicate those machines. In our area, through Barrie, Angus, about a year ago, there was a giant sweep done, and many of those machines were eliminated.
Mr Kormos: Exactly.
Ms Rees: It's possible to do that.
Mr Kormos: It requires policing. It has nothing to do with the government getting its piece of the action out of legalized slots.
Ms Rees: Certainly the taxes that will be returned from those machines will make a substantial difference if those are eliminated.
Mr Kormos: The government needs that money. The government needs that money --
Ms Rees: That's what I mean. The government will get it. It's not getting it now.
Mr Kormos: -- because it promised the rich of this province a tax break. Now it's got to pay them off. It's got to piece them off, you see. It's got to cough up. It's got to deliver.
Ms Rees: Could I just make a comment on your characterization of the racetrack customer, Mr Kormos?
Mr Kormos: Sure.
Ms Rees: You seem to know it rather well and you --
Mr Kormos: You bet your boots I do. As a matter of fact, I probably know more about a whole lot of the areas of gambling than more than a few members of this committee, and I'm not afraid at all to acknowledge that, because I think it's important. People who come here and somehow suggest that they've never seen this sort of activity, I think it's naïve.
Ms Rees: It's very important, and through your work as our minister in past years, you're very aware of the economics and the situation of racing.
Mr Kormos: That's right, and I'm also aware --
Ms Rees: I would just explain that there is a whole other area of customers who attend the track, who are by far the majority, who go for a social evening. They go to the dining room. They take their wives.
Mr Kormos: Or their husbands.
Ms Rees: Or someone. When they get to the end of their $20 or their $40, they go home. Not everyone is out of control at the racetrack.
The Chair: Thank you very much, Mr Kormos. We'll move to Ms Bassett.
Ms Isabel Bassett (St Andrew-St Patrick): Thanks, Ms Rees, for your presentation. I hear you run one of the best tracks in the province, so thanks for taking the time to come down and talk to us today.
The Treasurer said in the budget that it was very important to introduce video lotteries into a controlled environment. I wonder if you have given any thought to how you would make sure that minors don't have access to video lotteries at your racetrack.
Ms Rees: Certainly the areas that we're looking at in our own facility, which are the only areas I can talk about really with any validity, but I'm sure it's the same at each track, will be self-contained. I mean they are rooms. They are rooms with exits and entrances that can be policed, that you can require proof of age. We're very used to doing that. We do it every night. These are licensed areas, and our staff and the staff that we would hire all go through the training, and they are all very carefully trained in recognizing signs of drunkenness and also to identify minors. I don't think that would be a large problem.
Ms Bassett: You don't see that as a concern at all.
Ms Rees: You would just require photo ID the way they do in bars.
Mr Guzzo: Just enlighten us. How many days in 1995 did Barrie operate live racing?
Ms Rees: Sixty-six live in 1995. That has gone from 100. We normally raced 100 live days of racing.
Mr Guzzo: What about offtrack now?
Ms Rees: We are open now seven nights a week.
Mr Guzzo: What was your total handle in 1995?
Ms Rees: In 1995, $14 million.
Mr Guzzo: How much did you send to the Ontario government?
Ms Rees: We sent between 7% and 9% of that, and then the rebate of 2.4 was rebated back to our horsemen.
Mr Guzzo: Yes, but that's through the -- so 7% to 9% of $14 million, and what do you send, half of 1% to the federal government?
Ms Rees: It's 0.08%.
Mr Guzzo: Thank you.
Ms Rees: You might be interested in the shift of wagering lately with the teletheatres. Three or four years ago we had $14 million on live racing, and that meant a great deal more to the racetrack than it does today. Today we anticipate $3 million on live racing this year, and the rest is made up of intertrack wagering. That just tells you the scope of the attractiveness of other products that we bring in from around the country and the continent on which --
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Mr Guzzo: Are you carrying Saratoga this afternoon?
Ms Rees: No, we are not.
The Chair: Thank you very much for your presentation, Ms Rees.
Mr Hudak: On a point of order, Mr Chair: Yesterday Mr Kormos mentioned that in his opinion video lotteries were the most addictive form of gambling. On several occasions today he has said that slot machines instead are the most addictive form of gambling. What brought it to mind was his recent portrayal of the racetracks. He makes an interesting portrayal of the racetracks as being highly addictive as well. In other arguments that the opposition has used in terms of instant gratification, no skill required, you could easily make an argument that break-open tickets would follow that same sort of line of argument.
I wonder if Mr Kormos would be kind enough to provide the evidence that he refers to in his studies as to which form of gaming, whether it's slot machines or video lotteries or racetracks or break-open tickets --
Mr Kormos: Thank you, Mr Chair. I will --
The Chair: Other than your own personal experience, Mr Kormos, if you could provide us --
Laughter.
Mr Kormos: Quite frankly, that's an interesting comment, because any one of us at this committee table could have suffered a gambling addiction or experienced it in our families or among our friends or among our households, as we could have had a personal addiction to drugs or alcohol, as could our family members or friends; in each instance scenarios that we would have utilized in developing our background, our expertise or experience, or our perspective on this.
I think that comment was an unfortunate one, Mr Chair. I would be pleased to talk about a gambling addiction if I had had one. I'm fortunate that I haven't. But I've had some experience with the phenomenon, and it's neither a pleasant one nor is it a laughable one; no more so than any other disease. I find it interesting --
The Chair: Mr Kormos, you were asked to provide evidence. You are not testifying in front of this committee.
Mr Kormos: I shall. I respond now to your, at the very best, supercilious comment which seems to have permeated some of the discussion here. There seems to be some giggle-giggle, adolescent quality to the discussion of a particular facet of our concern here, which is addictiveness of this --
The Chair: Mr Kormos, do you wish to answer the question or do you not?
Mr Kormos: I certainly will.
The Chair: Because our next presenter is not here and I intend to adjourn otherwise.
Mr Kormos: I'd be pleased to take the time. First of all, Mr Hudak, as is to be expected, misinterprets and fails to properly relate the contents of my discussion about racetrack betting. I refer him specifically to the article by Mark Griffiths, which I referred to yesterday, from the University of Exeter, the Journal of Gambling Studies, volume VI, subvolume II; also an interesting one where Griffiths talks specifically about the psychology of slot machines and how they in themselves are designed in such a way as to make them peculiarly addictive. That is in the Society for the Study of Gambling newsletter --
The Chair: Excuse me, Mr Kormos, I hate to interrupt, but Mr Hudak --
Mr Hudak: Thank you, Mr Chair. I apologize to Mr Kormos. I should have made my request a bit more clear. He's repeating, in effect, the argument he made yesterday. I appreciate that. I'd like to make my request a bit more clear. Is it possible to provide the actual studies and methodology behind those studies for my information and for the benefit of the other members of this committee so that we can as well go through these studies in detail and spend time looking through them and --
The Chair: I thought that's what he was doing, Mr Hudak.
Mr Hudak: I think what he's doing, Mr Chair, is taking parts and giving his interpretations of these studies. I wonder if he could --
The Chair: Well, he's providing us with references as to on what he bases his opinions. If you would just list them, Mr Kormos.
Mr Kormos: Mr Hudak is a university graduate. I wonder who wrote his essays. He seems not prepared to do his own research. I've given him the sources, and if he's prepared to go and do the work and find them and read them, he's welcome to. Quite frankly, the legislative library can be a useful source. As I indicated, the Griffiths work from the University of Exeter has been published in a number of publications. I started to give them, but having given the name of the researcher, Mark Griffiths at the University of Exeter, I'll leave it at that.
Mr Hudak should of course read, if he hasn't already, the Brandon University study that I made reference to yesterday, and that of course is the Gfellner study. It's a very interesting one because it's a profile of so-called VLT gamblers in Brandon, Manitoba.
Mr Flaherty: On a point of order, Mr Chair: Is Mr Kormos saying that study supports the conclusion he is stating here? I've seen the study, and it doesn't.
The Chair: Gentlemen, he is attempting to answer the question and he's listing on what studies he bases his opinion, which he has repeatedly given us.
Mr Kormos: The problem with these people is they want to --
The Chair: Mr Kormos, I'm sorry for the interruption. This is not an opportunity to make a speech. Please provide your sources and the individuals involved can read them and decide for themselves.
Mr Kormos: But once again I wonder who wrote these people's essays in high school. Why don't they do their own darned research? It seems to me that they've got a ministry that is pathetically unqualified to present this bill before the committee.
The Chair: Mr Kormos, that really doesn't add to the deliberations.
Mr Kormos: Norm Sterling didn't have a handle on it. These Conservative members don't have a handle on it. They're embarrassed by questions that were put to their minister and to senior policy advisers yesterday. They aren't aware of the plethora of research that's been available. I've got a pile of it; I've read a pile of it. There's more and I've got more coming. They can do their own research; I'll do mine.
DAYS INN
The Chair: We have our next presenter here from the Days Inn, Mr Vaskas. Welcome and thank you for attending somewhat early today.
Mr Jonas Vaskas: My name is Jonas Vaskas. I'm the general manager of the 536-room Days Inn located at 30 Carlton Street directly adjacent to Maple Leaf Gardens. Thank you for allowing me the opportunity to appear before your committee today.
I would like to begin by stating that I am in support of Bill 75 as it relates to video lottery terminals and urge the government to allow their implementation within the hospitality establishments as soon as possible.
Our industry has still not fully recovered from the recession and it will take many more years to recover the losses incurred over the last five years. Last year our hotel experienced very encouraging improvements in food and beverage revenues. However, for the first six-month period in 1996 we have recorded a decrease of 25% in combined restaurant, banquet and bar sales.
The Minister of Finance, in his budget presentation on May 8, said that the government was going to allow VLTs to help our industry. Specifically, he said, "We believe that VLTs, if implemented within tight regulatory control and in limited-access environments, can meet a legitimate entertainment demand and provide a significant stimulus to the hospitality industry." Minister Eves also made reference to approximately 15,000 illegal machines currently in operation throughout the province.
It is important that the implementation stage for our industry not be delayed and that the timing be as soon as possible following the racetrack and charitable casino schedule. Our hotel currently generates approximately $66,000 yearly in banquet room rental and food and beverage sales from charitable casino operators. With the establishment of permanent locations this income will be lost. From the government perspective, delaying the implementation within our industry will mean delay in receiving over $500 million annually for machines allocated to our sector. Conversely, it means that the untaxable revenue from the illegal machines will remain in the underground economy.
From our industry's perspective, a delay in implementing would hurt us, the reason being that during the first stage -- to racetracks and charity casinos -- business dislocation may result. Customers will gravitate where they can legally play VLTs. We cannot afford to lose any more business, even for a short term. As well, who knows if that customer will return.
Those businesses close to the casinos in Windsor, Orillia, Sault Ste Marie and now Niagara Falls need VLTs as well. The casino in Windsor, for example, has had a devastating negative impact on local food and beverage establishments. On the other hand, VLTs will not negatively impact casinos. This has been proven by a study conducted by Dr Marfels of Dalhousie University in Nova Scotia.
VLTs work as an attendance generator because they are an acceptable form of entertainment our clientele want. VLTs will undoubtedly be of interest to our European, American and Asian guests.
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Independent research conducted by Dr Gfellner of Brandon University found that the average VLT player plays for 30 minutes once or twice per week and spends an average of $10. She states that to most people, VLTs are perceived as a modest form of risk-taking in an entertainment-oriented social environment. Finally, the overwhelming majority of VLT players reported that the most important reason they frequented a bar or lounge was to relax, be with friends, socialize and meet people. It is an affordable and budgeted activity that is viewed as recreational.
A new brand of beer does not increase the overall level of alcoholism. With the existing forms of gaming today -- lotteries, sports pools, bingos, horse racing, casinos -- the introduction of legitimate video gaming in hospitality-sector establishments will not increase the potential for compulsive or problematic gaming in Ontario. Research shows that less than 2% of the population are potential compulsive gamblers and another 3% to 5% may experience some problems.
I would like to take this opportunity to point out that the public supports VLTs in our establishments. Our customers tell us this, illegal gaming machines at competing locations prove this, and surveys conducted by Environics and Angus Reid confirm this.
On behalf of my fellow employees, I urge your committee to recommend quick passage of Bill 75. Our situation is critical and we need the stimulus of this new form of entertainment, as it would greatly benefit our industry and help to improve our ability to provide much-needed employment. The positive results of VLTs within the hospitality sector have been demonstrated by the province of Manitoba. Thank you.
Mr Kormos: You quote Gfellner, and that's an oft-quoted section of Gfellner because of course it talks about averages and it contains the same -- well, one has to understand what an average is. An average is an average and doesn't take into account the two extremes. What about Gfellner's suggestion on page 18 of her study where she writes: "[M]ore people gamble when opportunities to gamble are more readily available. Thus, the accessibility of VLTs places more people at risk for gambling addiction and for some this will include involvement in criminal behaviour." Did you read that paragraph in Gfellner's report from Brandon University?
Mr Vaskas: No, I did not, sir.
Mr Kormos: You obviously endorse her determination about what the average -- statistically, what constituted an average -- VLT player spent and the frequency of time playing. You concur with that, don't you?
Mr Vaskas: Yes, sir.
Mr Kormos: I trust then you'd agree with her conclusion reached on page 18, that the more accessibility there is to VLTs the more gambling there's going to be, and that "places more people at risk for gambling addiction and for some this will include involvement in criminal behaviour."
Mr Vaskas: I have not read the report, sir, completely.
Mr Kormos: You're prepared to approve of one paragraph in the report; you make reference to it in your submission today.
Mr Vaskas: Correct.
Mr Kormos: But you haven't read the report, is that correct?
Mr Vaskas: I've read excerpts of it. I haven't read the whole report.
Mr Kormos: But you're prepared to agree with Professor Gfellner as to her determination of what the average, the statistical average, VLT player spends and the amount of time they spend at the machine, correct?
Mr Vaskas: And that's what I've written in my statement, sir, yes.
Mr Kormos: But you're not prepared to endorse what she concludes about the contribution of so-called VLTs to increased gambling and the risk for gambling addiction and the risk for criminal conduct to support gambling habits.
Mr Vaskas: I've already stated that, sir.
Mr Kormos: That what? You're not prepared to agree with that.
Mr Vaskas: I have not read the report so I cannot agree with something that I haven't read completely.
Mr Kormos: I'll tell you what. You read an excerpt that you clearly agreed with or else you wouldn't have put it in your submission, right?
Mr Vaskas: That's correct.
Mr Kormos: Let me read you this excerpt, page 18: "Although few men reported involvement in illegal activities to better cover gambling debts, two thirds were classified as pathological gamblers. This is consistent with associations between pathological gambling and income-generating crime." In other words, there's a relationship between the two. "As shown elsewhere, more people gamble when opportunities to gamble are more readily available. Thus, the accessibility of VLTs places more people at risk for gambling addiction and for some this will include involvement in criminal behaviour."
That's the full excerpt. It's the full paragraph on the bottom of page 18. Do you agree with that as readily as you agree with the excerpt that you had previously read of Professor Gfellner's study?
Mr Vaskas: I also make a statement in regard to a new brand of beer. Does that increase alcoholism? Does the opening up of another lounge or the availability of another legal alcohol establishment increase alcoholism?
Mr Kormos: I don't know what research you relied upon to conclude that a new brand of beer does not increase the overall level of alcoholism. I don't know whether that's the case or not. But I do know what Professor Gfellner from Brandon University says about increased accessibility to VLTs and the danger it poses in terms of increased gambling, the risk of increased gambling addiction and the increased risk of involvement in criminal behaviour. That's the result of her study at Brandon. You clearly endorse the research there.
Mr Vaskas: I stated an excerpt from the research basically outlining how it pertains to an average VLT player. That's what I've included in my statement.
Mr Kormos: You want to agree with the professor in her identification of a statistical average, but you don't want to agree with her when she talks about the addictiveness of the game and about the criminal activity that can be involved with addicted players.
Mr Vaskas: I don't want to be put into a situation to agree or disagree with something I haven't fully read, and I completely acknowledge that I have not read the entire report. I'm certainly not an experienced orator or a politician as yourself, sir, but I think it's common knowledge that we take segments of reports and sources to better our argument, and that's what I've done today.
Mr Kormos: You're in fine company, sir.
Ms Bassett: Thanks for your presentation, Mr Vaskas. As I mentioned in the previous presentation, I said that the Treasurer had said it's important to introduce video lotteries in a very controlled environment. Some people raise the fear that perhaps the proximity to alcohol in the hospitality business where lotteries would be might mean that people would become intoxicated and gamble away their last dime. I wonder, do you see your bartenders as taking responsibility to say, "Hey, you can't gamble any more tonight"? Have you thought that through?
Mr Vaskas: I really don't see that as being an issue because our bartenders are trained to oversee the consumption of clients. I managed a hotel in Alberta when VLTs were introduced there. I didn't have them in our establishment, but I knew others who had them, and they did not pose a problem. I lived in Germany for a time where they have a form of VLT with very modest returns, and it was treated as just a form of recreation.
Ms Bassett: So your bartenders would be responsible, in a way, to cut somebody off?
Mr Vaskas: Absolutely. I've been to Las Vegas. Certainly it's on a much grander scale and I would say probably much more difficult to control, but I didn't see wanton intoxication in those casinos.
Mr Hudak: Mr Vaskas, I think there's a little bit of politics afoot, and this will happen in the committee process. You chose from the Gfellner study a certain page and Mr Kormos in his statements yesterday chose page 18 and ignored the fact you brought up today, that the average video lottery player seems to be a responsible individual. Either side can line up and take an expert, can quote subtly from their studies. Committee people could do the same thing here, but I'd like to speak about the contents of the bill, if I could.
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If you talk about gambling, the more widespread it is the more addictive it could be, with the previous government introducing casinos and Sport Select and lotteries and these sorts of things, scratch and win tickets. This government has decided to put aside 2% of the revenue to combat addition, to do research in that area so we can find out, is Gfellner right or is another area right. We're putting a substantial sum into that area so we can find out exactly what the answers are and do some treatment. What do you think about the government's position on the 2% towards addiction research and treatment and the amount of money that's going to the charities through this program?
Mr Vaskas: Personally, I think it's very progressive. I do not deny that there is a problem as far as gambling is concerned. I'm sure there is. I don't think it can be attributed to VLTs or any specific form of gambling. If VLTs aren't there, the compulsive gambler will utilize another source.
Mr Hudak: If I could sum that up, the previous governments had the opportunity to do the same thing. They probably had access to a Gfellner type of study that said the more widespread gaming is, the more opportunity there is to become addicted to it. That's the Gfellner study, I guess, from page 18; I'll certainly read that. This government would face the same questions, but has decided to put aside that 2% to deal with this area, but all the previous governments did was kept the money and ignored the addiction problems. We're going to fight that, and I appreciate your support for that.
Mr Kennedy: When you look at your clientele and your overall outlook as the Days Inn, you have a mixed clientele, obviously, in terms of families and so on. Are you not worried about the association with gambling in your other establishments, your restaurant and your hotel business?
Mr Vaskas: As stated in my presentation, for about the last two years on a monthly basis we have hosted charity casinos in our hotel and we have not experienced any problems. The way I understand VLTs -- in our establishment, we have approximately 80 seats in our lounge; the maximum we would receive would be maybe four to five machines. I certainly don't see that as something that could be looked upon as a negative.
Mr Kennedy: The limits in other provinces, by the way, are between 20 and 40 machines at a single location. I wonder how you'd respond to a comment talked about yesterday from Staff Inspector Gottschalk with the Metro Toronto Police. He says VLTs are a nightmare and he says crime can be expected to rise, based on the evidence of other jurisdictions. How do you feel about associating your establishment with an activity that raises that kind of concern on the part of police?
Mr Vaskas: I would certainly have a concern if I felt it was a legitimate concern.
Mr Kennedy: Is there any way you can reconcile the investigation you've done as an establishment, obviously a responsible member of the business community, into the prospect of VLTs and the kind of concerns being expressed by the police force?
Mr Vaskas: I can only say that I've experienced them in New Brunswick, but in the lounge there I believe the limit was only one. It certainly wasn't a form of wanton gambling, as one would experience in Las Vegas, with blackjack tables and slot machines. We're talking about one to, say, five machines in an establishment in a corner somewhere. Clients choose to play them or they choose not to play them.
Mr Kennedy: So you don't have the concern in terms of crime that's shared by the police.
Mr Vaskas: No, I do not.
Mr Kennedy: In terms of the other figures in your report, you say the industry will delay receiving $500 million. Could you explain that? The minister here said yesterday that he wasn't sure either how much money he was bringing in, which was startling and of great concern, but he seemed to indicate $180 million as an annual rate, but then in the hallway $500 million as the government's take. I understand it's 10%, perhaps, for the establishment.
Mr Vaskas: My intention there -- it says from a government perspective that the government would receive $500 million.
Mr Kennedy: I see. So the "our" and the government are synonymous in that respect.
Mr Vaskas: It means delaying implementation within our industry will --
Mr Kennedy: I just wanted to clarify. Is there an estimate of how much benefit there would be for your industry or for the hotel?
Mr Vaskas: I do not have an estimate.
Mr Kennedy: It might be of interest to you to be aware that the studies in the States are showing that the dollars to fund video lottery terminals -- to give you a sense of proportion, in South Dakota, where they were first introduced, they are now nine times as large as the state lottery in terms of the amount of money they take, and that money comes from somewhere in the economy. Where it comes from in the economy is discretionary entertainment dollars as well as basic needs people have. I'm wondering if you don't have at least some concern that the dollars you currently enjoy from discretionary entertainment income will be lost to this activity.
Mr Vaskas: There may be some attrition there.
The Chair: Mr Vaskas, thank you very much for your presentation here today.
We are adjourning until 1:20 this afternoon. We will start promptly at 1:20, as we have a plane waiting again.
The committee recessed from 1146 to 1320.
ONTARIO VIDEO GAMING CORP
The Chair: Our first presenter is the Ontario Video Gaming Corp, Mr Marshall Pollock.
Mr Marshall Pollock: Thank you, Mr Chair. With me is Jim Szarka, the retired deputy commissioner of the Ontario Provincial Police, a director of the corporation, and Norma Coleman, a director of the corporation from Windsor. Our third member was supposed to be Mike Fraser from the United Food and Commercial Workers International Union, one of the large investors in our corporation, but he's not here, so filling in for him is Paul Morton, the chairman of the corporation.
First, having participated in this morning's activities as part of the audience, I'd like to put this whole issue of VLTs in perspective. Capturing up to $1 billion in illegal gambling revenues from the underground economy is important, as the finance minister said. On the other side there's legitimate controversy as to whether or not the government itself ought to be running a gambling operation rather than just regulating and taxing it. But the bottom line is that gaming is the fastest-growing segment of the entertainment industry in North America because the public, not the government, has decided it is an attractive entertainment alternative.
Social gambling is a popular activity in Ontario; 84% of the public gamble in one way or another on lotteries, bingos, horse racing, casinos or whatever. The good news is that they do it modestly and spend less than $10 a week.
When I started the Ontario Lottery Corp in 1975, those who opposed gambling on moral grounds deluged us with dire predictions that ranged from the abandonment of the work ethic to the creation of a nation of problem gamblers. I'm pleased to say after 20 years that none of these predictions came true. In fact, 90% to 95% of all Ontarians do not have any problems with gambling, and of the balance only 1% to 2% are compulsive or addictive gamblers who need help or treatment. The government has recognized that need and is setting aside $9 million in VLT revenues for those programs.
Let's be clear. According to the leading experts in the field of addictions, the type of gambling, whether it's bingo, cards, dice, roulette, horse racing, slot machines or VLTs, is irrelevant to the problem gambling issue. Although colourful and a headline grabber, there is absolutely no evidence to support the claim that VLTs are analogous to crack cocaine or are more harmful than any other form of gambling. Just the way that food doesn't cause compulsive overeating and department stores don't cause compulsive shopping, different gambling devices don't cause compulsive gambling. A person has to be predisposed both biologically and psychologically to become addicted.
This view is supported by independent research, the most recent of which is a study by the University of Windsor which used data collected before and after the opening of the Windsor casino. The study found that the rate or the number of problem gamblers in the population does not increase with the introduction of a new brand of gambling, whether it is casino gambling or VLTs.
That is also confirmed by two problem gambling studies in South Dakota, the jurisdiction which has the longest experience with VLTs, almost 10 years. In South Dakota a follow-up study conducted two years after the introduction of VLTs found that the overall prevalence rate of problem gambling in South Dakota actually declined by 0.5% from the original level two years earlier, notwithstanding continued popularity of VLTs. That ought not to be surprising because we already know that the introduction of a new brand of beer does not increase the number of alcoholics in the population.
Finally, as we also learned from our attempts to eliminate the use of alcohol, prohibition does not work. The only real beneficiaries were the criminals who supplied illegal alcohol.
That brings me to the first point of my submission in the written form, which is, if we're going to raise the kinds of revenues the Minister of Finance is talking about, create jobs and have a positive impact on the hospitality industry and at the same time have an impact on illegal VLTs, then we need to follow the experience of the other eight provinces by putting a modest number of VLTs into bars and licensed lounges instead of simply concentrating them at racetracks and charitable casinos.
My second point deals with the role of government in gambling. In my respectful submission, gambling is not an essential service and government doesn't need to operate it to control it and make certain it's run fairly and aboveboard. Over 93% of all gambling in the world today is owned and operated by responsible, private sector operators who are licensed and controlled by government.
This submission complies fully with the provisions of the Criminal Code of Canada and the legal opinion of the former Chief Justice of Ontario, the Honourable Charles Dubin, which we refer to at length in the written submission. In his opinion, government can implement a program of video gaming in Ontario regulated and controlled by the Alcohol and Gaming Commission, conducted and managed by the Ontario Lottery Corp, and financed and operated by an approved private sector operator without the expenditure of public funds or any increase in the public service.
As you can see from the illustration of the regulatory framework, the government can absolutely ensure integrity and regulatory control at five different levels:
First, by establishing the overall gaming policy and through the memorandum of understanding with the minister.
Second, by the licensing and regulatory control of the gaming commission, which licenses not only the operator and its employees and all of the site holders but the manufacturers of the machines as well. It also inspects, tests and certifies each machine and seals and controls the computer chip that runs the game. It also tests and certifies the tamper-proof, online computer control system to which each VLT is linked by a telecommunications line which monitors and controls every aspect of every minute of the life of each VLT. That's in addition to the physical security devices, locks and alarms built into each machine.
Third, it can maintain integrity and control by the conduct and management of the program by the Ontario Lottery Corp in overseeing and auditing the gaming operations and activities of the operator.
Fourth, by the careful selection of the private sector operator by an impartial and non-political committee of senior public servants.
Fifth, by the ultimate audit of the finances of the program by the Provincial Auditor.
Why the private sector? The private sector alternative can be cheaper, faster and better than a government-run alternative and doesn't require the expenditure of any public funds or an increase in the public service. The private sector alternative requires no government money. In fact the positive revenue flow to the government in the first six months will be more than $400 million ahead of the public sector approach which uses government funds and employees.
The VLT program is different from the casino program. In the casino program the government gets 20% of the gross revenue from the casino tax and then shares in the net revenues with the casino operator. For this reason costs of operation can affect the profitability of most of the government's share from casino gambling. That is not the case with VLTs. In the VLT scenario the government's share amounts to 70% of the gross revenues, with 10% going to charities, 10% to the site holder and 10% to operating costs. Under this structure any significant lift to government revenues can only come by increasing overall revenues; that is, by having a more effective and better-operated video gaming format, which we submit has a greater chance of happening through a private sector operation than through a governmental agency.
In Ontario, the operating costs for video gaming are pegged at 10%, and the private sector operator has to meet this target if it is going to recover its investment and make any profit. Whether or not it does, the government still gets its 70% and the charities their 10%, which is the largest share in North America.
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This is not magic or illusion. In doing its job the private sector operator also has greater marketplace agility and flexibility than a government agency. For example, if it needs to hire a competent data centre manager and the current market rate for someone in that category is $95,000 a year, the private sector operator can hire the best qualified without having to worry about the hierarchy of civil service pay scales.
Without taking away from the dedication or commitment of its employees, the Ontario Lottery Corp has no experience or core competence in developing and operating video gaming, and there are no economies of scale with its other lottery games. For example, the OLC online network for 6/49 is linked to retail outlets and convenience stores and does not reach the proposed VLT locations which are age-restricted and age-controlled premises. Neither does the OLC staff call on or service these age-controlled premises. In short, the OLC has no VLT operating experience and would have to acquire the same kind of operating resources from the private sector as the private sector operator but without the same operational flexibility.
Finally, and perhaps most importantly according to Canadian Voter Contact, public opinion favours private sector financing and operation of the VLT program. The majority of the public also agrees that a private sector operator would be more efficient and would have no less honesty and integrity than the Ontario Lottery Corp.
In conclusion, I would simply say that public gaming is not an essential service that needs to be operated by government when an acceptable private sector operator can be selected and licensed to do so in a manner similar to the operation of the Windsor Casino.
Those are my submissions, Mr Chairman. I'd be happy to entertain questions.
Mr Flaherty: Thank you, Mr Pollock and your colleagues, for being here today and for the depth of the submission, which is appreciated, the written part of it in particular. It is helpful to us to have some research rather than just speculation.
We heard one submission at least so far this morning about the possible effect of VLs on other charitable gaming activities such as break-open tickets. What comments can you make on that subject?
Mr Pollock: In a marketplace products attract customers because of their unique characteristics. Some compete; some complement. A lot of information has been put out this morning particularly that in Alberta, for example, video lottery terminals had a significant impact on the sales of break-open tickets or pull-tabs.
In the back of your material, and as well in this chart, I would show you that this is the history of gambling activities in Alberta from 1991 through 1992, 1993 and 1994. In 1991, the revenues, the sales from break-open tickets or pull-tabs were roughly $225 million a year. Casinos were about $100 million; that is, charitable casinos. What you see happening in this year of 1991-92 is a dramatic decline in break-open tickets and a dramatic increase in charitable casino revenues. People started to go to casinos and stopped buying break-open tickets.
As to whether or not this has any cause and relation to the introduction of VLTs in August 1992, about a year and a half after the decline, I fail to see any connection. My suggestion is that there has been a crossover, a mirror image, on the increase of casino activity which has cut into the product life of pull-tabs.
If you look at this other dramatic rise of sales in VLTs, you see that bingo operations continue on as normal, the normal lottery operations continue on as normal, other charitable raffles continue on as normal, notwithstanding this increasing spike. To suggest that VLTs caused the decline over here is, I think, being less than honest with the facts.
Mr Crozier: Thank you, Mr Pollock. You've said in your remarks that the type of gambling is irrelevant to the problem gambling issue and that there is absolutely no evidence to support the claim that VLTs are somewhat like crack cocaine. Would you consider Tibor Barsony of the Canadian Foundation on Compulsive Gambling as any kind of an expert?
Mr Pollock: I think Tibor Barsony understands compulsive aspects of gaming; yes, I do. I don't think he's an expert on compulsive gambling or addiction, as someone like Durand Jacobs may be.
Mr Crozier: Is he any less of an expert than you are?
Mr Pollock: I don't know what he's read as far as the material is concerned and I don't know whether he knows much about gaming, but I do know, having had discussions with Tibor Barsony, that his concern is not that there will be an increase in problem gamblers beyond the 1% or 2% but that there is no funding today to deal with the 1% or 2% of the people who are compulsive gamblers who exist in society even before VLTs.
Mr Crozier: So as long as we wash our hands with giving some money to compulsive gambling, those who are concerned about them, that's okay then?
Mr Pollock: Well, I don't think that's the question, whether it's okay or not. I think the solution to the people's problems -- and they're significant problems for that 1% or 2% of the people who suffer from problem gambling -- is the programs that need to be funded. We have, as a corporation and a responsible member of the gaming industry, for years said that ought to be the function of the gaming industry, that the gaming industry ought to put money forward to deal with the small percentage of people who can't handle gaming, in the same way that responsible beverage companies put some money into programs for dealing with alcoholism.
Mr Crozier: The $200 million that it might cost to pay for the 20,000 video slot machines that are being proposed to be eventually introduced in the province, is your company prepared to fund that?
Mr Pollock: Yes.
Mr Crozier: Is that why you support the VLTs?
Mr Pollock: No. I've been involved in the public gaming business for 25 years now, since I started the Ontario Lottery Corp and even before that when I was involved in horse racing. I don't think it's a question of whether I want to be involved with gaming, but whether the public does. It's a perfect program for the government that doesn't have to worry about any kind of sunset clause, because when the public doesn't want to play, they stop playing and the games go out of business. It's the public's interest in this as an alternative form.
I would be concerned, as some of the expressions of concern this morning, if we were faced with a large number of people who hadn't gambled spending inordinate amounts of money on gambling, but all of the statistics show that Ontarians are pretty level-headed. They spend 10 bucks a week on gambling. That's about three beers.
The Chair: Thank you very much, Mr Crozier. We have to move on to Mr Kormos.
Mr Kormos: I wondered where the line earlier today came from, the reference that a new brand of beer does not increase the number of alcoholics in the population. You at least should have been credited with it by the witness this morning.
Mr Pollock: I've been saying that for years.
Mr Kormos: I bet you have. Nobody's going to dispute that. In fact, addiction experts would not say that but would rather say that increased availability or increased accessibility to alcohol is going to increase the amount of alcohol consumption. Do you dispute that?
Mr Pollock: I don't dispute the fact that it will increase the amount of alcohol consumption. I dispute the fact that it will increase the amount of alcohol problems or alcoholics.
Mr Kormos: The problem is that we're in interesting and changing times. Again, I understand there's a whole lot of research out there. I've been trying to get through it myself. There's research, of course, which supports gaming, gambling; there's a whole lot of research that's current in response to this new regime in Canada and in Ontario that has been critical of it.
Frisch from the University of Windsor in a recent survey found that among adolescents 8% were already problem gamblers and a further 9% were potential problem gamblers. The aggregate there is 17%. Frisch argues, and he's supported by Wayne Yorke, a Nova Scotia psychologist, and by Jeffrey Derevensky, who is a psychologist at McGill University in Montreal, based on their respective research, that we have a new generation that has a greater susceptibility to gambling, especially the type of gambling being done with video slots because of the nature of the game and because of -- well, some of it's pretty mundane; I mean, the whole video game phenomenon and how young people were tuned into this over the last 15 or so years. Aren't Frisch's numbers -- 8% of adolescents already problem gamblers, potentially 9% in addition to that who will be problem gamblers -- frightening numbers?
Mr Pollock: I think what they do is underline the need to establish programs of education for people to understand gambling. I think that education programs should start in the schools. Young people are gambling now, whether we like it or not, on activities that are prohibited activities. They're buying lottery tickets, and they're not supposed to do that. I have an 18-year-old son who smokes, and I don't like him to do that either. So all I can do is educate him as to why he ought not to be doing this.
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Part of the $9 million that's going to be spent, I would presume, would be for educational programs to deter or at least let people understand what problem gambling is about. I'm opposed to problem gambling; I'm opposed to children gambling. That's why we support the idea that these ought to be age-controlled licensed premises where children under the age of 19 can't play them.
Mr Kormos: Of course, the tobacco industry has spent millions, indeed probably billions, of dollars financing its own research to undermine the research that's demonstrated a link between tobacco use and alcohol, that's demonstrated the addictiveness of tobacco. The tobacco industry also spends millions of dollars, if not billions, on marketing its product, especially at young people, knowing that the earlier you can get them hooked, the longer you've got a customer. Surely you see some parallel.
Mr Pollock: Absolutely none. I don't see any parallel in that at all, because I think advertising tobacco, advertising gambling to young people, is abhorrent to me and to my colleagues. We certainly don't think this program needs to be advertised in that way. We certainly don't have a group of researchers who are conducting work into young people gambling telling us one thing and us trying to persuade people to the contrary. The research is there. There are people, 1% to 2% of the population, who have a propensity to become problem gamblers, and those people have to be looked after. They're already there.
Mr Kormos: But Frisch says that number is changing. He says it could be up to as high as 17% based on the research he's done with young people in 1995-96.
Mr Pollock: I think the numbers are high and based on speculation. I think the better study was the one that was done in Alberta by Dr Jacobs, who indicated there should be a concentration on existing forms of gambling, that children are playing games at school, betting on cards, those kinds of things. You have to go in and talk about this thing. Too many people put their heads in the sand and pretend it isn't there. People are gambling; young people are gambling.
Mr Kormos: But similarly, Gfellner from Brandon said --
The Chair: Thank you very much, Mr Kormos.
Interjection.
Mr Pollock: That's not her study, though.
The Chair: Mr Marshall, I'd like to thank you and your associates for making the presentation here today.
ONTARIO HARNESS HORSE ASSOCIATION
The Chair: Our next presenter is the Ontario Harness Horse Association, Mr Earl Lennox. Welcome, Mr Lennox. You have the floor.
Mr Earl Lennox: I'd like to thank the committee for making this opportunity available to us to express our support for the introduction of video lotteries as set out in Bill 75.
The Ontario Harness Horse Association is a voluntary membership organization representing all the owners, trainers, drivers and caretakers of harness horses racing in Ontario.
The horse people of Ontario will be impacted significantly by video lotteries. Our purses are tied directly to the amount of money bet. While we support the government's introduction of video lotteries at racetracks, we are understandably concerned that they be managed so as to at least ensure the current stability and the long-term viability of our very important farm-based industry.
The government has recognized through its tax relief proposed in the 1996 spring budget the negative impact on parimutuel wagering of a series of competitive forms of gaming which have been gradually introduced over the past 25 years. That long overdue tax relief assistance may be totally lost if the potential negative impact of video lotteries is not addressed and monitored carefully.
Our industry objective is to maintain horse racing as our core business, and revenues from video lotteries must support this objective. The horse people of Ontario are full partners in this new initiative. We have a surviving economy and we need to stay alive and keep going. Almost all of the tracks are in a borderline break-even position. For the horse people, racing is a business, employment and a way of life. Revenues from video lotteries will be reinvested into farms, machinery, equipment, livestock, feed, bedding, fertilizer and labour by creating and maintaining jobs and generally strengthening local and provincial economies.
Horse racing is the longest-standing form of legal gambling in Canada and it is strictly regulated by both the federal and provincial governments. Racetrack customers have made a conscious decision to seek out gaming as a socially acceptable type of entertainment.
Racetracks provide a secure environment for the introduction of video lotteries. Managers have the experience and technological expertise from parimutuel wagering to work cooperatively with government agencies in the setup and operation of video lotteries.
We are you. We are not gaming management teams from Las Vegas or Atlantic City, nor are we equipment suppliers from another state. We are an Ontario-driven industry. We are producing horses that are competitive anywhere. We have been producing trainers and drivers for decades who are competitive anywhere. Harness racing is one of the few international sports where Canadians excel and dominate.
We are looking forward to the introduction of video lotteries as a method of broadening our base of fan interest and sustaining and possibly growing our economic foundation.
The Chair: Thank you, Mr Lennox, for leaving time for more questions than we usually have. We have approximately five minutes per caucus.
Mr Crozier: Good afternoon, sir. You know Tom Joy, I'm sure.
Mr Lennox: Yes.
Mr Crozier: He says that he looks at the addition of VLTs as another form of diversification. I quote him when he says, "I always insist that our core business be racing. With every new possibility, my first question is, what is it going to do for our racing?" Do you share that view?
Mr Lennox: Certainly.
Mr Crozier: And what it's going to do for racing is it's going to give you added revenue which you will then put towards further development of the racing industry.
Mr Lennox: Our revenue is purses based on parimutuel handle. The horsemen's contracts with the various tracks in Ontario generally cover a percentage of split revenue. We're optimistic that we'll get a similar split on the revenue, whatever it may be, from the video lotteries to what we're now getting from the parimutuel commissions. Our concern is that with the current proposed share rate, we may be seriously impacted, because in some jurisdictions I believe the cannibalization effect is as high as 35% on the parimutuel handle.
With the introduction of simulcast theatres in the last two years, the parimutuel total handle went up in Ontario in 1994-95, but it stabilized this year, and if anything, it's falling backwards. We went through years where we weren't gaining, where we weren't keeping up with the cost of living and we weren't keeping up with inflation. Suddenly we got a shot in the arm for the last two years, which has now levelled off, sagged a bit perhaps, and we're hoping that the video lotteries, if the proper split is made, if we get our contracted share, will help us to maintain our status quo at least.
Mr Crozier: Will you share this increased revenue if you get it? Will you share that with the horsemen?
Mr Lennox: Certainly. At most tracks it's a roughly 50-50 split on the handle.
Mr Crozier: Oh, on the handle. But will you share the revenue from video lottery terminals with the horsemen on a 50-50 split?
Mr Lennox: It's our understanding that if Windsor Raceway takes in $100 worth of revenue, we'll get roughly 50% of it. The current contract with Windsor is 52%.
Mr Crozier: Thank you. Will it be shared with the horsemen, I guess I should have asked. This question of cannibalism: You make the statement very early in your submission that you support the introduction of video lottery terminals as set out in Bill 75. So that means that you unequivocally support video lottery terminals in licensed establishments?
Mr Lennox: We support them in racetracks.
Mr Crozier: Ah, that isn't what you say here. You say you support the introduction of video lottery terminals as set out in Bill 75. I just want to make the record clear, that's all. So you don't necessarily support them going into all licensed establishments?
Mr Lennox: We understand that the plan is to do that down the road, but hopefully there will be some revisitation of how it works out with regard to racing as to how soon they may be introduced in other areas.
Mr Crozier: We hope so too, that saner heads will prevail. My objective, sir, is kind of working backwards. I appreciate the problems the racing industry has had. Windsor Raceway is in an adjacent riding to mine but certainly has an effect in the agricultural area in my riding, and we're concerned about the harness racing and the horse racing industry in the province. So we kind of are working backwards in that we don't support the introduction of this form of video slot machine in all licensed establishments, and I just wanted to see if you shared some of that position with us.
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Mr Lennox: I suppose the horsemen have to go along to a certain degree, inasmuch as it isn't a perfect world or a perfect province, and this is presented to racetracks first and other establishments later. We're hoping to get it in the racetracks, get it working to our satisfaction and then hopefully it'll be revisited to see if it is necessary to put it somewhere else or if the economy can sustain it somewhere else.
Mr Kormos: Thank you, sir. You probably know we had representatives from the racetrack industry here this morning saying much the same thing as you just did. I'm not suggesting that anybody compared notes before you got here but --
Mr Lennox: I just got here.
Mr Kormos: -- I understand the issue of the horse race industry; it has suffered a decline across the board and apparently across North America, but certainly in Ontario. I'm from the Niagara region with the Fort Erie track. It's interesting historically that, as you know, at least the Ontario Jockey Club initially opposed casino gambling in the province, and I was ad idem with them at that point because they were concerned about casino gambling taking away even more dollars from what appeared to be a game that was slowing down a little bit.
Professor Garry Smith from the University of Alberta, described as a gambling specialist but with a lot of research under his belt, identifies horse racing, track betting, as once a favourite of gamblers, considered now somewhat sedate and by some old-fashioned. He contrasts that with video slot machines, electronic slots, because he talks about the speed at which you can play. You can complete a game cycle in about one and a half seconds once you get the feel for popping in the loonies or the toonies or the $5 tokens. He says that's what gamblers want, this tingle of excitement all the time when you're playing and that they control the speed of the play, which you don't in most other forms of gambling.
It was suggested that the slots at a racetrack would be a nice way for people to spend that 20 minutes between races. Is this how you envision people playing the slots at a racetrack?
Mr Lennox: I certainly hope that people who are interested in playing slots will come to the track, and because they're going to be installed in the same grandstand building facilities, that those people will become interested in horse racing. Unfortunately we're going to lose a few customers the other way. But I was talking to a gentlemen from Maryland on Monday who was telling me the problem they have at Dover Downs, where the cut is extremely high in favour of the track and the horsemen really: It's in a separate building. The people play the slots and then have to go over to the track, as it were. He said, "Whatever you do, if you get them installed, hopefully they'll be in the same building, because it's a significant improvement." But at Dover the purses have gone up dramatically. A year ago at the winter meet of 1995, the horsemen were racing for an average purse I believe of $11,000 a day and now they're racing for $75,000 a day.
Mr Kormos: We know that gambling addiction is historical. There are horse gamblers who are addicts, and you as a person involved with the industry could probably spot one almost a mile away as she or he approaches the window. They're almost identifiable in that regard. The plethora of evidence suggesting -- I understand the problem that the horse race industry has in the fact that you've got to find some other sources of revenue to bolster an industry that doesn't have the bettor support it once had.
Mr Lennox: The only support it once had.
Mr Kormos: That's right. Are you not concerned about the addictiveness of these electronic slot machines and the prospect that we're going to evidence, witness a far higher incidence of gambling addiction as a result of this universal accessibility to slots, compounding how many times whatever level of gambling addiction there is at the horse track? Aren't you concerned about this as a member of the community and as a family person?
Mr Lennox: Certainly I'm concerned. I've got daughters 13 and 16, but to the best of my knowledge neither one of them uses drugs and they don't engage in sex where they might get AIDS and hopefully they won't play lottery machines until they bet me broke.
Mr Kormos: And I hope they don't either.
Mr E.J. Douglas Rollins (Quinte): Thank you, Mr Lennox, for coming today. I appreciate your interest on the horse end of the track. The number of tracks in the province of Ontario over the last few years has dropped. There have been a few more closures, quite a number of horses less in the province today in the racing circuit than there were eight or 10 years ago. Do you feel that when father and mother come to the track -- I think that racetrack people as a whole quite often assume racing as a family sport of entertainment where the father and mother both come to the track, and father probably does a goodly portion of the bet -- do you think that mother might play the machines a little bit oftener than father would or overtake from the person betting on the horse, or he's not going to give that up? I'm sure that person who's diligently into that program isn't going to run off and play the machines for the next six or seven minutes before he can make another wager.
Mr Lennox: I think observations have been, where slots or video lotteries have been introduced, that there is a far greater percentage of women playing the slots than there are men. Again, this gentleman from Maryland I talked to on Monday said he was by far in the minority at the Dover Downs site. Mostly adult women were playing the slots and the men tended to be, as you suggest, gambling on the horse races.
Mr Rollins: I think it's complementary. The horse people should appreciate that you people have got the foresight to see a way of saving an industry that was "the" industry at one time in Ontario which has fallen short of being able to attract all those people to the racetrack to do all their wagering there.
Do you continue to think that by allowing the machines only at the top four grades of tracks -- according to the bill, it doesn't allow them into all racetracks in the province of Ontario, only the top-rated four categories, I believe.
Mr Lennox: There basically aren't any other than one- or two-day fairs where they carry on parimutuel racing. The smallest number of dates given out is to Clinton Raceway, which I believe races 12 Sundays in summer, and it's considered a class 4 track. Otherwise you'd get down to places like the Markham fair that would maybe have two or three days of parimutuel racing. I don't believe there is any other place in Ontario that has more than three days of parimutuel racing unless they're in --
Mr Rollins: Belleville does. We have I think about 28 days of racing down there.
Mr Lennox: Yes, but it's a class 4 track.
Mr Rollins: But it wouldn't be one that is eligible to get machines?
Mr Lennox: Oh, yes. It's supposed to get 70-some machines, I believe.
Mr Rollins: Oh, is it? That's what's scheduled?
Mr Lennox: Yes.
Mr Guzzo: Mr Lennox, I'd like first of all to touch on the employment issue and the people you represent. First of all, there's no extended-meet racetrack in Ontario where your organization does not negotiate for the people who put the show on, ie, the horsemen, correct?
Mr Lennox: That's right.
Mr Guzzo: So everybody you represent has a collective agreement with track management, and you're then in a position -- I'm doing this for you, Mr Kormos; you'll appreciate this -- to guarantee the people you represent a fair share of whatever income there is.
Secondly, the profile. I'm from eastern Ontario. The people you represent in eastern Ontario live on farms; they live in small-town Ontario. Indeed in western Quebec we look at the same situation. The people you represent are caretakers or people who make their living in this industry, is that not correct, as well as the owner?
Mr Lennox: I do myself. I do shit every morning.
Mr Guzzo: On your farm how many people from the rural community do you employ?
Mr Lennox: I have one person full-time and two part-timers.
Mr Guzzo: I don't know what the situation --
Interjections.
Mr Lennox: I had a shower before I came down, Peter.
Mr Guzzo: I don't know what the situation is in Mr Crozier's or Mr Kormos's area, but on the farms of eastern Ontario we would find one, two, five, up to seven or 10 employees. What percentage of the horses that put the show on would be trained at the track as opposed to on the farm at home? Any idea?
Mr Lennox: In the Ontario Jockey Club racing program, I think on a given night at Woodbine or Mohawk 60% of the horses ship in from other locations, the odd one comes from Elmira and Hanover and Flamborough, but only 40% of the horses that race at Mohawk on a given night are actually stabled in the barn area there.
Mr Guzzo: That would be lower at a track like Rideau-Carleton in Ottawa or at Elmira itself, correct?
Mr Lennox: That's right, yes. For example, in Belleville I think Jack McDonald told me there are only 35 horses actually in training, but they require 80 to put on the races every Friday night.
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Mr Guzzo: It's a trickle-down effect of the employment factor that this government is trying to protect.
Mr Lennox: Many of those people aren't really employable in other professions either.
Mr Guzzo: That's a very good point. They've been doing this all their lives and that's what they know. The animal is what they know.
Mr Lennox: That's right.
The Chair: I thank you very much, sir, for your presentation here today.
B'NAI BRITH CANADA
The Chair: Our next presenter is B'nai Brith Canada, Mr Ruby Richman. Welcome. If someone is to assist you in making the presentation, Mr Richman, you could identify them for the purpose of Hansard.
Mr Frank Dimant: We need a clarification. B'nai Brith Canada will be represented by David Colodny, our national treasurer and chairman of our financial management cabinet, and myself, Frank Dimant, executive vice-president of the organization.
Just a quick word on B'nai Brith Canada. To many of you we're a known entity. We're a national volunteer organization and we specialize in fighting anti-Semitism, bigotry and hatred. We also provide a tremendous number of community services across the province.
Mr David Colodny: Charity sweepstakes, charity lotteries, bingos, charity casinos, break-open tickets and raffles in an evolutionary form have been part of Ontario culture for the past 26 years. More than $2.5 billion is wagered annually at these charity gaming events. This form of charitable gaming, highly regulated by the government, has become a traditional method of raising funds by social service organizations for charitable and religious purposes.
Charities have become dependent on the funds raised through charity gaming, especially in today's economic climate where to a large extent the ability to raise funds from traditional fund-raising programs has diminished.
With the establishment of the Ontario Lottery Corp in the 1970s, and especially since the establishment of the Gaming Control Commission and the Ontario Casino Corp in 1993, there has been a steady and progressive erosion of the rights and abilities of charities to raise funds from these sources in the face of competition by government-provided gaming.
The introduction of the 20,000 video lottery terminals, to be distributed in racetracks, charity casinos and licensed establishments, will further directly compete with charity gaming, thereby once again diminishing the ability of charities to fund-raise from this gaming.
To offset this inability to compete, charities should be able to participate in the income from VLT-derived revenue, both as a replacement for lost revenues and as a replacement for the lost potential sources of gaming revenue. Not to share revenue with the charities will result in a greater dependency by gaming charities on the general government funding which could lead to the collapse of the vital, volunteer-driven social services sector.
B'nai Brith Canada recognizes the need for consecutive Ontario governments to participate in gaming, but that government's entry into gaming should be based on a partnership with the charitable sector which has invested a great deal of time and money in developing the industry. The introduction of VLTs should be viewed as a partnership with the charitable sector.
Mr Dimant: We have three recommendations that we'd like to present to your committee, the first recommendation being that charity gaming is part of Ontario culture and has been accepted and supported as such by the public and local and provincial politicians. Charities have invested heavily in this emerging industry and they have earned the right to continue operating free from interference and unfair competition. Our recommendation is that VLTs should be introduced into charity casinos and bingo halls owned and operated by charities for charities.
Second, the inability of gaming charities like the foundation to compete with government-provided gaming restricts them to providing limited, unpopular amenities. If charities are put at a competitive disadvantage by the encroachment of government-provided gaming, funding from this new source of gaming revenue should be channelled in part to charities. Recommendation 2: A portion of the funds derived from VLTs should be distributed to gaming charities to enable them to continue their charitable work.
Finally, many charities have invested large amounts of money in resources and personnel to develop their charitable fund-raising programs. In the event that the province proceeds with the introduction of VLTs into the province, then those charities which have pioneered gaming events in this city should be grandfathered into a situation that would allow them to continue either to operate or to participate in revenue from VLTs similar to racetracks and licensed establishments in a competitive way to ensure their viability and maintain their community volunteer service programs. Our final recommendation is that income derived from VLTs in charity casinos and charity bingo halls should be shared on a 50-50 basis.
Those are our recommendations.
Mr Kormos: Interestingly the government, because it's putting 20,000 slot machines out there in every place but casinos -- that's what this Bill 75 is all about. The government made a commitment to the horse race industry, which I'm confident it'll fulfil, because the horse race industry was lobbying, rightly so, about the cannibalistic effect of first casinos and then wide-open, free-ranging slots as we have proposed here. So the government took care, at least as they saw it, of the horse race industry, bringing them on side, which is why now the horse race industry, among other things -- and we've had spokespeople here several times today -- has endorsed slots, but they want them to be at the racetrack.
The government has also committed, as you probably know, 2% of revenues to pay for gambling addiction programs, and that has helped to soothe the concerns of people who operate gambling addiction programs, people whose livelihood is derived from there. Similarly, the government, as you well know, has made a commitment to giving charitable organizations a piece of the action, a piece of the take.
We've been concerned, I think all of us, at the lack of model. There's been a dance in the fog because nobody's been able to come here to look at the proposed models as to how that's going to be achieved. Is it going to be done, for instance, at a central level? In other words, is it going to be determined here at Queen's Park? Is it going to be done at a regional, local level? I come from smaller-community Ontario, as do I think most of the people on this committee. From community to community, various charitable organizations are more or less adept at fund-raising, depending upon the amount of volunteers they can muster and upon the economies in those communities. Should there be a precedent? Should there be historical level of participation based on regional historical level of fund-raising, as compared to some sort of distribution?
What are the sort of models you've had in mind? Because we haven't had anything to work with. The government hasn't given this committee any tools to talk about the model of sharing funds with charities.
Mr Dimant: Certainly we talk about precedent in our brief and we think that's very important. While we appreciate the wonderful work that the Ontario Trillium Foundation does, we would be aghast if we have a creation of another Trillium fund for this purpose. I think the government has to recognize the grass-roots people of this community, and those are the service organizations, the religious organizations who plow in the fields. They've worked, they've endeavoured even in this industry, and we're concerned that at the end of the day there's going to be a superstructure imposed and we'll need to have at least a few grantsmen directors on our staff to enable us to get a grant.
I don't think this is what we want to see, speaking for certainly a segment of the people of Ontario. We would like to see history taken into consideration. We'd like to see an understanding of the local situation by the government. There has to be a model that will identify those organizations that have worked so tediously in this field, whether it's -- I can mention Variety Clubs and CNIB and ourselves and others, who have pioneered. I think they have to be part of the equation when this is all determined, and the regional and the local people who depend on it, because certainly there is no doubt that the VLTs will take away money from the charitable sector. We have to find a way to give it back to the charities to enable them to carry on their work so it'll be less of a burden on the government.
Mr Kormos: Can you propose some sort of models that would synchronize a provincial perspective? Down in Welland there's Lions International, but there's also a Lions Club in Welland that does good work, and it's not a big club, it's not a big detachment or unit. How does --
Mr Dimant: I think there has to be an examination of the fund-raising that's done right now on a regional level, not Lions International but the local Lions Club. How much do they get out of the gaming sector right now and how much are they going to tentatively lose from this kind of introduction of VLTs? They have to be compensated so that their work continues. I would say that's across the board we have to look at that. The main purpose is to help the citizens of Ontario.
Mr Kormos: You of course were here when the last spokesperson for the horse racing industry spoke. What about the inevitable competition, notwithstanding the numbers, 2%, X%, that are proposed now? What about the inevitable lobbying and politics about the gambling addictions people wanting more than 2%, you competing with the horse race industry in terms of percentages? How is that going to be resolved?
Mr Dimant: I think at some point there'll be arbitration, but we're really concerned that in all of this give and take and tugs of war, the charities are the ones that have fared the worst, charities and religious organizations that have been in developed bingo business and so on, taken over by commercial operators. The charity casinos, which were started by charities for themselves, have become run by operators. We're concerned that the voice of charities not be lost in this so that it doesn't become a tug of war just between the racetrack owners and the gaming addiction foundation, but that we remember that the charities, the grass-roots people also have a portion, a stake in this. I want to come back to that.
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Mr Hudak: Thank you, gentlemen, for your presentation. I think the area I come from, again a small town like Mr Kormos talks about, Niagara South -- there's one community called Fort Erie. Maybe you've been there before. It has a beautiful racetrack that employs, indirectly and directly, between 3,000 and 4,000 individuals. At the same time, we have a booming bingo industry and some very successful charities that do outstanding, and our own Lions Club that I could brag about for a while -- I was at one of their dinners recently. Outstanding work from the Lions Club.
I think what I hear from different sectors, whether it's the bingos, the charities, those that run the Monte Carlos and the tracks, is they'd like some sort of equal playing field. There's a movement certainly in New York state to go to a big casino over there, which would devastate our charities unless we do something about that; it would devastate the track unless we do something about that. So I think the government has made, and I think you agree, some substantial moves towards improving all sectors, and specifically to charities. I think you mentioned video lottery terminals and revenue at the charity event sites. I think you're also on record, gentlemen, for VLTs at bingo parlours. Is that correct?
Mr Dimant: Yes, charity bingo halls. We're very specific, because we have to keep emphasizing that there's a difference between commercial operators and charities. So in those charity halls, they should have a right to the VLTs. I think for too long the hands of charities have been tied. Competition is okay; it's fair. But don't tie the hands of the charities all the time, and that's what's happened heretofore. We hope this time around at least you'll be listening to us and you'll be looking at grandfathering and you'll be looking at charities that are in the field and you'll be looking at charity bingo halls and giving them a fair break.
Mr Hudak: So in the way this should roll out, my understanding of what I read in the budget and such was initially at the racetracks, which you've discussed, and charity event sites. Then, down the road, the government will make a reasonable assessment of where it should go into liquor-licensed establishments, and you think we should add charity commercial bingo parlours and halls as well.
Mr Dimant: I think charity halls should be right after the racetracks or simultaneously with the racetracks. Why not let charities benefit at the same time?
Mr Hudak: Finally, in terms of the distribution mechanism for the charities, your advice, gentlemen, was something more close to a local level as opposed to centrally controlled.
Mr Dimant: That's correct. I think there's a possibility even some charities that are on a provincial level, you can have it two-tier, but it's got to be charity-driven; it's got to be the people, the grass roots of this community. Yes, let's get it back to the regional areas; let's get it back to the hands of the people.
Mr Hudak: If you look at the whole gaming industry, competition comes from New York state, competition probably comes from Michigan, a movement of the last government towards the lottos, the scratch and win, the Sport Select etc -- money that went I believe directly to the government as opposed to charities. What you've heard in the budget and the progress this committee has been making, is that substantial improvement for the charities in Ontario?
Mr Dimant: I just have to say for the record, our biggest competitor to charities was the government itself. It wasn't the Americans. Charities, those of us that are more aggressive, would be pleased to compete with the government, if only you'd untie our hands a little bit. So there's movement now, but I think keep untying the hands.
Mr Crozier: Could you tell me, do you favour video lottery terminals in licensed establishments?
Mr Dimant: If you ask the question we debated at length before we presented, do we favour it altogether -- that's also a fair question -- we recognize the inevitability of it happening.
Mr Crozier: No, no, let's assume that these committee hearings are going to do something. If this government hears people saying they shouldn't be in licensed establishments, let's assume -- I know it's a stretch, but they might listen. Where would you stand on the issue?
Mr Dimant: We're for restricting it in specific gaming areas. We are not in favour of it going all over the place, being readily available at sites where all sorts of people can be tempted, rather at destination sites where people knowingly go to gamble, but certainly not in all licensed facilities.
Mr Crozier: Thank you for your forthright answer. When you, under recommendation 3, suggest that the income derived from VLTs in these charity casinos and charity bingo halls, which you'd like to recommend, be shared on a 50-50 basis, I just want to clarify. Mr Pollock, who appeared here a short time ago, said that the government's share amounts to 70% of gross revenues. So what you're saying is -- you want to share 50-50 with whom?
Mr Dimant: With the government, at the end of the day.
Mr Crozier: With the government. So you don't agree with this 70% of gross revenues going to the government and 10% going to charities.
Mr Dimant: I think Mr Pollock speaks for his industry.
Mr Crozier: I'm using those statistics, and you'd prefer to see it more on a 50-50 basis.
Mr Dimant: That's right.
Mr Crozier: But of course we all understand, if we believe what's in the budget, that the government can't afford to do that.
Mr Dimant: We believe that the government may take note of what some of our organizations are saying and perhaps at the end of the day sit down and negotiate a fair percentage with the charities. So I think we're ready for negotiations and I think we have to be heard.
Mr Crozier: I think we could even support your position in that Mr Harris said in fact that he wouldn't even move on this type of gambling before all sectors were consulted. Have you been consulted on this?
Mr Dimant: We believe this is part of the consultation process and will accept it as such.
Mr Crozier: Okay, thank you. I won't pursue that any more.
The Chair: Thank you very much, gentlemen.
RACETRACKS OF CANADA
The Chair: Our next presenter is Racetracks of Canada, Mr Roland Roberts. Welcome, Mr Roberts.
Mr Roland Roberts: Good afternoon. I have some material here for distribution to you.
The Chair: If you'd provide that to the clerk, she will distribute it to the committee.
Mr Roberts: Thank you, Mr Chairman and committee members, for this opportunity to present to you today the concerns of our 16 Ontario member racetracks with respect to the imminent introduction of video lotteries at Ontario racetracks under the authority of Bill 75.
Racetracks of Canada is a national service association whose membership consists of 31 thoroughbred and standardbred racetracks which are located in each of the provinces of Canada in which horse racing is currently conducted. As stated previously, 16 of these racetracks are located in Ontario. The mandate of Racetracks of Canada is to further the interests of the parimutuel horse racing industry in general and the interests of racetrack operators in particular.
My mandate on this particular occasion is to make representation on behalf of the 16 Ontario member racetracks but, I must emphasize, not to express the independent views of any particular racetrack operator.
We are most appreciative of the government of Ontario's recognition of the significant contribution which the Ontario horse racing industry makes to the provincial economy. This fact was acknowledged in the recent provincial budget, which, by reallocation of parimutuel tax revenues, provides the horse racing industry with the means to renew its financial viability and to more confidently plan for future developments. This is of paramount importance to enable the industry to improve its competitive position in the entertainment and gaming environment.
The opportunity which results from the government of Ontario's plan to initiate the introduction of video lotteries at racetracks in an important aspect in the future development of the horse racing industry. Through the auspices of the Ontario Horse Racing Industry Association, better known as OHRIA, the industry enthusiastically supports the implementation of video lotteries at racetracks.
We, the racetracks, are confident that our experience in the field of gaming, our awareness of and proven ability to meet and indeed surpass the need for maintaining the highest levels of integrity and security, will ensure that government's concerns and expectations will be more than adequately met. In addition, the industry is familiar with the requirements of working within a tightly regulated environment. It is now subject to the supervision of the Ontario Racing Commission, the Ontario Liquor Licence Board and the Canadian Parimutuel Agency, which has jurisdiction over the systems and controls designed to safeguard the betting public by ensuring the integrity of the wagering or betting systems.
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Racetracks have the synergies and infrastructure to facilitate the implementation of a video lottery network which will make this new gaming device available throughout the province in controlled and attractive venues. We believe that for government and the racing industry to properly evaluate the effects of video lotteries, racetracks will require the opportunity to operate video lotteries in a controlled and exclusive environment for an extended period of time, following which joint consideration could be given to a further expansion of the program.
We believe that by working in a cooperative partnership, the government of Ontario and the horse racing industry can achieve results based on sound business, economic and moral principles which will achieve the best possible returns to government and a reasonable return to the racing industry.
As much of the industry is agriculturally based -- namely, through breeding, training and boarding farms, as well as the many racetracks located in rural communities -- its contribution to rural Ontario is of major significance. Even those racetracks residing in metropolitan areas provide a significant beneficial effect to the agricultural community through the demands for veterinary services and feed and bedding for horses.
For your information, the Ontario horse racing industry currently provides an estimated 40,000 direct and indirect full- and part-time jobs to residents of Ontario, with an annual payroll of almost $1 billion. It is the third-largest agricultural sector in the province of Ontario, with expenditures of approximately $578 million.
The stated objective of the horse racing industry is the preservation and growth of the live racing product in Ontario. Thus, revenues generated through the introduction of video lotteries in Ontario will be reinvested into the Ontario economy and local communities. This will provide a cyclical effect in that increased purses will attract new horse owners and encourage those already in the business of horse racing to increase their already substantial investments, thereby increasing the demand for more horses of better quality. This, in turn, will encourage breeders to expand and upgrade their breeding base. More and better quality horses will, in turn, provide a more attractive and competitive product which will result in increased public interest, improved attendance and wagering levels, and increased revenues to the government.
The industry perceives each racetrack as having the potential to become a sports/entertainment/gaming complex designed to meet consumer demands and expectations. We believe that racetracks can fulfil this requirement and become consumer-driven destination centres, with the experience and built-in safeguards and facilities which other premises may not enjoy.
While the industry is concerned with enhancing its position within the sports/entertainment/gaming marketplace, it is cognizant of its moral responsibility to the community. In that regard, horse racing has provided, and will continue to provide, financial support to Gamblers Anonymous, or more properly the Canadian Foundation on Compulsive Gambling. The industry, through its advertising campaigns, has always emphasized the sport and entertainment value of its product and has seldom promoted directly the gaming aspect, which is deemed to be a matter of customer choice.
Racetracks are also prepared to assist charitable organizations achieve their funding requirements and are willing to work and cooperate with government and charitable organizations to achieve this end. Racetracks have developed over the years successful working relationships with many charities, such as Variety Village, the Canadian Association of Riding for the Disabled, the Multiple Sclerosis Society and other charities which neighbour each racetrack within its local community.
Racetracks of Canada, Ontario division, is prepared and willing to participate in discussions to achieve an objective which will be in the best interests of the government, the consumer, charitable organizations and the horse racing industry. Thank you for your attention.
Mr Guzzo: Sir, thank you very much for your presentation. I have to tell you that I am one who has a little difficulty with this segment of the industry. I happen to think that one of the reasons you people are in the difficulty you're in today has been brought about by your own management and less by competition from other forms of gaming.
But I read with interest on page 4 of your submission when you refer to the "40,000 direct and indirect full- and part-time jobs to residents of Ontario" -- if anything, I think you might be somewhat low -- "with an annual payroll of almost $1 billion." But if you skip to the next paragraph, in my opinion that's about as important an issue in this as we will deal with, where you say, "As much of the industry is agriculturally based, namely, through breeding, training and boarding farms, and many racetracks are located in rural communities, its contribution to rural Ontario is of major significance. Even those racetracks residing in metropolitan areas provide a significant beneficial effect to the agricultural community," driving home the fact that $578 million is the estimated net section of the agricultural sector.
The people in the backstretch, the people at the racetracks who either live there and work on a full-time basis or work on the breeding farms or the training farms and come in there are the people I think we have to be most concerned with, mainly because I don't think they have an alternative. The people who are working at the tracks, whether it's the students or housewives, as a second job, who punch the tickets, who sell the tickets, and indeed the full-time people managing and servicing the racetracks are capable of being employed elsewhere if the tracks were to close tomorrow. But that agricultural community -- do you know of any place where this sector could be employed in small-town Ontario, rural Ontario if this business were to disappear from the face of Ontario?
Mr Roberts: I believe your assessment is quite correct. No, they wouldn't be absorbed. I think the racing industry plays a very significant role in the maintaining of many of the farms in rural Ontario because racing is an adjunct to the main farming industry and in many cases I believe is supportive of the farming community.
Mr Guzzo: I asked Mr Lennox this. He felt that every track in Ontario that has an extended meet has a collective agreement with either the thoroughbred horsemen or the harness horsemen. Is that your understanding? Does each and every track that you represent here in Ontario have a form of a collective agreement?
Mr Roberts: It's not referred to as a collective agreement as that parlance is usually understood, but yes, there is a letter of agreement or a contract with each of the horsemen's associations who abide on that track.
Mr Guzzo: There's no track where the horsemen are not represented by some agency?
Mr Roberts: That is correct.
Mr Guzzo: I appreciate it's not a collective agreement, but I use that term for my friend; he understands those things.
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Mr Crozier: Good afternoon, Mr Roberts. Do you support the introduction of video-type slot machines in licensed establishments beyond racetracks?
Mr Roberts: We would not recommend that they be introduced at licensed sites.
Mr Crozier: As part of your submission, down near the bottom of page 3, you said "an extended period of time, following which joint consideration could be given to a further expansion of the program." What did you mean by that?
Mr Roberts: The assessment as was raised by the gentleman who preceded me, looking at the charitable organizations, reaching out into the charitable halls, if it's deemed in the wisdom of the government to extend that into licensed premises, further expansion -- I should have pre-empted this part of my answer -- looking at an extension within the racetrack community and increasing the number of terminals available, there certainly is some concern on the part of the racetracks that the allocation as presently prescribed -- and we understand the reason for it -- will create some difficulties within the racetrack community, living within that structure, and we anticipate the demand will justify an increase in those numbers.
Mr Crozier: We all understand that the only real reason I suspect the government's introducing these video-type slot machines is because of its need for revenue, because a year or so ago the two top men on the government side, Premier Harris and Mr Eves, objected to them, up until this point. If we assume that they need the revenue, I would like it clarified. What you're saying is that perhaps the numbers of VLTs could be expanded, but that it still should be done within the confines of a strictly controlled area.
Mr Roberts: That is quite true.
Mr Crozier: I appreciate that because one of our concerns -- although we have concerns with video slot machines all together -- is the accessibility and the need, if they're going to be introduced, to initially introduce them in very controlled circumstances and that in the long run they should stay in those controlled areas.
Mr Roberts: We certainly support that view.
Mr Crozier: We too support the viability of racing in the province of Ontario and we know what it means to our agricultural areas. I come from a rural riding. The first horse race I ever went to I was working in the ticket room where you had to balance all the tickets, but then we got modernized and went on to these machines that spit out the tickets and balance them. But in any event, I appreciate your comments in that respect.
Mr Kormos: At the end of a race night, granted admissions to a track are a number that's looked at by the management of the track, and food sales and beverage sales -- there's a little bit of money to be made there -- but ultimately, at the end of the day, the number that's of most interest to the racetrack is the gross amount bet, isn't it?
Mr Roberts: It's significant, because it's important to the horsemen as well as to the racetrack.
Mr Kormos: That's where the money comes from, isn't it?
Mr Roberts: Yes.
Mr Kormos: It's not the admissions.
Mr Roberts: They all certainly contribute.
Mr Kormos: But the admissions aren't the primary source of revenue, are they?
Mr Roberts: No, they are not the primary source.
Mr Kormos: It's the total amount bet, right? That's what the business is all about.
Mr Roberts: No, I would --
Mr Kormos: The more that's bet the more profitable the business is. Is that fair?
Mr Roberts: I'll wait to see where you're leading.
Mr Kormos: Let's start talking about the Ontario Lottery Corp, because you may or may not have been the beneficiary, like so many other Ontarians, of the things they deliver with your junk mail. One came down to my house on Bald Street in Welland the other day that if I went and bought one scratch and win ticket I'd get a second one free, and there was a second one too. That was similar to the sort of stuff that the Ontario Lottery Corp has been doing for a good number of years. They do junk mailing to households, they do ads encouraging people to buy lottery tickets. You're familiar with that, aren't you?
Mr Roberts: Oh yes.
Mr Kormos: Because that's how they make their money, isn't it?
Mr Roberts: But if you're alluding that that's what racetracks do --
Mr Kormos: That's how they make their money, isn't it, the lottery corporation?
Mr Roberts: Yes.
Mr Kormos: By encouraging more and more people to buy lottery tickets.
Mr Roberts: Correct.
Mr Kormos: Encouraging more and more people to gamble, right?
Mr Roberts: Yes.
Mr Kormos: It's not rocket science. If it was, I wouldn't be capable of it.
Mr Rollins: Well said.
Mr Kormos: But that's how they make money. I saw an interesting ad recently; I think it was Woodbine. I appreciate you qualified your comment that seldom does the race industry promote gaming or the gaming aspect of it, because it is a little unseemly, right? There was an ad -- again it was the Eaton's catalogue people -- and they were all frolicking over at the Woodbine track and they were talking about betting this horse and betting that horse and who won and who didn't. Do you recall that ad?
Mr Roberts: I didn't see it.
Mr Kormos: But the fact is that once you get them there -- you have bettor-friendly programs, don't you?
Mr Roberts: Certainly.
Mr Kormos: And that's to encourage neophytes to not be afraid of the window, right? That's why you have bettor-friendly programs. You want neophytes to feel comfortable reading that program and picking the winner, don't you?
Mr Roberts: What's your point?
Mr Kormos: My point is I want to know whether you want bettors, neophytes, to feel comfortable and to bet at that window.
Mr Roberts: We want people to feel comfortable coming into a racetrack. It's one of the areas that we have worked very hard at in terms of making our people more friendly in terms of dealing with the customer.
Mr Kormos: You want them there so that they'll bet once they get there.
Mr Roberts: If that's their choice.
Mr Kormos: You want them there so that they'll bet once they get there. That's why you've got bettor-friendly programs.
Mr Roberts: If that's their choice.
Mr Kormos: But that's why you have bettor-friendly programs, isn't it?
Mr Roberts: It's the same reason as you go to a hockey or baseball game or almost any concert, you have a program, and they're friendly. It's true within any operation.
Mr Kormos: So far betting at a basketball game -- far be it from me to suggest it'll always be illegal in this province -- remains somewhat illegal.
You've indicated that you don't support these slots helter-skelter in every community in every neighbourhood. I trust that's because of the potential social danger that exists, the increased exposure to them. You're going to have greater levels of gambling addictiveness. Is that fair to say?
Mr Roberts: I think unless you're aware of something that I'm not, we aren't discussing slots; we're discussing video lottery terminals, which are very --
Mr Kormos: You call them VLTs, I call them slots.
The Vice-Chair (Mr Ron Johnson): I'm sorry, Mr Kormos, the time has expired. Mr Roberts, I want to thank you on behalf of the committee for your presentation.
ONTARIO HOTEL AND MOTEL ASSOCIATION
The Vice-Chair: Our next presenter will be Mr Rod Seiling from the Ontario Hotel and Motel Association. Mr Seiling, welcome. If you could please identify yourself. You have 20 minutes for your presentation and you may wish to leave some time for some questions at the end.
Mr Rod Seiling: Thank you, Mr Chairman. My name's Rod Seiling. I'm president of the Ontario Hotel and Motel Association. We have over 1,000 members across the province. From the very largest to the very smallest, we represent a broad cross-section.
Let me begin by congratulating the government for its commitment to introduce video lottery terminals in the province and specifically to our industry. It is interesting to note the misinformation being put forth by some to discredit the government on this issue and as a means to promote their own interests.
Ontario's hospitality industry is one of the province's larger and important industries. Unfortunately, the recession has hit it very hard, with sales down 20% with no real turnaround in sight.
Collectively we directly employ 232,000 people with another 85,000 employees indirectly, for a total of 357,000. This represents a decrease of over 90,000 from pre-recession days. Our sales total is about $10 billion annually, which equates to 3.8% of the province's GDP. We're also an important component of Ontario's tourism sector, which accounts for more than $3 billion to Ontario annually, and a major purchaser of Ontario agricultural products and a primary source of off-farm income in rural Ontario.
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As I indicated earlier, the recession has hit the industry very hard and shows no signs of easing up. Bankruptcies continue very high, which continue to threaten jobs. Since 1992 there have been more than 1,400. Many businesses continue to struggle to survive, costs continue to escalate, with revenues still in decline. However, on May 8 the government gave them all better hope for days ahead: video lottery terminals.
I'm here today to ask you not only to support the commitment made by the Minister of Finance on May 8, but to ask the government to commence implementation as soon as possible for our industry. I am also here today to put before you some substantiable facts and information on VLTs, not anecdotal misinformation that we have seen and heard recently.
First off, the government is not introducing VLTs to the province; they're already here. According to the Ontario Provincial Police estimates, the numbers range from a low of 15,000 to some 20,000. These illegal grey machines are costing the government approximately $400 million annually in non-tax revenue. Furthermore, by ignoring their presence some businesses are forced to operate illegally just to try and remain competitive.
VLTs are an accepted form of adult entertainment. They are not an insidious gaming device nor any more addictive than any other gaming available in Ontario, as some would have you believe. Moreover, about two thirds of Ontarians want them in adult licensed bars and restaurants, according to surveys. Interestingly, the poll results showed Liberal and NDP voters slightly more favourable to them than PC supporters.
Studies conducted by Brandon University in Manitoba indicate that video lottery players see video gaming as part of an evening's entertainment. It is planned as part of going out and hence it is part of their budget planning process. VLT players do so about one or two times per week and spend on average about $10 per play. Dr Barbara Gfellner from Brandon University conducted a study and found that most people who played VLTs did so to socialize not to gamble, and that it is viewed as a recreational activity. I draw your attention to excerpts from her study, which is attached to this presentation.
We also want to commend the government on its forethought to dedicating funding towards the development of programs for those with gaming problems. There already is in the marketplace today many forms of gaming. VLTs, it should be noted, according to research, are not any more addictive than any other forms available, be they horse racing, bingos, casinos etc.
Data indicates there is a small component of the population susceptible to compulsive gambling. Compulsive gambling, like compulsive drinking, is not a cumulative problem which grows with the introduction of new brands and types. Gamblers transfer their attention from one form of gaming to another. For example, horse racing revenues have declined substantially from the days when they were the only legal game in town.
Tibor Barsony, the executive director of the Canadian Foundation on Compulsive Gambling, has said, "Prohibition is not the answer, education and treatment is." Dr Durand Jacobs, vice-president of the US National Council on Problem Gambling, said when he was here in Canada: "The majority of the population has no problem with gambling. For most folks, gambling is just fun and games, but for the small minority who have a problem, it can be devastating and we have to develop programs to help them."
It is interesting to note that research shows that less than 2% of the population exhibits the potential to become problem compulsive gamblers. This compares to 6% for alcohol, you should note. However, we all recognize that for some, no matter what the product, a problem can develop, and we commend the government in recognizing this fact and moving forward on it.
Despite what you may have heard or been led to believe, the introduction of VLTs in other provinces has proven to be a job-creator and a major stimulator to our industry. Only in Nova Scotia, where originally they were allowed in corner stores, was there a problem. Now that they are in restricted locations, as per Bill 75, we are not aware of any problems, contrary to what some may want you to believe. I should also point out that VLTs and casinos in Nova Scotia are coexisting quite well. A study conducted by Professor Marfels of Dalhousie University has concluded no negative impacts. There are two different audiences: one destination, the other drop in. Based on that experience in those other provinces, VLTs will create thousands of new jobs in Ontario's hospitality industry as well as providing a new source of funds for the industry and government.
In Manitoba, for example, the introduction of VLTs has resulted in the creation of almost one full-time and one part-time job per business location. Overlay those numbers in Ontario and you're looking at well over 10,000 new jobs. These, it should be noted, are direct jobs.
Prior to the introduction of VLTs in Manitoba, the Manitoba Hotel Association reported that its members were going bankrupt at a rate of about 14 per year. With the introduction of VLTs, that number has dropped to two per year, a drop of over 85%. A recent survey conducted by the association revealed that 65% of its members credited VLTs as playing a crucial role in averting financial disaster.
Another positive spinoff is on the local economy as it relates to the purchase of capital improvements. Construction projects and the purchase of goods and services relative to the operation of VLTs resulted in a boost to the local economy. Each operator spent an average of about $20,000 to install machines. That figure translates into well over $100 million in capital expenditures all across this province.
In terms of an implementation schedule, we urge you to recommend the government to move the hospitality industry on line as soon as possible. The minister, in the budget on May 8, said VLTs were being introduced to help stimulate the hospitality industry. This measure is clearly intended to help the industry, but any undue delay could in fact exacerbate the shift in business that will accrue to those who will receive VLTs in the earlier implementation schedule. This will make an already serious economic situation -- and I refer to northern Ontario and rural Ontario specifically -- even more urgent. It will also delay the fight against the illegal grey machine market, including bringing the $400 million-plus of new non-tax revenues into the government accounts.
VLTs are important to our industry for a number of reasons. Obviously they provide an important new source of revenue to the business. The proposed 10% commission fee is low in comparison to other jurisdictions -- averages between 16% and 30% -- but one that we can live with. Because VLTs are viewed by the public as a desirable form of entertainment, they increase the traffic flow, they bring in customers. Customers eat and drink, which creates more economic activity. A byproduct of this new activity is our agricultural sector, as our industry is one of the largest purchasers of Ontario farm products, as well as off-farm employment, as I mentioned earlier.
It is also important to comment on the supposed impact on charitable gaming. Contrary to what you may have been told, VLTs have not had any negative impact on charitable gaming. For example, in Alberta the drop in charitable gaming occurred with the introduction of casinos over one-half year before VLTs were introduced in that province. I should also have indicated earlier that according to our figures charitable gaming in this province is up some 40% over the last three years.
VLTs will help to save our industry. That is the clear and loud voice of all our members all across the province. The facts support that belief. Our members are already licensed, and as such, they are proven responsible professionals, trained and thoroughly familiar with all that results from the operations of activities for adults, including liability. A healthy hospitality sector through VLTs means a healthier local economy. A strong and vibrant business reinvests in its business, hires more people, purchases more goods and services, sponsors local charitable and sporting events and pays taxes.
Before closing, I would also like to comment on a number of other aspects contained in Bill 75. Combining the Liquor Licence Board of Ontario and the Ontario Gaming Commission into the Alcohol and Gaming Commission of Ontario appears to be a logical move. Combining their operations should not only provide efficiencies, it should also mean less confusion arising over the regulatory enforcement side once the hospitality industry begins to operate VLTs. It should also assist the government in dealing with illegal grey machines.
I would also want to ensure that bad operators are not allowed the privilege of a licence. The provision to revoke a licence to a problem location on the outlined grounds -- prostitution, drugs, illegal gaming, physical threats to persons -- is well-meaning and good. Before any final action is taken, it should require a public hearing so as to protect the rights of the owner. Interpretation is subjective and we need to ensure that fairness to all parties is maintained.
We commend the government for taking this initiative. It will stimulate our industry without any government funding, it will help eliminate illegal machines and bring untaxed revenues into the mainstream economy and in the process help the government reduce the deficit. Thank you very much.
The Vice-Chair: Thank you, Mr Seiling, for your presentation. We will now move to questions. We're looking at about three minutes per caucus starting with the Liberal caucus.
Mr Crozier: Good afternoon, sir. I tried to deal with this problem that your industry has leading up to this. We know full well how you feel about the introduction of video lottery terminals in licensed establishments in the hotel and motel industry. We're told as well that in Alberta -- and you've referred to Alberta -- what resulted was less money spent on food and beverage and more money spent on VLTs. Were you aware of that or do you agree with that?
Mr Seiling: I'm aware of what you're speaking of, but I would suggest your information is incorrect. Our information is that the level of purchases on alcohol remain the same; the actual amount spent on food and beverage other than alcohol increased, and I have documentation from an operator to that effect.
Mr Crozier: From an operator?
Mr Seiling: Well, operators.
Mr Crozier: Good. So there's been some research in that area and you feel confident that that's the case.
Mr Seiling: I should point out that it's not just the case in Alberta, it's the case in other provinces as well.
Mr Crozier: In the other provinces, how widespread are VLTs in licensed establishments? In other words, does everybody get a crack at them?
Mr Seiling: The government has a formula for dispersing them and they range from province to province. They're a different formula.
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Mr Crozier: It's my understanding, in the province of Alberta, for example, that they're starting to cut back on the numbers that are in any given establishment.
Mr Seiling: Yes, but you have to understand the reason for that. When Alberta first allowed VLTs in licensed establishments, and they were the first ones to get them, they allowed multiple licences per location. Now they're cutting back to one licence per location for VLTs; it can't have different rooms licensed, so you can't double and triple up. They're also relocating those excess machines now to other locations that didn't receive them.
Mr Crozier: You're also aware that in Alberta there has been some problem and that there is some concern with how these rooms are observed by the staff, how they're supervised. For example, bartenders are looking after serving people at the bar and these VLTs are in another room. How would you manage that, do you think?
Mr Seiling: Quite frankly, I'm not aware of that, but I don't see the relativity given that, as I understand Bill 75, they're to be in age-restricted locations where the licence is held. I don't foresee that as a problem here in Ontario.
Mr Crozier: You don't see it as a problem because people under age have access to restaurants and you don't think there'll be any problem whatsoever in supervising access to these VLTs.
Mr Seiling: My reading of Bill 75 is "age-restricted," so if you're under 19 you don't get in. Part of your agreement to have VLTs, if you're licensed, is that you are not allowed to have anyone in that room under the age of 19.
Mr Crozier: But it is your understanding that they have to be in a separate room.
Mr Seiling: Your licensed area has to be age-restricted, not a separate room from your licence. My understanding is that the machines are in your licensed area and it's age-restricted.
Mr Crozier: So if I'm a parent and want to go to a restaurant now or a licensed food and beverage area, have dinner, some wine, perhaps a drink before and a drink after dinner, I won't be able to take my children under the age of 19 to dinner with me?
Mr Seiling: That is the case in some establishments today. It's up to individual licensees to decide whether they're going to be age-restricted. That is in effect today and it will be a business decision that each licensee will make as to whether they want to participate in this program.
Mr Crozier: Do you expect that these business decisions, because of the competitive nature of having VLTs in your establishment or not, the revenue possibilities of them, notwithstanding that they're business decisions, might reduce the number of establishments which will be family-oriented?
Mr Seiling: Quite clearly, there are businesses that cater to families that will not want to participate in this program. There are others that cater to an older demographic crowd and will want to. It's worked out that way in other jurisdictions as well and there's not been a problem.
Mr Crozier: Is your experience then that family businesses are not in trouble but other ones are?
Mr Seiling: I didn't say that, sir.
Mr Crozier: I know you didn't say that. That's a point I want to make.
The Chair: Thanks, Mr Crozier. We're going to have to move on to Mr Kormos.
Mr Kormos: Did your association take a position on the last government's casino legislation, the casino location in Windsor?
Mr Seiling: Yes, there was a representation made.
Mr Kormos: What was the position your association made?
Mr Seiling: There was not a major objection, as I recall. I was not with the association at that time.
Mr Kormos: Did the association endorse the casino as it was described: an economic development tool especially for small business in downtown Windsor?
Mr Seiling: As I would recall again, I wasn't part of the association at that time, so I feel it's inappropriate to comment.
Mr Kormos: Are you aware of the Ontario Restaurant Association's report of last year which indicated that the trickle-down that was suggested by advocates of the Windsor casino simply didn't trickle, nor did it go down, that the small businesses in downtown Windsor weren't enjoying economic benefits as a result of the location of the Windsor casino? Are you aware of that?
Mr Seiling: Thank you very much, Mr Kormos. That's exactly the reason why VLTs are so important to the hospitality industry.
Mr Kormos: Exactly. The hospitality industry wants to get into the gaming business.
Mr Seiling: No, we want to get into the entertainment business, sir. If you go back and look at the research, people play VLTs as a form of entertainment. It's not to gamble.
Mr Kormos: In 1995 -- you want to talk about Alberta? -- a Lac La Biche, Alberta, truck driver killed his wife and himself after an argument over his use of VLTs. A 40-year-old female accounts clerk at an engineering firm enlisted the help of her teenage daughter to steal $178,500 from her employer to feed her VLT habit. The woman, who had no criminal record before being convicted and sentenced to 30 months in jail, was on the verge of suicide when she sought help. A 47-year-old woman insurance adjuster bilked $19,117 from her employer to support her VLT habit.
One woman -- this was a news report -- wagered away her entire divorce settlement. Another one: A man who lost his wife and home because of his VLT habit cashed an entire paycheque into loonies and fed it all into a lottery terminal. One well-heeled Calgary gambler blew a million bucks on VLTs before seeking help.
The experience in Alberta -- this is according to therapists who work with Gamblers Anonymous and other treatment organizations -- is that the average VLT user will have blown $30,000, 30 grand, before approaching the abuse commission or Gamblers Anonymous. Is this entertainment? That's entertainment?
Mr Seiling: Mr Kormos, I think the government is to be commended. They are putting money into programs that aren't there today to help those people that no previous government has seen fit to fund.
Mr Kormos: You see, Dr Frisch from the University of Windsor -- you might have heard my reference to his study -- indicates that among younger people, adolescents, there is already an indication of some 9% who have confirmed gambling problems and another 8% who have a high potential to fall into that category. That's a gross or aggregate number of 17%. This researcher remarks on the fact that this seems to be somewhat unique to a new generation. Aren't you concerned about the prospect of 17% of adolescents being gambling-addicted?
Mr Seiling: Mr Chairman, can I have --
The Chair: I'm afraid that Mr Kormos in this case, Mr Seiling, will get the last word, because we must move to the next caucus.
Mr Flaherty: I will just take a moment. Thank you for coming, Mr Seiling. I appreciate it.
The point raised by our colleague Mr Crozier about the gaming premises, subsection 8(2) of Bill 75 deals with the issue raised, and just to avoid the ambiguity, the section provides:
"No person in control of premises where there are video lottery terminals, and no person acting on that person's behalf, shall,
"(a) permit a person under 19 years of age to have access to the gaming premises area where video lottery terminals are located."
It's an area within the establishment as defined in the legislation. I bring that up just to clarify some matter that was raised in the other questions, and that is my only contribution, Chair.
Ms Bassett: Mr Seiling, I want to just pursue the job issue. You mentioned that pre-recession you had 90,000 more jobs than you have today -- we haven't bounced back in the hospitality industry -- and that with the introduction of VLTs Manitoba gained 10,000 jobs or around there.
Mr Seiling: No. If you correlate that, the Manitoba Hotel Association did a survey of pre- and post-VLTs. They found that there were I think 0.9 full-time jobs created per location. If you correlate those to Ontario with the number of machines that are being proposed here, that would work out on the low, conservative side to about 10,000 new full-time jobs.
Ms Bassett: That's what I was getting at. We wanted to find out how many jobs you think the introduction of VLTs would bring to the hospitality industry in Ontario and what kinds of jobs. Just one other part: Would it be in the rural areas as well as in downtown cities?
Mr Seiling: It would be all across the province. The hospitality industry is suffering across the board, but if you want to put it in degrees, it is rural and northern Ontario that are suffering the most, and they are the ones who are struggling the most with the illegal machines.
Ms Bassett: What kinds of jobs would they be? My colleague was talking about low-skilled jobs for people in the horse and harness industry. Would this be the same kind of job, people who wouldn't get jobs somewhere else?
Mr Seiling: We prefer to call them entry jobs. They would be bartenders, bus people, wait staff all across, you name it, within the hospitality establishment.
The Chair: Thank you very much, Mr Seiling, for attending today.
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CANADIAN CASINO NEWS
The Chair: Our next presentation is the Canadian Casino News, Mr Ivan Sack. Good day, Mr Sack. How are you?
Mr Ivan Sack: I'm fine. My name is Ivan Sack. I'm editor of Canadian Casino News. Just to tell you a teeny bit about Canadian Casino News, it's a monthly publication which I own and write. It deals with casino and other gaming across Canada. Right now it has subscribers in seven countries.
Ladies and gentlemen, I want to begin by thanking you for the opportunity to speak this afternoon. My comments will be along the following lines. First I would like to talk about the content of Bill 75, and secondly I would like to talk a bit about the environment in which the Alcohol and Gaming Commission of Ontario, the new agency being created by this bill, will work.
With regard to the content of Bill 75, I support combining the functions of the Liquor Licensing Commission and the Ontario Gaming Control Commission into one body. Alberta, Saskatchewan and Quebec have already done this, and in my conversations with these bodies I've gained the impression that things are not only working well but that significant savings have been achieved by the elimination of two separate sets of inspectors. Hopefully this greater efficiency will be carried through to the bottom line of the Ontario commission and it will reduce the costs associated with obtaining a licence to sell gaming equipment and supplies in Ontario.
The operation of casinos and VLTs and the ability to sell to the Ontario gaming industry are considered a privilege granted by the commission as opposed to a natural right of commerce. The rights of gaming suppliers are therefore at the mercy of the powerful gaming commissions, and to this end I support subsection 11(1) of the act, wherein it gives a supplier the right to appeal a board decision to the Divisional Court, and subsection 11(2) of the act, wherein it limits the right of appeal to questions of process only.
You may not be aware of the fact that by including these provisions within its act the government of Ontario has adopted the model used in Nevada and rejected the approach followed in New Jersey. Unlike Nevada, where the Gaming Control Act provides for judicial review of gaming commission disciplinary decisions and orders but not licensing decisions, the New Jersey Casino Control Act provides for judicial review of all decisions and orders of the Casino Control Commission. I congratulate the government on having selected the Nevada model, as I believe that you defeat the commission when you make its every decision open to judicial review.
I mentioned earlier that I hoped the greater economies achieved by combining the commissions would result in lower licensing fees. Casino gaming suppliers -- these are the companies which, for example, sell gaming cards, chips, tables and slot machines and VLT machines -- pay an annual $15,000 licensing fee. The same supplier pays $5,000 in New Jersey for a four-year licence and $1,000 a year in Nevada. In all cases, additional fees may be added at the discretion of the commissions in question.
The government places economic development and job creation at the centre of each of its gaming announcements. While I'm not a bleeding heart when it comes to gaming suppliers, I am very concerned that a $15,000 annual licence fee defeats this objective by making it very difficult, if not impossible, for small and emerging gaming suppliers to become or remain licensed in Ontario. This leaves the Ontario market open to large, multinational companies with offshore manufacturing and little beyond retail operations in Canada.
In a practical sense we have to ask ourselves why a cabinet-making firm of, let's say, 10 people in Guelph can make pews for a church or synagogue but must pay $15,000 each year for the right to make gaming tables for a casino. Gaming regulations should be little more than a means to an end. While it must ensure the integrity of those who own or operate or work in a casino, guarantee that casino games are conducted fairly and makes sure that all casino gaming revenues are accounted for, the commission must be careful not to let misconceptions about the gaming industry replace its own common sense.
I know that in a clause-by-clause exercise such as this there is often a tendency to focus on the trees and to forget about the forest, though I would ask that you think about how you position the commission within the broader environment within which it must work. The commission must avoid the temptation to micromanage Ontario's gaming industry.
New Jersey did this by beginning with a very restrictive set of regulations, a set of regulations which, for example, required it to approve promotions and pass judgement upon the colour of the carpet at the entrance to a casino. It did this in part because, as the second North American gaming jurisdiction to approve casino gaming, the state had to pioneer many of its initiatives. They initially did everyone a service by erring on the side of caution. The commission was finally forced to ease its restrictions last year when the relationship between it and the industry it regulated became so confrontational that both its own and the industry's effectiveness became impaired.
While Ontario is in many ways a new gaming jurisdiction, it does not have the same type of learning curve as New Jersey did, as many of Ontario's suppliers are already licensed in several North American gaming jurisdictions. In most cases they have already complied with regulations which are very similar to our own and, to this end, I see Ontario and its commission as having a very unique opportunity to work cooperatively with the gaming industry in a way which jurisdictions such as New Jersey are only now starting to do.
How would I do this? I gave you my thoughts on the need to lower licensing fees as a way to encourage smaller Ontario industries. This having been said, there are several areas where the act should be more specific:
(1) Even though last May's budget talked about the profits from permanent charity casinos and VLTs going to charities, the act does not define what a charity is. I assume the intent is to leave this for the commission to define, though I would caution against this. Commissioners are not gods. I am not going to put any commission on the spot; however, there are well-founded stories of commissions having given casino gaming licences to Little League baseball teams bound for Europe with an equal complement of parent chaperons, and of one NFL team having been given a charity gaming licence to top up its pension plan. As I see it, you have an obligation as you write this legislation to ensure that it is written in a way which protects legitimate charities from encroachment.
(2) In a commercial casino, everyone who has access to the gaming floor must be licensed, while in provinces where VLTs are located in bars, only the owner-operator of the establishment must be licensed. When it comes to opportunities for abuse, there is little difference between a slot and a VLT given that both must be repaired, both require the handling of cash, and both are open to collusion on the part of dishonest employees. The same ambiguities apply to charity casinos where, while all employees must be licensed by a gaming commission, the volunteers who are responsible for counting the cash at the end of the night's play are not.
(3) I am concerned that clauses 3(4)(a) and (b), which deal with the relationship between the commission and its minister, be strengthened. Clause 3(4)(a) of the act gives the commission the obligation to "inform and advise the minister with respect to matters that are of an urgent, critical or relevant nature." Clause 3(4)(b) gives the commission the obligation to "advise or report to the minister on any matter that the minister may refer" to it.
Clause 3(4)(a) is so broad as to allow an unscrupulous minister and a receptive commission chair to drive a truck through it. Who is to say what type of or how much information is relevant to a particular decision? More to the point, given that the commission is a quasi-judicial panel and must have the independence of a panel of judges, why should a minister, upon request, be briefed on its decisions?
As the present wording of the act risks politicizing the commission, I would recommend that clause 3(4)(a) of the act be struck and that clause 3(4)(b) be amended to require that any communication between the minister and the commission be restricted to written correspondence which must be tabled in the Legislature within 30 days of exchange.
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As I promised in my introduction, I would like to talk a bit now about the environment in which the Alcohol and Gaming Commission of Ontario will work. I have to begin by challenging many of the numbers which I see thrown about in terms of the thousands of new jobs which will be created by placing 20,000 VLTs in Ontario and by the establishment of up to 50 permanent charity casinos. Some of the industry numbers which I see I think are very high, while I think the government's own revenue projections are modestly low.
First, the job projections: Ontario's roving charity casinos last year provided Ontarians with 12,300 days of gaming. If the government increases the number of charity casinos to 50, as it has said it would, this total would go to 15,600 days. This would represent a 30% expansion for the industry and represent approximately 750 new jobs. If, on the other hand, the government only brings in 35 permanent charity casinos, as is presently rumoured, the net job impact would be almost nil, as the industry would simply maintain the jobs which are already in Ontario's charity casino industry. My calculations are based on the expectation that each charity casino will have 100 VLTs and 40 table games.
It is too early to say how many jobs would be created by placing VLTs in bars and at racetracks, as the racing industry has yet to completely weigh the tradeoffs in the decrease in its handle against its gains from the VLTs. However, given that the racing industry already has cashiers, the job gains here would be limited primarily to service attendants and repair people for the VLTs. The same would also apply to bars, where on the assumption that each licence is restricted to four VLTs, it would mean no additional bar staff, though additional attendants and roving repair people. The management control system would have to be staffed up and, depending upon the configuration used, additional jobs would be created here.
The hospitality industry is better positioned to tell you about its gains, though studies which I have read and conversations which I have had with knowledgeable people within the gaming industry cause me to conclude that VLTs have a small to negligible impact upon tourism. Americans will not fly to Guelph and take a hotel room for two nights in order to play four VLTs in a small bar. VLTs will help to make marginal bars profitable and thereby help maintain jobs. Many bars in Alberta, for example, count on VLTs for up to 50% of their revenue, though these are not new jobs.
When it comes to revenue, the government has estimated that charities will receive $180 million annually. My own calculations place this at $222.4 million, based on a total gross for both VLTs and casinos of $1.67 billion. The government has not made public its estimate of its share of the take, though I place this at $1.25 billion a year.
The 2% of gross revenue which the government has said it will assign to problem gaming will equal $33.4 million a year. Given that Ontario now spends $1 million a year on gaming addiction, this quantum leap in funding would appear to indicate that the government (a) anticipates that its actions will lead to a substantially higher level of gaming addiction, (b) intends to give addiction groups a gigantic windfall, or (c) has not really thought through its program. The choice is yours.
As a final comment, there is concern within the gaming industry that the government lacks a comprehensive gaming strategy and appears to be making major gaming announcements on the fly. Within a period of three years, Ontario will have gone from a market with little beyond lotteries and a small number of roving charity casinos to one of North America's most saturated gaming markets. It's a giant step by any measure and one which, believe it or not, is causing concern within the industry. Yes, gaming manufacturers welcome the new business opportunities which the government's announcements represent, and well they should, though on another level there is a general concern that the government not spoil everything by moving too quickly and provoking a public backlash. Remember, Ontario is to have a referendum on commercial casino gaming in the fall of 1997. The public is bound to view this as a vote on all gaming, and at this point I, for one, would not want to predict the outcome.
The Chair: Thank you, Mr Sack. We only have one minute per caucus. Mr Kormos.
Mr Kormos: Thank you kindly. My calculation was that 20,000 slots in the province of Ontario, population 11 million, is a ratio of one slot for every 550 population.
Mr Sack: Or another one would be two slots for every 1,000 people.
Mr Kormos: Close enough; fair enough. I did that kind of calculation for my own community where I live. I represent the communities of Welland and Thorold, 48,000 people: 87 slots in that community if that ratio were fairly represented. Heck, even at $1,000 a week in each of those 87 slots, that's $87,000 a week out of the community of Welland alone. That's a lot of money, isn't it?
Mr Sack: It is, although it goes to the government, a good chunk of it.
Mr Kormos: Quite right.
Mr Sack: In Alberta, for example, the government made an average of about $61,400 on every slot in the province in 1995 -- every VLT in the province, sorry.
Mr Kormos: So in communities that don't have high tourist traffic -- and again, tourists come to Welland, but it doesn't have high tourist traffic; it's not Toronto, it's not Niagara Falls -- we're talking about a lot of money coming out of the pockets of locals. That's one of the things that concerned me about Windsor as a location, because its catchment area was designed to be a 100-mile radius, which I thought was a little nuts, as compared to, let's say, Niagara Falls.
Mr Sack: Yes, but Windsor brings everyone from Detroit, so --
Mr Kormos: Fresh money. Fair enough. There is some argument there.
What's going to happen when the American side develops similar casinos, especially when they can shoot craps and bettors in Ontario can't because of the Criminal Code? My understanding is that it's some of the big money bettors -- not pikers, but big money bettors -- who prefer the craps tables. What's going to happen to Windsor and Niagara Falls, Ontario, when New York state and Detroit introduce casinos with crap tables?
Mr Sack: I think first of all Ontario is going to have to eliminate its $50 valet parking, cut the price of its $5 hamburgers and perhaps lower table minimums from $25 down to maybe $5. That would be a start. Then it will be competitive with casinos in Detroit.
Mr Kormos: What about the dice players?
Mr Sack: I think you're going to have craps in Canada's casinos probably within about a year or two.
Mr Flaherty: Mr Sack, in terms of the context, the reality of gaming today, I gather that even in the casinos, the machine gaming is becoming dominant, as opposed to table gaming.
Mr Sack: Yes. Anywhere from perhaps 63% to 67% of revenue comes from slots, as opposed to table games.
Mr Flaherty: If I recall, that's a reversal of the situation 10 or 20 years ago.
Mr Sack: Oh, yes. What changed it was when they put larger hoppers into slots. That allowed them to up the size of the jackpots, and that attracted a lot more people.
Mr Flaherty: So there's this demand for this sort of machine gaming that includes machines like video lotteries.
In terms of one of your major points, which was, as I understood it, to proceed cautiously, in reviewing the legislation I'm sure you've noticed that we're going to listen to the experiences of the other eight provinces that have already done this in Canada. But also there's the consultation process, of which this is part, plus the consultation with respect to implementation -- because the bill itself does not deal with implementation; it just deals with the framework -- and also the five-year review, which is in section 8 of the bill. These are all cautious control steps that I assume you support in terms of moving carefully and in a controlled way along this street.
Mr Sack: Yes, I support moving carefully. The point I'm trying to make is that my concern quite frankly is that the government is not doing this, that the government is moving, in essence, on several streams right now. It's bringing on commercial casinos, most recently Niagara Falls. It's bringing on VLTs, a very large VLT program, bringing on permanent charity casinos, and the gaming commission right now is looking at satellite bingo which will link the province.
Mr Flaherty: You appreciate the lack of control now in the --
The Chair: I'm sorry. Your time is up, Mr Flaherty.
Mr Crozier: Mr Sack, I consider your observations as being at arm's length and that you do have your ear to the ground when it comes to casino gambling. Yesterday I likened this document to being a reckless, fly-by-the-seat-of-your-pants document. Therefore I would agree, in the choice you gave us, that the government has not really thought its program through. We share, and I'd just like you to emphasize it, our concern about the government not planning. Are you aware of any long-term strategic plan that the government has for gaming in Ontario?
Mr Sack: No, I'm not, and this is frankly what causes me some concern and I think causes a lot of people within the industry concern. For example, I asked the Ministry of Finance if they had done a pro forma for the charity casinos because a lot of my subscribers, the charity casino operators from across the country, are coming to me and asking me what I think etc, and they're trying to weigh whether 10% of gross will cover their cost.
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The problem, as I've come to see it, is that normally you would do a model business case and you would say that based on this, the following split will be sufficient. The charity casino operators, for example, will tell you they can't operate a casino on 10% of gross. Part of my concern is that I would like to see more study. A decision to put VLTs at Windsor Raceway: What impact does this have on the Windsor casino? Or a decision to put VLTs at Fort Erie Race Track: What impact does that have on the revenue the government itself expects to get from the Niagara Falls casino? Is the government sort of trying to take it with both hands, but frankly by taking it with one hand, will take it out of the other hand, if I explain myself?
Then also, a really big concern I have is that I support gaming and I think it's a very legitimate form of entertainment for people; on the other hand, as I mentioned, I am concerned that the referendum that is coming along, for a lot of people, particularly if the VLTs are starting to be introduced into restaurants -- I think in a lot of cases your constituency office telephones are going to light up, because I have talked to members of the Legislature in other provinces -- in fact, some of them are my subscribers -- and they tell me that they have no end of headaches with VLTs. As a result, the Gordon committee in Alberta recommended that the number of VLTs be reduced, not only that the number of licences in each establishment be reduced to one, but that the number of VLTs permitted per licence be reduced from seven to four, and that was from the Klein government. The committee which reported in February in Manitoba --
The Chair: I'm sorry, I'm going to have to interrupt you because we have run way over. Mr Sack, thank you for your presentation.
STANDARDBRED HORSEMAN'S ASSOCIATION
The Chair: We proceed to the Standardbred Horseman's Association. Good afternoon.
Mr Lou Liebenau: Good afternoon. My name is Lou Liebenau. I'm a director of district 6 of the Ontario Harness Horse Association. The two racetracks in my district are Mohawk Raceway in Campbellville and Woodbine in Rexdale. I am also the Ontario Harness Horse Association representative on the OHRIA VL committee.
I would like to thank the committee for the opportunity to make my presentation, which will be fairly brief. The Ontario Harness Horse Association strongly supports the implementation of VLs at racetracks. We want to work with the government to maximize revenues for the benefit of government and our industry.
Racetracks are the logical choice for the implementation of VLs. We have the facilities, we have parking, we have customer amenities, we have secure environment for customers. Several hundreds of new jobs will be created by this implementation.
It is vital for our industry to be able to compete for the gaming dollar with two new casinos opening within a one-hour drive of Woodbine and Mohawk raceways. Harness racing in district 6 is world-class. We compete as Ontarians successfully in Scandinavia, Europe and North America.
Our thousands of members have invested several hundreds of millions of dollars in breeding and racing stock. We buy farms, thousands of trailers and trucks. There are well over 10,000 people employed in Ontario as a result of racing in district 6. We represent province-wide some $3 billion into the Ontario economy. The money we earn stays in Ontario. In effect, we are you, we are your fellow citizens. With your anticipated constructive assistance, we can be a strong and vibrant industry.
Mr Flaherty: Thank you for being here this afternoon, sir. I appreciate it, especially on behalf of such a large industry in Ontario. Earlier this afternoon we heard from Mr Lennox of the OHHA, who gave an example which I hadn't heard before from Dover Downs in Maryland of purses a year ago of about $11,000 and now at about $75,000.
Mr Liebenau: Actually, on the purse structure at Dover Downs, I was there in the spring and I believe January 1 the total purses were $9,000 for the day, and when I was there on April 30 the total purses for that day, with no stakes races included, which would increase it, but no stakes races included, was $75,000 for that day.
Mr Flaherty: That goes along with the introduction of the VLs at that location.
Mr Liebenau: Yes, that's the result of that exercise.
Mr Flaherty: I take it it goes without saying that higher purses are desirable for your industry.
Mr Liebenau: The higher purses definitely allow the members of the industry to buy new equipment, trucks, trailers, better livestock to improve the breed etc. It just rolls over into the economy and helps the economy thrive.
Mr Flaherty: Do you have any idea how many people work in district 6 in your industry?
Mr Liebenau: Any statistics that I've seen, it's well in excess of 10,000. District 6 is basically, if you will, the marquee district of Ontario for harness racing.
Mr Guzzo: Easy now, easy.
Mr Liebenau: It's a very high concentration. Between Mohawk and Woodbine, we race 265 cards a year, which is the largest of any jurisdiction in North America. Getting back to the employment, we supply year-round employment to many thousands of people doing that.
Mr Guzzo: The title is the Standardbred Horseman's Association. This is really the Ontario Harness Horse Association.
Mr Liebenau: I am a district 6 member of that association, yes. The high concentration of our sport in Ontario -- I'll be careful this time, but it's concentrated in district 6 and that's my focus.
Mr Guzzo: You're elected every two or three years.
Mr Liebenau: Every two or three years, yes.
Mr Guzzo: The people who elect you and the people you represent are owners, drivers, trainers, grooms, caretakers; correct?
Mr Liebenau: Correct.
Mr Guzzo: Many of them work in the farming communities and live in the farming communities and the small towns in district 6; some of them live at the racetracks.
Mr Liebenau: Definitely, yes.
Mr Guzzo: It's these people you're speaking for when you come here today.
Mr Liebenau: Absolutely. We're representing -- it's actually taking place right now. Our association on a provincial level is greatly concerned for the average person in the industry, the full-time employee, the groom. As a matter of fact, we've just recently been able to introduce a pension program for them. So we're very much interested in the betterment of the average person working full-time in the industry.
Mr Guzzo: It's your organization that negotiates with the tracks a percentage of the purse money, the betting dollar, to be returned through the purse pool.
Mr Liebenau: Yes, correct.
Mr Ramsay: Thank you, Mr Liebenau, for your presentation today. Has your association done an impact study as to the benefits of the introduction of VLTs to the racetracks?
Mr Liebenau: The intended benefit of the VLTs is to allow us to compete on an even level with the several other gaming venues that have been introduced in Ontario. The ones of the highest impact -- the Windsor Casino, the Orillia casino that just opened, and the one that will be of the highest impact of my district 6 would be the one in Niagara Falls. Basically, the racetrack of today has to be an entertainment centre. We have to have the food, the entertainment via the live racing, which is primarily our number one objective, and basically offer something for everyone and make it fun for them to come to the racetrack. The good old days of the races and then you go home is sort of gone. You have to compete in a very highly competitive entertainment market.
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Mr Ramsay: So the introduction of VLTs, I guess then, obviously will make you more competitive against the other venues.
Mr Liebenau: Yes, definitely.
Mr Ramsay: Have you done any impact studies as to the further introduction, as this government is planning, of the VLTs into the charity casinos that a lot of communities are going to have, and then phase 3, when licensed establishments all over Ontario will have them?
Mr Liebenau: One point I'd like to make, and I will answer your question, is that the jurisdiction, being Ontario, is the largest jurisdiction where this type of venture has taken place. We have well over $1 billion in betting. The larger the betting in the jurisdiction, the larger the likelihood of cannibalization. If you have a larger bet, you have more to lose, and that's basically where we're at.
We think that, as my presentation very briefly quoted, we're a natural for these machines in all the things we offer: the secure environment, the parking. When you put 400 or 500 machines in one locale, you're definitely going to create additional employment. They have to be managed, repaired, supervised etc; more people coming to the facility; parking lot attendants, more restaurant workers etc, the offshoot. The less concentrated the equipment is -- I think it was stated before that some restaurants in Alberta have four or five machines -- there's no additional employment created. We hope to get the opportunity to work closely with the government, review the implementation after a reasonable length of time and possibly increase our participation.
Mr Ramsay: So you're not concerned with phase 2 and phase 3, with the further implementation?
Mr Liebenau: We're not concerned in the effect that we just want the opportunity to put our best foot forward and be able to compete on an even level. If the government decides that if in fact earnings through the racetracks maximized do not fulfil its requirements, then it's up to the government if they want to further the expansion.
Mr Kormos: When you read Scarne, you're told that horse racing is just about the best bet in town, is the best rate of return on your bet, at the horse track, as compared to almost every other form of gambling, right?
Mr Liebenau: Basically, yes, that's true.
Mr Kormos: Notwithstanding that, Garry Smith from the University of Alberta in his research tells us that the gambling industry most impacted by the slots out in Alberta is horse racing. Are you aware of that observation by Garry Smith from the University of Alberta?
Mr Liebenau: Yes, I've heard of it. I think that -- if I may give you my reason for it?
Mr Kormos: Sure.
Mr Liebenau: I think the reason for it, obviously, is that there are 20 minutes to half an hour between horse races and the number of bets available with this equipment is much more frequent. That's basically the reason for it.
Mr Kormos: That's right. You got it. But here you are -- and you know the hotel-motel association was here as well. They want a piece of the action too, right? You know that.
Mr Liebenau: Yes.
Mr Kormos: Yes, there you go. I read a little bit of body language there. The horse race industry wants a piece of the action, right?
Mr Liebenau: Definitely.
Mr Kormos: Fair enough. You don't want the casinos to have it all to themselves. Down in Vegas, 7 Eleven stores -- that's why they're called 7 Eleven, because the name evolved out of Las Vegas; it has nothing to do with their store opening hours, because they were always 24-hour-a-day operations. They've got slots in the 7 Eleven stores. Should the 7 Eleven stores in my community, if this is what's going to help them make it through tough times --
Mr Liebenau: That would be very regrettable, I think.
Mr Kormos: Why?
Mr Liebenau: You don't have any control. You've taken it to a level where you're putting it beside bubble gum. I think that's completely wrong and you will definitely have minors playing the equipment. That's totally wrong.
Mr Kormos: But you see, 7 Eleven and other variety stores are lobbying this government now for the right to sell beer and wine in their corner stores.
Mr Liebenau: That'll be the government's decision.
Mr Kormos: Right. They say that if they're allowed to sell beer and wine, they know they're going to have to provide adults or persons over the age of 19 to sell and dispense the beer and wine. They know they're going to have to card people just like they explained they card them now for cigarettes. Heck, as I say, in Las Vegas, 7 Elevens have slots.
Mr Liebenau: I don't believe Ontario should be Las Vegas. We should have more of a family-minded initiative in these matters.
Mr Kormos: Are you concerned? Because you tell me you'd rather not see slots in a 7 Eleven store or a Becker's or whatever the case might be.
Mr Liebenau: That's my opinion as an individual.
Mr Kormos: Fair enough, as a family person, as a member of the community.
Mr Liebenau: Yes.
Mr Kormos: You don't want them by the bubble gum. Why not? You don't want to see kids playing them?
Mr Liebenau: Definitely not.
Mr Kormos: You don't want to see kids seeing adults play them?
Mr Liebenau: That I think is up to their parents and up to the legal implications of the facilities where these machines are and whether they're allowed in or not. I can't comment on that. I wouldn't want my child to be in that environment.
Mr Kormos: Because it indoctrinates, it legitimizes gambling for a child, doesn't it?
Mr Liebenau: It makes it easy, yes.
Mr Kormos: It leads, in your view as an adult, to behaviour on the part of the child that could well lead to gambling later in life, inappropriate gambling?
Mr Liebenau: You make different decisions about your life at certain junctures. I think to have a child make that decision at that age is premature.
Mr Kormos: You want to protect children from exposure to that?
Mr Liebenau: I think that would be advisable, yes.
Mr Kormos: Because you, as a mature person, perceive the potential for a child being impacted or affected by virtue of that?
Mr Liebenau: Well, adults are influenced by things that they are told are good for them, or whatever.
Mr Kormos: Frisch's study at the University of Windsor shows an alarming 17% of adolescents either with proven gambling problems or high risk for gambling problems -- unprecedented, the first generation we've ever seen that. Scare the heck out of you?
Mr Liebenau: I can't comment on that; I'm not aware of it.
The Chair: Thank you, sir, for your attendance here today.
BIG SISTERS OF PEEL
The Chair: Our next presenter is Big Sisters of Peel.
Ms Eileen Moore: Good afternoon. My name is Eileen Moore and I'm the director of development for Big Sisters of Peel. I'd like to thank you for the opportunity to present to the committee our agency's thoughts and concerns regarding Bill 75 and the introduction of video lottery terminals.
I would like to tell you first a bit about our agency, who we are and what we do, tell you the numbers and then finally comment on some concerns we have regarding video lottery terminals and how they will be introduced.
Big Sisters of Peel is a young agency, although this is belied by our current status. It was incorporated in 1982 and in its first year provided service to 16 children through the one-to-one match with a big sister. Growth was steady and manageable over the next 11 years, but over the past three years the increase in the need for service has been explosive. In early 1993 the agency was providing service to 190 children through the matching program and another 74 children were on the waiting list. Now in 1996 there are 330 matched little sisters and 110 children waiting. We have become the largest Big Sisters agency in Canada and we anticipate that at current levels of growth we will be the largest Big Sisters, Big Brothers or amalgamated agency in Canada within a year. Combine this with the fact that our agency continues to raise approximately 75% of our budget through our own efforts, and is not funded by any level of government, and I think the agency is a fine example of grass-roots community service.
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I'm often most proud of the agency's preventive focus. Our goal is to help prevent further difficulties in a child's life, to help them make better choices. We have learned not only through anecdotal evidence but also through empirical studies that role-modelling agencies like Big Sisters and Big Brothers do make a significant difference. A recent study showed that children who had benefited from the guidance and support of a positive adult role model went further in school, obtained better jobs and were more likely to break the welfare cycle. Not only do these agencies provide a cost-effective service now, but the difference lasts a lifetime.
As I mentioned earlier, our agency is responsible for raising 75% of our budget through our own efforts. The other 25% comes from the United Way of Peel. The fact that our agency has been able to serve an increasing number of children is only because of the revenues we have generated through charitable gaming activities. We will run 47 bingo sessions this year, manage three break-open ticket locations ourselves without the use and payment of a gaming assistant company, run 24 Monte Carlo events and have just completed our two yearly raffles. We will manage all of these events on our own and will coordinate the incredible number of volunteers needed for these events. It's hard work, but we believe in the merit of that and have the wonderful support of our volunteers.
But in these difficult economic times, when corporate and private donations are strained, it has been the revenues generated through charitable gaming which have ensured our service provision. Charitable gaming will account for 50% of our budget in 1996. Perhaps it will not always be so and we may once again see fund-raising opportunities in other areas, but right now these revenues are crucial to the financial health of our agency and, frankly, many other community-based organizations.
It's safe to say that in the region of Peel charitable gaming raises as much, if not more, moneys for services than does the United Way. I wonder how other communities fare. It's an understatement on a grand scale to say that these funds are important to our communities, and yet I can't help but note that it seems that, as charitable organizations, our revenues from this source are increasingly threatened. I remember a paper which came out several years ago called Charitable Gaming -- Putting Charities Back in the Driver's Seat. I must say, these days it doesn't even seem that charities get to ride in the car.
As we see it, the gaming industry is in a state of upheaval: new games, new stakeholders and a playing field which is not level. More than anything else at this point, what we need now is to stop and develop a provincial strategy, much the same as British Columbia did, before we proceed with any other initiatives. Failing that, how does our agency perceive we will be impacted by this issue, Bill 75? In a nutshell, we're worried.
Our concern is not with the introduction of these machines into racetracks; it is primarily with the potential introduction into licensed establishments. For example, there's a licensed restaurant just a few doors down in the mall where our break-open ticket vendor is located. This vendor has been selling tickets for our agency for five years now, and they raise approximately $100,000 net for our agency per year. About one sixth of our agency's services and staff are dependent on these revenues. If a restaurant were to put in VLTs, we know that our break-open ticket revenue would drop drastically. The argument could then be made that our agency might have access to VLT revenues from casino events or a share from other locations, but how much, and is it sure to offset the loss in revenues we will surely face?
The second challenge is the distribution of funds which will be provided to the charitable sector. Will it be centrally pooled and organizations will make application; another Trillium Foundation perhaps? Is it possible that the ability to secure funds from this source will have little to do with the organization's commitment and ability to work for these revenues and more for its ability to put together nice proposals? In the case of our organization, we have always put forth the effort, volunteer support and time into educating ourselves so that we could secure the best possible gaming activities or locations.
Finally, we are concerned with the percentage of revenues from VLTs currently designated to the charitable sector. As we understand it, the Minister of Finance has said that 10% of total revenues from VLTs will be provided to the charitable sector. This province used to have a tradition that all gaming activities, limited though they were then, were charitable in nature, but as we all know, that has changed.
A growing public acceptance of gaming as a form of entertainment has led to many stakeholders in the industry and a mushrooming of the kinds of gaming available. The last five years have truly been of concern to the charitable sector. We find ourselves strictly regulated, limited in the kinds of games we can provide, unable to change those that we can offer and unable to effectively advertise our events. We can't compete. These days I wonder if we will even be able to maintain our place in this industry over the next two years. Under these circumstances, I find 10% of VLT revenues to be nominal and gratuitous.
We suggest the following:
Do not proceed further until a provincial strategy on gaming has been developed with the full consultation of the charitable sector.
Ensure that any further expansion of gaming activities in this province, including VLTs, returns to the tradition of being charitable in nature.
Failing that, do not introduce VLTs into licensed establishments until we have a better understanding of the financial impact on the charitable sector.
Allow the charitable sector to compete on a level playing field, with an expansion of products and advertising.
Quite a wish list, isn't it? At Big Sisters of Peel we know the value of the work we do. We believe in the hard work to ensure our financial health and we'd ask you to consider our request. Thank you.
Mr Ramsay: Eileen, thank you very much for your presentation. You bring up now from a non-profit organization a concern that I certainly share and that was brought up by some of the people who manufacture Nevada tickets and that sort of thing. It really strikes home. The government members should really listen to this presentation, because I think what many are asking for is the government maybe just to slow down a little bit. You've even said you don't mind the first phase, going into racetracks, but as to the further extension of these machines; I think you're right: The government should halt that until it does a total impact study on not only the economy but organizations such as yours.
I think the point you're making -- I was very impressed by the list of 47 bingos you run every year, the Nevadas you run, the Monte Carlo nights you run. You're running them and managing them, so you're maximizing the profits there. What the government's doing with this is going to destroy the tools that previous governments -- all governments -- have given you over the past, which you're using effectively, with this introduction of VLTs all over the place. Now you're going to have to come begging back to the government -- like you say, what kind of application it's going to be -- for a handout, where the way we used to do it, and still do it today, is you have the tools, so however hard you work in your organization, your volunteers, you can benefit your clients, in this case girls who need that adult supervision and help.
It's devastating. I'd like to ask if the government has a study on what it's going to do and making you into an application-writing sort of organization rather than a community group that puts its hands together and creates opportunities for people to give money. It's terrible. You've said it there. Is there anything else you'd want to say about this? Do you see yourself now as just basically sending applications to the government? I guess that's what you'll be left to do.
Ms Moore: There are two points to be made here. Truly, we believe in an overall gaming strategy now for the province. There are so many stakeholders, and all of us -- I'm sure you've heard "level playing field" if not once, a zillion times, and will continue to hear "level playing field." There are a lot of us out there now juggling for our place in this industry. We need to stop until we identify where each stakeholder stands now and will stand for the future. Right now we're scared. We're worried because we don't know what will happen to us. That's really crucial at this point for us.
Our preference, and the point is well made, is to work for our revenues. We believe in that. We think it makes us more energetic, more viable as a charitable organization. We don't think the granting system, just doling money out based on nice proposals, is necessarily always healthy, so we would prefer to have the tools to work for our revenues -- truly.
Mr Ramsay: It is ironic, Eileen and members of the committee, that a government that I thought really believed in self-sufficiency and self-reliance, as I think a lot of people in Ontario do today, that we all have to sort of pull up our socks and contribute to what we want to do, has the very opposite sort of message. Non-profit groups and charities are getting from this government a message saying, "We're going to go back to the good old days where you just apply for a government handout and we'll dole out the money." It's wrong. I thank you for your presentation.
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Mr Kormos: Your concern was expressed by some already during the course of these hearings and indeed reared its head during the introduction of casino gambling in general back three years ago. I appreciate the concern you have, but I also appreciate that you're here with a Big Sisters organization. I was, some 15 years ago now, for several years on the board of directors of Big Brothers down in Welland, where I'm from, where I live. That, along with the work I did at the time, caused me to become pretty familiar with the kinds -- and again, they're not all the same, you know that; every family is different -- of families that, sadly, too many of these kids came from, which is why Big Brothers and Big Sisters is such an important resource. As you talk about waiting lists, that was one of the profound problems, and still is. For lack of volunteers -- yes, times have changed. You know some of the problems. Especially volunteering for that kind of work, there is simply some hesitancy that wasn't there two decades ago.
As I say, I'm also familiar, not only because of my role on the board but because of my involvement in the community and the job I did at the time and the work I did, with, sadly, too many of the families that had single-parent children, children of alcohol abusers, children of drug abusers, children of gambling addicts.
You know that one of the things we've been talking about in this discussion of slots has been our fear. Some of us have a profound fear, based on work that's been done, based on observations, anecdotal, and research that's been done in Great Britain, among other places, a whole lot of it in Great Britain, on the highly addictive nature of slots. I agree that studies from different places produce different results, but one observation by persons doing studies showed that VLT users are generally people who can ill afford to use their money on VLTs. Most often they are less educated than the general public, suffer from low self-esteem and are employed at lower-paying jobs.
Part of that connects with me. These are people who want to grab the brass ring. Why not? There's the prospect of a payoff. Casino Rama up in Orillia: By God, we read about all the winners. Did you see that in the paper a few days ago? It was $15,000 -- I can't remember the number. We didn't read about the losers.
One of my concerns, and I think a whole lot of folks' -- and I appreciate what you're saying. At the end of the day I'm concerned but confident that this government is going to put slots, 20,000 of them, across this province. That having been done, obviously our struggle is going to have to be to make sure that at least charities, which have been screwed out of their piece of charitable gaming, get a piece of it.
But I'm also concerned about the fact that these slots -- I'm convinced, I really am, and I'd like to be able to come back in 10 years' time and say I was wrong -- are going to create the very sort of family and individual problems that bring mothers, yes, and fathers, to your office signing up for Big Sisters for their daughters or to the neighbouring Big Brothers office signing up for Big Brothers for their young sons.
We read Frisch's study from the University of Windsor, that an aggregate of 17% of the almost 1,000 adolescents he studied -- approximately half of them already had confirmed gambling problems and the other half showed a strong predilection. He observes that this is totally novel; this is a generational phenomenon. It doesn't coincide with the rate of gambling addiction among the adult population currently. He is concerned and speculates that this could well be a new generation with a phenomenal percentage of addictive gambling.
The potential of these slots, the crack cocaine of gambling, to destroy families -- and I know for a fact that when I was with the organization some of the kids we dealt with were the children of gambling addicts. Not slots at the time; it was far less pervasive forms of gambling. I simply raise that. I feel concerned because you're, I suspect -- and maybe you're not, maybe you feel okay with slots, but maybe you're in a little bit of a catch-22.
Ms Moore: I have a lot of thoughts, and people do regularly question me, as to, "How do you make peace with gaming as a form of fund-raising?" My understanding is that a recent Canadian study shows that 5% of the population has problems with gambling; 1% to 2% are pathological gamblers. I think there a lot of behaviours we engage in as adults where a certain amount of the population will have problems with an activity that the vast majority of us don't. Does that mean we can take away something that's reasonable from the majority of people who don't have a problem with it? Yes, I do think about it, I do concern myself with it, but I have made peace with it, largely.
Mr Guzzo: Thank you very much for your presentation. Not unlike my friend Mr Kormos, I too have had some experience over a period of 11 years in dealing with the families he so capably describes. I have some concern with your concern, because when I hear the type of person who would go out and spend money playing video lottery, if you're correct and it's going to hurt you, I have to assume that the person Mr Kormos described is the same person who's buying those pop-open tickets in that shopping centre. You're afraid they'll turn to the video lottery machine if it goes into the bar or restaurant, which in all likelihood it would not. In other words, if you accept what Mr Kormos suggests, you have to be concerned that you're taking money from that same type of person today, that the person who's buying your ticket or going to your bingo is the same person with the low intellect who can't really afford it, using that money, taking the clothes off the backs of their children. Otherwise, if it's not, you won't be hurt by these. Correct?
Ms Moore: I'm sorry, are you identifying a particular segment of the population, or are we looking at the demographics of gamers as a whole?
Mr Guzzo: I'm doing exactly what Mr Kormos did.
Ms Moore: I know, and I'm kind of confused by the whole thing.
Mr Guzzo: Oh, you're confused by Mr Kormos? I'm sorry, because I thought you were drinking it in. I was afraid you were swallowing it. Well, if you're not buying it --
Ms Moore: No, I have my own position on gaming.
Mr Ramsay: We're confused too, so don't worry about it.
Ms Moore: No, I've made peace with how I feel about it.
Mr Guzzo: Let me ask you this: With regard to your bingos, do you have your own hall or do you use a commercial hall?
Ms Moore: No, our hall actually is one of -- I believe there are only two or three in Ontario which are completely not-for-profit. We operate out of Rutherford Bingo, which is owned by the Rotary Club, so every single cent, whether it's raised by us or raised by Rotary, ends up back in the hands of the community. It's completely not-for-profit. Do I believe they should all be like that? Absolutely.
Mr Guzzo: Maybe that's where we're going with this bill.
Ms Moore: Now, there's a stretch.
Mr Guzzo: Certainly one of the motivating factors that's causing the government to act is the fact that in some areas -- in my own area, the member for Ottawa West, my former law partner Mr Chiarelli, has been one of the most vocal people with regard to the bingo halls and to the Monte Carlos not returning a fair return to the charities. That's the Liberal member for Ottawa West. He's not here today, so you get a different story from up north or from down around Windsor, but I'll tell you, when you get in the Legislature --
Mr Crozier: I will defend him, because he wants them non-profit just like she does. Don't pick on somebody who isn't here.
Mr Guzzo: How many bingo halls did you refer to in your area that operate that way?
Ms Moore: There are only, I believe, two or three in Ontario that are completely not-for-profit. There is only one in the region of Peel, and that's the one we operate out of.
Mr Guzzo: I see. With regard to the Monte Carlo night, who runs those for you?
Ms Moore: A management company.
Mr Guzzo: How long have you been doing that? How many years?
Ms Moore: One and a half.
Mr Guzzo: I see. So the return to the charity, your organization, has been consistent over that period of one and a half years?
Ms Moore: No. Monte Carlos fluctuate drastically, because we're gypsies. We are only allowed three-day events in and out of various venues. It's very difficult to gauge how things are going to be from one month to the next. We can't advertise effectively. Our players don't know where we're going to be next. No, we have no control over that.
Mr Guzzo: So that's what the permanent hall that this bill provides for is going to correct. Your concern is that you won't get the choice days or you won't get as many days?
Ms Moore: No, I'm not identifying any issues around the permanency of charitable casinos. Our concern at this point is strictly with the introduction and implementation of VLTs. Mind you, given that, I still do believe that a provincial strategy needs to be developed that will include the permanency of charitable casinos.
The Chair: Thank you, Mr Guzzo, and thank you, Ms Moore, for your presentation. It's much appreciated.
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ONTARIO JOCKEY CLUB
The Chair: Our next presenter is the Ontario Jockey Club. Welcome, Mr Biemann. Would you proceed, please.
Mr Helmut Biemann: Thank you. The Ontario Jockey Club appreciates this opportunity to present to you its views on the introduction of video lotteries at its three racetracks in Ontario.
The OJC was originally established in 1881 to conduct horse racing in the province of Ontario. Since the early 1920s the OJC has conducted parimutuel wagering under powers provided to it by section 204 of the Criminal Code.
Today, the OJC is a non-profit organization with a clearly defined objective to provide at its racetracks the highest quality of horse racing and the best possible facilities for the public and all those engaged in the industry.
The OJC is the largest horse racing organization in Canada and one of the largest in North America. Wagering conducted at OJC racetracks is in excess of 70% of the parimutuel wagering conducted in Ontario and 50% of the Canadian industry. Racing is conducted year-round at the OJC racetracks over 550 race days each year.
The government's decision to introduce video lotteries initially at racetracks fits in with the OJC strategy of developing each OJC racetrack as a sports, gaming and entertainment location. The OJC supports the introduction and is looking forward to developing business plans with the provincial government which are mutually beneficial.
The OJC believes that in today's world gaming has been accepted by the general public as an acceptable form of entertainment. The introduction of video lotteries will provide a competitive gaming alternative to the present underground gaming economy, which continues to grow with advances in technology, particularly at offshore locations and via the Internet.
The OJC believes that it is socially responsible on the part of the government to introduce video lotteries initially in a controlled gaming environment such as is provided by the OJC's racetracks. Racetracks are, contrary to some beliefs, heavily regulated and controlled by the federal and provincial governments through their agencies: the Canadian Parimutuel Agency and the Ontario Racing Commission.
The OJC believes that the government should conduct studies six months after the introduction of video lotteries at racetracks to assess the social and economic impact of their introduction, particularly on the present participants in the Ontario gaming industry.
The OJC further believes that video lotteries will integrate well with its present parimutuel operations because of the many synergies, which principally are the integrity of its operations, security, surveillance, money-handling procedures, experience with electronic gaming, and a pool of licensed employees with extensive knowledge in gaming. The OJC considers that in locating video lotteries initially at racetracks customers will have to make a conscious decision to travel to a racetrack, thereby reducing impulsive gambling.
The OJC does have some concerns, however, as mentioned yesterday by Minister Sterling. Parimutuel wagering at racetracks will be impacted to some degree by the introduction of video lotteries. The OJC believes that by working in a cooperative partnership with the government of Ontario a video lottery business plan can be developed which will meet the concerns of the general public while being beneficial to the provincial government, the local municipalities in which the OJC operates, provincial charities and the racing industry, which currently employs an estimated 40,000 direct and indirect, full- and part-time jobs in Ontario and is the third-largest component of the agricultural economy. In fact, the OJC is within the top 30 employers in Toronto.
The OJC is committed to changing with an evolving North American gaming marketplace, particularly in the face of increasing competition, to become a first-class operator of sports, gaming and entertainment complexes in Ontario designed to meet the demands of today's entertainment consumer.
Mr Flaherty: We had some comment this afternoon from one of the presenters about the future of racetracks as entertainment centres. Can you comment on that?
Mr Biemann: I believe that to compete we are going to have to become multi-activity destinations. Currently, most racetracks are pretty much focused on horse racing. To compete, we're going to have to appeal to the increasing selectivity of modern consumers.
Mr Flaherty: There has also been some concern expressed here so far about ensuring that minors not have access to video lotteries, and of course the legislation has certain provisions in that regard. In terms of the Ontario Jockey Club tracks, what would you envision being arranged to ensure that minors cannot access the machines?
Mr Biemann: Our facilities are very much controlled environments. We would anticipate that the actual gaming areas for VLs would be completely segregated. We would have security guards at the entrances in any event, given the flow of money. That system would allow us to ensure that no minors would even be allowed on the gaming floors.
Mr Hudak: Thank you, Mr Biemann, for your presentation. It's my understanding from your presentation that there are 40,000 people employed directly or indirectly in racing.
Mr Biemann: Full- and part-time. A study done out of McMaster University by the industry association equated it to 27,000 full-time equivalent jobs.
Mr Hudak: You're probably aware that I come from Niagara South, which includes the Fort Erie Racetrack, so I have some experience in these matters.
In the current situation, the status quo, VLTs were not introduced at racetracks. You were competing against casinos. You were competing against all kinds of other gaming legalized by the previous government. New York state is heading towards gaming in a big way; Michigan as well. What would be the state of these 40,000 jobs if video lotteries were not implemented at racetracks?
Mr Biemann: They would be in jeopardy in the immediate term.
Mr Hudak: And this isn't just the OJC; this is not a small group of people. These are hardworking people. They don't get a tremendous amount of money from the work, although they work very hard, very labour-oriented.
Mr Biemann: That's correct. For most people on the horse side of the business, it's a labour of love.
Mr Hudak: You mentioned a multi-activity package. Are there other jurisdictions that have tried putting video lotteries at tracks, and what's been the experience? Has it been a successful package?
Mr Biemann: Yes. There have been successes and there have been failures. The best example we found was in Prairie Meadows in Des Moines, Iowa. They successfully integrated it in every sense, operationally, marketing-wise. The racing integrated with the VLs.
A place where it didn't work out very well was Louisiana Downs. This is in Shreveport, Louisiana. They put 500 video lottery terminals in the plant, and initially the track purses increased and the track started to show a small profit. Once the three riverboats opened, with full-blown slot machines and craps tables and everything, they couldn't even get people to their VLs. They're down to 90 now and they're suffering, and they're wondering what their future is going to be.
Mr Hudak: Let me ask you something just from my own backyard, the Fort Erie track, on the border right next to Buffalo, New York. For a million people, that's within a few hours' drive. If the government implements this sensibly, into the racetracks first, and then, as you said, evaluates how it's gone, what do you think that means for the people from Fort Erie, Port Colborne, Welland, Wainfleet, from my part of the province?
Mr Biemann: Fort Erie is right on the gateway to Buffalo. It represents a tremendous opportunity to exploit a market south of the border, and if we can implement it properly -- as I mentioned before, Prairie Meadows has done an excellent implementation. They were allowed some funds to renovate their property so that it was a pleasant place to come. Louisiana Downs didn't even do a paint job. They just bolted them to the floor in a dated grandstand. If it's done cooperatively and if it's done with a mind to being a first-class installation, we will draw thousands of people daily from south of the border, which will provide a large number of huge economic benefits.
Mr Ramsay: Thank you, Mr Biemann, for your presentation. Has the jockey club done impact studies on the benefits of VLTs to racetrack attendance and betting and what maybe some of the downsides are? Are there reduced revenues to betting when you've got the VLTs present? That's especially at your class 1 tracks where you're going to have 500 of them.
Mr Biemann: VLTs have never been introduced to a jurisdiction that has the volume of betting that especially the Toronto market has. The studies I've seen go as high as a 40% cannibalization rate. Definitely there will be some, but it's anybody's guess. The cannibalization will be somewhere between zero and 40%, the loss of parimutuel wagering over to VLT wagering.
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Mr Ramsay: Will this still go towards the horse racing, though, that you would derive some revenue from this to help with the purses, or are purses going to suffer since the betting is down?
Mr Biemann: Our hope would be that some of that cannibalization, or all of it hopefully, would be offset by revenues from the VLTs.
Mr Ramsay: Have you looked further afield to the phase 2 implementation that the government has planned, with the extension of the VLTs to the charitable casinos that will be in many localities across the province, and then of course phase 3 when the plan is to extend VLTs to licensed establishments? Do you have a sense of what the impact might be, once you've got people on to the machines through horse racing, when they're then available in other locations?
Mr Biemann: Definitely there would be some cannibalization from the sites on racetracks to betting in bars. We are not opposed to the expansion of VLTs per se into the hospitality industry. Our position is that we would like some study done, a step-rated introduction, so that we can study it at first hand before we expand to phase 2 and phase 3.
Mr Ramsay: So you would be asking the government to slow down a little bit and maybe do an overall gaming strategy, some impact studies, before they go to phases 2 and 3.
Mr Biemann: We haven't studied that. I'm not competent to comment on that. We haven't studied what the damage would be. It's just that intuitively we know the racetracks are a responsible initial place to introduce them and gauge it, because the environments are so controlled and distinct.
Mr Ramsay: So it's a concern.
Mr Biemann: Yes.
Mr Kormos: I've spoken about this several times today with people representing your industry. I recall the Ontario Jockey Club's opposition to casino gambling at its outset, and then being brought on side but wanting to be able to bid for casino locations. Fort Erie was one of the locations they competed for, wasn't it?
Mr Biemann: I can't personally recall.
Mr Kormos: If other forms of gaming were available to you -- blackjack tables, roulette wheels, that sort of thing -- would the OJC similarly be prepared to accommodate that?
Mr Biemann: Yes. If the government were to implement that, we would be prepared to accommodate that.
Mr Kormos: As compared to merely accommodating the government -- I appreciate that you'd want to give the government a hand in getting its program under way -- would you be pleased to see that happen?
Mr Biemann: Our interest is horse racing and the maintenance of high-quality horse racing. That's our mandate. If it's introduced in such a manner that we can have an even playing field, we wouldn't be opposed to it.
Mr Kormos: You've spoken about cannibalization to the tune of what, 30%?
Mr Biemann: Up to 40% is a study out of Lexington.
Mr Kormos: Let's put this in a context. Niagara Falls has got an interim casino being built and you're 15 minutes, 20 minutes away from the Fort Erie track. The Niagara Falls casino will be built and it will be up and going in short order. Do you expect a 30% to 40% drop in revenues at Fort Erie? How does that work? Explain that to me.
Mr Biemann: The up to 40% is a study by Richard Thalheimer out of Louisville, Kentucky. That's where VLs were introduced right on to racetracks, so the customer had an immediate choice. There are studies that show 10% and 15%, depending on different distances, in smaller markets. Each market is so different, it's hard to gauge, but we would expect something definitely in the double-digit range of cannibalization from the Niagara Falls casino. It's a very potent competitor.
Mr Kormos: Both of them constitute gambling, right?
Mr Biemann: Yes.
Mr Kormos: One is a preferable form of gambling. Why would you lose? Why would you be cannibalized?
Mr Biemann: The more options that people are presented with, they're simply going to have more options. When horse racing was the only game in town, everybody bet at the races. As lotteries and Pro Line and everything else got introduced, it got diluted. There will be a natural dilution simply by adding more product choice.
Mr Kormos: It seems to me, then, it's a matter of simply being able to gamble and people having preferences.
Mr Biemann: I'm not sure I understand your question.
Mr Kormos: If there's going to be cannibalization, if there are people who are going to abandon the racetrack for the slots, it seems to me that those people, whatever percentage they're going to be, are people who would rather bet on slots than on horses, given equal opportunity.
Mr Biemann: That would happen regardless of what other gaming alternatives were brought in. There would be some cannibalization.
Mr Kormos: These are people who would rather bet on something else than horses, in this case, slots.
Mr Biemann: There would be people who would move over from racing to any other form of gaming.
Mr Kormos: Why would anybody want to do that? You're in the industry. You understand the horse racing, horse gambling, horse betting industry. Why would anybody abandon the horse race --
Mr Biemann: Perhaps for the same reason you don't go to the same restaurant every night.
Mr Kormos: Yet it's only to the tune of 30% to 40%. Clearly, there are some who would remain committed and whose preference is to bet on horses.
Mr Biemann: Yes, a large percentage is devoted to racing only.
Mr Kormos: But your business is about gambling, isn't it?
Mr Biemann: Our business survives because of gambling.
Mr Kormos: And the survival of your business depends upon promoting gambling.
Mr Biemann: It's a complicated question. Our revenues come from parimutuel wagering.
Mr Kormos: Gambling.
Mr Biemann: Which is gambling.
Mr Kormos: Yes. And I appreciate that there are various ways of doing it. You've got ad campaigns, you've got brochures, you dress up and clean up one racetrack or another, you'll put in a better dining room and promote that, but at the end of the day what you want is to get people there and have them wagering, don't you?
Mr Biemann: Yes.
Mr Kormos: That's the nature of the business, from the economic side, isn't it?
Mr Biemann: Yes.
Mr Kormos: Similarly, from the point of view of the slots industry -- and there's nothing in itself offensive about this, but the nature of slots, and most of us are familiar with them in one way or another, is to get people to pump as much money into them as possible, isn't it?
Mr Biemann: That would be the objective of the operator.
Mr Kormos: Yes. And one of the neat things about slots, from a profit-making point of view -- in the restaurant industry, for instance, you've got to turn the table. Maybe you haven't had the experience of managing a slot operation but you don't want the machine sitting idle, do you?
Mr Biemann: No. That wouldn't make sense.
Mr Kormos: You want to see coins being pumped into it.
Mr Biemann: That's the purpose of it.
Mr Kormos: And the more the merrier.
Mr Biemann: I don't necessarily agree with that.
Mr Kormos: I agree, it isn't very merry, but the more, the more profitable.
Mr Biemann: I think a balance has to be struck, and that's the purpose of these hearings.
Mr Kormos: What kind of payout should Ontario slots have?
Mr Biemann: What kind of payout? As in per cent return to a customer?
Mr Kormos: You've got it.
Mr Biemann: In my opinion, we should have a very healthy payout to compete with the inevitable casinos coming in on the Michigan, New York side.
Mr Kormos: What kind of payout do you think would be a healthy one? Don't forget, the wagering on horse betting, somebody told me earlier here today and confirmed my suspicion, is one of safest bets in town in terms of the highest payback, right?
Mr Biemann: Yes.
Mr Kormos: You've got slots, and what kind of payout would you expect in view of the fact that you're juxtaposed to parimutuel betting on horses? What kind of payout would be one that's going to make your slots competitive?
Mr Biemann: Do you mean the return to the bettor?
Mr Kormos: Yes.
Mr Biemann: On an average bet?
Mr Kormos: Yes.
Mr Biemann: Higher than 90%.
Mr Kormos: Higher than 90%.
The Chair: Thank you, Mr Kormos. Time is up. Thank you very much, sir, for your attendance here today.
1620
B'NAI B'RITH YOUTH ORGANIZATION
The Chair: Our next presentation is from the B'nai B'rith Youth Organization, Mr Gary Gladstone, director of charity. Welcome, Mr Gladstone. You have 20 minutes, including all questions, and you may proceed.
Mr Gary Gladstone: Good afternoon. My name is Gary Gladstone and I'm the director of charitable gaming for the B'nai B'rith Youth Organization, as well as being a board member of Charities First Ontario and the chairman of the Mayfair Downsview Bingo Sponsors Association, representing the 35 charities which operate weekly bingo sessions at Mayfair Wilson Avenue.
The B'nai B'rith Youth Organization, BBYO, is the world's largest Jewish youth group, with chapters in Canada, the United States and around the world offering youth between the ages of 13 and 18 the opportunity to learn leadership development skills in independently operating units. In Ontario, BBYO is heavily reliant on charitable gaming to meet its funding needs. We have an extensive break-open, or Nevada, lottery ticket program, bingos, charitable casinos and the occasional raffle.
Charities First Ontario, CFO, as I'm sure you are aware, is an independent umbrella group of charities involved in all forms of charitable gaming. Our chairman, Jeff Wilbee, will be making a separate presentation to you next week. BBYO fully endorses CFO's position on Bill 75.
I thank you for the opportunity to speak on Bill 75, An Act to regulate alcohol and gaming in the public interest, to fund charities for the responsible management of video lotteries and to amend certain statutes related to liquor and gaming. This afternoon I would like to address the following points and then it will be my pleasure to accept questions from you.
Charities must be involved in all stages of the decision-making process. A comprehensive gaming policy must be established. Charities must play on a level playing field. BBYO is in favour of permanent site charity casinos. BBYO is in favour of a controlled implementation of video lottery terminals, VLTs, at the racetrack, charity casinos and bingo halls. BBYO believes that further study is required before VLTs are permitted into other age-controlled premises. BBYO believes that charities should be consulted with regard to the distribution of funds.
The purpose of this act is to fund charities through responsible management of video lottery terminals. Currently, BBYO receives funding from many forms of charitable gaming as indicated above. I am sure you will agree that it does not make sense to introduce a new form of gaming without knowing how it will affect all other forms of gaming. It is for this reason that I feel very strongly that a comprehensive gaming policy covering all forms of gaming -- charitable, racetrack, OLC etc -- should be developed immediately.
It is important to note that the government of Ontario is both the regulator -- the Ontario Gaming Control Commission, soon to be the Alcohol and Gaming Commission of Ontario -- as well as the major competitor, the Ontario Lottery Corp, to charitable gaming in the province. The OGCC regulates three-day Monte Carlo events; the OLC has permanent site casinos. The OGCC regulates break-open ticket sales; the OLC has lottery tickets etc.
In all of the following discussions it is important to keep in mind that charities must play on a level playing field and must be an equal partner in all decisions being made. Charities are a vital stakeholder in all forms of charitable gaming. To put it bluntly, without charities there is no charitable gaming. Premier Harris requests that we do more with less and requests that charities pick up the slack. Let's ensure that we are not in the position of doing less with nothing because all revenue sources are dried up.
BBYO is in full support of the announcement in the budget that there will be permanent site charity casinos in Ontario. It is about time that the three-day floating crap game be replaced with a more permanent and responsible gaming scenario. It is imperative that charities be involved in the decision-making process as new terms and conditions are created to ensure that charities are in the driver's seat and that the charities are benefiting from charitable gaming at the same time that the operators are allowed to make a living and various levels of government receive their fair share.
BBYO supports the staged implementation of VLTs at the racetrack, the permanent site charity casinos, and in bingo halls. It is our belief that VLTs at the racetrack and at permanent site charity casinos will enhance revenues for all concerned without a severe degradation from other sources. It is also our contention that VLTs be allowed in bingo halls at the same time as permanent site casinos. Bingo halls are already age-controlled premises where gaming is taking place.
I would advise against a further implementation into all age-controlled premises -- bars, restaurants, hotels etc -- as this will have significant negative impact on the vast majority of charities raising funds through break-open tickets. As well, it would encourage patrons to visit these particular age-controlled premises on a more regular basis to gamble and perhaps overindulge in both alcohol and gaming, leading to increased problem gaming.
One of the most perplexing problems in my mind is the distribution of proceeds from VLTs in general. I have discussed this issue with many colleagues and we have yet to come up with an equitable format to ensure that all charities -- local, regional, provincial and national -- that operate in Ontario will receive adequate funding to compensate for lost gaming revenues as well as enable new charities to receive funding.
It is imperative that charities be consulted as any and all decisions regarding VLTs are made. Charities must be in the driver's seat at all times. It is BBYO's contention that Charities First Ontario is in a unique position to assist the new Alcohol and Gaming Commission with all elements of charitable gaming regulation and enforcement.
To recap, I have indicated that charities must be involved in all stages of the decision-making process. A comprehensive gaming policy must be established. Charities must be allowed to play on a level playing field. BBYO is in favour of permanent site charity casinos. We are in favour of controlled implementation of VLTs at the racetrack, charity casinos and bingo halls. We believe that further study is required before VLTs are permitted into other age-controlled premises. And we believe that charities should be consulted with regard to the distribution of funds.
Thank you very much for your time. It would now be my pleasure to answer any questions you may have.
The Chair: Thank you, Mr Gladstone. Each caucus has approximately four minutes. Mr Kormos.
Mr Kormos: Thank you, Chair. Mr Crozier may have been first, but --
The Chair: No. You should have been first last time. We came back to you.
Mr Crozier: My apologies. Thank you for accommodating me.
The Chair: You're going to go last this time.
Mr Kormos: And the last shall be first.
As you know, we've heard from a number of charitable organizations, organizations that rely upon fund-raising and, as often as not, more and more so, bingos, break-open tickets, Nevada tickets or Monte Carlo nights for their fund-raising. Again, to recap it, I think it's consistent that they were fearful of casinos -- a whole lot of us were -- and the impact this would have on the fund-raising capacity. As it was, there was only one, and now there's two, and soon there will be three. So that's spreading its tentacles more and more.
With this proposition of slots, 20,000 of them across the province, two for every 1,000 population, give or take, one for every 550 people, it means, heck, in smaller-community Ontario it will probably be all that much more dramatic, because it means in a community like where I live, Welland, 48,000 people, 87 slot machines throughout the city at the end of the day. My impression is that you're concerned that slots are a particularly lucrative source of funding. Is that fair to say?
Mr Gladstone: It has been proven that one of the reasons the VLTs are so successful is much like video games when they first came out, because of the instant gratification, the instant chance of win, the rapid play of the game.
Mr Kormos: So it's not as if you're going to be content with being told you can run all the blackjack games, 21, and all the roulette wheels you want but the government's going to keep control of slots -- mind you, it will be the private sector, in all likelihood, that will keep control of slots -- because you don't see that as a level playing field either. If you're stuck with blackjack, 21, and roulette wheels and somebody else gets the slots, that's not a level playing field to you, is it?
Mr Gladstone: I wish I could have roulette wheels. I'm not permitted those.
Mr Kormos: Okay, but 21, blackjack, that's not a level playing field for you?
Mr Gladstone: No.
Mr Kormos: I was thinking of that fund-raiser down on King Street in Welland, upstairs in the firehall. That's where I saw the roulette wheel. My apologies.
Mr Flaherty: Now they're in trouble.
Mr Kormos: Are you kidding? They've been doing it for decades.
Mr Rollins: They will be tomorrow.
Mr Kormos: Many a Monte Carlo night long before Bob Rae ever introduced casinos to Ontario, let me tell you, friends.
A level playing field would also be achieved if there were simply no slots at all, wouldn't it?
1630
Mr Gladstone: That wouldn't be the case because there currently is not a level playing field. If you take a bingo hall, the charities in a bingo hall may only advertise a maximum of 1% of their total prize board. If you take the Ontario Lottery Corp, they may advertise until they go bankrupt if they so choose.
Mr Kormos: I'm hard-pressed to see the Ontario Lottery Corp going bankrupt.
Mr Gladstone: I rest my case.
Mr Kormos: Again, if there were no slots at all, that would address the issue of inequity vis-à-vis slots and other games.
Mr Gladstone: Between that, yes, but it would not help the level playing field and it would not have a policy in place regarding all gaming within the province to have one concerted goal so everyone in the province would know where we were going with all the stakeholders -- not only those involved with charitable gaming, but our compatriots from the racetrack, from the OLC etc.
Mr Kormos: You advise against slots in places other than bingo halls --
Mr Gladstone: Casinos and racetracks.
Mr Kormos: -- casinos and racetracks. You advise against it. Obviously part of that is motivated by, again, the enhanced competition that would be created.
Mr Gladstone: Right. And I'm not only advising against; I'm suggesting that when the policy plan perhaps could be fast-tracked and is in place, we could look at it a bit more carefully. But until such time, I do not believe we would be in a position to cope with the problem gaming and I do not believe we would be in a position to cope with the increased play in those machines that would then take away from all other forms of charitable gaming.
Mr Kormos: So in part again because of the unfair competition it would create, but also in no small part because you perceive some social dangers in the widespread placement of these slots.
Mr Gladstone: Yes, no question.
Mr Kormos: Tell me about that, please.
Mr Gladstone: I don't have any numbers and I don't have any studies, but --
Mr Kormos: Fair enough. What's your gut instinct? You've obviously conducted some Monte Carlo nights. I bet you you have.
Mr Gladstone: There is a reason why the B'nai B'rith Youth Organization is a member of an organization such as Charities First Ontario: to ensure that when we're discussing gaming issues around the table, problem gaming is also looked at and so some funds are diverted that way to make sure the so-called problems we would create by generating funds are also looked after on the other end.
Mr Flaherty: Mr Gladstone, thank you for coming today and making your very lucid presentation. I wanted to comment on the consultation issue. Certainly the government is committed to the consultation process, this being part of it. A number of the concerns that you've raised I'd like to discuss with you in terms of dollars for charities. A number of the concerns you have raised, however, deal with implementation matters that are not part of Bill 75, which is the bill this committee is working on now.
Bill 75 sets up the legal framework which will give the government the ability to proceed with certain initiatives, but it certainly doesn't have the provisions in it that will be as a result of further consultations about which charities qualify and which don't and that sort of thing, which are some very important matters, as I'm sure you appreciate.
If I could turn to the issue of funding now, I take it that you're in favour of increasing the dollars available for charitable causes through the use of VLs and the other gaming initiatives in the act?
Mr Gladstone: Absolutely.
Mr Flaherty: The commitment in the May budget was up to $180 million in increased funding for charities arising out of these new initiatives, and specifically with respect to the Monte Carlo situation -- these are the roaming Monte Carlo events that seemed to be one continuing Monte Carlo night -- the information I have is that they're producing about $10 million to $15 million per year and that with the new charity gaming halls, which I gather you favour, the permanent sites --
Mr Gladstone: Very much so.
Mr Flaherty: -- the estimate is that will be increased about 10 times. I take it that's satisfactory from your organization's point of view?
Mr Gladstone: I'll take your word for the numbers and the other issue with regard to the charity casinos. Again, we haven't seen anything of how the revenue splits will work and who will get how much and what have you, but to ensure, again in consultation with the charities, that the charities are not looking for handouts, that they are looking, as was indicated earlier by a fellow member of Charities First with the girls club of Peel, that the charities want to earn their funds, that they don't want to have to walk up to someone with their hand out and say, "Please give me money I need."
Getting back to the issue of funding of the VLTs, although not part of the bill, when you're discussing $180 million, that's a lot of money to be distributed, and a very major concern is how those funds will be distributed and what is the mechanism that will be used and how will the charities, particularly those affected by the loss of break-open ticket revenue, which is where we feel it will harm the most once they're in stage 3 of the implementation, how will those charities get, as well as new charities from off the block who perhaps don't have a break-open ticket program but have a great need for funding?
Mr Flaherty: I certainly agree with the need for continuing consultation with respect to the implementation aspects, which are not addressed in the framework, which is the bill, which is one of the reasons for this staged and controlled introduction of VLs, which is contemplated, so that there'll be opportunities to review the status and progress in that regard. Good luck to your organization in the work you do.
Mr Crozier: Good afternoon, Mr Gladstone. What I gather was just said on behalf of the government is: "Trust me. We're going to get to this, but first we're going to get the VLTs in." You gave us a list in recapping of those things that you think must be done and I don't know whether they're in any particular order, but first is that charities must be involved at all stages of the decision-making process; and second, a comprehensive gaming policy must be established. Has your organization, or, to your knowledge, Charities First or anyone you're involved with been consulted to this point with regard to the introduction of video slot machines?
Mr Gladstone: Charities First Ontario sent out a fair bit of information to all MPPs in the House requesting a gaming policy and giving what information we had on the video lottery terminals. I don't think there's been much consultation coming the other way.
Mr Crozier: How would you characterize the planning and implementation of gaming in Ontario, as far back as you're familiar with it, to this point?
Mr Gladstone: Represented evenly by all parties, the consultation process with the charities, to the best of my knowledge, has not been exemplary.
Mr Crozier: I appreciate that and I needed your comments in that area. When it comes to the charities, that you must play on a level playing field, to this point, and the point I guess has been made before, you've had a stake in raising your funds, you've been physically involved in raising those funds. You don't feel that you maybe have the same opportunity with regard to the distribution of these funds down the road. Is that correct?
Mr Gladstone: Yes, and no one knows how the funds will be distributed, so yes.
Mr Crozier: That, I would think, and I would be interested to see if you would agree with me, is going to be a gargantuan task when you consider all the charitable interests in the province of Ontario at the present time.
Mr Gladstone: Yes, and especially when you realize that nowhere in the act is the word "charity" defined.
Mr Crozier: So it's going to be difficult, that everybody gets their fair share.
Mr Gladstone: That's right.
Mr Crozier: You would want to work very closely with the government on that?
Mr Gladstone: Absolutely.
Mr Crozier: At the same time, and I appreciate your position in representing your organization, you will want to have your organization's best interests at heart.
Mr Gladstone: That's correct, which is why I am recommending that BBYO, in particular, not sit down at the table, but our umbrella association group, for lack of a better term, Charities First, be sitting at that table to ensure that all charities are properly looked after.
Mr Crozier: I think that's a fair position to take and I appreciate the points you've raised in your submission today.
The Chair: Mr Gladstone, thank you for your submission today.
1640
HEALTH PROMOTIONS STRATEGIES INC
The Chair: Our next presenter is Health Promotions Strategies Inc. Mr Iversen, please take a seat.
Mr John Iversen: Thank you, Mr Chairman, for allowing me to make this presentation today. My name is John Iversen. I'm president of Health Promotions Strategies Inc. We are a gaming service supplier in the province of Ontario as well as a gaming equipment supplier. We have a payroll staff now of 23 and we have sales of about $2.3 million, with some 220 provincial and municipal clients in the charity fund-raising business.
I believe, since there are 108 registered gaming service suppliers in this province, that we are fairly representative of those types of small businesses. In fact, we were the first gaming service supplier in the province and I know we speak from where we come with the knowledge since we've been around since this business was first allowed under the act.
I'm trying to keep the perspective mainly as a small business. I know you've taken lots of presentations from others, particularly with respect to those that are against VLTs and those that are for and so on. I've tried to put it in the perspective of the effect it may have on us as a small business and on our colleagues in the same industry.
Last year, we raised approximately $8 million for not-for-profit organizations. The bulk of this money through our some 220 charity clients was returned to their respective communities through charitable works. We are employed throughout the entire province.
Over one half of our charity clients -- we've done this through our own statistical survey -- that is, in excess of 100 charities, depend to a minimum of 50% of their revenues from break-open tickets, and some of them to a maximum of 100% of their revenues from break-open tickets. These are particularly the smaller ones. Any decline in this activity could have a severe impact on these charities, particularly the smaller ones. I relate to the effect that they might be out looking for other types of avenues or vehicles they can use to replace any reductions in the break-open ticket area. Particularly, they will be looking for revenues from VLTs, which we understand will not be so readily available to many of them.
Our company is particularly concerned not only about our ability to generate revenues for these charities, but also to survive as a small business. We've seen the impact in other jurisdictions, such as Alberta, where we have a sister company, where VLTs have been introduced, namely, that the sales of VLTs has dropped.
Just as an aside, we recognize that in the not-too-recent past, the government stopped funding charities and many charitable and social aspects of our society, and encouraged private industry to take up the task. Private industry, through companies like ourselves, have in fact done that. We see the introduction of VLTs as somewhat an attack on our small business industry. It's a threat to us, particularly at a time when we have taken up that cause. I looked back in the statistics of the Ontario Lottery Corp in 1992, and at that time they funded some $350 million, of which $16 million was returned to charities. I think going forward from that time, some of the same type of formula will bear out, and I'm not sure that the introduction of VLTs will necessarily change that formula.
It is fair to say that the government continues to advertise that it is going for downsizing and privatizing, but we are very much part of that downsizing and privatizing and we see this as a reversal of the trend.
I understand and I have understood from the beginning that this act is an act that has already been passed. However, we are extremely concerned about the proliferation of VLTs and the proliferation of this reversal of trend, as we are just in the mere fact that it's happened.
Our company, as I said, was one of the first ones to be licensed and our collective experience to date among our own staff and salespeople has caused us to believe -- and we are doing this through our sister companies in Alberta as well -- that the introduction of VLTs in Ontario could impact our sales by a decrease of as much as 40%.
Our main yardstick centres around the fact -- and in our discussions with charities -- that we are convinced there is a pool of moneys in the province available in the area of gaming and this pool is finite and only shifts from one type of activity to another. While certain proceeds from VLT gaming are earmarked for charitable purposes, the total amount that will be available to the charity clients we deal with will inevitably decrease.
Break-open tickets right now provide 12.5% of gross sales going directly to the charities, and other than to show where they are spending those money, there is little or no bureaucracy attached to that. In other words, break-open ticket revenues for charities are not subject to onerous granting procedures, which we understand they might be under VLTs.
We must also remember that the sale of break-open tickets is done through some 10,000 small private businesses and retail sites throughout Ontario. Our own calculations exponentially, through our own statistics and our own offices, show that some $96 million is now being threatened to small -- I call them ma and pa -- retail outlets, convenience stores for the most part.
We see that the consequence of this is that those people will look and lobby for a piece of the VLT business or some other compensation so that they can make these moneys up. I can tell you that with many of them, they represent a very significant part of their earnings now. If they start to lobby for more participation, either in VLTs or whatever, we will then have a proliferation of them and we will have a threat, inasmuch as right now, in our industry, we see these little break-open tickets as being an entertainment value and of very small financial consequence to the buyer. They're a 50-cent charitable type of gaming, but it is not the kind of gaming we see that is being introduced such as in casinos and so on. It's quite different.
We feel that VLT introduction will put pressure eventually on these types of activities that we do to raise the prize board. We will have to start offering bigger prizes and so on in order to compete for that pool of money. This brings in a much higher and riskier level of gaming in the province of Ontario.
The government should expect that break-open ticket retail sales will also want VLTs, thus causing exponential growth with its consequent effect on family income, particularly at the low-income and welfare levels. I must say to you that our experience as a gaming service supplier is that the largest purchasers or the most significant purchasers of our type of product at the 50-cent level are the low-income and welfare levels. We are justified we feel, of course, because they themselves are the recipients of much of the charitable work this goes to. I would not want to see, and we would not want to see as an industry, that this now becomes a much higher and riskier level of playing.
Any threat to the break-open ticket industry is a real and direct threat to the community-based charitable activities and particularly to the small business sector we represent.
I have included in my submission the statistics, which I'm sure you already have from other sources, that were provided by the Ontario Gaming Control Commission that indicate the number of people who are involved in our sector, the break-open ticket area.
To make my cause one more time or to drive home my point, we see this as a significant threat to small business, the business that has taken up the flag of the government's initiative to downsize and privatize.
Those are my comments and I welcome any questions.
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Mr Frank Klees (York-Mackenzie): I find it interesting that you characterize the break-open ticket as entertainment. Could you explain to me where the entertainment value is in break-open tickets?
Mr Iversen: First of all, in our particular company and in many companies we call them "charity game tickets." We actually do not call them "Nevada tickets" or "pull tickets" or, as you call them, "break-open tickets." "Break-open tickets" is how the act reads and describes them, but in fact we call them "charity game tickets."
We believe this has entertainment value to the buyers who buy them. We've watched them play these games. They are concerned with the type of product, the way they can hold them in their hands, the fun aspect of winning $1, $5 and so on.
Mr Klees: Okay, I think I understand the direction you're going. You indicate that the majority of the people who buy these tickets, be they 50 cents or whatever, by your own admission, are people who really can't afford it. Isn't that right?
Mr Iversen: No, I didn't say that, sir.
Mr Klees: Well, you said that the largest number of people who buy these are welfare recipients and low-income families.
Mr Iversen: Correct.
Mr Klees: We've heard for the last number of months a tremendous uproar about the fact that those are the people who can't afford to pay their rent, can't afford to buy groceries. Can you explain to me where the morality is in promoting a business that actually targets that low-income family for the money that should go to food?
Mr Iversen: All right, sir. I will preface by saying that I didn't realize I was coming here to speak about the morality of it today, but I'll try to do justice to your question. This is why we look at the entertainment value of it. To the extent that a higher-income person can afford entertainment value at a much higher level, the low-income person can afford entertainment at a 50-cent level.
Mr Klees: Not if they can't pay for their groceries, not if they can't pay for their rent. Surely there's something wrong with the picture. I would agree with you that the higher-income person, the higher-income family, surely can afford to make a choice of the kind of entertainment they want to have. Hence, video lotteries.
But I'd suggest to you that as I listened to your presentation what I had a problem with was that I hear you arguing about market share, and you're arguing about market share on the backs of people who can't afford to even be in the market. I don't dispute that with you. In fact, I think the problem in this market is at the lower end, at the 50-cent level, that appeals to those people not for entertainment, I would really question that, but I think the reason someone on welfare pays 50 cents for a ticket is for the hope of getting off welfare through a big win, or through a little win. I have a real problem with the argument that you're going to oppose video lotteries because you're going to lose market share on the backs of those people.
Mr Iversen: Let me try to answer that, sir. Number one, the break-open ticket industry at the 50-cent level does provide, in our view, entertainment value to the people. We've watched them; I don't know if you have, sir, and I don't mean to be flippant about it.
Mr Klees: Well, I've watched them, but I wonder what their kids are doing without the milk that they need for that 50 cents. I wouldn't want to be part of that industry, I tell you honestly.
Mr Iversen: That's fine.
The Chair: Excuse me, Mr Klees, your time is up.
Mr Iversen: The payout, Mr Chairman, 73.3% of the moneys that are spent right there at the table or right there at the cash dispenser goes right back into their hands.
Mr Klees: And 25% they leave there.
The Chair: Thank you, Mr Klees and Mr Iversen.
Mr Kormos: I'm pleased Mr Klees is finally coming around. He's starting to inquire about entertainment value. You see, the problem is that the demographics of who uses slots in this country are remarkably similar to the demographics of who uses break-open tickets -- I'm sorry, charity game tickets. That's okay, because they call slot machines video lottery terminals, so I understand why people would want to attach nomenclature that imparts a particular image. In the eastern provinces' slots, 80% of the users are male, the majority under 45, with a high prevalence among adolescent males. Women are increasing as users. The women users fall into an older age category. The numbers are increasing among retirees. The majority of individuals playing the slots in the Atlantic provinces are from low socioeconomic backgrounds, the working poor and the unemployed, and that's common to the Atlantic provinces.
In Manitoba, the profile of the user is with grade 12 education or less and an average yearly salary between $20,000 and $24,000, with a growing number of women.
In Saskatchewan, average yearly income of slots is $30,000 or less; 43% have not completed grade 12, and 17% of the problem gamblers were unemployed, the ones with acknowledged problems.
In Alberta, 62% are high school graduates or less, with a somewhat higher top in the average annual income -- $25,000 to $50,000 was the profile of the gambler.
In effect, what the heck, charity gaming tickets are modelled on slots, the three cherries, the three sevens. They're modelled on slots. It's effectively much of the same buzz, isn't it, without needing a machine and putting a coin in?
I was amazed though, because when I saw Health Promotions Strategies Inc on the list of presenters, I did not anticipate a company of your sort, with offices in Burlington, Calgary and Scottsdale, Arizona. How did you come about with it? Were you involved with American fund-raising initially for health care?
Mr Iversen: No.
Mr Kormos: How did you come about with the name Health Promotions Inc?
Mr Iversen: Because originally all, but now over 90%, of the charities that we helped to fund are in the health-related industry.
Mr Kormos: Is that in Canada?
Mr Iversen: No, in Ontario.
Mr Kormos: In Ontario.
Mr Iversen: Right, and our reach beyond Ontario is simply that some of our charity clients are asking us to assist them outside of Ontario. There's nothing more to it than that, nothing particularly sinister.
Mr Kormos: Sure. I was intrigued by it. I just wondered what the origin of that was. We've got a gross revenue of $1,310,400,000. That's in Canada or Ontario?
Mr Iversen: Ontario. Break-open tickets, those are all Ontario statistics.
Mr Kormos: Big bucks.
The Chair: Our time is at an end, Mr Kormos. I'm sorry.
Mr Iversen, I thank you very much for attending here today and presenting your --
Mr Iversen: Mr Chairman, I never did get to answer the very last question. I thought --
The Chair: We don't have time. There's a viewpoint of some people on this committee that the poor are not entitled to be entertained, I would assume. That's what I understood from it, and I'm sure we'll be dealing with that during the next three weeks. I thank you very much.
Mr Klees: Mr Chair, that's unfair.
ONTARIO ARTS NETWORK
The Chair: Our next presenter will be the Ontario Arts Network. We have a written brief from them. Mr Pat Bradley.
Ms Pat Bradley: Actually, that's Ms Pat Bradley.
The Chair: Oh, Ms Pat Bradley.
Ms Bradley: Thank you, Mr Chairman, committee members.
My name is Pat Bradley. I'm the executive director of the Professional Association of Canadian Theatres and the co-chair of the Ontario Arts Network. My colleague Anne Kolisnyk is the executive director of the Ontario Association of Art Galleries.
We're here on behalf of the more than 30 organizations that make up the Ontario Arts Network. We represent thousands of organizations and tens of thousands of Ontario artist citizens who make up the cultural framework of this province. We represent theatre companies, centres culturels, art galleries, dance organizations, community arts councils, symphonies, opera companies, community choirs and the artists who work in those organizations, performers, visual artists and writers. These artists and arts organizations are in every community in Ontario no matter how small and their audiences are in every community in Ontario.
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We're not here to give you advice on how the new video lottery terminals should be run or to comment on whether Ontario should indeed embark on this venture. We know there are many with more knowledge and experience than we have and we know that this committee will listen to the input of people from communities around Ontario and make informed decisions. I understand that the focus of these hearings is not on the use of the money, but I think it needs to be brought up at this time.
We're here to ask you to think about what this government will do with the profits of this new venture. We understand that the current plan is to direct approximately half to the provincial treasury to offset the budget deficit and to direct the balance to Ontario charitable organizations.
We urge you to embed this direction in the legislation or in regulation. It is the communities of Ontario that will be providing the money that feeds this new system of revenue generation and it is the communities of Ontario that must receive the benefits. Community ventures, whether sports and recreation facilities, local historic boards and museums, community action and social service groups and arts and cultural organizations, must be guaranteed in legislation the funds generated by the VLTs.
It is these groups and organizations that have borne much of the brunt of the budget cutting that the government and people of Ontario feel is necessary. Speaking for the arts community, we are aware that we must take our fair share of the cuts, and we have, but there comes a point when the fabric of our culture is threatened.
There is not a developed nation in the world that does not have a comprehensive system of support for arts and culture either spearheaded or supported by government. These systems range from the European model, in which direct government support of the arts dwarfs that of our combined federal, provincial and municipal governments, to the American model, where indirect government support leverages huge sums of money from corporations as well as indirect subsidies such as preferential postal rates and forgiven property and other taxes.
Canada and Ontario are betwixt and between and recent government cuts of direct funding have had a drastic effect on the ability of arts organizations to survive. Those cuts have been instituted without putting into effect countervailing support measures such as are available to US arts organizations. It's all very well to urge arts organizations and other charities to derive more of their income from the corporate sector, but the odds of success are decreased without proper support systems.
The arts and cultural community across the province, in common with other charitable organizations, has learned how to adapt to the new realities. We're not here to whine, but it's impossible not to imagine the effects on communities across Ontario when there is a 30% cut to the Ontario Arts Council's budget for granting to artists and arts organizations.
Therefore, Bill 75 gives the Legislature an opportunity to continue to build culture in communities across the province by directing a fair share of the profits of the video lottery terminals to arts and cultural organizations. There are a variety of mechanisms available including the government's Ministry of Citizenship, Culture and Recreation which helped build a cultural and recreation infrastructure across the province many years ago when provincial lottery money was first a source of government revenue. The facilities that were built with those funds, the organizations that were assisted at birth, the artists and cultural workers who developed then are at great risk today. A new source of funding for a cornerstone of community life in Ontario is absolutely essential.
I'm going to turn it over very briefly to my colleague who will speak rather more pointedly to one particular arts community, the gallery community.
Ms Anne Kolisnyk: The Ontario Association of Art Galleries represents the public galleries in Ontario, the most notable of which is probably the National Gallery of Canada. But they do extend to the north, to every region of the province; in fact, to 50 cities, towns and regions of Ontario that have and have supported generously and have built a public art gallery.
They've been suffering from the cutbacks, as has the whole arts infrastructure, and they've been turning more and more to bingo and to break-open tickets to survive. Further cuts are on their way next week of 34% to their operating budgets from the Ontario Arts Council. There's no way they can make that up. There's no way they can make that up in this timetable, and so they're going to have to look for more diverse revenues anywhere they can. I've been getting crisis calls all day today as this news comes out about the cut from the arts council.
I do think these institutions are important. I think they're important because the communities that host them built them and invested a lot in them. They're really anchored out there and I hope you will find a way to direct additional revenues to the arts in Ontario. Thank you.
The Chair: Thank you. Could you identify yourself for the purpose of Hansard, madam.
Ms Kolisnyk: My name is Anne Kolisnyk and I'm the executive director of the Ontario Association of Art Galleries, representing the public art galleries.
Mr Kormos: I'm in a peculiar position because I agree with you about one facet of your presentation, I should tell you folks that, and I disagree with you profoundly about what I see as basically the other facet of it. One, I join you in despairing about the abandonment of arts and culture, as it is now, by both major levels of government, provincial and federal, because, yes, I think these are important public assets that have to be maintained and should be maintained with a public spirit and democratically by virtue of the funding that has been traditional. To suggest that everything was okay may not be correct. I concede that everything may not have been okay, but so what? That doesn't mean you reject or abandon the prospect of understanding that an investment in arts and culture benefits all of us collectively, all of us individually. It's an investment in our future and it is an investment in our culture as Canadians because we're in a unique position to create a unique Canadian culture, which is a very fluid one, a maturing one and one which is growing and whose future one can't really predict because of that extremely fluid nature of our society.
But I suspect you might know -- maybe you don't -- that I find it repugnant that we engage in this type of activity -- gambling -- and the most active type of gambling -- slot machines -- attacking the poorest, because that's the profile of the people who use slots. It's among the lowest-income people in our society who use slots and who are drawn to them, because they're the quarter machines. Right? They're the quarters. I don't know whether there are any nickel machines in the province. I know in some American jurisdictions, I've been in casinos where there were nickel machines. Let me tell you, sometimes you can look in the eyes, as you walk around the machines, of the folks playing nickel machines and these are people who, as I say, are at the nickel machine because their lifestyle prohibits them from being at any higher range.
So I disagree fundamentally with the government, with the state getting involved in peddling a highly addictive and dangerous form of gambling, least of all to support such important institutions.
The other issue, of course, that has to be dealt with, is that -- I'm sure one of my colleagues from the Conservative bench might respond by saying: "Well you know, geez, but we've got to reduce the deficit. This is why we can't afford to fund these things anymore." But you see, not a penny of the money that's going to be raised, and it's going to be millions if not billions, by drawing poor people, lower-income people to slots and getting them hooked -- not a penny of that is going to go to reduce the deficit. It's all about the tax break that was promised for the very rich in this province. That's the greatest sadness of it all.
Having said that, I'm confident that this government is going to proceed with its folly, with the insanity of 20,000 slots here in the province of Ontario in every place but casinos. Every place but casinos, because that doesn't count, the casino slots. I'm confident they're going to do it.
We've been dancing in a fog. We've not really had a handle on the numbers. The Ontario Jockey Club thinks there should be a payoff of 90%. That is to say, 90 cents on every dollar that's put in should be paid out. I'm looking forward to seeing what the Minister of Consumer and Commercial -- I don't think that fits into their agenda in terms of the economics of it. It would be interesting if it did.
Mr Guzzo: Ninety-five.
Mr Kormos: But here we are. They've obviously had to accommodate various sectors. The government's had to accommodate the race horse industry. The government's had to, and feels, I suspect, somewhat compelled to accommodate charitable organizations, several of which have appeared today and more will be appearing as this committee travels across the province and returns back here to Toronto. There's going to be a real scramble for those dollars and there's great potential, because we haven't been presented with the model as to the divvying up of the cash, the stash. We know there's going to be a whole lot of cash there. The government knows that it wants to have as much of it into its coffers as possible to pay for its tax break for the rich. I mean, it's going to give 2%, which is still a lot of money, to gambling addictions. That's one of the difficult things.
Having said what I have, and indicating quite clearly that I really find it unacceptable that government is engaging in this sort of process to impose taxes on the poor, taxes on the desperate. That's what the gambling, especially this type of addictive gambling, is all about --
The Chair: Thank you, Mr Kormos. If we could go to the Conservative caucus.
Ms Bassett: I was delighted to see your names down here today, making this presentation. I don't want to make a speech and go into the cuts and all of the problems that you're facing, but you did say that the United States corporations who make gifts are given more favourable tax treatment, and we are trying to encourage that with the crown foundation status here. It's not going to make up; it's a step. The federal government is moving and there's a lot of pressure to make them move more.
But it brings me to a question. You mentioned in your last paragraph that there are several mechanisms available that could be party to helping to divvy up these funds. I wonder, other than the Ontario Arts Council, if there's anything else that you think we should be looking at.
Ms Bradley: Obviously, the most direct mechanisms are the ones that are in place already through the ministry but also through the ministry's agencies: The Ontario Arts Council for most arts organizations; various direct agencies.
There have also occasionally been foundation-type organizations that have been used to funnel government money through. We are as a community looking at what we can do collectively to provide support, sometimes through regranting assistance through organizations like our own, service organizations.
Ms Bassett: So you feel the community would cooperate enough to get together with all the various groups within a --
Ms Kolisnyk: We began to get together and we are fighting to keep the lottery money.
Ms Bradley: We lost that one.
Ms Bassett: All right. I just wanted to know where you were going.
Ms Kolisnyk: TOAN, the Ontario Arts Network, represents these 30 organizations that have been consistently getting together, lowering the barriers -- "I'm dance, I have to be privileged; I'm art galleries, I have to..." -- and working together on these strategies, yes, absolutely.
Ms Bassett: All right. Thank you. I know my colleagues have other questions.
The Chair: No, I think that's the end of the day. You have one minute. The remainder is Liberal time and they're not here.
Mr Young: I was reading something, but what percentage of your members or your associates are already registered charities?
Ms Bradley: For the organizations like the dance companies, the theatre organizations, the art galleries, virtually 100%. Ms Kolisnyk: A hundred percent. We also represent individuals who aren't, but where we represent organizations they are non-profit, registered organizations.
Ms Bradley: Non-profit, charitable organizations. They have both statuses.
The Chair: Thank you very much for your presentation here today.
The taxis are waiting and I am adjourning this meeting to 9 o'clock tomorrow in Thunder Bay.
The committee adjourned at 1713.