NEVADA PEOPLE MANAGEMENT SERVICES
GAMING SERVICES AND SUPPORT CORP
ESSEX PRESBYTERY AND LONDON CONFERENCE, UNITED CHURCH OF CANADA
CONTENTS
Thursday 15 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
Nevada People Management Services
Bedford Hotel
Cadith Entertainments Ltd
B.J. Games Inc
Blue Moon Hotel
Mr Malcolm MacPhail
Hiawatha Horse Park
Gaming Services and Support Corp
Kilroy'z on Kildare
Oak's Inn
Essex Presbytery and London Conference, United Church of Canada
Mr Michael Cowtan
Windsor Raceway
Arlington Tavern
STANDING COMMITTEE ON ADMINISTRATION OF JUSTICE
Chair / Président: Mr Gerry Martiniuk (Cambridge PC)
Vice-Chair / Vice-Président: Mr Ron Johnson (Brantford PC)
Mrs MarionBoyd (London Centre / -Centre ND)
Mr RobertChiarelli (Ottawa West / -Ouest L)
Mr Sean G. Conway (Renfrew North / -Nord L)
Mr EdDoyle (Wentworth East / -Est PC)
*Mr Garry J. Guzzo (Ottawa-Rideau PC)
Mr HowardHampton (Rainy River ND)
*Mr TimHudak (Niagara South / -Sud PC)
*Mr RonJohnson (Brantford PC)
*Mr FrankKlees (York-Mackenzie PC)
Mr Gary L. Leadston (Kitchener-Wilmot PC)
*Mr GerryMartiniuk (Cambridge PC)
Mr John L. Parker (York East / -Est PC)
Mr DavidRamsay (Timiskaming L)
Mr DavidTilson (Dufferin-Peel PC)
*In attendance /présents
Substitutions present /Membres remplaçants présents:
Mr 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 BobWood (London South / -Sud PC) for Mr Doyle
Mr Terence H. Young (Halton Centre / -Centre PC) for Mr Parker
Clerk / Greffière: Ms Donna Bryce
Staff / Personnel: Mr Andrew McNaught, research officer, Legislative Research Service
J-1231
The committee met at 1100 in the Holiday Inn, Sarnia.
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.
The Chair (Mr Gerry Martiniuk): Good morning, members of the committee and ladies and gentlemen. This is a continuation of the hearings of the administration of justice committee 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. We are pleased indeed to be in the beautiful city of Sarnia.
Mr Bruce Crozier (Essex South): You're in Point Edward.
The Chair: I'm sorry, Point Edward. It's a suburb of Sarnia. We have that problem in Cambridge because Cambridge is made up of three municipalities and we still refer to them as separate municipalities, so I understand that.
This act, if I may summarize it for the members of the audience not totally familiar with it, has two basic thrusts. One, it amalgamates the regulatory functions of the Liquor Licence Board of Ontario and the Gaming Control Commission into one commission so that all of the regulation is done at one place and enforced from one commission. The second thing it does is it introduces for the first time into Ontario legalized video lottery terminals. The policy statement made by the Minister of Finance suggests that if in fact the Legislature approves this legislation, then the video lottery terminals would be introduced into racetracks and permanent charity casino sites in the first phrase and in the second phase it would be introduced into liquor-licensed premises in various municipalities. I won't spend any more time on that.
Each presenter this morning will have 20 minutes which includes any questions, so if you could leave some time for questions for the members of the committee, I'm sure they will appreciate it. To my right are the government members, members of the Progressive Conservative Party in government, and to my left are members of the loyal opposition, the Liberal Party, and the third party, the NDP.
NEVADA PEOPLE MANAGEMENT SERVICES
The Chair: I understand our first presenter is the Nevada People Management Services, Mr Jim Landles, gaming assistant. Is that yourself, sir?
Mr Jim Landles: That's myself.
The Chair: Welcome. I'd ask you to proceed.
Mr Landles: I would first like to thank the standing committee on justice for the invitation to voice my concerns on Bill 75. As I said, my name is Jim Landles. I work as a gaming assistant for Nevada People Management Services and as such I deal with the small charities on a monthly basis. We set up and manage Nevada break-open ticket lotteries for these charities and non-profit organizations. The proposed video lottery terminals will certainly affect our business, but that's not the primary reason that drove me to be here today. There are really two reasons, and this is a fairly brief presentation. I'm against Bill 75, and based on experience and proven facts, I felt a personal need to impart these reasons to the committee.
The first weakness in Bill 75 is the inherent weakness of all government-run enterprises. I worked for seven years with the Canadian Federation of Independent Business, and I'm sure all the MPPs are aware of that organization. The horror stories I heard in that organization of waste and inefficiency could easily fill the next eight hours. It's common knowledge that the government sets a much poorer standard for itself than it sets for everyone else. The Ontario Lottery Corp is one of these agencies, and passing a bill that would give it more money to control I feel would be a grievous mistake.
The Ontario Lottery Corp financial report for 1995 shows that after 20 years with all its huge prizes and massive advertising, its total sales revenue for all games including Lotto 6/49, which really is a licence to print money, is $1.9 billion. Incredibly, the Ontario charities, after only eight years at it and no advertising at all, selling a 50-cent break-open ticket that's half the price of the lowest-priced lottery ticket of the corporation, had $1.3 billion in sales. In other words, they sold $1.3 billion of break-open tickets on impulse, with no advertising. I think that says that the private sector seems to do a much better job than the Ontario Lottery Corp.
You only have to look at their annual report to see that their overhead has reached a point that no private sector business would tolerate, and yet this government department supplies coffee for all their staff at their head office, a bill that totals $38,000 a year. When questioned on this, they were told that the staff doesn't take coffee breaks. If you phone the lottery corporation and try to reach anybody during the mid-afternoon or mid-morning, they're not at their desks. I just find this unbelievable. There's no large corporation that pays its staff's coffee bill.
Bill 75 will result in taking money from charities and giving it to an inefficient corporation whose return on investment is questionable. The Ontario Trillium Foundation was formed to disburse the money that has been earned by the lottery corporation to the charities it considers most deserving. According to figures given to me by Charities First Ontario, the overhead of this foundation is at present 10% of the money it allocates, which I find to be astounding.
The next point is the gaming commission admits that it has nowhere near enough gaming inspectors or enforcement people to enforce the present sites that come under its control. How will they enforce the additional sites created by the VLTs?
I understand that yourself, you're talking about combining the liquor control board and the gaming commission, but they're both so drastically understaffed, even if you combine them both together, I honestly don't feel they can do the job policing the sites. I go into Nevada sites all the time, and I would say approximately 35% of the sites don't meet the standards of the gaming commission. Our sites do. Every one of my sites does. I don't have a problem if the gaming commission comes in, and it's not a hard job to do. It's just sloppiness and it's just not caring. But the gaming commission certainly needs to up their monitoring of these sites.
My second area of concern with Bill 75 is the effect it will have in the licensed establishments on charity fund-raising, the small charities. The large charities will certainly suffer, but the small local groups will be devastated. I'm talking about the people who give so much of their time, people that I meet on a monthly basis, a tobacco farmer who runs the Delhi district minor hockey, the bank loans manager who raises funds for the Norwich basketball association, the accountant who is president of Burford minor soccer and the grocery store cashier who's secretary-treasurer and fund-raiser for Simcoe junior baseball. These people volunteer their services because it makes them feel like they're accomplishing something positive for the youth of their community. If the funding for these groups starts to drop every year because of Bill 75, how many of these volunteers will stay on? Who wants to volunteer for something that makes them feel like failures? If we volunteer, it's because we want to feel good about what we're doing.
I remember when the Wintario grants went to build hundreds of community centres and arenas in the small communities. They would not have had these otherwise. But the cost of running these centres is going up all the time and youth sports are finding it harder and harder to afford to rent these facilities. Many of the volunteers I speak with say that break-open tickets are the first all-year-round funding they've had, and it's resulted in them being able to budget and plan ahead effectively.
Remember that these are the grass roots of the charities. You can't compare them to the Ontario Lottery Corp, for their salaries are zero and their overhead is postage stamps and photocopies, and 100% of their money goes right where it's supposed to, to the kids.
I am not naïve. Clearly we will not stop the VLTs from coming into Ontario. The government has made a decision, and there is no indication that there will be any hope of reversing it at this time, and given the majority this government enjoys, this bill will pass. I can only hope that you'll revise phase 3 of this bill in putting the VLTs into the liquor establishments, because that's the real dangerous phase.
I'd like to just put an addendum to this. I want you to understand. I had quite a condemnation of government there. It was the government infrastructure I was condemning; it was nothing political or it was not individual parties or individual people. In fact, I'm a huge Mike Harris fan, and I agree with everything he's done so far except this.
I'd like to state also that working for a lobby group, I understand that a lot of people think the MPPs are overpaid and underworked. I know it's exactly the opposite. The good ones who get re-elected work their hearts out, and I know the hours they work. So I'd like to thank you very much for this time.
The Chair: Thank you, sir. We have a little over two minutes per caucus.
1110
Mr Jim Flaherty (Durham Centre): Thank you, sir, for your presentation this morning. It's good to be in southwestern Ontario. This is our only visit to southwestern Ontario during these committee hearings, so we're looking forward on the government side, and I know on the opposition side, to hearing from the presenters here today.
I was pleased that you mentioned the Canadian Federation of Independent Business. Speaking for myself, I'm very fond of that organization and was a member in my private business life before politics.
Let me, if I may, just tell you where the government's coming from on this, on Bill 75.
One of the ideas that's important is to put alcohol and gaming under one regulatory body. The reason for that is self-evident, that to some extent gaming is entering into licensed premises, premises that serve alcohol, and it would be a duplication of services, and inefficient, to have double regulation, two regulatory agencies in that area.
With respect to the introduction of video lotteries, the government accepts that the majority of the people in the province of Ontario, the vast majority, are intelligent, reasonable, moderate people and they act that way when they use video lottery machines. We know that in the eight provinces in Canada that have video lotteries the average person plays once or twice a week for 30 minutes at a time and spends about $10 each time and, perhaps more importantly, sticks to a predetermined budget. So the alarmists, the people who would make outrageous statements about people not being able to handle this sort of enterprise, this sort of gaming -- it's just not accurate in terms of maritime Canada, of Quebec, of Alberta, Saskatchewan and the other provinces that have adopted video lotteries.
The government's approach is to take a controlled, cautious, phased approach, first of all, to introduce video lotteries in racetracks and permanent charity gaming halls, because we have a real regulatory problem with these roving casinos, trying to regulate them, because they're moving all the time, and then review it and look at licensed premises. Licensed premises only permit the machines to be in areas where persons under the age of 19 do not have access.
Enforcement: With the new agency, the new Alcohol and Gaming Commission of Ontario, together they will have in excess of 100 inspectors. The some 30-odd inspectors now with the LLBO do more than 7,000 spot checks a year; almost half the licensed premises in Ontario are spot-checked right now by the LLBO. As I say, together they'll have more than 100 inspectors and, perhaps most importantly, the operator of a licensed premise who dared to breach what would be the law -- that is, that no one under the age of 19 would be allowed even in the area of the video lotteries, much less playing them -- would be in danger not only of losing their licence to have the video lottery machine but losing their licence to have a business, that is, their liquor licence, from that same inspector.
By way of introduction, that is the general approach that the government has taken. There is also a five-year review provision. We are also limiting the number of video lottery machines to 20,000, including the licensed premises, which would give us the lowest number of video lotteries in Canada of any jurisdiction, of any of the nine provinces then who would have them, on a per capita basis.
The Chair: Thank you, Mr Flaherty. We'll move on to the opposition.
Mr Gerard Kennedy (York South): Your presentation, I think, needs to be responded to in terms of the points you raised directly. The government position that hasn't been revealed by Mr Flaherty is simply to take money. This is about a big grab by the government for money. The government will not reveal how much money it plans to make off this. We see, however, in the budget documents that 10% for charity means a $1.8-billion eventual take in order to support that kind of thing. But what people need to hear clearly from people associated with the charitable gaming aspect in this province is why so many of those charities are concerned about losing their monetary base. In other words, this bill is named "getting moneys for charity." It doesn't say, "This is a government that can't add and needs to take money."
One interesting point is that Mr Harris is against himself on this one, so you don't need to feel bad about your support for him, because a year ago he was saying this was something he wouldn't do, and now he is. So you don't need to feel that it's completely inconsistent except that this government is so badly off in terms of its projections. On the charitable impact, this bill speaks about generating new money for charities and yet it would take away the money that's coming from the break-open tickets. If you can establish it, that's clearly your position and how much would be lost; secondly, what the impact will be of governmentalizing what used to be fundamentally a private activity in the sense of the amount of money, and now what this does to the charities. Because I can assure you that, from someone who's been involved in the operation of charities, without either government funds or gaming revenues, charities will start to look interested in this source of revenue that wasn't there before and there will be smaller slices of the pie all around.
I'm wondering if you could establish exactly what you see as the impact on the charitable sector that is depending on gaming right now.
Mr Landles: The larger charities certainly have a lot of options. The ones that concern me, as I said, are the small ones. I deal with them on a monthly basis. These small sports organizations are mostly youth sports and the local Optimist Club and people like this. Before, they were depending on many community fund-raisers, they were depending on draws and there was never any source of regular income. They're the ones that are going to be the most hurt, because I don't really think the money's going to trickle down that far. That's going to be the basic problem. That's the major fear I have. Because of the huge infrastructure of government, I think the little people -- and these are the grass-roots charities -- are going to be ignored, are going to be left out.
Mr Kennedy: What's the percentage that the charities get of the break-open tickets that your business helps to supply and support?
Mr Landles: Everything's licensed by the gaming commission, what we can spend and what we can take. The percentage I'm not sure of, but the amount varies per box. The boxes bring in $1,084, each box that's sold; it's over 2,000 tickets. After all expenses, the charities make anywhere from $124 to $144 a box. It varies, because the licensing fee in each individual community varies from $1 to $24 a box. The thing I see is that we do all the work. The cities like London take $24 out of every box and our total management fee is $40.
Mr Peter Kormos (Welland-Thorold): It's interesting to note that Ontario Lottery Corp ticket sales, everything from Lotto 6/49 to bingo and keno, in the Sarnia area last year totalled $14,973,668. You can bet your boots that the government, because it's got big cash -- man, this is cash for life for the government -- has no intention of tinkering with its proceeds from Ontario Lottery Corp, especially since Ontario Lottery Corp is going to be in there like dirty thieves. It wasn't an accident that I referred to them that way. As a matter of fact, VLTs, a neologism for high-tech slot machines, have been referred to as "vulgar little thieves."
In any event, what's left then? Where do you seize the bucks from? The government ain't going to want to take it from Ontario Lottery Corp -- $14 million, almost $15 million right here in Sarnia alone. What have you got left? You've got bingo. You've got break-open tickets. You've got the fund-raising efforts of small organizations.
Now, part of the government spin -- you see, they've got to pull all this stuff. They have 20,000 slots, in every corner of every neighbourhood in this province, one for every 550 population. That'll help you figure out how many you could have in your community. Government's got to peddle these, so it puts the spin on: "There's going to be 10% allocated to charities." No model as to who those charities are; the strong suggestion from a number of presenters is that it should be -- the government hasn't said this -- charities that have charitable numbers from the federal government. You and I both know that excludes a whole lot of charities.
Mr Landles: All the sports charities, yes.
Mr Kormos: It excludes the snowmobile clubs. It excludes the Moose Lodge. It excludes sports groups. It excludes community-based groups that do good works but don't qualify for that very stringent level of tax charity. You know what it's like to line up, if you've even bothered trying lately, to try to get some of the bucks the Ontario Lottery Corp has picked out of your pocket. You're talking about the same sort of bureaucracy. The big guys, the big hitters, the high-profile ones, the ones with the high-priced consultants, are going to get the cash. They're going to get the gold; you're going to get the shaft. It scares the hell out of me.
Mr Landles: I agree 100%. That's what concerns me -- the small sports groups that are keeping kids off the streets. I have one group in Delhi, Ontario, that's a hockey organization. They had a situation where a team that had won the championship for the year couldn't afford to bus its kids to the final. One team had a really good break-open site. They had lots of money left. They paid for the opposing team's buses so they could enter the final stage of the hockey. This is the type of thing that goes on. These are the ones that are going to lose out. All these kids in these small towns, in these small organizations, are going to lose out.
Even if the VLTs take only 25%, the ice time and arena times went up something like 30% this year. That's in communities like Woodstock and London and these areas. They can't afford it. Because of Mike Harris and all his cutbacks -- and I agree with his cutbacks -- all we're doing here now is just starting to shift money, and we're shifting it out of kids' mouths. That's what bothers me.
The Chair: Mr Landles, thank you very much for attending here today.
1120
BEDFORD HOTEL
The Chair: Our next presentation is by the Bedford Hotel, Mary Lapaine. Welcome, Ms Lapaine.
Mrs Mary Lapaine: Mr Chairman and members of the committee, my name is Mary Lapaine and I want to thank you for the opportunity to appear before you today. My husband and I operate the Bedford Hotel is Goderich. Just as an aside, I'd like you to know that my family went there in 1929 and this year we are celebrating the 100th anniversary of our building. I have been very much a part of the hospitality industry for a long time and this morning I would like to bring you some of the facts and tell you how difficult it has been, particularly over the last five years, to be in this industry.
I would like to 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 more important industries. Unfortunately, the recession has hit us very hard, with sales down 20% and no real turnaround in sight. In our own particular case, we are down by 26% over the past five years due to the recession and the decrease in summer tourism, particularly in American visitors. As a result of this, we've had to decrease our staff complement by about half and discontinue our usual practice of hiring summer students. Even the excellent marketing tool initiated by the southwestern Ontario tourism association of calling this whole region the west coast of Ontario has not been able to counter the decline.
I've had the personal opportunity of visiting Manitoba, Saskatchewan and Alberta, where VLTs were introduced several years ago. Particularly in small and rural area properties, the results have been an added interest for the customer which has translated into a larger volume of sales, increased employment, money for capital expenditures and a dramatic drop in the number of bankruptcies in the industry. I even personally had the opportunity to speak to the Premier of Manitoba about this and he said that their main thrust in this was to help the rural population. As many of you probably know, when VLTs were introduced in Manitoba they were for the rural areas, not the city of Winnipeg.
I am here today not only to ask you 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. Most of us haven't got a lot of time left. I'm not being facetious about that remark; it is the truth.
The government is not introducing VLTs into the province; they are already here. According to the Ontario Provincial Police estimates, the numbers range from a total of 15,000 to 25,000. These illegal grey machines are costing the government approximately $400 million annually in new, non-tax revenue. Many operators have become desperate and in order to save their businesses have resorted to these illegal machines, but would much prefer to operate legally and install machines approved by the government.
As stated earlier by Mr Flaherty, studies conducted by Brandon University in Manitoba show that video lottery players take it as a part of going out and plan it in their budget process. They go one to two times a week and spend about $10. Dr Barbara Gfellner from Brandon University, who conducted the study, found that most people who played VLTs did so to socialize, not gamble, and it is viewed as a recreational activity.
We want to commend the government on its forethought to dedicating funding towards the development of programs for those with gaming problems. There are already many forms of gambling in the marketplace today and it should be noted that VLTs, according to research, are no more addictive than any other kind of gambling.
Data indicate 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. Horse racing revenues, for example, 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, says, "Prohibition is not the answer; education and treatment is." It is interesting to note that less than 2% of the population exhibit the potential to become potential gamblers. This compares to 6% for alcohol. However, we all recognize that for some, no matter what the product, a problem can develop. We commend the government for recognizing this fact and moving forward on it.
As I stated earlier, from my own experience the VLT introduction in other provinces has proven to be a job creator and a major stimulus to our industry. Only in Nova Scotia, where originally they were allowed in corner stores, was there a problem. But now that they're restricted, we are not aware of any problems, contrary to what you may want to believe. I also should point out that VLTs and casinos in Nova Scotia are coexisting quite well. We had the opportunity to be in Nova Scotia last year and visit the casino at the Sheraton hotel. I know that it is doing very well. The small operators in Nova Scotia are very happy with their VLT program as well. There are two different audiences -- one destination, the other drop-in. Based on that experience, 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 the government.
In translating the experience in the western provinces, which was about 1.5 new employment per operation, that would translate into 10,000 new jobs for Ontario. Capital expenditures could exceed $100 million in the province, as most establishments could conceivably spend $20,000 to install the machines.
In terms of an implementation schedule, we urge you to recommend to the government that the hospitality industry be moved on line as soon possible. The minister, in the budget on May 8, said:
"Initially, VLTs will be located only at racetracks and permanent charitable event sites -- locations where the machines can be closely monitored and where they will complement other existing gaming activities. Once an acceptable implementation plan is developed, the network can then be expanded to the hospitality industry...."
This measure is clearly intended to help our industry, but any undue delay could further hurt our industry as the early implementation to the other gaming venues could cause a shift in business. I know there is a great concern among our rural population that a 10,000-square-foot charitable gaming venue could become a major competitor. We certainly are all very big contributors to charities. I think probably the hospitality industry is one of the bigger things in a town that helps out charities, but we are concerned about the impact of huge charitable gaming venues and we think there are other ways that charities can be helped, maybe to a greater extent.
We also would like to see the machines installed because it will fight against the illegal grey machines and will also bring approximately $400 million of non-tax revenues into the government.
VLTs are very important to our industry. Obviously, they provide a new, important source of revenue. The proposed 10% commission is low in comparison to other jurisdictions, which go from 16% to 30%, but one we can live with. Because VLTs are viewed by the public as a desirable form of entertainment, they increase traffic flow and bring in customers. Customers eat and drink, which creates more economic activity. A byproduct of this new activity is the agricultural section, as our industry is one of the largest purchasers of Ontario farm products.
VLTs will help to save our industry. This is the clear and loud voice of our members across the province. Our members are already licensed. As such, they are proven, responsible, trained professionals and therefore familiar with all the results from the operation of activities for adults, including liability. A healthy hospitality sector through VLTs means a healthier 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.
We commend the government for taking this initiative as it will stimulate our industry without government funding. It will eliminate the illegal machines and bring the untaxed revenues into the mainstream economy and in the process help the government reduce the deficit.
Mr Crozier: Good morning, Ms Lapaine, and welcome. The one thing that I would like to comment on that bothers me about this presentation is, "It is interesting to note this misinformation being put forth by some to discredit the government on this issue as a means to promote their own interests."
I don't know how many times we've heard that phrase over the last week and a half. I look at many of the comments made, as sources from which they draw their conclusions, to be much like economists, that if you put all the economists end to end, all you'd have is a long line of economists. We can each look to our own research as it fits our own circumstance.
1130
I'd like to know how you feel personally. You interjected some comments about how you feel and how it affects your business. How do you feel, since you've visited other jurisdictions, that the revenue to you is proposed to be 10% in this case where in some other jurisdictions it's as high as 25%.?
Mrs Lapaine: How do I view that? Obviously we were hoping for higher revenue, but the main thrust for us in wanting video lottery terminals is not the return that we feel we're getting off the video lottery terminals. We look at it as a means for people to come into our business. People no longer come out to a bar to drink; social venues, everything has changed. We look at it as, if we have the video lottery terminals, no matter what our return is we're going to increase our food and beverage business and that will stimulate our whole business. Traffic in an establishment is the most important thing because people attract people; there's no question about that. For us that's the main thrust behind it. Obviously, 10%, we would have liked more but we're very happy with 10% because we feel the introduction of the machines is the more important thing to the betterment of our business.
Mr Crozier: I'd like to get to that point. They're going to be proposed first to go into racetracks and permanent charitable gaming sites. The numbers that have been suggested for those venues leave less than one machine per licensed establishment in the rest of the province of Ontario. If, I suppose, the government were to be totally fair and distribute them to everybody, you might get one machine. I suspect what's going to happen is that there are going to be some that have more clout than others, that some will get several machines and some will get none. How do you feel about that?
Mrs Lapaine: I agree, but I think there are some licensed establishments which may not want them. Their venues may be different. To say that if you gave them to every licensed establishment in Ontario they'd get one -- I think that is not going to happen. As far as how they're going to choose, that's a very difficult question. I have been associated with the Ontario Hotel and Motel Association. I know they've taken a long look at it and they've made a recommendation, which we think is fair, that probably three to seven machines be the area that this government look at with the numbers they propose are going to be put into our establishments.
Mr Crozier: If that meant that 50,000 machines would go into Ontario rather than 20,000, that would be okay with you?
Mrs Lapaine: Yes, but it may have to be done within the government guidelines and we're prepared to live with that.
Mr Kormos: I appreciate what's happening. The hotel and motel association is lobbying very hard, as is their right, to get slots in their members' locations. There's a whole lot of money to be made there, no two ways about it, a quarter and a loonie at a time, and not that slow, because the play on these machines is as rapid as one and a half seconds per play. We've heard your submission in a number of cities from a number of sources because the hotel and motel association distributed that and asked their members to appear at these hearings and make those submissions.
It's unfortunate, though, that when they gave you that submission and they referred to the Gfellner report from Brandon, Manitoba, they told you what her conclusions were --
Mrs Lapaine: I've read the Gfellner report, Mr Kormos.
Mr Kormos: -- as to the statistical average player but didn't include in their submission that you were to make to this committee that 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.
It's unfortunate that the hotel and motel association didn't include in their submission that in Gfellner's study, 9.1.% of men and 9.3% of women VLT players were pathological or problem gamblers, far higher than the average for other types of gaming or gambling.
It's unfortunate that they didn't refer to what the Addiction Research Foundation told us up in Thunder Bay, that video lottery terminals are considered to be the most addictive form of gambling. I appreciate that the Toronto staff from ARF declined to say that, but if I were in a senior position in an agency that was relying upon this government for funding, I'd be careful what I said too, in view of the cuts.
It's unfortunate that the hotel and motel association doesn't include the parts of the submission from the Lake of the Woods Addiction Services where, with respect to video lottery terminals, they say it's very addictive and the trend is towards developing faster and faster games.
It's unfortunate that the hotel and motel association doesn't make reference to the fact that the Frisch study -- I spoke with Dr Frisch yesterday at the University of Windsor -- indicates that 17% of adolescents are almost split evenly as either pathological gamblers or high-risk gamblers, that we're witnessing a generation of high-risk gambling that the slots are particularly catering to.
It's unfortunate that the hotel and motel association, in making reference to these grey machines, doesn't say what Dr Howard Schaffer of Harvard Medical School has to say about illegal slots, that legalization of VLTs would not do away with illegal slots, that there would only be a substantial increase in gambling and some would even return and continue to sustain the illegal slots because the payoffs will probably be higher.
It's unfortunate that the hotel and motel association doesn't indicate that the Ontario Provincial Police has told this government that legalization of slots is not going to get rid of grey machines, that the police need the resources to go after these machines. There are only 11 officers in our anti-racket squad operating provincially.
It's unfortunate they didn't tell you that an 80-page report prepared for provincial security similarly indicates, among other things, that slot machines, as proposed, attract organized crime the way a cow plop attracts flies, that we run a high risk here because there isn't a gambling jurisdiction with slots that's over 10 years old that hasn't got a strong presence, hasn't been corrupted by organized crime.
I hear what you're saying. I understand your industry needs the additional revenue --
The Chair: Thank you, Mr Kormos. We will move on to the Conservative caucus now, if we may.
Mr Kormos: -- but I really wish that we had --
The Chair: I wish you'd take a breath periodically so I could just get in there without interrupting you.
Mr Kormos: Thank you, Chair. Just go right ahead, sir, because I'm on a roll.
The Chair: I try not to interrupt.
Mr Terence H. Young (Halton Centre): Mr Chairman, on a point of order: If the microphone were cut off, it might move Mr Kormos to stop speaking.
The Chair: We're just wasting the government's time at this moment.
Mr Kormos: It wouldn't stop me. There's far too much at risk. I'm not in the back pocket of gambling --
Mr Flaherty: I hear what Mr Kormos said. We've been hearing his views for a week and a half. He is a prohibitionist on gaming. His party is not. His political party, the New Democratic Party, introduced commercial casino gambling to Ontario. Mr Kormos is against that, he's against the Windsor casino, and I respect his view against gaming. It is a point of view that some advocate and he advocates it well. Our government takes a more measured view, I think, a more realistic view of treating people in the province as adults and looking at the Canadian experience more broadly.
I don't agree with Mr Kormos that we can be dismissive about the hospitality and tourism industry in Ontario. It is a huge industry.
Mrs Lapaine: Fourth largest, I believe, in the province.
Mr Flaherty: In many areas of the province, including areas where we've been -- Fort Erie earlier this week and Kenora last week -- tourism is the number one industry and employs thousands of people across Ontario. The estimate we've heard at these hearings is that this bill by the government would increase employment in the hospitality industry by 10,000 people -- 10,000 jobs across Ontario, and that's not getting into the racetrack industry and the employment problems in that industry, where many people work who, we've heard, probably would not be capable of obtaining employment in more office-type settings than the racetrack, the horse setting. It's really important from an employment point of view, and our government is concerned about job creation.
I want to go back and talk about charities for a moment because it was said here earlier that Bill 75 would take money from charities. That's not true. In fact, Bill 75 would increase the amount of money going to charities in Ontario by up to $180 million. It's an incredible increase to charities. If we're concerned about charities in Ontario as opposed to operators who make money raising money for charities, if we're really concerned about the charities themselves, this bill is a tremendous improvement in the amount of money that'll be going to charities in Ontario. In fact, the revenue will be more than 10 times what it is now from the Monte Carlo business, which is $10 million to $15 million per year; it'll be up to $180 million, which is well over 10 times that sum. I think that point needs to be made about the benefit to charities from Bill 75.
Mrs Lapaine: I add, Mr Flaherty, that I honestly was trying to say earlier that even in small communities I think there will be a good flow to charities. When hospitality industries are viable we're very good to charities, but when times get tough we can only do so much. We used to sponsor three different teams in our town. We can't afford to do it any more. You can't be laying your people off and supporting recreational teams. There's a tremendous spinoff that the charities will benefit from particularly, that I can speak for, in small communities, because I'm very aware of not only my community but others.
The Chair: Mrs Lapaine, thank you very much for your presentation. I apologize to Mr Guzzo and Mr Young as there was not time.
1140
CADITH ENTERTAINMENTS LTD
The Chair: We are proceeding to our next presentation, Cadith Entertainments Ltd, represented by Mr Lucio Sandrin and Mr Tony Rosa, and you have a third person here too.
Mr Lucio Sandrin: Mr Chairman, we wish to express our sincere appreciation to you and the committee for the opportunity to express our views on this important legislation.
My name is Lucio Sandrin. I am accompanied by Mr Tony Rosa and Mr Phil Katz. I am a shareholder and director of Cadith Entertainments. Mr Rosa is our director of gaming. Mr Katz is president of Big "D" and Bingo Country Windsor.
Through our associated companies, Bingo Country and Upper Canada Casino, we have provided gaming-related services to charitable organizations in Ontario for more than 18 years. We manage more than 45 bingo halls in Ontario and manage about 150 Monte Carlo charity casinos annually. Through these companies and their 1,000 employees we provide fund-raising support for about 2,500 charities and non-profit organizations in Ontario and help to raise more than $40 million annual for them. Our organization is successful only if our charities are successful and our customers are happy and continue to play the game.
It is important to note that Ontario has been a model for many other jurisdictions throughout the successful partnership of government, the private sector and charities in raising funds at the grass-roots level and reducing or eliminating the need for government support to these charitable organizations. This success has also been a function of the high degree of regulation and control that is exercised by the Ontario Gaming Control Commission and the various municipalities on commercial operators, charities and suppliers of goods and services to the charitable gaming industry.
Our prime concern is the continued strength and viability of charitable gaming in Ontario. The proposed legislation provides both opportunity and threats to this industry. We have observed with interest that there is virtually unanimous agreement that VLTs will generate substantial revenues and that the issues being presented to this committee are how these revenues will be divided and the impact of the VLTs on our society. As could be anticipated, many submissions that have been made reflect the vested interests of the presenters. While we certainly have our own vested interests, we have attempted to be as objective as possible in presenting our views and recommendations and we trust they will be taken in that spirit.
We are neither for nor against the introduction of VLTs. However, if VLTs are introduced, we believe it is essential that a level playing field be maintained for existing stakeholders in the charitable gaming industry.
The introduction of VLTs seems to be a recognition of the public's interest in this form of entertainment, an attempt to provide regulation to the current illegal machines in use in the province and to provide additional revenues to the government, charities and racetracks in Ontario. We are concerned, however, that the VLTs, combined with the new permanent charity casinos and the commercial casinos at Windsor, Rama and Niagara Falls, represent a rate of change that could present real dangers to the very constituents these changes are designed to help. We therefore encourage planning, moderation, effective regulatory enforcement and regular reviews to ensure these changes result in the anticipated benefits.
We believe that the organizational changes, in bringing the regulation and enforcement of gaming and alcohol under one commission, should assist in the more cost-efficient administration of laws and regulations.
Racetracks: This is an industry at risk, and we support the intent of the legislation to provide a competitive advantage for a short period of time.
It will, however, be up to the management and staff of these facilities to take advantage of the opportunity being provided and to prove to customers that they are good value for the entertainment dollar. Once that short period of competitive advantage is over, they will have to compete with other establishments on an equal footing. VLTs are not a long-term panacea.
The hospitality industry is a critical industry to our society and especially to Ontario. This is also an industry that has suffered significantly during the recent recession. VLTs may provide a source of additional customers and revenues and may provide new employment opportunities. The simple reality is that no one knows the impact of VLTs on racetracks and the planned charity casinos in Ontario. We strongly urge that the addition of VLTs in bars, restaurants, hotels and other licensed establishments be deferred until the initial impact of VLTs is known and interested parties are able to make better informed submissions with respect to their possible expansion.
Of particular concern is the lack of experience of these establishments in managing gaming activities. As noted earlier, the charitable gaming industry in Ontario has been successful in part due to the comprehensive regulatory gaming environment in which it has operated. A similar gaming environment also exists in the racetracks but is non-existent in bars, restaurants and hotels.
It is essential that charitable gaming remains competitive with other gaming alternatives. This is becoming a greater and greater challenge with the introduction of sophisticated new products such as VLTs. Failure to remain competitive will result in the loss of existing customers and the inability to attract new customers, a fate similar to that of the racetracks. Let us not forget how important the customer is.
Revenues to charities from bingo, break-open tickets and Monte Carlo casinos are very much a grass-roots activity. The charity volunteers for these activities have a significant direct effect on the ultimate results, and you have heard from a number of local charitable and not-for-profit organizations that are very apprehensive about the coming changes. These organizations and their volunteers have legitimate concerns and deserve to be heard. The introduction of VLTs is a real threat to their revenues from break-open tickets and bingos. The stated method of distribution of the VLT revenues simply adds to these concerns.
We believe there must be continued, direct recognition of the efforts expended by local charity organizations and their volunteers. We urge the government to consider increasing the percentage paid to the charities to at least 20% and to allocate the moneys on the basis of their direct participation in bingo and casino fund-raising efforts. We do not believe allocation to charities should be on the basis of written requests to a nameless and faceless entity that will dole out the funds.
It is a virtual certainty that charity revenues from bingo will be negatively impacted by the introduction of VLTs in charity casinos, racetracks and possibly other locations. Therefore, if Bill 75 is passed, we recommend that urgent consideration be given to including VLTs in bingo halls, again with proceeds to the charities based on their participation in the bingo events. While this would require increasing the permitted age in bingo halls to 19 from 18, no other changes would be required, as these establishments already provide a restricted, regulated and controlled gaming environment.
Problem gambling: This is an issue that has occupied a good deal of the committee's time and energy, and rightfully so. Historical research suggests that 1% to 2% of the population is subject to serious problems with gambling and that this percentage has remained relatively static regardless of the amount or quantity of gaming that is available. While there is no specific reference in the act, it is our understanding that 2% of the proceeds will be made available to assist in the treatment of individuals with problems relating to gambling. This is a very substantial amount of money, particularly when compared to the very modest present funding available.
1150
There has been a reference to recent studies that suggest that historical percentages of problem gamblers no longer apply in this age of high-tech devices. We are certainly not competent to comment on the validity of these studies, but should VLTs be introduced, we have two recommendations.
Firstly, we believe that proper legislation, adequately enforced, is not only a significant deterrent to the unwarranted use of these devices but will also assist in the eradication of illegal, unregulated devices which we believe are a serious threat to society. In order for enforcement of the rules to be effective and the prescribed fines to have real value, it is essential that regulators have adequate funds to fulfil their duties. Without adequate funding for enforcement, abuses will exist. VLTs can be a significant source of this funding.
Secondly, we would encourage the use of benchmark studies to determine the present level of problem gambling in Ontario and to compare these with results of similar studies following introduction of VLTs. If the results supported a much higher level of problem gambling, we believe radical action would be essential, and this could include the elimination of VLTs.
Enforcement: As noted above, we fully support strong enforcement of all regulations and strongly urge that adequate funding be made available to regulatory bodies. Strong enforcement not only will reflect well on government policy but also is essential for the wellbeing of charitable organizations and the private sector. Strong enforcement of the regulations will protect charities and consumers and ensure a strong and vibrant industry that provides jobs, funding and excellent value for consumers for their entertainment dollars.
We would like to summarize the key elements of our presentation as follows:
(1) We are neither for nor against the introduction of VLTs. However, if VLTs are introduced -- and they appear to be coming -- we believe it is essential that a level playing field be maintained for existing stakeholders in the charitable gaming industry.
(2) Should VLTs be introduced:
(a) We encourage planning, moderation, effective regulatory enforcement and regular reviews to ensure their introduction results in the anticipated benefits.
(b) We strongly urge that the addition of VLTs into non-gaming establishments such as bars, restaurants, hotels and other licensed establishments be deferred until the initial impact is known.
(c) VLTs must be permitted immediately in bingo halls to ensure the revenue base of charities is sustained.
(d) Revenues to charities should be based on their direct participation in bingo and casino fund-raising efforts and their share of proceeds should be increased to 20%.
(e) Adequate funding must be made available to regulators to ensure the rules are followed and a level playing field maintained. VLTs can be a significant source of this funding.
(f) If a benchmark study suggests an unacceptable level of problem gambling as a result of the VLTs, they should be withdrawn or severely restricted.
We wish to again thank you for the opportunity of expressing our views here. Our sincere appreciation for the opportunity of speaking to you this morning.
The Chair: Thank you very much, sir. We have two minutes per caucus.
Mr Kormos: Two minutes isn't a whole lot of time, Chair.
Thank you kindly. Yours is similar to submissions made by people in your industry across this province. Let me suggest this to you: It's no accident that it happens to be slots. Why isn't the government proposing that hotels and motels be permitted to have blackjack games? That's a form of gambling that's very traditional, historic -- perhaps influence the federal government to permit dice games. It's no accident.
They're not encouraging hotels and motels to apply for licences to have supervised poker games. They're talking about slots because there's an industry out there that knows this is the new thing -- the electronic slots, these VLTs, these vulgar little thieves that have been called one of the most addictive forms of gambling, not by politicians but by people who have done extensive research in this area: in Great Britain, Mark Griffiths, the University of Exeter; Dr Gary Schaffer at Harvard Medical School; Jeffrey Derevensky, who I spoke with at length yesterday, from McGill University, who has done extensive research in this area. These things are hot. There's more money to be made in this form of gambling than any other form of gambling.
Also, they attract new people to gambling who never would have gambled otherwise in their lives. You don't have to learn any rules of the game. You don't have to know the value of a hand of cards. You don't have to understand the odds in a dice game and what it means to bet a certain bet as compared to another. You don't have to understand even the basic principles that any blackjack player understands as compared to blindly drawing more cards.
It's a form of gambling that's going to make billions of dollars for certain sectors. I'm afraid the charities are being used as patsies, being used as shills, because they're being paid off with a little piece of the action to try to convince the public. It's all part of the marketing job of selling slots to an unsuspecting public.
The Chair: Thank you, Mr Kormos. Two minutes is up.
Mr Young: Can you please describe for me what you mean by "a level playing field"? I'll just give you a little preamble. We know there are grey machines out there. They're in some restaurants and bars and there's some indication there are some of them in bingo halls as well. You're not suggesting, I'm sure, that restaurants and hotels be allowed to run bingo games, so what do you mean by "a level playing field"?
Mr Tony Rosa: I think what we talked about, a level playing field, is that VLTs -- right now in the gaming industry there is a segregation of players, and what players are accustomed to playing or what they like to play, there's a minor crossover. This particular unit creates a much larger crossover of the different sectors that are involved in the industry right now, so allowing one sector to have it without the other one having it is what we mean by not creating a level playing field.
Mr Young: There's also talk about a province-wide game of bingo on television. They do it with conference telephone. Wouldn't that be a better way to increase your business and get some more excitement in your bingo halls?
Mr Rosa: We are pursuing that game right now with the government itself. Yes, we feel that's a way of attracting new business and new players to the charitable gaming industry, but we also feel that without participation in the VLTs, if they do come out, it will create the unlevel playing field.
Mr Young: We've heard from a large number of delegations now, people who own small businesses, medium-sized businesses, hotels, restaurants etc. I'm starting to get the clear message that the biggest bang for the buck in jobs, in economic activity, is going to be in those small businesses, like the lady who was here earlier this morning. Do you have any comment on that?
Mr Sandrin: I personally agree with that, Mr Young. If you'll note, it's 45 halls, so there's a bunch of small, little halls we own. A lot of people work there and a lot of charities work there, and they work hard for their dollar and a lot of times go home with smithams. But society is in a turmoil of where we're going with this gaming stuff, so consequently we think that while it's coming and it's inevitable that it may be coming, if it does come, we suggest that it does have a strong, strong bearing on the bingo industries and the charities involved in bingo.
The Chair: Thank you, Mr Young. We must move on.
Mr Kennedy: If you had your choice and you had a choice not to have VLTs and to continue with the businesses that you have now and the impact you think you're having with charities in the community and so on, would you choose to have them or to not have them?
Mr Phil Katz: It's not a matter of whether we have choice. We're suggesting --
Mr Kennedy: I'm just asking your opinion as someone who looks at the impacts that are coming and so forth. If it was your choice in terms of where this could come from, would you or would you not have the VLTs?
Mr Katz: You mean in the whole marketplace?
Mr Kennedy: In the whole marketplace, yes. Correct.
Mr Katz: I have a hard time answering that, because if there's a desire by the public to do certain things -- in Windsor and here in Sarnia, we may soon be facing some gaming competition in Michigan. If we don't establish our marketplace and if we don't begin to make this a place of destination, by the time we wake up, the Americans will go right by, which is what they do.
Mr Flaherty: Listen up, Gerard.
Mr Kennedy: Let me just relate that to you from some of the experience of other communities that have gone down that route. There's been a decision in parts of this community have a casino, and a casino is touted as an economic development type of initiative.
This is not about economic development; this is about the government collecting more money from the community than your games do, than even casinos do. If you look at the dollar breakdown, the money is leaving communities. Less is being paid out in prizes in VLTs than in break-open tickets or in bingo, less is being given to the operators, less is being given to the charities and more is being taken by government and being taken downtown. Those are absolutely the facts.
1200
Mr E.J. Douglas Rollins (Quinte): Wrong facts.
Mr Flaherty: That's totally wrong.
The Chair: Gentlemen, let him have his chance.
Mr Kennedy: I want to commend you on the other part of your presentation, because I think it reflects well on your industry that you would concern yourself with a baseline study.
Mr Flaherty: Misleading presenters.
Mr Crozier: What a rude person, Mr Chair. He interrupts this gentleman.
The Chair: Mr Kennedy, please proceed.
Mr Kennedy: Your point in terms of baselines -- the government side is having obvious problems with the facts of this. But they have to agree, they have to admit, this is mainly about them taking money; if they didn't, then they would agree with your point, which is that there should be a baseline study. Why is there such a rush to put these VLTs into bars and restaurants? Why proliferate them? Why not do as your study suggests? Take this slowly; take a step. This legislation is about putting a base for the government to spread these out very widely, and the reason they need to do that is for the money. The baseline study is a very good idea, because if it doesn't happen we won't know what impact this will have in terms of the different problem behaviours associated with gambling.
The other point --
The Chair: Thank you, Mr Kennedy. I did add on some time for the interruption. Gentlemen, the time has elapsed for your presentation. Thank you for attending today.
Mr Kennedy: We are going to have to start timing ourselves, Mr Chair.
The Chair: You go right ahead, Mr Kennedy. I think I've been very fair. If you think I've been unfair, put it on the table. I will not tolerate snide comments.
Mr Crozier: Even when they're coming from the Chair?
B.J. GAMES INC
The Chair: B.J. Games of Brantford, Mr Peter Prowse, owner. Welcome, Mr Prowse.
Mr Peter Prowse: Thank you and good afternoon, Mr Chairman and members of the committee. I'm pleased to appear before you today to address certain matters respecting Bill 75. My name is Peter Prowse and I am president of B.J. Games, an Ontario corporation with headquarters in Brantford, Ontario. B.J. Games is a registered supplier of gaming equipment and services and a registered manufacturer of gaming equipment operating within the province of Ontario. Our company has been the principal operator of the casino at the Canadian National Exhibition since its inception.
As an aside, I would like to extend an invitation to all members of the committee to visit us at the CNE to view a functioning charitable casino. I believe you would find this visit informative. Please ask for me or one of my senior staff to tour and review the casino and security services. This is truly an example of a made-in-Ontario working model of a charitable casino operated by an Ontario company.
Our company has been in business in excess of 20 years. I have seen the changes, from one-day events where green felts covered banquet tables to three-day charitable events and now commercial casinos. As an operator, as an employer of 250 qualified staff and as a former employer of 400 staff now at Casino Windsor and Casino Rama, I am proud to have been a contributor to the growth and development of gaming in this province. Provincial revenues, employment and personal income continue to be important issues to the province and public alike. A controlled expansion of this industry will assist in increasing provincial revenues, reducing unemployment and establishing a number of well-paid gaming positions.
It is obvious therefore that I am a supporter of this legislation, but this support comes with endorsement of the minister's statement that the initiatives to benefit the people of Ontario, the charities and the racing and hospitality industry will be accomplished in a measured and controlled fashion.
Let us take a few moments in retrospect to examine the errors or omissions of the past. In doing so, it is worthy to note that when the Liberals were in power charitable gaming and the gaming commission were conceived; that when the New Democratic Party was in power charitable gaming was implemented; and that now it is a Conservative government that is proposing new legislation to further regulate and expand gaming and to provide more discipline and control in the gaming marketplace. From my perspective, all three political parties, their constituent members, operators, charities and the public should share a common interest to support, improve and implement this legislation.
The obvious errors or omissions in past legislation that have encumbered the successful operation of charitable casinos to date are many, but of significance are the following:
(1) The requirement to set up and tear down every three days has attenuating costs and increases wear and tear on equipment, reducing net funds to the charities.
(2) Casino employees have excessive transportation and meal costs, reducing their incomes.
(3) Rental agreements with halls are excessive, reducing net funds to charities.
(4) Quality security and surveillance systems are not always provided due to costs, setup, tear-down and all the things that go with that.
(5) Regulation and enforcement by government officials is complicated, more expensive and less effective than desired.
(6) Advertising costs are expensive due to site changes, reducing net funds to charities.
To be simplistic, the charitable -- roving -- casino business has worked, but not well under the present legislation. Establishing permanent sites will provide significant cost savings, create numerous operating efficiencies, improve security and surveillance and as a result increase revenues to benefit the province, the charities, the operators and the employees.
The charitable industry, Casino Windsor, Casino Rama, and their successes confirm that there is a legitimate demand for entertainment within the casino industry in this province, but at the same time I share the minister's concern, as identified in his statements, that implementation of this legislation should provide more regulation and control in the industry. We have seen evidence of the successes and failures of our sister provinces in implementing gaming legislation. I support the establishment of VLTs in this province, but in a controlled and progressive manner.
The horse racing industry has been detrimentally affected with the introduction of other gaming and lottery pursuits. It is wise that the minister proposes initially to introduce VLTs into the racetracks and permanent charity casinos, and to review and assess that decision prior to considering other venues and locales. In a similar fashion, I am aware that the GCC has reviewed the operation of permanent charitable gaming in British Columbia both to build and improve upon the government's intent in Ontario. The BC example has been a positive experience for government, charities and the public. Evidence of that success is the BC minister's recent announcement to extend the number of permanent charitable casino sites in that province.
I support the progressive and responsible steps this government and previous governments have taken to introduce gaming to Ontario. I also applaud the minister's frankness in admitting that the government needs to pay the provincial debt and that the introduction of VLTs to the permanent charity sites and the racetracks will enhance provincial coffers. But let us not lose sight of the fact that the charity purse will also be substantially increased. Charitable gaming was introduced by the previous government because provincial grants were being reduced due to dwindling provincial revenues. The charities were to be the principal benefactors. That has not been the case because the roving venues were not as successful as presumed, due to competition and the difficult working conditions for their operators. With permanent venues and more games the charities will benefit.
1210
I made mention earlier that regulation and enforcement of the charitable industry was less than optimally effective, and also expensive. My intent was not to discredit the GCC staff or their commitment; rather to recognize that the establishment of permanent charitable sites will lift a bureaucratic nightmare from the shoulders of the commission. The industry achieved rapid growth, placing unreasonable demands on commission staff for licensing requirements. This further complicated the charity requirements for advertising each event, and the combination or coordination of both requirements often led to problems and detrimental impacts on the success of individual events. Establishing permanent sites will eliminate a substantial paperwork function of the commission, hopefully allocating resources to more meaningful objectives in the regulation and enforcement areas. Further, without the advertising restrictions the charities will again benefit.
In closing, I would again encourage the members of this committee to become more informed and knowledgeable respecting those issues of this bill, particularly respecting the gaming provisions. Take the opportunity to visit Casino Windsor, the Northern Belle, Casino Rama, the CNE casino and your local charitable casino. I believe you will find support for both limited commercial casinos and local permanent charity casinos. In addition to supporting an entertainment function, you are assisting in increasing provincial revenues, charitable funding, employment improvements and opportunities, and employees' revenues.
Thank you very much. It would be my pleasure to attempt to answer any questions you may have.
Mr Ron Johnson (Brantford): Thank you, Peter, for making the drive up from Brantford for the committee hearings here today. It's good to see you again.
You indicated that obviously your big point here, which I got, was the establishment of the permanent location sites, that this was going to be a boost not just for local economies, and of course the industry itself, but for the charities as well. Our estimate is that it's going to increase charities' take from charitable casinos tenfold, in that charities will get about 10 times the amount of revenue under this legislation that they do currently. Is that a fair assessment, in your estimation?
Mr Prowse: In the brief studies that our association has conducted, we feel that eight to 12 seems to be the number that the charities will benefit by, so 10 fits right down the middle.
Mr Ron Johnson: Yes, because I know a number of the charities that we have had come forward have been obviously enthusiastic about the increased revenue that they're going to get from the permanent locations.
You indicate now that you're the largest operator in the province and you've got 250 staff. What do you see in terms of your industry and how it will grow with the permanent sites? Do you see that as a big employment boost across the province, not just you as an operator, but all of the operators that would be involved?
Mr Prowse: Certainly for employment. It's nice for an employee to know where he's going to go to work the next day. In a roving casino you could be in Markham one day, Scarborough the next and then downtown Toronto. It's nice to know where they're going to work. It will create many jobs, many more than we're producing now.
Mr Ron Johnson: I know that you did, and still do, I guess, the CNE casino in Toronto. You took me on a tour there last year. It's an incredibly professional operation that's run for the CNE. I want to encourage anybody on the committee here to go down and look at that again this year. It's a wonderful operation. He gave me a great tour just before one of his dealers took my money. It was a lot of fun.
Mr Young: I'd like to get your comments on something, with a short preamble. I took this home and plugged it into my telephone line at home the other night at midnight; everybody was asleep in the house. Within 10 minutes, I was logged on to some company -- Lord knows where they are, somewhere in the States -- an electronic casino on the Internet. They gave me $500 credit and here I was playing away. This was not real money in this case, but there are companies that do that.
Mr Crozier: Wait till you get the bill; it's like the call line where the ladies talk.
Mr Young: You just send your $500 on your Amex or something and you can play, and this is going on. I think we have to be very careful we're not taking the ostrich approach to the whole issue of gambling in Ontario. Do you have any comments on that?
Mr Kormos: There's pornography and paedophilia on there too, Terence.
Mr Prowse: I'm under the impression that gaming on the Internet is a federal jurisdiction, so I don't know. I'm not for that on there.
Mr Kennedy: There's been some talk about the casino at the CNE as it affects charities in the past. You've alluded to that. You did say that the charities were not the principal benefactors as they were intended to be. I'm wondering what you see in the structure of this that will make sure that charities will benefit from -- and I think you've accurately called them -- there's some effort by the government to call them charity gaming halls but they really are charitable casinos; 50 casinos will be put in place across the province without any say-so on the part of municipalities that want them or don't want them, but these up to 200 machines, I understand, and 50 tables, is that correct? Is that what you understand as well?
Mr Prowse: Number one, I don't think you can call them casinos because they're two different branches of the government. Casinos fall under a different area.
Mr Kennedy: This bill would bring it together. That's one of the facets of this bill, I believe.
Mr Prowse: So commercial gaming and charitable gaming would fall under the same bill?
Mr Kennedy: Yes.
Interjections: No.
Mr Kennedy: Sorry, I should let you finish your sentence. Could you respond to why charitable organizations have not received the maximum benefit at least every year from the CNE?
Mr Prowse: I think you'd have to talk to the CNE auditors and the CNE people to explain. It's really not my position to say where the moneys go; I just operate the games. You'll have to talk to the office.
Mr Kennedy: I think it is instructive that there are times when it's put forward in different parts of the public interest, in this case for charities, and in some of those cases they put hundreds of hours of volunteers' effort into it and receive very, very low returns. As you stand here today to promote this as a better way of securing returns for charities, I wonder: On what elements of this bill do you put that faith?
Mr Prowse: If you have fixed costs and you know where you're going to be, it's always easier to run a business. If you're roving, you're at the mercy of everyone else. I think this bill is trying to say, "Let's give our boys a home." That's what they're trying to say.
Mr Kennedy: In terms of the permanent locations.
Mr Prowse: Yes, sir.
Mr Kennedy: In terms of those permanent locations and the VLTs that would be in them, the position of the police in this province -- they have a coordinating mechanism called the Criminal Intelligence Service Ontario -- Mr Fantino, who's the chief in London, says their position is they're not in favour of VLTs.
Further, there's a concern on the part of the police in general, and it's reflected by an Inspector Gottschalk out of Metropolitan Toronto, that says: "Those who predict the legalization of VLTs will lessen or eliminate illegal VLTs are incorrect. Illegal machines are not subject to taxation or return percentages, monitoring, and are virtual cash collectors, and in the absence of strong enforcement may become indistinguishable from legitimate equipment." In other words, as other experts have said, all forms of gambling may expand once we start using these particular machines. Obviously this is a particular companion to the kind of expansion that you're endorsing here today. I wonder if you have a comment on the police's position in Ontario.
Mr Prowse: I can't comment on what the police feel. You can go back to what was said when the casino opened at Windsor, that crime would be rampant, and now obviously the police are singing a different tune there.
Mr Kennedy: Why do you think there is this concern about VLTs? You're somebody who's a professional in the gaming industry and obviously concerned about its image. There's a concern from the RCMP in western Canada that because of the number of new companies that have applied to be part of the expanded industry, they don't know who they all are. They have concerns about some of their origins. I'm just asking you, as somebody who's established as an Ontario company, if you've thought about and anticipated what could happen in terms of the attraction of companies from the States, some of which may be associated with illegal gambling.
Mr Prowse: It's obvious that anybody applying for a licence to operate in the province of Ontario will go through the proper regulatory searches and what have you. I don't anticipate anybody slipping through the cracks, through the bureaucracy of the OPP and the RCMP. There's a list of things that you have to go through just to get a licence.
If you're applying for a licence you are investigated to the nth degree. So if you're suggesting that somebody not up to standards would get into it, then that would not be true.
Mr Kormos: Thank you, Mr Prowse. There's no question that you and others in your industry have pioneered the concept of charitable casino gaming. Again, let's not be naïve. You and other colleagues are profit-making companies and you had to blend your interest with those of the clientele, because your clientele are the charities that you gather to put together an operation in any given community.
1220
We heard over the course of the last week and a half that there are in excess of 1,000 charity casino days a year -- I think I'm correct -- which I interpreted as being something like at any given time three locations simultaneously.
Interjection: Nine thousand.
Mr Kormos: Nine thousand. Okay, multiply that by nine then: 27 communities at any given time simultaneously having charitable gaming. I have been to some of these operations, ranging from modest ones to more extravagant ones, and I certainly can't dispute what you say. The blackjack tables were the most obvious games -- certainly not slots. I will decline your invitation because, sure as God made little apples, a Toronto Sun reporter will show up shooting a photo of me standing beside a gaming table during the midst of this debate, and I pass on that.
Interjection: On page 3.
Mr Kormos: There we go again, life full circle.
I am going to say this to you: Are you and your industry being taken for a ride? Who's going to be running -- because Mr Kennedy I don't think is that far off base. You can call them charity casinos and you can operate them under a different schema, but it's basically getting in the back door when you can't get in the front door. The reality is, there are going to be 50 more casino locations -- call them what you will -- in addition to the succession in Windsor, Casino Rama and now Niagara Falls, and again, I'm confident that Muskoka, Toronto, among others, are down the line in short order. Who got the Windsor casino? Was it Canadian operators?
Mr Prowse: No. They didn't have the expertise. Of course not.
Mr Kormos: Oh, they didn't have the expertise.
Mr Prowse: Of course not.
Mr Kormos: Who got the Casino Rama casino? Was it Canadian operators? No, because they didn't have the expertise. I haven't heard --
Mr Prowse: Well --
Mr Kormos: Let me finish.
Mr Ron Johnson: You are wrong, Peter.
Interjections: That's wrong.
Mr Kormos: No, an American-based company.
Mr Ron Johnson: Let the man answer the question. You're wrong.
Mr Kormos: An American-based company. Niagara Falls, I tell you -- I'll predict -- will be an American-based company. You're going to be competing with big players in the casino business from the United States, from Vegas and Atlantic City, who are going to be bending these people's ears. Again, I'm not suggesting there are going to be any payoffs because, like most politicians, you don't have to pay these people off with cash; you just scratch them behind the ears, give them a fruit plate and a couple of bottles of Ontario wine and they'll follow you home. I've known too many politicians for too long in too many different governments.
You're going to be competing with strong, powerful American interests who are going to want this 50 charity casinos action too. Wouldn't you want to see some guarantee that your industry, you and your colleagues, have first crack at operating these charity casinos?
Mr Prowse: Wouldn't it be nice if we competed with the Americans and if two bids were equal the Ontario company was given the nod? My answer would be yes. But if what you're suggesting is that an Ontario company, because we've been here, deserves the opportunity over somebody else and there's not fair competition, my answer would be no.
Mr Kormos: I say we can rent their expertise. We don't have to sell out this industry to buy it.
Mr Prowse: I'm not suggesting that. Your suggestion is that there will be up to 50 casinos, which is just about 23 more than what we're currently running, so it's not that large an increase. What we're saying is that if a Canadian company does rent American expertise, that's the way the Canadian company should structure its deal with an American company. If an American company comes in on its own, then its bid should be looked at on that basis. But if there are partnerships that come out of this and the Canadians or Ontarians do gain knowledge from the expertise of the Americans, isn't that wonderful too and now we can go off to the rest of the world and sell our expertise. We have to gain it from somewhere.
The Chair: Mr Prowse, I thank you very much for your attendance here today and your presentation.
BLUE MOON HOTEL
The Chair: Our next presenter is the Blue Moon country inn, Mr George Schmalz, owner. We have had a cancellation of the last one so this will be the last presentation this morning. I'll declare my bias with Mr Schmalz's establishment, the Blue Moon country inn. I've enjoyed the hospitality of your establishment on many occasions as it is a fixture within Waterloo region, Mr Schmalz. I'd ask you to proceed.
Mr George Schmalz: Thank you, Mr Chairman. My name is George Schmalz and I'm the owner-operator of the Blue Moon Hotel, located in the hamlet of Petersburg, a bedroom community of the Kitchener-Waterloo area. I want to thank you and the committee for the opportunity to appear before you today. I've also been asked by my neighbouring licensed operators in the townships of Wellesley and Wilmot in the regional municipality of Waterloo to voice our united support of Bill 75 as it relates to video lottery terminals and urge the government to implement them into the hospitality sector as soon as possible.
We, as an industry, are economically in dire straits and I can tell you from a personal perspective the urgency of the situation. I have operated the Blue Moon for 35 years this coming March and have been employed in the same 400-seat establishment since 1957. Our business is the K-W area. Without it, we would not survive. I have seen many changes over the years, some for the good and some not so good. For some of the younger committee members here, when I started in the hospitality business it was against the law to serve food with alcoholic beverages in taverns and bars. It was perceived as an inducement to drink more. More operators like myself are food and beverage operators and in the present state of the economy, every operator in Ontario, big or small, is giving food away. With 15,000 licensees in the province, the food consumption should keep our farmers very happy, and you can also throw in the hops and barley as well.
Our industry is in serious trouble. Sales in my operation are down 40% to 45% for the past three years. I lost 50% of my employees. My buying power is cut down and at times I have to go to the local grocery store to buy some items rather than to the suppliers, who demand a minimum delivery charge. I cannot blame them. They can at least can control their costs, but we cannot. Lower revenues do not keep up with the fixed overheads that have nearly doubled during the last 10 or 15 years, along with the increasing day-to-day operating costs.
I understand from newspaper reports that about 100,000 jobs have been lost in the hospitality industry alone and that the bankruptcies have increased dramatically to an all-time high of 1,400 since 1992. I can tell you personally that my licensee neighbours, as well as myself, are on troubled waters. We have numerous methods of in-house promotions, added-value items and offering package deals for bus groups to both seniors and tourists alike. We feature special entertainment, do co-operative joint promotions and hire industry consultants, all to no avail.
Today's operators have tremendous financial pressures on them to keep on the straight and narrow. Inducements being offered by unscrupulous people promoting the illegal liquor, brew and wine substitutes find their way to some customer's table, or have them enjoy one of the reported 15,000 illegal grey machines referred to by the Minister of Finance in his May 8 budget. This does not put money into the provincial treasury. It is very difficult to try to operate legally, especially in these economic times when competitors are attracting your customers with illegal machines and products.
We need this unfair competition to stop now. The minister also referred in his budget that the government was going to allow VLTs to help the hospitality industry, especially, he said, "We believe that VLTs, if implemented within tight regulatory controls and limited-access environments, can meet a legitimate entertainment demand and provide a significant stimulus to the hospitality industry." Our customers are changing today. We need and require the tools to meet tomorrow's challenges. Our industry needs a legitimate added-value product or service to help save the hospitality industry from collapsing. VLTs work as an attendance generator because they are an acceptable form of entertainment the public wants. They play them for entertainment, not to gamble. They are part of an afternoon or an evening out.
From a business point of view, the implementation stage for our industry should not be delayed and the timing be as soon as possible following the charitable casinos and the racetrack schedule. Delaying the implementation to our industry will mean the government will not be able to start receiving the over $500 million annually from the machines allocated to our sector. Conversely, it means that the illegal, untaxed revenues from the grey machines continue to remain in the underground economy, along with other illegal products. Delay could very well result in having an initiative that the government intended to help the hospitality industry hurt it.
The reason is that during the first stage of implementation to racetracks and charity casinos, it will create business dislocation. Customers will gravitate to where they can legally play VLTs. We cannot afford to lose any more customers, especially in the business time and for the short time. As well, who knows if that customer will come back at all, or even how often. Delay will also mean, as I said earlier, the government will be delaying moving on the offensive against the illegal machines. It's very difficult to try to operate legally, especially during these bleak, tough economic times when competitors are attracting your customers with illegal machines. We need this unfair competition to stop now.
1230
Independent research confirms this, as I believe you are already aware. I refer to the work conducted in Manitoba by Dr Barbara Gfellner from the University of Brandon. Dr Gfellner found that the average VLT player plays for 30 minutes once or twice a week and spends an average of $10.00. She also said that most people who play VLTs do so on a moderate basis and perceive VLTs to be a modest form of risk-taking in an entertainment-oriented social environment -- no different, I would add, from playing a game of shuffleboard, billiards or darts. Finally, the overwhelming majority, 85%, of VLT players reported that the most important reason they went to a bar or lounge was to relax, be with friends, socialize and meet people. It is an affordable and budgeted activity and viewed as recreational.
Around the province we witness a full selection of legal and illegal gambling opportunities. I have already referenced some of the illegal opportunities this measure will help control, but one does not have to go farther than your corner grocery store or bingo hall to find gambling opportunity. However, just as consumption of alcohol does not increase the overall level of alcoholism, the vast majority of players gamble in moderation and experience no significant gambling problems. If the LCBO introduces a new brand of alcohol, it does not increase the overall level of alcoholism. With all the existing forms of gaming today -- lotteries, bingo, horse racing, sports pools, break-open tickets -- the introduction of a new brand of gaming, video gaming, will not significantly increase the potential for compulsive or problem gaming in Ontario.
I would like to take this opportunity to point out that the public supports the introduction of VLTs into our establishments. Our patrons and customers tell us this as well. Independent surveys conducted by Angus Reid and Environics Research confirm this.
I also suggest that your recommendations include a request to move the implementation of VLTs for our suffering industry to high gear. Our situation is bleak. We have all been hoping and praying that the government would take this progressive step and we are grateful that it has. Manitoba has amply demonstrated the positive results. We need the stimulus of this new form of entertainment and we don't have to speculate as to the outcome. Positive results are there already, as amply demonstrated in Manitoba.
The Chair: Thank you very much, Mr Schmalz. We have a little over three minutes for each caucus.
Mr Crozier: As part of your presentation you list here that you've done a number of in-house promotions offering package deals and bus groups to seniors and tourists, that you feature special entertainment, cooperative joint promotions, hire industry consultants, experts, and you said it's all to no avail. Why?
Mr Schmalz: We are in changing times. We are competing with charitable casinos out there that can operate to 4 o'clock in the morning. In the Sun last Monday I counted nearly 15 charitable casinos operating. Those take away business from us. We haven't got a level playing field, period. We need a level playing field.
Mr Crozier: Okay, and you've had a lot of experience in that. I just wonder why all those things didn't seem to work at all.
Mr Schmalz: I heard the first speaker here today with break-open tickets. I guess he fails to understand that if we don't have the locations to sell those tickets and we are those locations, we're out of business and so is he.
Mr Crozier: I appreciate that. You've also said about VLTs, and I quote, "They play them for entertainment, not to gamble." Do you really believe that?
Mr Schmalz: I do.
Mr Crozier: Why, then, wouldn't you get VLTs in your establishment and let people play them but no money comes out, as if it's entertainment?
Mr Schmalz: We are trying to attract more business and create more jobs.
Mr Crozier: But the point is, they like to gamble on them.
Mr Schmalz: As they do on shuffleboard, darts or anything else.
Mr Crozier: Then just say so.
Mr Schmalz: Well, fine.
Mr Crozier: That's why I asked you if you believed it, sir.
Mr Schmalz: I guess gambling is because you've got to put a quarter in, or a dime.
Mr Crozier: I'm trying to get a handle on what you really believe. Tell us right up front.
Mr Schmalz: We believe that, like I said, we need some new tools to work with to attract more people into our establishments.
Mr Crozier: But they do like to gamble on them, don't they?
Mr Schmalz: If you want to call it a form of gambling, yes.
Mr Crozier: It's a form of gambling, all right; it's the most addictive form.
The minister in his opening statement on August 6 said, "To assist Ontario's hospitality industry, the Ontario Lottery Corp will develop a plan to introduce a limited number of video lottery terminals at selected locations." You know, when they get done putting them in racetracks and charitable casinos there's going to be less than one per licensed location in the province of Ontario. What chance do you think you'll have to be one of those selected locations across the province?
Mr Schmalz: I have no idea.
Mr Crozier: That concerns me.
Mr Schmalz: It certainly is a concern, but I hope at that time we will be able to make our presentation as well, my presentation. It's no different from what I said earlier -- I heard Mr Kormos say one to 550 people -- if my business is on the other side of that township line or county line and I'm only granted one, yet my audience comes from that other part, it's unfair too but I have to look at the logistics. I have to accept what's there.
Mr Kennedy: What happens to your business if you're not one of the ones selected? I just want to read this quote to you from one of the states. Richard Syron from the Federal Reserve Bank of Boston says it's their experience that if the money is spent locally on gambling enterprises there's no new generation of wealth, that money not spent elsewhere locally is in essence cannibalizing other businesses in the area. If you don't get a machine, are you concerned that will take away from your business as it exists now?
Mr Schmalz: I'll be lucky to be in business a year from now, that's how grave it is. I'm not the only one; I'm talking for my neighbours as well. I'm talking about the licensees around our area. We see a big shift in audiences coming into our businesses. That's why we're looking at new tools to assist us in our business, to attract more people into our businesses.
Mr Kennedy: You've done that I think very effectively. You let us know that very clearly. What happens if you don't get one of those tools but your competing establishment does?
Mr Schmalz: I guess I'm gone.
Mr Kormos: I appreciate what you said about the competition of charity casinos but I'll bet those steamed hot dogs they serve at charity casinos are nowhere near as good as the food you serve. It seems to me that you want to diversify beyond the food and beverage business into the gaming business.
Mr Schmalz: You could be right, Mr Kormos, but in the environment we're in we are giving food away. Our business means service, and if I have to cut my service I cut my volumes down. It's not an everyday operation where we can trust that we're going to have 100 people, 200 or 50 people.
Mr Kormos: I'm interested in this because I understand the motivation behind wanting slots: There are great profits to be made. I've never denied that, from day one, and never will. It's too obvious. I'm interested in this issue of job creation because the government promised 725,000 jobs, where they give us 20,000 slots; it doesn't add up to me. Ivan Sack -- I don't know the man personally -- the editor of Canadian Casino News, when he appeared before the committee, appeared to have some familiarity with the business. He said, "It is too early to say how many jobs would be" gained "by placing VLTs in bars and at racetracks." He pointed out that first the racetrack has to determine -- we're dealing with racetracks for a minute -- how much of the racetrack betting is going to be cannibalized by VLTs. Many people are going to put their money in the slots instead of at the parimutuel counter. But he does note, "However, given that the racetrack already has cashiers, the job gains" in the racetrack "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."
What we learned in terms of repair staff and maintenance people in the province of Quebec when we talked to them yesterday -- with 14,500 slots, 300 people for the whole province. Those are the jobs that were created in terms of servicing the slot machines, moving them from place to place, roving technicians that Mr Sack is talking about. They had no handle or any idea of where jobs were created in the bar or tavern industry.
There is some logic. One of the nice things about slots is that you don't have to person them like you do a crap table or a blackjack table or a poker table. It's not labour intensive. Again, I understand why this makes them more attractive to you. If they're isolated they don't have to be monitored or attended, you can have a change machine, and as long as you control the age of the person going in there, that's it.
I understand the motivation: because of the great money involved in this business. I'm concerned, though, about the fact that you and your industry, in hard times, are being used as patsies by the government, I really am.
The Chair: Thank you, Mr Kormos. If we could move on to the government caucus, we have --
Mr Kormos: Carcass?
The Chair: Did I say "carcass"?
Interjection: Food again. Food is on his mind.
The Chair: Probably. It's Mr Flaherty and Mr Guzzo.
Mr Flaherty: Thank you for your presentation, sir. I was amused at I suppose the chutzpah of the Liberal speaker who said -- I marked it down, it was so amusing -- "I'm trying to get a handle on what you really believe." We've been at these hearings for a week and a half now. We're trying to get a handle on what the Liberal Party really believes, Mr Kennedy and Mr Crozier. At least Mr Kormos has the decency to take a position which is against VLTs; whether his party supports him or not I don't know.
Mr Kormos: I'm being damned by faint praise here. I'm not sure.
Mr Flaherty: We don't know what the Liberals believe. Some days they believe in VLTs, some days they don't. Some days they want them at racetracks, some days they don't. They don't want them in your place some days, in Fort Erie they didn't, maybe here they do. I don't know. It's the position du jour; it's like the soup du jour with the Liberal Party. We don't know what they believe. Well, we'll find out. Maybe Mr Kennedy believes something different. Maybe they need to have a carcass meeting. We don't know.
In terms of job creation I think what my colleague Mr Young raised is really important, that we're talking to a significant extent in the hospitality business about small business, or relatively small business, in the province. We have heard repeatedly around the province -- I remember hearing the exact same figure in Kenora that you used this morning for the hospitality establishment there, that they reduced their staff by 50%, by half, in recent years. What kinds of numbers are we talking about? How many people did you have working?
Mr Schmalz: We had up as high as 50 at one time. We're down to about 22 right now.
Mr Flaherty: What about summer students?
Mr Schmalz: We have one part-time summer student, that's all. We close at maybe 10 o'clock on a Saturday night because there's no traffic out there, where other people in certain market areas are open to 2. Casinos are still going at 4 o'clock in the morning; don't ask me why. This is the problem, we know: It's a business that is controlled by government, by a liquor licence board, what we can do in our establishments. But we have no flexibility to do anything else.
I look down the road: What is the future of our hospitality industry if these are the problems we have right now? Is there going to be one in the future? We've read about hotels in Toronto going for 50% of their market value, if not less. You talk to real estate salesmen. They can't give away a licence today, because the government is still pushing them out. You ask the control board, "Why are you still giving out licences?" "Well, you don't have any problem with bankruptcies." They don't look at it that way. So an operator starts today, he goes out of business, goes down the road and starts up again. He hits the retail sales people; he hits the breweries for not paying their bills. It's a chain reaction. We, the legitimate operator, are suffering from this drastically.
Mr Garry J. Guzzo (Ottawa-Rideau): How much time do I have?
The Chair: About a minute and a half, Mr Guzzo.
Mr Guzzo: Thank you very much. Forget it.
The Chair: We are recessing till 2:20 this afternoon.
The committee recessed from 1243 to 1420.
MALCOLM MACPHAIL
The Chair: Our first presentation is Hiawatha-Dresden racetrack, Mr Malcolm MacPhail. Good afternoon, sir.
Mr Malcolm MacPhail: How are you?
The Chair: Very well. Please sit down and make yourself comfortable. When you're ready you can proceed.
Mr MacPhail: Good afternoon, ladies and gentlemen. My name is Malcolm MacPhail and I'm pleased to be able to appear before you today in regard to Bill 75. I am here as a horseman, representing horsemen from southwestern Ontario. This includes Woodstock, Dresden, London, Sarnia and Windsor. I'm qualified to speak on their behalf because I'm also the president of the Ontario Harness Horsemen's Association, which happens to be the largest horsemen's association in North America, with over 5,000 men and women members. So although I'm here representing a smaller group of southwestern Ontario horsemen, basically all my comments also would be relevant province-wide.
The horse people I represent are not opposed to VLs. In fact, we are quite encouraged that the provincial government recognizes that racetracks have the business expertise, the security and the background in gaming that any VL operation will require. VLs, along with the industry tax relief, should assist the horse people greatly in this province, but it needs to be implemented in a manner that complements racing, rather than impacting negatively upon us.
Although we support the VLs, we have concerns that our parimutuel handle could be impacted upon by them. The racing industry needs to make the government aware that our livelihood -- purses -- is dependent upon a healthy bet. It would be poor thinking on our behalf to accept the idea that VL revenues will make up for our on-track revenue losses. We need VLs to complement racing and add to our revenues, which will restore Ontario harness racing back to our number one status, as we were in the mid-1980s.
Hopefully I can be convincing enough during this consultation process to inform you that the formulas and assumptions being put forward to the industry by the government are not in our best interests at this time. The horsemen are presently working on an industry business plan with OHRIA, the Ontario Horse Racing Industry Association, that will clearly demonstrate my point.
I will conclude my presentation by reiterating that we welcome a well-conceived VL introduction to Ontario racetracks, especially border tracks such as Windsor and Sarnia, just as long as we can make the government aware that there will be impact on parimutuel wagering, which again I add is our only source of wages.
We know our racetracks are competent, safe and secure. It makes great sense that VLs are placed in these controlled gaming environments. The racetracks have the parking, the amenities and have an awareness of the social issues associated with gaming, and in my opinion there are no better businesses capable of handling VLs than raceways.
Thank you. I will be pleased to answer any questions you may have.
The Chair: Thank you, Mr MacPhail. We have approximately five minutes per caucus and Mr Kormos is first.
Mr Kormos: Thank you, sir. We've heard submissions from horse race industry people, all facets of them from across the province: from the Toronto area, from down Fort Erie way, large tracks, smaller tracks, the London fairground track. The government recently reduced its tariff on the betting down to 0.5%, which short of a few American jurisdictions where it may be 0% -- I think there might be a couple where it's 0% -- is among the lowest in North America -- hopefully. You know what happened last time. The jockey club gets some kickbacks from the government and it makes promises about spending it on improvements, but somehow the money gets spent on other things. Jeez, those things happen. You know what I'm talking about.
Mr MacPhail: I know what you're talking about, yes.
Mr Kormos: You bet your boots.
Mr MacPhail: As president of OHHA I get that every day.
Mr Kormos: I'm told there's a proposition for here in Sarnia -- Point Edward more specifically -- a $150-million proposition for a waterfront casino that's been talked about in the community. Are you aware of that?
Mr MacPhail: All I know is what I've read in the newspaper or heard on the radio.
Mr Kormos: I was just told about that. That's the sort of thing, it seems to me, that'll suck the very life out of the raceway in terms of cannibalization.
Mr MacPhail: There's no question about that. In the close proximity to a racetrack like Sarnia's, just down the road and maybe a couple of miles, I think Jim might as well close the doors if that happens.
Mr Kormos: Slots at your racetrack aren't going to solve your problem if that happens.
Mr MacPhail: No, not if that opened like that. I agree with you there.
Mr Kormos: The government is aware, because one of the leverages that the horse race industry has had with governments historically is that it provides high levels of employment. It's a labour-intensive industry and it translates into the surrounding community in terms of supporting farming activity.
Mr MacPhail: Yes.
Mr Kormos: So you've had that leverage, but my concern on the whole issue of the slots is that the government, at the end of the day, really isn't motivated by its interest in charities or its interest in the horse race industry or its interest in treating compulsive gambling. Government needs the cash. That's who's going to get the biggest chunk of this pie.
I suppose my concern -- and Mr Boushy isn't here today. I'm told that around town he's not a big promoter of the slots. Somebody described him as an independent up here in Sarnia and a Tory down in Queen's Park. He's not here today, so we don't know where he's going to stand in promoting it, but I think you in the horse race industry --
Mr Frank Klees (York-Mackenzie): Are you here as an NDP or as an individual?
Mr Kormos: I'm here as a member of the Legislative Assembly who's had the courage to stand up for what I think is right and not to be whipped into shape by a whip's office or a House leader's office on the promise of little perks and trips. That's what I'm here on. The government just sent Jim Brown to Atlanta to take a look at the Olympics. I'm sure that was an attractive trip. He's one of the government backbenchers.
In any event, the racetrack industry should be nervous about what's happening with this bill. Slots at the racetrack ain't going to protect you against the cannibalization of 20,000 slots elsewhere in the province.
Mr MacPhail: That's why we mention the cannibalization and the fact, even on track --
Mr Kormos: Yours is a refreshingly candid submission from your industry.
Mr Tim Hudak (Niagara South): Thank you, Mr MacPhail, for your presentation today. I was curious. A phrase came out that said racetracks should be worried about Bill 75. In fact, we've heard just the opposite. We heard that racetracks should be worried if no action had been taken. In fact, the racing industry was heading downhill fast without the actions of this government, especially when you talk about the casino expansion in Windsor. Some excellent management in Windsor has kept the track alive, but even they now, facing more competition across the border in Michigan, need these sorts of tools to move on.
At the Fort Erie track we were at two days ago, which is my home town, we heard very strongly from them about the big plans that they can have at the racetrack if Bill 75 passes and we proceed with the government's plans for the racing industry. Do you think that by putting VLTs at the tracks you're going to be bringing in new customers to the tracks, maybe bringing in some new racing fans, educating them about the beauty of horse racing and the skill involved?
Mr MacPhail: I think so, yes, definitely.
Mr Hudak: So when you talk about cannibalization, it's not whether the current dollar is going to be split 50-50 between VLTs or horse racing. You're talking about a lot of new customers coming in, the total revenue coming to horse racing.
Mr MacPhail: We're hoping that more come in than walk over from betting the horses to work with the VLs.
Mr Hudak: So some brand-new customers?
Mr MacPhail: Yes, we're hoping there will be more of them than there is of the current gambling public that go to racetracks.
Mr Hudak: Somebody has commented too that the racing fan tends to be greying over time, that they're not bringing in as many new customers. Do you think this will help bring in a new type of racing fan?
Mr MacPhail: I definitely hope so, yes. I've been to Vegas a few times. I'm not a great fan but I've been there, and you do tire of fooling around, so I'm hoping they'll walk out and look at the horses going or look up on the screen and see them on intertrack. That's what we're hoping. You've got to induct them into horse racing some time and once they see the horses going, hopefully they'll put a few bucks down on the horses.
Mr Hudak: Exactly. In fact, if my research is correct, this has worked very well in some other areas, like Hollywood Park in California, and West Virginia and Delaware. At these other racetracks that have tried VLTs mixed with horse racing, have they seen greater attendance in effect, and in some areas the purses have even gone up?
Mr MacPhail: Yes, they have dramatically in Maryland. I know that.
Mr Hudak: Even the dog racing, I think, in Rhode Island is another example.
Mr MacPhail: Is that right?
Mr Hudak: Yes. They have a track that was almost broke. It now has the highest greyhound purses around.
If the purses get raised like that, more customers coming in and generations of new customers, what does that mean for the average man or woman in horse racing? What does it mean for the farmer raising the horses?
Mr MacPhail: It means that in the last five years I've had to go from five brood mares down to one because the money's not there. I tried to negotiate last week with a fellow out of New York who has some horses in Dresden, and if they're not good enough for the Meadowlands, sometimes he sells them around here. I have a mare of his right now at my place, a filly actually, a three-year-old that's just not good enough and I said, "Well, I'll buy her for a brood mare." So if it's looking good enough, I'll get back in and buy another brood mare or two. That's what it means to me. Then I take her somewhere to have her bred and then I raise the foal. Everyone who does that, that's one more or two more horses around the country and two or three more people who are going to get something out of it.
1430
Mr Hudak: So more employment throughout Ontario, not just at the tracks.
Mr MacPhail: Oh, definitely, yes. That's the whole thing. That's the idea of it.
Mr Hudak: Ontario has a very proud history of thoroughbred, but if --
Mr MacPhail: There's no question about that. We've got the best in the world.
Mr Hudak: If we listened to the opponents of video lottery terminals and decided not to implement them in Ontario, if we listened to that and they wanted to keep the status quo -- in fact, I would say, go backwards for horse racing -- what would happen to the horse racing industry, in your opinion, if we did not proceed with this kind of bill?
Mr MacPhail: Our handle's steadily declining, and hopefully the new tax relief and these will bring us back up and put more purse money into the purse pools. That's what we live on, the purse pools. Every dollar that goes through the windows we get part of and that's all we live on.
Mr Hudak: So for these 40,000 people employed in the racing industry in Ontario in agriculture, the actions of this government are important for keeping those jobs and expanding these jobs?
Mr MacPhail: Yes. The action of this government has been good as far as the horse industry's concerned. We appreciate what this government is doing; there's no question about that.
Mr Hudak: Somebody might say that's just the blue bloods of the Ontario Jockey Club.
Mr MacPhail: No, that's not. I know the guys from the jockey club, but I work in Dresden. I was there this morning driving horses. There's only just a little track. I live 12 miles south of Dresden on a farm and I'm not jockey club by any means. Windsor Raceway is closer, and Jim Henderson, and it's us who've got to survive, not necessarily the jockey club. I'm worried about the small tracks and the small people in Ontario. That's where I come from.
Mr Ron Johnson: I want to thank you again for your presentation. Are you familiar at all with some of the other success stories that have happened, not necessarily just in Canada but down south as well, racetracks and the positive effect the installation of VLTs has had? Have you followed much of that at all?
Mr MacPhail: Yes. I'm a director on the executive of HHI, which is Harness Horsemen International. We have two meetings a year and I go to every one of them. Our horsemen in -- what's the name of that track in Maryland?
Interjection: In Delaware?
Mr MacPhail: Delaware. They were so bad off a couple of years ago that the track closed, so a bunch of horsemen got together and bought the track. Then they went to the Legislature and they got the VLs and stuff in it, and now --
Mr Ron Johnson: Now they're very successful.
Mr MacPhail: -- their purses have gone from about $20,000 a week to $75,000 a week. They only run one day a week, and now they're going to run two days a week, or three or four.
Mr Ron Johnson: Yes. I understand it's gone from somewhere around $9,000 up to $75,000 purses.
Mr MacPhail: It's phenomenal.
Mr Ron Johnson: Yes. I guess that's the point --
The Chair: Thank you, Mr Johnson. We must move on.
Mr Ron Johnson: There's no point.
Mr Crozier: Good afternoon, Mr MacPhail. I happen to be one of those who supports what the Ontario Harness Horsemen's Association is doing and I appreciate the fact that you've come here today to let us know how you feel about the introduction of video lottery terminals in the province of Ontario.
I mentioned to you briefly before we started today that my association with the Dresden track goes back quite a way in that the very first horse race I ever went to in my life, I was in charge of balancing the tickets at Leamington Raceway. It was done through Kinsmen and it was done because of the cooperation that we got from folks in Centralia and Dresden. A lot of your Dresden people used to come down and run the parimutuel. It taught me one thing: It's a lot safer being behind the parimutuels than it is out in front of them. In any event, I say "safer" when it comes to my buck.
You've mentioned in the points that you covered here that the government formulas being offered aren't correct and will be harmful to harness racing. Can you just elaborate on that a bit?
Mr MacPhail: The way they've offered -- they're talking about the splits -- they're talking about 10% of the gross take staying at the track and we don't know whether that'll be enough to offset the cannibalization. OHRIA, which is the horsemen's organization of tracks -- thoroughbreds, standardbreds and everything -- is trying to finalize a draft and then work with them. Now, if it's going to be enough, that's fine with us. But if it isn't, they'll work with the government. That's the only thing we're afraid of. An ongoing consultation process is all we're asking for.
Mr Crozier: That's a good point, because to one of the questions I asked one of our presenters earlier on this week or last, "Which would you rather have, the live handle or VLT income?" his answer was quick -- the live handle.
Mr MacPhail: Oh definitely, yes.
Mr Crozier: I appreciate what you're trying to emphasize. I haven't any doubt -- there's absolutely no doubt in my mind -- that VLTs will be coming to raceways. In fact, Mr Flaherty was quoted in the Buffalo News on August 14 saying, "This government is committed to the introduction of VLTs in permanent charitable casinos, and the first place they will go is the racetracks."
Mr Kormos: This government should be committed.
Mr Crozier: There's absolutely no doubt. It was interesting to me that he didn't say they were committed to putting them in bars and licensed establishments, but that's another question.
Mr Ron Johnson: Read the legislation.
Mr Crozier: We're told this is just enabling legislation, that we're going to be given an opportunity for further consultation on that. There's the first time I've heard that it doesn't matter much what happens beyond this. I'm sorry to hear that.
Mr Ron Johnson: That's not what I said and you know it.
Mr Crozier: The legislation doesn't say what you proposed it said.
I understand your position. I appreciate the fact that you came here today and that you will continue to press the government for what should be, if it was to introduce something that will help the horsemen and the raceways in this province.
Mr Kennedy: We had some of your colleagues here throughout the time of the hearings and I asked some of them this question: Would you prefer to have no VLTs in the gambling marketplace, or VLTs and some of them at the racetracks?
Mr MacPhail: We've got to have something to keep bringing people to the racetracks. We've got to have something to bring them. If they can't get VLTs at the racetracks, maybe they're going to go across the border someplace, or to Vegas or the Windsor casino, something like that.
Mr Kennedy: Or their neighbourhood restaurant and bar.
Mr MacPhail: If they're there and not at the racetrack, we're dead.
Mr Kennedy: But if you could keep them away from restaurants and bars and keep them only in casinos, do you still feel you would need them to compete?
Mr MacPhail: Yes, I think we do.
The Chair: Mr MacPhail, thank you very much for your attendance here today.
HIAWATHA HORSE PARK
The Chair: Our next presenter is Hiawatha Horse Park, Mr Jim Henderson, owner. Mr Henderson, welcome. I've never had the opportunity, but we passed your establishment on the way from the airport and it was a mighty fine-looking racetrack.
Mr Jim Henderson: It's fairly new.
I would like at this time to thank the committee for the opportunity to speak before you. We at Hiawatha Horse Park support the introduction of VLTs. We endorse 100% the report by OHRIA and Racetracks Canada that's been tabled on the introduction of the VLTs and working hand in hand with the government on the introduction of the VLTs to the racetracks.
The approach taken by the province, in our opinion, is a responsible one by bringing them to racetracks and charity casinos first. I hope that after a period of time of introduction at racetracks, we are reviewed and further consultation will be taken on what impact is being made on the rest of the industry.
1440
Hiawatha, along with all racetracks, has had controlled parimutuel wagering for a lot of years. We are experienced in the gaming industry. We work hand in hand with our communities, our charities, not only in employment, but in raising funds for local charity organizations. Hiawatha is a new racetrack and has the capability to expand into the VLT market very easily. We are kind of squeezed in the corner here in Sarnia. We don't have a lot of direction to go for patrons. We have Western Fair in Dresden. We're kind of bordered in by water, so our future is in the American market greatly. With the introduction of VLTs and the ability to attract Americans to the Sarnia area, it will increase our handle immensely. I think the same in the Windsor, Fort Erie and border communities; you'll see an increase in handle and not as much cannibalization as at some facilities.
We do know that there will be a cannibalization on the track because of the introduction of VLTs. Some of our patrons will go across and bet the machines instead of playing the VLTs, but also the people in Windsor and the north now within an hour of crossing to Michigan to go to northern Michigan and casinos will stay in this area a little more and we'll attract more people to this area.
The competition has increased, not only in the casinos and the lottery corporations and such; it has also increased in our area with the introduction of intertrack wagering in Michigan. Michigan had no intertrack wagering before this. Last year we were introduced to competition in the States. Tracks like Sports Creek introduced races from 14 different tracks at once and have taken away some of our patrons.
With VLTs, we'll realize some of those people coming back in this direction, but if we don't get VLTs and proceed with new forms of gaming in the industry, racetracks will suffer. If we're not allowed to have them at our facilities and they're off the sites, with the casinos and with the competition from the States, it will affect us if they're not allowed into Ontario at all. You're worried about putting them just in certain locations; we're worried about them not coming. We need something to attract the patrons back to the tracks.
Wagering was not a big concern with us in Michigan before this intertrack. We attracted a lot of the hard core, the gambler from Michigan who gambled all the time, the big bettor, because he wanted to bet into the Toronto pools and bet several different tracks, so he came into Canada and wagered here. Now the larger gambler is staying in Michigan.
Our market has been reduced to such an extent with the introduction of all the gaming that the 2% or 3% patronage base that we had in Ontario has not mainly decreased, but we've shared those people with all the rest of the industry. I conclude that if we don't do something at the racetracks in the different forms of gambling to bring in new patrons and other customers, that will affect the tracks more.
I'm fairly new at this industry. I purchased Hiawatha in 1991, in receivership. It was only a three-year-old facility. We purchased it, we started it up again, we turned it around and we've kept it in the black. It's not been in the black by big numbers or anything -- it's borderline red all the time -- but we keep it in the black. We've got approximately 250 people who work at the track -- part-time, permanent basis, school kids, university kids -- and we're open basically as a seasonal facility for live racing, approximately eight months.
With the VLTs, it should increase into a year-round operation more and there should be more interest in live racing. That's our primary goal: to have live racing and larger purses. Larger purses will increase our horse supply, will increase horse owners, will increase grooms -- more employment, more economic development to our area. If we continue to sit and not do anything with this industry -- it's been, I guess, an old dog's business for so long. It's always been one way, more or less agricultural-society-owned and a few private enterprises. It's always been kind of stagnant and they rely on one thing only.
We found at the racetrack that our attendance has really been up, but our handle has dropped because of the way they've been wagering. I think if they had something else there to play, your wife would come. Today she maybe doesn't like the racing, but she'll play the VLTs. She'll have dinner with you and it'll be more of an evening and an entertainment facility. At the racetracks the VLTs will go hand in hand. I'm glad to be a part of it. We've seen a lot of changes since I've been in it five years. I don't want to go into any other form of operation and I think the VLTs will support the tracks. It'll increase purses and it'll eventually support the tracks.
My submission is very small. Thank you.
Mr Rollins: Mr Henderson, thanks for your presentation. This government has seen fit to cut back the percentage of taxes we receive from the parimutuel by about 6.5%. No doubt that is certainly a plus in helping your operation to put that money back into the horse purses and keep them a little bit larger.
The payback on horse racing for the dollar that the person bets at the window, what percentage of that is returned back to the public?
Mr Henderson: It's going to be dependent on the way we do this after the new legislation and everything takes effect, how all the takes are going to be split. The patron is going to gain with this tax reduction also. We're giving back to the patron in percentage and we're also giving back to the patron in other forms around the facility -- in renovations, remodelling and programming -- other forms at the track. As an industry, we've tried to take an approach where we could entice more people and, for the people who are patrons already at the track, to improve it and enhance it and make it a little bit better for the facilities. A lot of our facilities need to be spruced up and looked after a little bit better. I think it'll all go back to the patrons in different forms.
Mr Rollins: The percentage of that dollar going back to the patron is roughly 80%?
Mr Henderson: Right.
Mr Rollins: And in the VLTs it could be as high as 95%?
Mr Henderson: I'm not sure about the VLTs. We have no figures yet on how the VLT splits or shares are going to be handled at this time.
Mr Rollins: We've been privy to that information. I don't know exactly where it will be set at, but it can be set somewhere in the 85% to 95% range. That could be back. You don't feel that cannibalization of those dollars will affect your racing even though that machine's there? Because when that patron puts that money into that slot machine, it's not as advantageous to you as putting it through the window of the parimutuel.
Mr Henderson: No question. I said that the cannibalization on facility is going to change. But what I'm hoping for is that the Americans and the people who have gone to other facilities and other locations, that dollar will start to come back to us. I think that'll hopefully cover our cannibalization that we lose.
Mr Ron Johnson: I want to thank you as well, Mr Henderson, for your presentation. I've actually been one of the lucky ones. Instead of just driving by and seeing your facility, I was a resident here back in 1988 when it first opened; I believe it was 1988 or 1987. I was there for two years, so I had the opportunity of actually being a patron of the horse park and I can tell you it was bustling back then.
Mr Crozier: Were you playing under age?
Mr Ron Johnson: No. It was bustling back then, as was the industry, and there's certainly been a decline in the last few years. I hope this will help.
You indicated that cannibalization was going to be a factor, but you're not sure how much. Then you talked about -- and this is what I thought was interesting about your comment -- your ability to attract the US market to Ontario, to this facility, as a result of the VLTs. That is exactly what we have heard from other border cities -- we were in Thunder Bay, we've been up to Kenora -- same thing. They're losing people to the United States in terms that their own spending revenue is going to the US and they're unable to attract that American dollar north. I feel that this will help do that and I'm not so sure that you're going to see any cannibalization at all. In fact, you may find that the excess American dollars coming up here are going to far outweigh any cannibalization effect. Anyway, good presentation.
1450
The Chair: Thank you very much, Mr Johnson. I apologize, Mr Klees. Time has elapsed. The opposition?
Mr Kennedy: I just want to focus again on that factor. How much do you attribute some of the recent struggles -- and I appreciate your facility is operating in the black and I congratulate you on that. How much of the struggle, though, that you have reflected in your presentation is due to casino gambling, to some of the increased gambling that's happened in this province in the interim?
Mr Henderson: It's really hard to tell. There's no way of coming up with a formula to say that this many people are still coming out. Our attendance is still very good. We do really well on attendance. Our dining room is still one of the largest. We still have 1,000 people come out for dinner. We've been doing very well on that side. The part that we're worried about is how many dollars are bet. Those people don't have those dollars any longer. They've gambled them at different locations, different facilities, and it's taken away from the side that we get our revenue from for the horsemen, the purse structure and that side of the industry. That has taken a big hit at our track.
Mr Kennedy: So what kind of concerns do you have to the plan to roll these out into restaurants, licensed establishments, that is, and bars? If that happens extensively, how do you see that affecting your business, even if you have some on your site?
Mr Henderson: I don't know on that one. I can't give an answer.
Mr Kennedy: Is it a concern for you?
Mr Henderson: No question. If they were at the tracks, it would be a plus, and if they weren't at the rest of the facilities -- I don't know if we're going to be that fortunate to say that they can't go anywhere else but at racetracks. If we could say that --
Mr Kennedy: That would be your preferred position?
Mr Henderson: No question.
Mr Kennedy: In terms of the impact overall -- I appreciate you can't isolate it, you couldn't certainly put a dollar figure on it, but if you were to say to the government, "Simply focus on the gambling that we have, the racetracks, the casinos, let them prosper, don't introduce more forms of gambling until we have some health in terms of the economic spinoffs from that," would you say that, if you had the choice?
Mr Henderson: No, I don't think so, because I think what's happened, a lot of the patrons have gone. We've lost them because they want that continual play and they've gone to the casino and they've gone to Michigan to play at the Michigan casinos and intertrack in the States. If we didn't bring VLTs and they didn't have anything else come out, I don't think the racetracks will increase. I think the only way to increase them now is to bring a new form and make it an entertainment facility, make it a more enhanced facility at the tracks. I think we'd be better off in that turn than we would not having them at all.
Mr Kennedy: Do you have a projection on how many VLT machines, how many electronic slot machines, you would need to be able to have some viability? What would be the threshold for attractiveness in terms of -- you say you have some of the crowds but you want to get more of the money into the different forms of gambling that would benefit the facility. Is that correct?
Mr Henderson: Correct. I'd like to get more of the money to stay in the facility.
Mr Kennedy: The threshold for you is 10% of the take. Have there been any projections done by yourself in terms of the number of machines?
Mr Henderson: We've worked with the figures, we've worked with the numbers. If you go out to the track -- I'd welcome you all to come out and have a look at it this evening; it's live racing. We've got a large area in the top. We figured that we could hold 300 machines in that area. We have a huge area in the bottom. There's a countless amount of -- it's as large as Windsor casino. It's a big facility. We could take as many machines as we could get in there, but I don't know what we can handle according to per capita. We're striving to bring them from across the border. I think with Detroit being so close and other large cities, we'll bring a lot of attendance into the city. I don't want to sour the people and have 50 machines come into the site or 100 machines and we get 2,000 people to come and play them. I think that would hinder us even more. It'll make people want to stay away. I think we need a good amount.
Mr Kennedy: So as far as you're concerned, you need a certain threshold. Is it fair to say 300 was a rough threshold for you?
Mr Henderson: That's what we were talking -- 300, 400 machines.
Mr Kennedy: But you do understand that the minister has talked about something like 2,000 machines committed to all the racetracks in the province, with the larger racetracks getting them first. Does that raise concern for you?
Mr Henderson: No question. I think the smaller tracks, especially on the borders, we have to voice our opinions and we have great concerns that they might overlook us and say, "These are the big boys, the big players," and we're the small players in the field, and pass us by. We don't want to be in that situation. We need the dollars coming in the same as the larger facilities.
Mr Kormos: I appreciate your comments and you've been quite candid, but I'm interested in this business of being competitive. What's the closest Stateside gambling location?
Mr Henderson: Mount Pleasant, Flint, Sports Creek, they're all within 45 minutes, an hour.
Mr Kormos: Because, you see, down in Fort Erie, the Fort Erie track, a big-bucks track, said much the same thing as you did -- down in volume of amount bet, down in attendance -- yet the closest gambling facility to them is, gosh, a good 150 miles down the I-90 between Rochester and Albany, a native reserve, because New York state is not a gaming jurisdiction yet. Then you've got Windsor, which is the entire other end of Highway 3 from Fort Erie. Do you perceive that these US side gaming opportunities are preventing people from coming to the racetrack?
Mr Henderson: No question. We've seen a drop in attendance since Sports Creek's been open. I've gone to Sports Creek, I've gone to Hazel Park. Hazel Park's 40 minutes from our track.
Mr Kormos: I've not been to Hazel Park. Tell me what's there.
Mr Henderson: A horse racing facility with intertrack wagering. The dollars are staying in the States now and not coming across.
Mr Kormos: These are horse tracks.
Mr Henderson: No question.
Mr Kormos: Because I believe that Michigan as well hasn't yet become a wide-open gaming jurisdiction.
Mr Henderson: It's opened up intertrack wagering in the States immensely now.
Mr Kormos: But so have we. Right? I mean, there are more opportunities to bet and more places to bet in Ontario now than there ever have been before. You don't have to drive to the track any more, you don't got to pay -- albeit a modest, the admission fee is peanuts, it really is at the end of the day both for you and the bettor. But there have never been more places for the racetrack bettor in Ontario to bet than there are now in the province of Ontario.
Mr Henderson: But we already had a large track base in Ontario. We have a lot of tracks in Ontario. Michigan had a fewer amount of tracks with a greater population.
Mr Kormos: Fair enough.
Mr Henderson: Now we have there available to bet 14 racetracks at one facility.
Mr Kormos: I'm concerned, quite frankly, about the whole failure of American travel in Canada, especially -- I appreciate when you're betting, it doesn't matter whether you're betting a buck or $1.40; a percentage return is still a percentage return. But when it comes to meals, when it comes to buying other things, Americans are getting a 40% bonus by and large when they come here. So I'm amazed why that hasn't been as much of a draw as before.
In the last gubernatorial campaign New York stated a Republican, a Bob Dole-Newt Gingrich type of Republican, very similar -- that's where this government got all its style from, down in New Jersey and places like that. So New York state's going to become a gaming jurisdiction very soon. One suspects that Detroit's going to become a gaming jurisdiction. If you say you need slots to compete, what's going to happen when Detroit and other Michigan racetracks respond in turn to have slots plus crap games? Then what is your next position going to be, because once again you're going to be uncompetitive, aren't you? What's next?
Mr Henderson: I have no idea. I have no answer for that.
Mr Kormos: I'm not saying I do. I'm just saying the Americans are going to respond in kind. They responded by building more racetracks. They wanted to keep more of their market. We understand that. We'd like some of it back. You say it's going to happen by putting in slot machines, but at the same time, you've got a proposal here in Point Edward for a $150-million casino development over here on the harbourfront.
Mr Henderson: Correct.
Mr Kormos: That's going to draw a lot of money, it's going to make a lot of money for the government, and the fellow advocating it, who apparently has really been leaning hard on these guys at Queen's Park, is going to be able to say a whole lot about the number of jobs it's going to create and the number of tourists it's going to attract. How does that cannibalize? It does.
Mr Henderson: No question, but hopefully, if that does occur, possibly we can put offtrack betting in the facility or we can gain back ground on other revenue, but we're going to have to work on it.
Mr Kormos: Because OTB hasn't worked for the racetracks in Ontario so far.
Mr Henderson: OTB, when it was in place, offtrack betting, we've done really well on the OT on network.
Mr Kormos: But Fort Erie's down in the amount bet. You're down in the amount bet. So all these new venues, that's what I'm saying, all these offtrack betting locations -- I don't know how many there are in the province -- haven't increased the amount bet. Hotels and restaurants say they're down too. Restaurants aren't selling as much food, aren't selling as much beverage. We heard that here today; we heard it in every other city we were in. The hotel-motel association, not selling as much food, not selling as much --
The Chair: Thank you, Mr Kormos. Our time allotted has completed. Mr Henderson, I'd like to thank you very much for your attendance today and your valuable input to the committee.
Mr Henderson: Thank you very much.
1500
Mr Klees: Mr Chair, while the other people are coming forward, I have a clarification that I believe is important for the committee.
The Chair: Yes? Do you want to make it now?
Mr Klees: Yes, if I could, please. It's relating to a comment made by Mr Kennedy, and I'd like to just clarify it for the record. He indicated that the minister had made the statement that these VLTs would be introduced first to large tracks and then to smaller tracks. That is not the case. The minister has never made that statement.
Second, I think Mr Kennedy said that there were some 2,000 VLTs that would be allocated to racetracks. That also is not factual. That statement has never been made by the ministry or anyone in the ministry. I think it's important just to clarify the record.
The Chair: Is there any comment on that?
Mr Kormos: Please, Chair, if I may comment on that.
The Chair: One minute.
Mr Kormos: One minute? How long did Mr Klees have?
The Chair: One minute.
Mr Kormos: Okay, I'll do it in one minute. The problem is that the minister says one thing one time and another thing the other. It was Jim Flaherty, the parliamentary assistant, who asserted so emphatically that during Prohibition more people died of alcoholism than in periods without Prohibition, a completely wacko statement, one which, although he's formally been requested to provide authority for it, here he is, he's the representative of the ministry that monitors the sale and distribution of alcohol, he hasn't come clean.
So I appreciate Mr Klees trying to do damage control, but the fact is that it's too late, because these guys are all over the place. These guys change their line from day to day, they do spin-doctoring. They've got high-priced little mandarins at Queen's Park monitoring these hearings, reading the transcripts and trying to clean up the messes that these guys leave behind.
The Chair: Thank you very much, Mr Kormos.
GAMING SERVICES AND SUPPORT CORP
The Chair: Our next submission is to be made by Gaming Services and Support Corp, Craig Hurst, president. Welcome, sir. We have received your written submission. I'd request that you proceed.
Mr Craig Hurst: My name is Craig Hurst, and I am here today in my capacity as the president of Gaming Services and Support Corp, a company that provides, as its name implies, services and supports to charities and non-profit organizations engaged in charitable gaming activities here in Ontario.
I am also a founding director of the Ontario Charitable Gaming Coalition, now known as Charities First Ontario; the founding president of the Break Open Ticket Program Management Alliance, the association of registered gaming equipment and service suppliers who provide products and management services to not-for-profit groups raising funds through the sale of break-open tickets; and the founding secretary of the Charitable Gaming Federation of Ontario, the organization of charity and commercial participants in the province's charitable gaming industry. You have previously heard presentations from all of these groups.
I am considered to be an expert in the area of charitable gaming and I bring a balanced perspective to the issues at hand, having been involved in the industry as a voluntary participant acting on behalf of numerous charities upon whose boards I sat and acting on behalf of a major charity here in the province before becoming a commercial participant. I have also owned and operated a commercial gaming service and supply company in Alberta and have direct experience with the gaming environment in that province. Indeed, I was called upon as a witness to the legislative review committee on lotteries in the province of Alberta and presented on two occasions, once in Edmonton and once in Calgary, to speak to their industry on the effects of video lottery terminals in that province.
Bill 75 has many strengths and weaknesses, and I would like to bring some of those to your attention. The Alcohol and Gaming Regulation and Public Protection Act, 1996, is clearly a step in the right direction in terms of efficiency and consistency. It will strengthen the functions of the existing Liquor Licence Board of Ontario and the Ontario Gaming Control Commission through their merger. The selection of a common chair to head these agencies was a wise choice on the part of the government, as the merging will be smoother as a result of the pre-existing impact of Mr Clare Lewis's management techniques upon them.
One concern that is eliminated as a result of this common chairmanship is the concern around which area of responsibility will receive the most attention. In other jurisdictions where the same merging has taken place, liquor issues have dominated gaming, as the more established and traditional liquor boards or commissions have had larger infrastructures, more senior staffing and larger budgets under the prior administrations and therefore have been the stronger of the partners in the new structures.
The gaming industry in Ontario should take comfort in the fact that the Alcohol and Gaming Commission of Ontario will presumably be chaired by a person who has a longer involvement in gaming administration and regulation than in liquor.
I raise one question, though, as I hear so many deputations from our colleagues in the horse racing industry. Perhaps one of the things this bill should consider is the merging of the Ontario Racing Commission with the other two as well.
It is hoped the new commission will be more effective and adequately resourced, particularly in the areas of registration and enforcement. The charitable gaming industry in Ontario has grown significantly over the last six years, especially since the introduction of the Gaming Control Act, 1992, but the Gaming Control Commission has never been able to catch up.
In 1993, tens of thousands of new registrations for companies and individuals were applied for, and the staffing component in place to deal with this surge was apparently designed only to address the needs of an established registration process. Applications took months to process while the applicant was required to wait in limbo, not being able to function until approval and being denied the income and opportunity of participating in the charitable gaming industry. The big losers as a result of these delays were the charities and non-profit organizations which were denied the net revenues of the activities the potential registrants were to engage in on the charities' behalf. Delays and lost opportunities cost the charities of Ontario millions of dollars over the last few years.
It is hoped that the merging of the LLBO and OGCC would enable the new commission to enhance enforcement of the respective regulations. On Monday we heard from liquor board employees who stated that the board is currently understaffed in terms of inspectors and that the introduction of video lottery terminals would be impossible to oversee without additional staffing. These concerns mirror those of us involved in charitable gaming. As the charitable gaming industry exploded, enforcement of the regulations lagged far behind. Reported infractions became too numerous to investigate, allowing the violators to carry on unchecked. This caused much hardship in the industry, as those charities and commercial operators living to the letter of the law paid severely for the gains of those who were not.
I encourage you to ensure that the new commission is adequately resourced in order to manage the registration and enforcement of the liquor and charitable gaming industries. The integrity of the government and these sectors is dependent upon this. I for one support tougher standards, and I know my industry colleagues would agree.
I support part I, section 1 of the bill as it details the appeal of a commission decision in Divisional Court on questions of law only. This process should not be removed from the final bill, as it makes the commission more accountable for its decisions and presumably less biased.
Part I, section 14 is acceptable, but I urge you to refer back to last Wednesday's presentation by Mr Ivan Sack, the editor of Canadian Casino News. He most articulately described to you an unfair licence fee structure that exists in this province, as compared with the states of New Jersey and Nevada in particular. Without question, higher fee structures have discouraged many of the undesirable parties from entering into the gaming industry. Unfortunately, it has also discouraged many desirable parties, particularly small, Ontario-owned business entities that have the ability to create thousands of new jobs in this province. The licence fee structure should be fair to all parties -- government, charitable and private sector alike -- and not be discouraging investment in this vital, made-in-Ontario industry.
In Bill 75, part II, section 6, the amendments to the Ontario Lottery Corporation Act add the definitions required to allow the Ontario Lottery Corp to operate video lottery terminals. This is something the charitable gaming industry conditionally supports. We refer you to reports that have been conducted by the Angus Reid corporation that indicate that Canadians are 54% against video lottery terminals, while only 29% are in favour. One wonders about the political equities that can be gained by such an introduction.
1510
You heard presentation this past Monday from Terry Sisson, the chairman of the Charitable Gaming Federation of Ontario, stating that the federation supports the introduction of video lottery terminals in racetracks, casinos and bingo halls, but that further expansion into other venues such as liquor-licensed establishments should not take place until such time as a long-term strategic plan for the Ontario gaming industry is developed, inclusive of the issues of the horse racing, government gaming, charitable gaming and native gaming sectors. As the drafter of the Charitable Gaming Federation's position, I strongly support it. It enables the government to proceed with video lottery terminals as a much-needed source of revenue before the very negative social and fiscal impacts of having VLTs in non-gaming environments are felt. It will allow the existing gaming market to adjust to and prepare for further VLT development.
One other aspect of the bill that I think needs to be brought to our attention and certainly is an issue that the gaming industry is concerned about is that the bill allows for the further operation of charitable gaming activities by the Ontario Lottery Corp. This decision too needs to be factored into a long-term strategic plan. Many of us are not supportive of that ability on the part of the Ontario Lottery Corp.
This province is host to one of the largest and most diversified gaming markets in the world. It has benefited the province substantially in terms of economic growth and the improvement of quality of life of our people, especially through its contribution to charities and non-profit organizations in every community.
You've been told by various presenters representing such organizations as the Ontario Video Gaming Corp and the Ontario Hotel and Motel Association that VLTs have not had an impact on existing gaming markets that the statistics, especially Alberta's, support.
You were shown a graph that indicates a decrease in break-open ticket sales in Alberta from $250 million to $100 million prior to the introduction of video lottery terminals and an increase in revenue for charity casinos from $100 million to $250 million during the same period, 1990 and 1991. The graph was inaccurate. The facts are that break-open or pull-ticket sales during 1990 in Alberta were a mere $106 million, not a quarter of a billion dollars, and fell to $103 million in 1991 and have subsequently fallen to $61 million since the introduction of video lottery terminals in 1992-93. The loss to charities has been almost $10 million in net profits, or 43%, over that period of time. One might also bear in mind that Alberta had no third-party or convenience store marketing of break-open tickets, and it is clearly anticipated that this issue will cause a greater erosion of net profits to charities from this activity.
It is also important to note that this province has no specific data on the total size of the charitable gaming industry, as indicated by International Gaming and Wagering Business magazine and indeed by our own gaming commission.
Gross revenues for charity casinos went from $192 million in 1990, not $100 million, to $224 million in 1991, $243 million in 1992, and peaked at $295 million in 1993-94. These figures for charity casinos would indicate an increasing benefit to charities of 53%, but it hasn't happened. Largely due to the introduction of video lottery terminals, charity casino net profits have remained relatively flat, increasing from $18.7 million in 1990 to a high of $22.8 million in 1993-94, an increase of only 22%. Net profits for charity casinos in 1994-95 fell to $19.1 million, barely $400,000 more than the 1990 net revenue, with an almost $97-million increase in gross sales.
Annual bingo net profits to charities have declined by $1.4 million per annum during the same period, but most of that decline has taken place since the introduction of video lottery terminals in 1992-93. To say that VLTs have not had a direct negative impact on charitable gaming, to use the words of Mr Marshall Pollock, is being "less than honest with the facts," if I may quote from his statement to you last Wednesday. Charities in Alberta and the other provinces have indeed suffered since video lottery terminals came in.
Charitable organizations and their volunteers have had to work doubly hard to maintain status quo funding in charitable gaming activities in Alberta at a time when Ontario's charitable gaming industry has doubled both in gross volume and net profits. Don't allow this to happen here.
The government has indicated to the public that $180 million of VLT profits will flow to the charitable sector. This is a noble statement, but no outline or model of how these moneys will flow or for which organizations they will be eligible has been articulated. If this amount is to represent 10% of video lottery terminal values, the legislation should state that.
The definition of "charity" needs to be included in this legislation, and I support the position of Charities First Ontario on this issue. Charitable gaming has allowed charities and non-profit organizations to be entrepreneurial and self-supporting in their revenue-generating activities. A convoluted grant application process will take away that attribute and will likely see more money flow to the organizations that have good grant application writers and not necessarily the greatest need or benefit to the needs of the community.
VLTs will without question cause communities to suffer in some ways unless a long-term strategic plan for gaming in Ontario is developed.
In closing, I would like to remind you of the 15,000 to 20,000 illegal VLTs that are in place in this province. According to Sergeant Larry Moodie of the Ontario Provincial Police, many of them are in the very same bars and restaurants that the legal machines are supposed to be going into. The Ontario Hotel and Motel Association and its members have admitted that this is so. As a province, we should be careful in entrusting this group to carry on the legalized form of this activity on our behalf.
I thank you for your time.
The Vice-Chair (Mr Ron Johnson): Thank you, Mr Hurst, for your presentation. We're going to go questions now, starting with the Liberal caucus, a minute and a half per caucus.
Mr Crozier: Thank you for your presentation. There's a lot of information in there that we've heard, as you say, from other organizations, but having it all put together is helpful. I want to ask you, because of your experience in the charitable gaming industry, what effect it might have on charities when they have to go to the government and get this new enhanced $180 million of funds that will be available.
Mr Hurst: I was the volunteer chairman of the trillium committee for the Canadian Mental Health Association, Ontario division, office in the late 1980s. As such, I had to make the applications on behalf of that organization to the Ontario Trillium Foundation. It was a very onerous and difficult process. It had matched funding requirements. It required a tremendous amount of academia application in the process of writing grant proposals, and indeed it created an onerous amount of accountability after the fact for maintaining, supporting and legitimizing the grants that had been given. Indeed, I would say that the work required to develop, maintain and fulfil the long-term obligations of a Trillium grant was much greater in terms of the dollars and cents and the number of hours required than is the charitable gaming industry. I think that if we move in a further direction towards that type of thing, many charities and non-profit organizations will lose out.
Mr Kormos: Thank you, Mr Hurst. When all of us came in here today, there's a little display set up in the foyer of the hotel, and when I saw those people wearing those Mickey Mouse ears, I thought it was a political statement about the quality of planning that the government had committed to this whole endeavour, because it really is pretty Mickey Mouse. We haven't seen a single bit of research by -- you name it -- Ernst and Young, Coopers and Lybrand, any number of firms that have experience in gaming. We haven't seen a single bit of research to indicate what would be the anticipated gross amount bet, what would be the structure of the payouts for charities, what would be the net revenues for hosts, or locations in which the machines are placed, what would be the net revenues for the owners of the machines. Not a single study, not a single bit of research. Everything has just been guesstimates, not even akin to estimates.
The number of $180 million is of course tossed about as the amount that will be given to charities. Nobody's telling anybody who, when, where, why and how. We're still unclear as to whether it's $180 million being 10% of the net revenues or 10% of the gross. This really is a Mickey Mouse operation.
1520
Mr Klees: Thank you, Mr Hurst, for your presentation; some very thoughtful recommendations. Contrary to what Mr Kormos is suggesting, the reason we're here conducting these meetings is to get the kind of input you're presenting to us. We wouldn't be here if we weren't interested in your input, if we weren't interested in the input from other presenters. In fact, the comments that were made by Mr Sisson in terms of the rollout of VLTs into the province -- he's actually gone further than we have, as you know, because we made the statement that we feel they should initially be introduced, in the interest of security and really understanding what the impact is in the community, first of all to racetracks and charitable gaming halls. Then we would do an assessment, then we would do a careful analysis before we considered introducing them to the rest of the licensed establishments. We appreciate the things you've brought forward to us. There will be further consultation. We look forward to working with you, and your member organizations as well, in working out some of those details.
The Vice-Chair: Mr Hurst, on behalf of the committee I want to thank you for your presentation.
KILROY'Z ON KILDARE
The Vice-Chair: The next presenter will be Mr Jack Barker, owner of Kilroy'z on Kildare bar. Good afternoon, sir.
Mr Jack Barker: I own a small bar in Windsor, and since the introduction of Casino Windsor I've seen my revenue going down 40% to 50%. To offset this we need something, which is VLTs. Premier Harris, when he got elected, said he would help compensate any business that got hurt by Casino Windsor. For our compensation we need VLTs, plain and simple.
Night after night I see my customers come in, maybe have one, two drinks. "Let's go to the casino." What have I got to offer? We've cut our food prices to the bone; I never raised my liquor prices at all. It's just that the casino's there, all the lights and the glitter. I have a pool table, shuffleboard, darts. It's not that any more. People like to gamble.
If we don't get the VLTs, we're doomed; it's simple. I had eight employees; now I've got three. We keep talking and talking, "We're going to get this. We're going to try and get this," and now there's so much negative going out about the VLTs. Then they talk about the machines that are the grey area, the illegal machines. We're just being pounded. So I'm in support of the VLTs. This is all I'm here for, just to tell you I am. That's it.
Mr Kormos: Thank you, sir. I appreciate what you say because it's what the Ontario Restaurant Association said approximately a year ago when it assessed the impact of the casino on local businesses. This was, as you'll recall, the concern about the casino back in 1993. There were strong competing interests. I was at those hearings in Windsor. They were sitting in Windsor along with other places. I'm not suggesting you were one of the people who came forward, but a whole bunch of your colleagues, including people who purported to represent you -- to wit, the chambers of commerce, those sorts of people -- were saying, "By God, Windsor needs a casino because downtown businesses, restaurants, hotels, taverns need the shot in the arm." Do you remember that at all?
Mr Barker: Yes, the downtown Windsor hotel association.
Mr Kormos: That's right, the hotel-motel association.
Mr Barker: I'm 10 minutes away. I could be 500 miles away. It doesn't matter.
Mr Kormos: They were plugging it like mad. The restaurant association was plugging it, and then the restaurant association, as I say, approximately a year ago released a study confirming exactly what you say. Again, I understand why you want the slots. They're fast cash; I understand that.
You heard what I said earlier, and that is that I am concerned now, as I was concerned in 1993, about the lack of a real understanding of the impact. I think you have to wonder about, if everybody has a slot, how much capacity there is for the community to keep on feeding those coins in there.
How has Dwight Duncan responded to this? I notice you carbon-copied him.
Mr Barker: You see how Dwight Duncan now is? He's now running for the party leadership and his big platform is against the VLTs.
Mr Klees: That's now. What was it before?
Mr Kormos: No, no. That's fair enough.
Mr Barker: I took one of my grey area machines and plunked it on his desk and said, "Here, we're going to see one of those."
Mr Klees: His position next week might be different again.
Mr Kormos: Mind you, I don't know. Dwight Duncan might want to take a card from my books. I ran for leadership opposing VLTs and I lost, so he might want to reconsider.
Mr Barker: We just need a level playing field.
Mr Young: There were other reasons, Peter.
Mr Kormos: Yes, the other guys got more votes.
I understand what you're saying, but you know what my position is. You know what it was on casinos and you know what it is on the slots. I don't think they're the answer. The government hasn't produced any documentation. That's what failed us with the Windsor casino introduction. We didn't have any hard data. We had wannabes and wishes -- "I hope it's going to be."
Mr Barker: Yes, but the casino is there now. The steel riggings are all going up, so we know it's there, it's permanent.
Mr Kormos: There are going to be 50 more across the province, these so-called charity ones.
Mr Barker: Last week three bars just closed down in Windsor. One had been in business 47 years. You can talk to any of them and they say business is down 30% to 40%.
Mr Kormos: The Windsor Raceway is going to be here later today saying it wants slots too -- it's going to be making its submission later -- because it needs a piece of the action. They feel they've been cannibalized by the casino and other gaming. So you're going to be competing with the Windsor Raceway in some respects. I'm not satisfied that it's the answer, but God bless.
Mr Klees: Mr Barker, thank you for your presentation. I'd like to just take a minute because of what you said about Mr Duncan and his position. I think it's important we get some clarification as to who stands where on this issue and what we are trying to achieve. I think the government's position is quite clear. I tried to clarify that a little bit earlier today.
What we also know is where Mr Kormos stands. We have to respect the fact that Mr Kormos, from the beginning, has been very consistent on his position. He is categorically opposed to VLTs in any form anywhere. Unfortunately, we don't know what his party stands for, and time will tell as to where his party ends up on this issue.
What continues to be a bit of a confusion for us, though, is where the Liberal Party stands.
Mr Crozier: Careful. I've got an answer for you.
Mr Kormos: We knew where Mike Harris stood in 1993.
Mr Klees: That's what we are trying to get a handle on. My understanding is that the Liberal position is that they are prepared to support VLTs in racetracks and charity gaming halls; they are not prepared to entertain supporting extending VLTs to the small business people in the province who are experiencing tremendous stress, as you have expressed to us here. By the way, we've heard for the last two weeks consistently, from the hospitality industry, from the tourism industry, that you people are having a very difficult time competing with cross-border options that people have, competing with the existing circumstances of the economy. You're going deeper and deeper into debt; there's a loss of jobs. I cannot understand, and I'm prepared to give some of our time to Mr Crozier to help explain to us why they're prepared to --
Mr Crozier: You're digging the hole deeper.
Mr Klees: -- support VLTs for racetracks and charitable gaming halls, but they're not prepared to support the small business sector in this province that needs our help more than any other sector. Mr Crozier, would you confirm your position for us?
The Vice-Chair: I'm sorry, Mr Klees, but I have Mr Young on the list as well. Mr Young, you've got two minutes.
1530
Mr Young: I'd like to hear Mr Crozier's answer as well, because some people who work in the hotel and motel industry told me that prior to the last election the Liberal Party promised them that they would agree to taking VLTs in hotels and motels and restaurants. So I want to hear the clarification too. Please go ahead.
Mr Crozier: That person from the hotel-motel industry is here. I would have thought that he would have told you that kind of off the record; I'm surprised at that.
Mr Young: I didn't say that person, Mr Crozier; people in that industry.
Mr Crozier: But the important thing was that it wasn't in our policy.
I'm glad you came here, Mr Barker, because you've heard these guys chanting over there about how they don't know what the Liberal position will be next week. I'll bet you dollars to doughnuts that you remember last year, during the election campaign, when Mr Harris said he didn't want the government to receive profits from its Windsor casinos.
Mr Kormos: Mike Harris?
Mr Crozier: He even threatened to shut the successful tourist attraction down. Do you remember that? He changed the next day.
Mr Kormos: He might have just lied.
Mr Crozier: You know, Mr Harris and Mr Eves said in Hansard, in the House, in 1993 --
Mr Hudak: What do you say, Bruce?
Mr Crozier: I'm getting to that: "As Donald Trump says, `Gaming doesn't come cheap.' I have to agree with a lot of the critics on that. It brings crime, it brings prostitution, it brings a lot of things that maybe areas didn't have before. There is a big cost to pay."
Mr Kormos: Who said that?
Mr Crozier: That was said by Harris. He also said in 1993, "Every officer and every policing dollar that goes towards casino crime or that kind of criminal activity is a dollar that's taken away from fighting the crime that currently exists on our streets."
The finance minister said, "VLTs could create a lot of social problems in society." This was when he was finance minister. "Lots of other provinces have introduced VLTs and lots of other provinces have had social problems as a result of VLTs." He said that in the Toronto Sun, March 24, 1996.
Sir, I have 58 pages of Hansard.
Mr Hudak: Liberal positions?
Mr Crozier: No, they're all Eves and Harris quotes, and there is not one of them that supports VLTs. They all damn that kind of thing.
I wanted to add, after Mr Harris said in Windsor -- he even threatened to close down the casino till his spin people got to him that night and said, "My God, Mike, you're throwing the campaign down the drain."
Mr Kormos: They must have slapped him six ways to Sunday.
Mr Klees: He might lose all those seats down in Windsor. He might lose all those seats in Essex county. That was the big threat, Bruce.
Mr Crozier: It damn well shows you what happened, didn't it?
Mr Klees: I tell you, we had a lot to lose on that one.
Mr Crozier: For somebody who's lost twice in Essex county, I wouldn't bring up Essex county.
You see, folks, I try to be a reasonable person, but when they start to goad me I'm ready. You don't fool around with the old man.
Mike Harris also said, "I don't want $1 million a day in the province of Ontario. I don't want the money." This was about gambling. "I don't want the Ontario government to have it." We know how much he's changed, hasn't he?
Mr Klees: Bruce, you're going to run out of time. Give us your position.
Mr Crozier: Here's my position, and this was in a press report. He has led you to believe that I don't support VLTs in restaurants and bars like yours. I have said, and I believe this to be the case, that this form of gambling is particularly addictive, especially for the young and the less well off. Yet the Tories are pushing full steam ahead to put slot machines in neighbourhood bars and restaurants, but here's the hooker, because they don't --
Mr Hudak: The what?
Mr Crozier: They don't listen or read. Okay?
Mr Young: We never said that.
Mr Crozier: Well, you don't want to bring up hookers either. Here's the hook, because these guys don't think when they open their mouths half the time.
Mr Klees: Now, that's not nice.
Mr Crozier: Here's what I went on to say: "without proper consultation with the communities affected." You see, they didn't listen to that. Okay?
Mr Klees: That's incorrect.
Mr Crozier: I'm quoted as saying that. I have come to the conclusion, and I said this in my opening statement to the minister -- as a matter of fact, it was one of the weakest statements I've ever heard a minister make in that he didn't have answers to questions. He didn't have any idea --
The Vice-Chair: Mr Crozier, I'm sorry. We have run out of time.
Mr Barker, on behalf of the committee, I'd like to thank you for your presentation.
Mr Young: Mr Chairman, on a point of order: I'd like to ask for unanimous consent from the committee for Mr Crozier to take another minute to complete his position for the committee.
Mr Klees: Agreed.
The Vice-Chair: Unanimous consent?
Mr Crozier: That's not a point of order.
Mr Kormos: Come on, Chair.
Mr Crozier: He doesn't want to let me --
The Vice-Chair: He's asking for unanimous consent. I understand it's not a point of order, but he is asking for unanimous consent for one minute.
Mr Kormos: Speaking to that, Chair, I did want to introduce -- by God, they rushed out after that last presenter -- Liz McGregor, who's a senior staff person for the minister who travels with these hearings, and a communications person who travels with these hearings. They had to rush out after that particular submitter --
The Vice-Chair: Mr Kormos, do we have unanimous consent to give Mr Crozier one minute to wrap up his remarks?
Mr Kormos: Yes, please.
Mr Crozier: So what I've said is, and you will see this -- I don't know when you want us to put amendments on the table. I think it's a little too early because the government hasn't put any amendments up. You know why they haven't put amendments up, folks? Because they're not going to make any changes in spite of what you've brought to the table and the other presenters have --
Mr Kormos: I think they will, Bruce.
Interjection: You want to bet on that, Bruce?
Mr Crozier: The position I'm taking back is that before slot machines are introduced to neighbourhood restaurants and bars, there has to be proper consultation with the communities affected. We're going to move a resolution to that effect, and I'll bet you 10 to one it's turned down.
Mr Klees: That's our position, Mr Crozier.
The Vice-Chair: Thank you very much, Mr Crozier.
OAK'S INN
The Vice-Chair: The next presenter would be Mike Childs, general manager of Oak's Inn (Wallaceburg) Inc. Good afternoon, sir.
Mr Mike Childs: Good afternoon.
The Vice-Chair: You're entering a bit of a political frenzy, it seems, but we're going to hear you out.
Mr Kormos: No, no. We were just pointing out that Mike Harris and Ernie Eves lied several times on this issue and will probably continue to do so.
The Vice-Chair: He goes on like that. Mr Childs, you'll have 20 minutes for --
Mr Kormos: Mike Harris and Ernie Eves do go on like that. They lie like rugs.
Mr Young: That's unparliamentary.
Mr Kormos: Of course, but it's true.
The Vice-Chair: Mr Kormos, please.
Mr Kormos: Well, it's true. The record's there.
The Vice-Chair: Mr Childs, you'll have 20 minutes for your remarks and you may wish to leave some time for questions from members at the end of that. You can begin any time.
Mr Childs: Mr Chairman, committee members, thank you for the opportunity of speaking today. I'm Mike Childs from the Oak's Inn in Wallaceburg. We run a family-run operation, a full-service motel, restaurant, lounge and motel rooms.
What I'm here for today is that I'm very much in support of Bill 75 as it pertains to VLTs. Our industry is in serious trouble. Sales are down 20% across the industry. We have lost about 100,000 jobs, with 1,400 bankruptcies since 1992 in our industry.
In my business the average consumption per person has dropped. We understand the reason behind this and we understand that that philosophy or that style of drinking and a reduction in sales is here to stay. We are supportive of that concept; we do not believe in overconsumption of alcohol. But at the same time, that's what part of our sales are driven from.
Not only is the average consumption down; the length of stay is also down. We've gone to other forms of activity in our lounge to try to prolong their stay, such as large-screen TVs, darts, pool, other things that can entertain the patrons while they are there and increase the duration of their stay. As well, in our lounge operation we've seen an ongoing increase in food sales. So we are doing things ourselves to try to promote an increase in sales in that area.
1540
The Minister of Finance, in his budget on May 8, said the government was going to allow VLTs to help our industry. Specifically, he said, "We believe that VLTs, if implemented within tight regulatory controls and in limited-access environments, can meet a legitimate entertainment demand and provide a significant stimulus to the hospitality industry." Minister Eves also referred to the 15,000 illegal machines that are out there.
It is important for VLTs for the hospitality industry to get implemented as soon as possible. If so, there are several points that would do.
First of all, the government would start receiving an estimated $500 million annually from this sector. It would reduce the illegal, untaxed revenues from the grey machines, the underground economy, and allow our sector to keep pace with racetracks and charity casinos. We cannot afford to lose any more of our customers. It also works as an attendance generator. It's a form of entertainment and it would allow our industry a chance to see increases in sales that we've not seen for years. As well, competitors would no longer be able to attract our customers with illegal machines.
I'd like to make some other points. Once again, this is all in printed material that's been handed out. Independent research confirms this, as I believe you're already aware. I refer to the work conducted in Manitoba by Dr Barbara Gfellner at Brandon University that shows the average VLT player plays for 30 minutes once or twice per week and spends an average of $10. She also says most people who play the VLTs do so on a moderate, budgeted basis and perceive VLTs as a moderate form of risk-taking in an entertainment-oriented social environment.
I believe a lot of the printed information you've already received with reference to the different things. Research has shown that 2% of the population are potential compulsive gamblers and another 3% to 5% may experience some problems. It's a very small percentage.
The executive director of the Canadian Foundation on Compulsive Gambling says, "Prohibition is not the answer; education and treatment is." Dr Jacobs, vice-president of the US National Council on Problem Gambling, said in an interview on Canadian television: "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."
Mr Chairman, on behalf of myself, the employees I still have and those I wish I could possibly hire in the future, I urge you and your committee to recommend to the government quick passage of Bill 75. We need the stimulus of this new form of entertainment. We don't have to speculate as to the outcome; positive results have already been demonstrated in Manitoba. We appreciate the government's consideration and hope they'll take the next progressive steps.
The Vice-Chair: Thank you very much, Mr Childs. I appreciate your presentation. We're now going to move to questions: five minutes per caucus, starting with the Conservatives.
Mr Hudak: I just had a further clarification on some stands. Tell me how you think about this issue. Lyn McLeod, the leader of the Liberal Party, said on June 24, debating this bill, that she does not want to see VLTs outside of commercial casinos. She supports charity casinos without VLTs. She states in Hansard, "The take from a charity casino that didn't have slot machines wouldn't be good enough for this government...." As far as Lyn McLeod is concerned, no VLTs outside of casinos. So for the restaurant and motel association, she's giving the brushoff.
The same day, Gerard Kennedy, who could be the next Liberal leader, said, and this is in quotes from Hansard: "We want to put forward very clearly that the position of the Liberal Party is not to increase and not to make legal any of these video lotteries outside of casinos."
That's the Liberal position expressed in Hansard June 24 when we debated this. It seems to have changed about 15 minutes ago. Maybe Mr Crozier has his own position, and I can respect that --
Mr Crozier: You haven't shown much respect for it.
Mr Hudak: -- although the man Mr Crozier is backing for the leadership, I understand, is Dwight Duncan from the Windsor area, who also said no VLTs outside of casinos. If that were the case, if we pursued the Liberal agenda that said no VLTs outside of casinos, what does that do for your industry?
Mr Childs: I believe we need an uplift in our industry. This is one of the avenues that could possibly help, or would definitely help, our industry. Once again, we can revisit that conversation, but our industry has gone through tough times in the last few years and I don't think anyone in this room would disagree with that point. The type of market we are dealing with needs to be entertained and generates prolonged stays in different venues. Once again, we are competing against the casinos for some of that market of entertainment, and all we want to do is be on a level playing field, or at least brought a little closer.
Mr Hudak: Again, the Liberals are clearly on the record as opposed to VLTs outside of anything but casinos; they want to keep them in the big casinos like in Windsor. You saw about 15 minutes ago a little leg, a little wink and a nod, trying to hook the association in, saying, "Maybe we'll consider it," but the reality is that the three or four Liberal leaders -- how many leaders they have right now -- are all solidly against VLTs. I think we should make that clear, and I appreciate that it's on the record now.
If we do put the lottery terminals in the restaurants and bars, what do you think that does? Is that going to take away from your current sales or are you bringing in new customers spending a bit more money? Are you generating new revenue or are you just redistributing current revenue?
Mr Childs: No, definitely generating new revenue. You're entertaining people. You're giving them a venue where they can come in and spend some time in your area.
Mr Hudak: So when you bring new revenues into your establishments through the video lottery terminals, what does that mean for employment? What do the new revenues mean in terms of maybe paying down some debts or adding structures? More capital investment too, do you think?
Mr Childs: Depending on the locations, whether they're suitable or not, definitely it's going to -- more capital for the locations to compete with other similar locations; definitely hiring more people to handle the increase of traffic that we are so hoping we will get, or that I'm positive we will receive. At least in my establishment I see it as a definite plus and could honestly say that we would see an increase of traffic through our establishment, which would increase employment, which would also increase ongoing progress in our building.
Mr Hudak: So you're very optimistic. What has been the experience in other provinces?
The Vice-Chair: I'm sorry, we have run out of time. To Mr Crozier, Liberal caucus.
Mr Crozier: I think I had my fun before. I prefer to talk about what you want to talk about. But I will say that when it comes down to the end in this debate, you will probably see a difference of opinion. I doubt that you will see one member from the government express opinion that differs one iota from what they've been told to support. But I'll tell Mr Hudak one thing. The night that vote's taken, I'll be able to go back, I'll be able to lay down, I'll be able to sleep, and my conscience will be clear because I will --
Mr Hudak: Bruce, you know it's going to mean thousands of jobs in the Fort Erie area --
Mr Crozier: Horse feathers.
Mr Hudak: There are going to be thousands of jobs in Sarnia because it's just like Fort Erie. They've got a racetrack and there's bingo. It's on the border. You know it's good for the border cities.
Mr Crozier: Horse feathers.
The Vice-Chair: Mr Hudak, please. You were not interrupted during your five minutes, and I would expect the same courtesy.
1550
Mr Crozier: Besides that, he's rude.
But I will be able to sleep with an absolute clear conscience that I've done what I think is right, and sir, if it doesn't agree totally with you, I'm sorry. But having heard, hopefully by then, all the sides of the argument, I will be free to make the decision on my own.
Now, more to the point of what your concern should be. I understand where you're coming from; absolutely. If I could be assured -- I don't know what the answer is and we've had suggestions to the government of a number of changes they could make -- selling wholesale liquor to you, that would help, would it not?
Mr Childs: Yes, it would.
Mr Crozier: You buy at the same price I do, or even more. Do you have to pay any kind of a levy on top of what I pay?
Mr Childs: Yes, the big thing is the taxing at the retail end of it as well, the shipper.
Mr Crozier: Sure. And in fact you have to charge 10% retail sales tax?
Mr Childs: Ten per cent retail and then 7% GST.
Mr Crozier: Yes. So there are things this government could do, but you see, they've got this huge problem. They need money. They're going to borrow $20 billion over the next four years to pay for a tax cut, a tax cut that you might not even share in because you might not even be paying any taxes. But they've got to pay for that. At the time of the budget, the finance people walked in and said: "Ernie, you've got a problem. Your figures don't add up and we've got to get to something that's going to increase our revenue dramatically."
If they really cared about you, rather than 10% off VLTs, you'd get 20%, 25%, 40%. Rather than giving 10% to charities, they'd give charities 50%. But you know, they don't really give a damn in the end about charities and you in this circumstance. What they care about is the 70% they're going to get.
The minister said on Tuesday, August 6, "To assist Ontario's hospitality industry, the Ontario Lottery Corp will develop a plan to introduce a limited number of video lottery terminals at selected locations across the province." Can you tell me, sir, how many terminals or how important it is to you that you're one of the selected locations? You may not be selected is what I'm saying. What if your competition gets some of these machines and you don't?
Mr Childs: It's definitely a competition. We would be competing against that entertaining dollar. That's the one thing. You're saying the percentage, as far as the government and the tax split and the charities. Myself, from my business, I look at it as a drawing card for entertainment, and the food and beverage sales that are associated with it are one of our main concerns. If we're competing with another entertainment outlet in town, yes, it will impact.
The Vice-Chair: Thank you, Mr Childs. I'm sorry. We do have to move on to the NDP caucus.
Mr Kormos: The malaise that you talk about -- again, we've heard similar comments across the province -- the malaise in your industry is common across the province, isn't it, the downturn, the hard times?
Mr Childs: Yes.
Mr Kormos: Upscale, downscale, the whole nine yards.
Mr Childs: Right across the board.
Mr Kormos: Suit-and-tie operations and dungaree operations, right?
Mr Childs: Other styles have been hit harder, different percentages and also locations through the province have been hit at different levels as well.
Mr Kormos: I appreciate you're saying that the revenue from legal slots is going to help you overcome that.
Mr Childs: Any extra revenue's going to help. We look at the attendance factor. As far as putting more people in our building on the entertainment end of it, it is going to help us, as much or more than the revenue coming from the --
Mr Kormos: The province is talking about 20,000 slots, big chunks of them in charity casinos and in racetracks, right? And the police tell us of 20,000 grey slots out there throughout the province, right?
Mr Childs: Mm-hmm.
Mr Kormos: Mr Hurst tells us that these are, as often as not, in hotel, motel, beverage room locations. Is that where they are?
Mr Childs: To my knowledge, there are some locations. Once again, there are as many or more good quality operators as there are poor ones, and --
Mr Kormos: But there's 20,000 of them out there in hotels, motels and beverage rooms.
Mr Childs: To name some locations, and there probably are some in locations that are not licensed as well.
Mr Kormos: Okay, like?
Mr Childs: After-hours, illegal --
Mr Kormos: Oh, booze cans. Gotcha, yes.
Mr Childs: Yes.
Mr Kormos: An illegal or grey slot, if it's being used for gambling, the owner is entitled to keep all the money, isn't he?
Mr Childs: One would assume that, but there are different --
Mr Kormos: Well, he doesn't have to share with the government.
Mr Childs: He might be sharing with machine owners.
Mr Kormos: Machine owners, fair enough, but he doesn't have to share with the government, doesn't have to share with charities, doesn't have to contribute 2% to anti-addiction programs. So then my question is: How come the 20,000 illegal slots haven't done for the hotel, motel, beverage industry what you tell us legal slots are going to do when in fact a hotel, motel, beverage room with one of these 20,000 illegal slots is keeping indeed more of the money than you're going to end up with at the end of the day with a legal slot?
Mr Childs: I don't know if I have the exact answer, but I would assume, my opinion is, a lot of those revenues coming off those machines aren't hitting any books or the businesses that are worth tracking.
Mr Kormos: They're not even paying taxes on them. They're not even paying taxes on the money. They get to keep it all. So what I don't understand is, how are 20,000 legal slots going to give you the big boost in the arm where you only get a small percentage of the profits, when 20,000 illegal slots where you get a much bigger chunk of the profits, haven't helped?
Mr Childs: The ones that have no morals and don't mind illegal slots are probably going to make it through. For us, there are clean operators that won't touch --
Mr Kormos: But you told me the malaise is across the board and the police tell us that the slots, the illegal ones, are in seedy little booze cans, but in mainstream they're in hotels, motels, beverage rooms. The police say they're prevalent. I just got a report here from the Welland Tribune down in Niagara: across the board Niagara has its share. That's my problem with -- I've got to tell you, Mr Seiling's worked real hard on this campaign.
The Vice-Chair: Thank you, Mr Kormos, your time has expired. Thank you very much. I want to, on behalf of the committee, Mr Childs, thank you very much for your presentation.
Mr Childs: Thank you very much for your time.
ESSEX PRESBYTERY AND LONDON CONFERENCE, UNITED CHURCH OF CANADA
The Vice-Chair: The next presenter will be the United Church of Canada, Essex Presbytery and London Conference, Rev Douglas Sly and Dr Don Bardwell. Good afternoon, gentlemen. If you could identify yourselves individually for Hansard.
Rev Douglas Sly: I'm Sly and he's Bardwell.
The Vice-Chair: Thank you. You'll have 20 minutes for your presentation and you may wish to leave some time for questions at the end for the members. You can continue any time.
Mr Sly: Thank you, Mr Chairman. We have roughly seven and a half minutes each in our presentations and we would like to leave the other five minutes for some discussion after that.
Ladies and gentlemen, I appreciate the opportunity, along with my colleague Dr Bardwell, to address you regarding my church's concerns about your government's intentions to place 6,000 to 8,000 VLTs in restaurants and bars as an initial step in your plans to increase that to possibly 20,000 in the province, from what we have read and heard.
Let me say unequivocally at the outset that I reiterate in the strongest possible way my own and my church's opposition to gambling in its varied forms. My colleague and I have access to official statements of the United Church of Canada that it has made at its General Council meetings in 1977 and again in 1988. We affirm our church's position on gambling and we reiterate the opposition recently expressed in two resolutions that were fully endorsed by Essex Presbytery of the United Church on May 20 and in London Conference on May 26.
Why do we oppose the introduction of VLTs and other forms of gambling? We oppose the sum and substance of Bill 75 because it undermines the wellbeing of citizens of this province. We see it primarily as a money-grabber. While we do not wish to impose our own beliefs about gambling on anyone, we feel that we must oppose the government's intentions to promote gambling and encourage people to spend their money on machines of such dubious benefit to anybody. It is very hard for us to see any personal benefit to the player.
1600
Our opposition to the government's intentions to promote VLTs in the province is based upon our perception of the function of government. In our thinking, the main function of government is (a) to promote, to hold, to revere and to encourage the wellbeing of all citizens over whom it has authority to govern, not only its electors but all of the citizens; (b) to establish the ways and means of protecting its citizens from influences and forces that reveal potential harm to their wellbeing; and (c) to create, where possible, the kind of lifestyle that would encourage responsible citizenship through participation in the political process, as well as in organizations that are devoted to improve the social life of society.
If this is an accurate expression of the function of government, we might draw some obvious conclusions about the effect that the gaming industry has upon the attitudes of people. Thirty years ago, the government issued warnings that anyone found buying lottery tickets in support of the Irish Sweepstakes would be subject to prosecution by fine, imprisonment or possibly both. It held that gambling of this nature was both legally and morally wrong. The passing of legislation has now legalized gambling. Are we to assume that the government's legislation has also changed public morality? This is not at all clear to us. A great outcry in Nova Scotia last year over the attendant evils of VLTs saw the government removing 70% of those machines in the province, reducing the number from 3,500 to about 1,000.
And on this particular point let me hasten to add that government-sponsored gambling exacerbates deficit difficulties already evident in the economies of many states in the United States, as well as many provinces in Canada. The proliferation of legalized gambling hits us as a striking example of governments, under the pressure to reduce deficits and balance budgets, not only legalizing a potentially harmful activity but actually promoting it. When governments get into the promotion business, we are subjected to cleverly produced advertisements designed to manipulate us and get us to gamble more and more of our money because the government needs it. When we complain, the response is that the money goes to support many deserving causes. The implication is that the end justifies the means.
Does the end justify the means? No less a figure than the late Mahatma Gandhi stated that means and ends are exactly the same thing, that you do not pursue illegal or immoral means to achieve a legal or a moral goal. In the church we say that the goal and end of life is the Kingdom of God, a condition of love, peace and justice. God help us if we use hate, war and unjust means to achieve such goals.
How can any government justify, to itself or to its citizens, particularly to the young, the wholesale promotion of greed? By changing people's attitudes towards money and how to get it without (a) working for it or (b) some form of investment, the government is launching into uncharted waters that are very dangerous indeed in terms of our thinking. Here is a most telling statement by Mr J. Jourdion, the marketing director of the Western Canada Lottery Corp, that says, "Any promotion that can alter the regular purchasing habits of the consumer is viewed as significantly benefiting our long-term success." That is the quote of the month in the Gaming and Wagering Business magazine.
You will agree that the gaming industry is not a productive industry. It is a recreational one, moving money from the small, often ragged and torn pockets of the general consumer into the smooth, well-lined, receptive and seemingly bottomless pockets of the government and the owners. We would prefer to see the government find other means of raising revenues, perhaps even in the form of more taxation, if I could say such a thing, than initiating and promoting the use of VLTs. While we respect the present government's efforts to get control of the economy, we cannot agree with Mr Eves when he tries to justify the placing of VLTs by the government in order to control the illegal ones already being used. Two wrongs have never made a right.
Among many dangers inherent in life, gambling raises false hopes, produces cynical attitudes in people, exploits human weakness and frailty and is accompanied by increases in the crime rate. Gambling dulls the sense of social responsibility. In the light of all this it is our sincere desire to uphold and honour our government not as our predator but as our protector.
Rev Dr Don Bardwell will further our argument with regard to the government as protector.
Rev Dr Don Bardwell: Good afternoon, Mr Chairman, ladies and gentlemen. Thank you for listening.
Our view is that there are times when the government is looked upon as the protector of its citizens and is expected to take steps to assure the safety and security of the people. In a democracy, such protection takes into consideration the freedom of personal choice we all cherish. In a highly technological and complex society, certain freedoms may have to be compromised in order to ensure everyone's security. In the second part of this brief we ask the government for protection.
Our position is that we need "protection from" far more than we need "further promotion and expansion of" the phenomenally growing gambling industry in North America. A significant number of people have suffered, are suffering and will suffer from the consequences of gambling. One of the most problematic characteristics of the problem gambler is how difficulties are denied and hidden until they reach very serious proportions. We have heard of an increase in the number of women experiencing problems with gambling. Pre-casino prevalence studies in Windsor indicated that twice as many males as females were identified as problem gamblers. Post-casino prevalence studies done one year after the casino opened showed no significant difference in the percentage of male and female problem gamblers. Youth seem to be particularly vulnerable to the problems of gambling. "The number of teen gamblers in Ontario is rising at an alarming rate."
Common sense tells us that the more venues there are for gambling, the more people will gamble, and the more people will gamble, the more they will have problems with gambling, including youth and young adults. Placing VLTs in bars, for example, opens up a new venue for gambling. It changes the activity of such establishments. It is different from adding VLTs to existing gambling establishments. A lot of people get in over their heads and are hurt badly. VLTs in bars will mean more problem gamblers.
1610
We are here today to appeal to you to continue to take action and to be seen as taking action which gives a clear signal to all of us that there is a dark and shadowed side to the gambling enterprise. In addition to saying no to VLTs, we see the government exercising a protective role through research, education and treatment. It is encouraging to know that the government has expressed its intention to make more funds available for such purposes.
(1) Vigorous study and reliable research need to be enlarged. We need to know what is going on in the gambling industry and the degree to which people are harmed by gambling and helped by treatment. Much of what we hear is still anecdotal in nature and we are in need of continuing good, reliable, solid research studies. Since Windsor has the longest history of gambling machines, it seems logical that continuing research would be supported in this region.
We need to change the perception among many concerned citizens that the government is primarily interested in research that supports gambling and its expansion to one in which it becomes common knowledge that this government is deeply concerned about the negative impact on people's lives gambling can bring.
(2) The government can fulfil its protective role through educating us in understandable ways about the possible consequences when gambling becomes a problem. We know there are definite signs. Some people are able to discern these and take action that will prevent harm, but many are not.
Another way of educating people is to endorse and support a lifestyle option that refrains from gambling at all. Still another is to work closely with organizations such as the Canadian Foundation on Compulsive Gambling to make information available in appropriate places to warn people of potential dangers, and we have included in our packet of information three pamphlets as a good example of clear information. Another way is to inform people where help can be found for the compulsive gambler and his or her family.
(3) The government can take seriously the need for well-trained counsellors and to assist agencies providing treatment for the victims of compulsive gambling. I am most familiar with a course offered by Iona College, affiliated with the United Church of Canada, at the University of Windsor. Five courses have now been held, attended by 100 counsellors, for the treatment of victims of compulsive gambling. As a fourth pamphlet we enclose a course description for your information. I trust that you have been given these pamphlets.
Many participants have come from agencies as well as from churches and all have expressed their own growing concern about the increase in numbers of people having problems with gambling. We have worked in partnership with the Canadian Foundation on Compulsive Gambling; there is an ongoing demand for this course, and two more will be held in 1997. In order to break even financially we need 30 participants at each course, but we have carried on with as few as 13 persons in one course. If we are to continue to offer this excellent course, we will need some kind of financial support. We have received one grant from the previous government and a grant from the United Church of Canada, but we do need help.
In conclusion, Mr Chairman and ladies and gentlemen, we urge you to recommend no to VLTs and yes to (1) more ongoing solid research; (2) education of the public through accurate information; and (3) training of counsellors and treatment for victims.
We thank you for the opportunity to appear before you and for your listening to our presentation.
The Vice-Chair: Thank you, Dr Bardwell and Rev Sly. We've got time for questions, about one minute per caucus, starting with Mr Kormos of the NDP.
Mr Kormos: Gentlemen, I appreciate your submission. You haven't been in the majority, I want you know. As you can well imagine, the hotel and motel association, that industry, the tavern industry, the racetrack industry and the break-open ticket industry have been very aggressively pursuing this. The government has been very aggressively promoting it. It's no secret, as I indicated earlier, that it's not an expansion of blackjack or an expansion of the roulette game or an expansion of the poker table that they're promoting; it's a massive expansion of slot machines.
The government members refuse to even acknowledge the extensive research: McGill University, Harvard Medical School, the University of Windsor, the University of Alberta, the University of Brandon, the University of Exeter. I made reference to those studies; I tried to give them bibliographies. They talk about a pending crisis in addiction because adolescents, currently in 1996, betray a proclivity for gambling --
The Vice-Chair: Thank you, Mr Kormos.
Mr Kormos: -- that is a multiple --
The Vice-Chair: Mr Kormos, I'm sorry, your time has expired. Mr Klees of the Conservative caucus, please.
Mr Kormos: They do not want to talk about the morality --
The Vice-Chair: Mr Kormos, please.
Mr Kormos: You're welcome -- they do not want to talk about morality.
Mr Klees: Thank you, gentlemen, for your presentation. I commend you on the work that you're doing. I've had a chance to review very briefly the brochures -- very helpful, I'm sure. I want to assure you that many members within the government caucus share your concern that if there is to be any extension at all of the opportunity for gambling, it be done with good conscience and with the individuals in our communities and in our society in mind.
I want to clarify something for you, though, that I think is very important. A release was sent out today by the Liberals that says, "Yet the Tories are pushing full steam ahead to put slot machines in neighbourhood bars and restaurants without proper consultation with the communities affected." I want you to know that if that were the case I wouldn't be sitting here. That is not what we're doing. We are here consulting with communities across the province. The government has made it very clear that the introduction of VLTs, first of all, is going to be at racetracks and in charity gaming halls and that there will be a very careful review prior to the extension of VLTs into licensed facilities.
Mr Crozier: Gentlemen, I thank you for being here. You as well as other people in this room have had to endure a lot of political posturing today. You've been subjected to skewed questions, some of them even coming from government briefing papers. We're their poor cousins; we don't have any briefing papers.
You've also come and given us your opinion, as Mr Kormos has alluded to, in the face of almost insurmountable odds, I'm afraid to say. We appreciate what you've had to say, and I will go on record as believing and supporting what Mr Klees has just said, that the government will listen, but there will be VLTs in bars and restaurants.
The Vice-Chair: On behalf of the committee I thank both of you for your presentation here this afternoon.
MICHAEL COWTAN
The Vice-Chair: The next presenter is Michael Cowtan, general manager of Elephant and Castle Group. Mr Cowtan, you have 20 minutes for your presentation. You may wish to leave some time for members to ask questions at the end. Begin any time.
Mr Michael Cowtan: I'll leave you lots of time. Mr Chairman, ladies and gentlemen, thank you for allowing me to be here this afternoon. My name is Michael Cowtan. I represent the Elephant and Castle in Sarnia.
I would like to begin by stating that I support Bill 75 as it relates to VLTs and I urge the government to implement them into the hospitality industry as soon as possible. The industry is in a serious economic situation, and from a personal perspective the situation is urgent. We are in serious financial trouble, especially in border cities, and I'll touch on that in a moment. Across the province we have seen a reduction in employment of 25% in our industry and 1,400 bankruptcies in the last four years.
I mentioned I'm here representing the Elephant and Castle in Sarnia, but I'm no longer their employee. I've suffered the axe -- friendly, but I've suffered the axe. The Sarnia Elephant and Castle can't afford me any more, and that is a direct result of what has happened in our industry over the last five, six, seven years. But for the sake of the 17 mostly part-time employees who are left at the Elephant and Castle in Sarnia, I ask you to act, and act fast. I don't mean in six months' time; I mean fast.
1620
It's not in my brief, but I would like to give you a little background about what's happening in Sarnia, as I see it, and not just the Elephant and Castle, but the Elephant and Castle in particular. Six years ago we had the equivalent of 25 full-time employees and a turnover of just over $1 million. We now have 17 employees, but they're mostly part-time. They're equivalent to about 10 full-time positions. The place is teetering on the brink. If it wasn't for the fact that the company and the group is committed to a lease, I'm sure they wouldn't be there.
As far as the local industry is concerned, we have an operator in this town who operates, among other things, a nightclub. It's closing this weekend. I don't think it's any secret he's chairman of the local chamber of commerce. He runs a number of enterprises in this town. He's had this nightclub for 10 years. It's extremely well run, and it's closing this weekend. We have various bars downtown. On Tuesday night the bailiff visited one. I don't know why, but I presume that as they left with a pile of money in their hands, at least he's got them off his back for the time being. We have another one where, according to the local press, there are half a million dollars in back taxes of various kinds owing to various levels of government. We have another one where I know the man and he's a nice guy. He doesn't go out of his way to operate illegally, and he's closed for 10 days for watering his liquor. These are men who are in desperate situations, who are employing people in this town and who will cease to be employing people in the very near future.
On to the Elephant and Castle across the country: Our experience in Alberta is that VLTs can produce sufficient revenue to save the day. We have three locations in Alberta. We have incremental income of $100,000 per annum per location from VLTs; $28,000 of that immediately goes back out as wages to the three people in each store who count the money. That's without the extra work created for servers, cooks and all the other aspects of the restaurants. I hear scare stories about this doesn't create any work for anyone. Well, it does, and it increases paycheques as well.
In the last 10 years in our industry, we've seen a dramatic swing to less alcohol consumption, and as operators we've had to find ways of entertaining our customers. In the case of the Elephant and Castle in Sarnia, we started a pool hall, we went to darts, video games, game boards for chess and Trivial Pursuit on our tabletops. All of those have made a difference and they have kept people in our seats, but we need more. VLTs are not going to be the whole answer, but they're going to help. VLTs will be just another diversion. At the same time, they will produce significant revenue for us and for the government and make a considerable difference to us as the operators.
Gambling, including VLTs, is here to stay. Not acting quickly only continues to send Elephant and Castle customers to Windsor every weekend and to places outside our province so they can spend their money the way they wish to.
We've heard talk locally of the effect that VLTs might have on charity break-open tickets. We had the same discussion a few years ago when break-open tickets were first introduced into non-club atmospheres. On the contrary, we've seen the amount going to charities increase and, at the same time, the corner stores that are now allowed to sell them too have become much more viable because of this income and have created income for self-employed people in that situation.
To fear the effects of VLTs on other forms of gaming is like fearing the introduction of electric light because of the negative effect on Union Gas.
You've heard estimates of 15,000 to 20,000 illegal machines already in the province being operated by business people who for the most part would not consider themselves criminal -- and I certainly wouldn't consider them criminal -- but they feel that they cannot survive without this income. I'm reminded of the tobacco situation and I'm sure there is no politician in this province who would say that he or she is happy that taxes were cut so drastically, but most recognize that an unenforceable law is no law at all. The same is true with grey VLTs. The honest operators are being penalized and the government is not getting the revenue.
VLTs will be part of an entertainment package that we need to attract visitors to our town and to our province and to keep our residents in our town and in our province.
I have to finish off with a little thing here because I was quoted in the local press as saying that I have concerns about people becoming addicted and I want to put it into perspective. As a responsible operator I was always concerned about the effect of alcohol on people, but it is a small minority who abuse themselves with alcohol, as indeed it is a very small minority who become addicted to any form of gambling, whatever form it might take. I believe the government has recognized the problem and is prepared to tackle it, but as the executive director of the Canadian Foundation on Compulsive Gambling has said, "Prohibition is not the answer; education and treatment is."
We didn't get anywhere in North America over the last 90 years, as far as my history books tell me, by prohibiting anything. We just made it attractive to criminals. I thank you for giving me the opportunity to address you this afternoon.
The Vice-Chair: Thank you, sir, for your presentation. Moving to questions, the Conservative caucus is first. You'll have about four minutes.
Mr Hudak: Thank you, sir, for your presentation; very well-rounded, very well-spoken. How long have you been in the entertainment industry, let's say, to put it pretty broad?
Mr Cowtan: Since 1982.
Mr Hudak: Some people have expressed to me in other conversations similar memories about similar arguments being used about the addictive nature of machines, the wrong element being attracted every time there is any new form of gaming introduced. In fact, some people talk about the same sort of arguments being used decades ago when they introduced pinball machines. Maybe when you were younger yourself you were one of those teenagers who was going to become hooked on pinball machines or on pool tables. So you hear a lot of the hyperbole.
I appreciate your argument and I agree with you that addiction does exist, but the fact of the matter is you reasoned very well that there's all kinds of gambling currently. You have legal games and illegal games. You have horse racing. You have dice, one of the illegal games. You have slot machines and casinos. You have video lottery terminals that we're proposing to bring in.
Jacobs especially in a number of studies talks about the nature of the addictive gambler, and they play four or five different games because they like the feel, the way that they enter into a different reality, I think. Jacobs gives an anecdote about one woman who when she plays dice in the States feels a bit taller, a bit more attractive. So there's a seduction there.
We had a really good presentation two days ago in Fort Erie from the New Port Centre, which is an addiction counselling centre in Port Colborne, Ontario. They said, from the presentation, "Your focusing on the activity or substance itself is not particularly useful or effective in addressing the problem and the practice often creates polarization." So I guess focusing on video lotteries and using a lot of hyperbole, as the opposition has wanted to do because it makes the headlines, is not responsible. It's great headlines but lousy science.
I appreciate your remarks that you support the $8 million or $9 million the government's putting in to addiction treatment, because that's not just going to treat VLTs, that's going to treat the gamblers who are already addicted, that's one of the types of behaviour. So it's going to treat those who are addicted to the dice, to the slots, to these various other games, calling their bookie. I appreciate your remarks in that area.
Another point you bring up too is just very well-reasoned, I think, the difference between video lottery terminals at the racetracks, say, and video lottery terminals at licensed establishments, where the racetrack would be more of a destination point and the video lottery terminal at the licensed establishments is another way of bringing in money from customers who are already there. I'll give you an example: Is a gambling customer, somebody who's interested in gambling for the evening, likely to come directly to your establishment or to the racetracks? Are there different customers between who's going to use a VLT at the track and who's going to use a VLT at a liquor-licensed establishment?
Mr Cowtan: A gambler who wants to go and gamble and not just be entertained isn't going to come to the Elephant and Castle. He might go to Hiawatha. I would think he's more likely to go to Windsor.
1630
The Vice-Chair: Mr Hudak, sorry, we are out of time. Moving on to the Liberal caucus, Mr Crozier.
Mr Crozier: Thank you, Mr Cowtan. Our problem is this: The break-open ticket people don't want us to have VLTs. For the most part the tracks don't want them put in licensed bars and establishments. Permanent charitable casinos would like to have them, but for the most part don't want them into licensed establishments. Bingos haven't been included in this, and there are over 300 bingos in the province. They want to be part of the action. Your story is not uncommon in the hospitality industry, and I sympathize with it. I went through the 1980s in a retail business where we went from 75 employees to 35 employees when times were tough. I don't have any questions of you, sir. I hope in the end, when all the dust settles, we've made the right decision. Thanks for your presentation.
Mr Cowtan: You're welcome.
Mr Kormos: We heard from one of your colleagues in Toronto earlier this week --
Mr Cowtan: Gord Josie.
Mr Kormos: -- who again described the type of operation the Elephant and Castle has had across the province for a number of years, and I listened to what you've had to say, and it's been said by many others in your industry. No need to apologize about your concern for addictions because having a concern for the addiction doesn't necessarily mean -- these folks call us neo-prohibitionists, and they pay people big money to come up with those little things, hoping that the press will pick it up day after day.
My concern about the logic here is that I know many owners of, what do they call it, adult entertainment parlours, strip clubs who insist that if they don't win their appeal to the Supreme Court of Canada from the Court of Appeal, which banned lap dancing -- you know, dirty dancing -- and if lap dancing isn't restored as being legal, by God, they won't be competitive, that that's their edge, that's what makes the difference between them being unprofitable or profitable, and they can provide employment, they've got an attraction that will keep their customers longer and, Lord knows, one assumes that it does. That's an argument that's current. You know that. The Court of Appeal just dealt with this. Strip club owners rallied; they raised tens if not hundreds of thousands of dollars among them to pay for legal costs, trying to win that Court of Appeal decision. They were extremely grateful to the two provincial judges, one in Toronto and one down in Niagara, who passed rulings which appeared to legalize so-called dirty dancing.
Prohibition: Well, prohibition probably doesn't work when it comes to pot or cocaine either. Clearly, the way to stamp out pot and cocaine and other illicit drug use is to devote more police resources to it. But the legalization of those substances would send a very clear message to people, and especially youngsters, who are at risk with respect to pot and cocaine -- it would give it the stamp of approval. As I said earlier, I don't think it's any accident that we're talking about slots here. We're not talking about permitting restaurateurs to have blackjack tables or to run roulette wheels. The fact is, we're told that you already have 20,000 slots in your businesses across the province. That's what we're told: There are 20,000 so-called grey machines. They haven't achieved the goal that you tell us slots are going to achieve for your industry. Notwithstanding what the people across the way say, there is an extensive body of research -- and I've had the pleasure of speaking with some of these researchers personally to confirm my interpretation of their research -- that talks about the potential for an epidemic problem with gambling addiction among young people, for whom slots are indeed the crack cocaine.
You're going to get your machines -- maybe not you, maybe the restaurant next to you, whoever's got more pull with Mr Boushy, so you better start working on him now -- your industry is, but I think we are courting disaster. I know there's not been a single document filed from the government by way of research talking about concrete, hard data showing economic impact on your industry or on any other facet of the business -- hotel-motel etc -- the impact of legal slots on it. That bothers me somewhat, because one would hope that a decision this mammoth -- because the interests are very powerful in the gambling industry and, quite frankly, very corrupt.
The Chair: Our time for this has elapsed. Thank you very much, sir, for your presentation.
WINDSOR RACEWAY
The Chair: Our next presentation will be the Windsor Raceway, Mr John Millson, president. Welcome, sir. I compliment you on the very attractive cover on your presentation.
Mr John Millson: Thank you very much. We're very proud of our standardbred horsemen in the city of Windsor. I appreciate the opportunity to be here before you today and to make our presentation. I will take about the next 15 minutes to summarize some of it.
Windsor Raceway thoroughly endorses Bill 75 as a way of assisting the horse racing industry to compete with the ever-increasing number of gaming venues. We believe the introduction of video lotteries at racetracks will guarantee the longevity of the 28,000 agriculturally based jobs associated with our business.
Windsor is a hotbed of gaming entertainment, and Windsor Raceway needs the tools to be compatible with and complement the government-owned Windsor casino and the Northern Belle riverboat casino. In addition to the Windsor casino experience, we are in competition with Michigan, where there are several casinos and eight horse racetracks with simulcast facilities, all within a short drive of Windsor Raceway. By creating one complete facility capable of providing a wide spectrum of entertainment possibilities, Windsor Raceway will be assured of its ability to continue with the success of its core component, that being live horse racing.
We have developed a business plan in accordance with the minister's budget speech to demonstrate how funds made available by a reduction in the provincial government's parimutuel tax rate and the introduction of VLTs will be utilized to ensure the viability of Windsor Raceway and the rural sector of Essex county. The actions of the government are viewed by us as an opportunity to manage our own affairs in a financially favourable climate that will be conducive to our growth and prosperity in the future.
Windsor Raceway has experienced significant growth over the last three years and has become the success story everyone wants to talk about. Our success, though, and that of the Windsor casino, has created significant problems and difficulties for our counterparts in Michigan. As a form of retaliation, the governor of Michigan gave simulcasting to Michigan racetracks last February. That one stroke of a pen created a 61% drop in our intertrack handle. It was a devastating effect.
The government's budget announcement allowed Windsor Raceway the opportunity to continue our live racing program over the summer. If it had been cancelled, it would have affected the employment of nearly 1,500. These jobs ranged from grooms and trainers to local farmers, blacksmiths, computer technicians, satellite operators and television crews. The employment of these individuals is somewhat specific to our industry, and it would have been difficult for them to find new employment.
With the continuation of the summer racing season and the balance of our 1996 fall season, Windsor Raceway will have raced 177 live days in 1996. Just to give you some idea of the magnitude of the economic impact to the agricultural community, by the end of 1996 Windsor Raceway will have generated over $11 million in purses, which is distributed directly to the horse people in rural Ontario.
Windsor Raceway respectfully submits that the government can accommodate its own needs and resolve the concerns of the horse racing industry with the implementation of Bill 75. This non-tax revenue generator can preserve the racing industry and also generate revenue for the province. The benefits and effect of Bill 75 to the horse racing industry, and to Windsor Raceway in particular, are that it will of course give a substantial revenue stream to the government of Ontario, plus it will guarantee live racing at Windsor Raceway with stronger purses, which means more money back into the agricultural community to provide a steady income and reinvestment in farms and, as well, investment in Windsor Raceway to upgrade our facilities, develop an enhanced marketing plan, increase employment and ensure the long-term presence of live racing at Windsor.
1640
This proposal has been implemented in eight of the 10 provinces in Canada with great success. In addition, there are thousands of video lotteries operating throughout North America which have been credited as the salvation of the horse racing industry in many of these areas.
We are prepared today to install video lottery machines in age-controlled, secure areas within our facility. Windsor city council and Mayor Mike Hurst have endorsed the introduction of video lottery machines at our racetrack. I would emphasize that these games are identical to those which are operational today at Windsor casino, only a few minutes from our front door. Our facilities are within the boundaries of the city of Windsor, and certainly the operation of this type of game in our community has been overwhelmingly endorsed. The introduction of video lottery machines to Windsor Raceway would guarantee a strong live racing product which would showcase Ontario racing to tracks and simulcast facilities around the world.
What does Windsor Raceway mean to the community? Is there an economic significance? Absolutely. The current economic impact that Windsor Raceway has on Essex county is approximately $55 million per year, of which $20 million is US tourist dollars. As I mentioned, we give $11 million in purses to the horse people community; $25 million remains in the city in the form of municipal taxes, utilities, wages, goods and services; $10 million goes to the federal and provincial governments for taxes; and $9 million to the agricultural community, including boarding horses, hay, straw, feed, blacksmiths, vets and so on.
The economic implications of this racetrack to the community are very significant. The real significance of the raceway is in the number of jobs the racing industry provides, and Windsor Raceway is the fifth-largest employer in the city of Windsor.
Just to give you a few short statistics: 334,750 individuals cross at the border to come to the city of Windsor, which enhances the bridge and city tunnel revenues.
Track employment: We have 576 people who work directly for Windsor Raceway onsite; we have 2,412 owners, drivers and trainers; we have 890 grooms who work in the back stretch.
We have 75 farms that rely on Windsor Raceway. We have 803 horses that are boarded onsite and we have a waiting list of horses trying to get on. We have over 800 horses that farm offtrack and get shipped in.
Our municipal taxes are $452,000 and we pay $533,000 in utilities.
I mentioned earlier the hay, straw and feed; 50% of all of the hay in Essex county is consumed by Windsor Raceway horses.
The racing industry in Ontario employs 28,000 people at 18 different racetracks. Rural-based family operations dominate the racing and breeding industry in the province. An Ontario government study confirmed that Ontario has 1,411 thoroughbred and standardbred operations, with expenditures of $1.4 billion annually and a gross economic impact of over $2 billion. We have faith that the government is aware of the importance of the agricultural community throughout Ontario and will respond to ensure its continued viability.
Racetracks in North America are experiencing the same difficulties as Windsor Raceway. The tracks which are able to survive and prosper are the ones fortunate enough to have forward-thinking legislatures which authorize the installation of video lottery terminal devices, and authorize them quickly. Parimutuel facilities across North America are realizing the only way to compete is to offer diverse gaming and entertainment opportunities. The video lottery machines are licensed in every state and province that has a land-based casino in North America, except in British Columbia and Ontario.
The following chart which is in your book demonstrates the different states and provinces that have them. Mr Johnson asked earlier what the experience was in other racetracks across North America, and I've listed four or five here. Assiniboia Downs, as an example, had actually gone bankrupt and then was taken over as a non-profit organization and since the installation of video lottery terminals has regained its strength and generates over 3,000 full- and part-time direct and indirect jobs.
Mountaineer Park, Chester, West Virginia: They were able to broaden their patron base to break the stereotypical image of racetracks and became Mountaineer Track and Resort. They've actually become a year-round resort.
Delaware racetrack, which was mentioned earlier, is probably the most significant and probably the one closest to Windsor Raceway as an example. They installed 715 slot machines last December. They completely turned their facility around. At that time they were giving out $10,000 an evening in purses and right now they're at $75,000, and I'm told that they're soon to move it to $100,000 per night in purse money.
Prairie Meadows was another fabulous facility. Many of you might have seen the video on that. Twenty-four months ago they had gone bankrupt. The state and the city put in the moneys for slot machines. They were then at the tune of $90 million in debt. As of last month, that full, entire $90 million has been paid off. The track is more viable now than it ever was and we have the municipalities and the state vying for all of this additional new revenue stream coming in. They're going to build new hospitals and new schools with the money.
Windsor Raceway has been coined as the horseplayers' casino, offering wagering and product from noon to midnight, 364 days of the year, with weekend Hong Kong racing stretching our hours to around the clock. However, video lottery machines have quickly become the gaming entertainment format for the 1990s. Casinos across North America report that video lottery devices and slot machines are responsible for generating more than 70% of their total gaming revenues.
Windsor Raceway is now developing a strategy of marketing our operation in such a way that would appeal to a much broader sector of the gaming market. We would couple our live racing and intertrack wagering with video gaming as part of the same betting terminals which presently operate at Windsor Raceway. Lottery patrons would be provided with the ability to watch live racing events while simultaneously playing other games. Incorporating what we call picture-in-a-picture technology, the video lottery machine actually turns into a horse racing mutuel-issuing ticket machine. These machines are operational in Assiniboia Downs, as an example, operational right across North America. It's almost an educational process where people are initially coming to play video lottery terminals, but then, because the horse racing is on the corner of the screen, have the ability to bet on the horses at the same time as well. There's a little bit of a plus there was well.
We envision packaging the live, simulcast and video game combos will necessitate internal design changes to provide a warm gaming atmosphere throughout the facility. Windsor Raceway is prepared to undertake these renovations and purchase the additional equipment necessary.
The video lottery system is operational today in many jurisdictions in North America and offers the same security, integrity and control that is commonly expected from traditional online lottery systems operated by the Ontario Lottery Corp. One such proposal could involve a partnership between public enterprise and private business, thereby maximizing the overall revenue potential and operating efficiency while ensuring a system-wide accountability and audit ability.
The Ontario government could oversee the control of the video lottery central system. Windsor Raceway, our racetracks, could be responsible for the operational activities, as we have already performed as a gaming house in the province for over 100 years. Security and integrity are critical to the success of the gaming operation.
Mr Kormos and Mr Rollins, you'll be interested to know that Windsor Raceway is not the big blue-collar type of facility that has been portrayed. In fact, because of the announcements of the budget and the turning back of money in the form of the tax rebate, as well as the video lottery machines, Windsor Raceway is prepared to turn moneys back to the customers to give it that more competitive and fun experience and to benefit the customers.
As an example, with the implementation of the tax reduction and the VLT program, Windsor will be eliminating all parking charges; eliminating the admission charge; reducing the price on our racing programs; increasing the payouts to the bettors by lowering the takeout on the win, place and show betting. We'll have improved facilities. We'll put $3 million into construction -- new elevators, escalators and improved access to the facility. We're going to upgrade our lighting in the parking area for increased security. New promotions, giveaways, free shuttle ground transportation and group tour markets will be enhanced.
The horse people win as well as Windsor. Mr Crozier, you'll be interested to know the benefits of such improvement programs are clearly illustrated with the Ontario sires stakes program, which is set to launch its 23rd season in 1996. The series is highlighted by over 40 gold events worth $100,000 each. Last year was another record-breaking year for the Ontario sires stakes as the program once again led the way with more individual $100,000 winners than any other sires stakes jurisdiction in North America. The entire Ontario sires stakes offers the potential for owners to earn a higher return on their investment and thus stimulates the activity at the four major yearling sales, which is critical to the breeding industry.
1650
Windsor Raceway, by having this enhanced racing, will have a competitive racing environment; purses will be increased; we will have more live racing, which will expand our international presence with midnight racing; will increase our number of race dates to compete with Michigan; will introduce a scholarship program for our backstretch employees, and we're going to improve our backstretch facilities. There will be increased security and better money management. With the introduction of VLTs we will be a 24-hour operation. In fact, we presently employ a 24-hour-a-day security force.
Windsor Raceway is in a position to act now. The intent of the government was to move quickly and we have responded. We have the full accord of our local community, as evidenced by the attached letter from our mayor, and the endorsement from our local horse people. Our direction is clear and we believe that we have demonstrated to the government in the past that, given the tools to perform, we will succeed. On May 7 you did just that, you gave us the tools, and upon approval, this plan will go into effect immediately. Although the plan is ambitious, many of the above points will be implemented without delay. The long-range plan is exactly what we needed to ensure our survival.
In closing, Windsor Raceway, because of circumstances beyond its control, finds itself in the most critical position in its 31-year history. New gaming and wagering venues have eroded our traditional US customer base. In spite of the most aggressive and dynamic marketing initiatives, Windsor Raceway cannot compete in the marketplace without VLTs. Quite simply, the jobs of our employees, the careers of our horse people and the survival of Windsor Raceway is contingent on the immediate approval and implementation of VLTs. They are the tools which we will utilize to stimulate attendance, thereby strengthening our core business, which is liveries.
The Chair: Thank you, Mr Millson. We have two minutes per caucus.
Mr Crozier: Good afternoon, Mr Millson, your worship. I appreciate everything you've said about Windsor Raceway because it means a great deal to the southern part of Essex county that I represent. If there are two people in the whole racing industry whom I believe and understand, it's Mr Joy and yourself. I have a clipping that says Windsor Raceway owner Tom Joy -- this was the Windsor Star May 8 -- "says he looks at the addition of VLTs as another form of diversification. "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?'"
He goes on to say: "`I took the same approach with VLTs. The way I look at it is that we're in a gaming facility and our business is gaming.'"
He goes on to say: "`It's like being a restaurant and adding pork chops to the menu. It's just going to be one more product line in our business.'"
That's what I'd like to ask you about, John. You mention that Michigan retaliated. I wonder what's going to be the retaliation to VLTs. Secondly, you haven't mentioned anything beyond establishing VLTs at racetracks and I wish you'd comment on that.
Mr Millson: Windsor Raceway came into the Detroit market not with its Canadian base but actually the Detroit base, so we've always had to stay one step ahead of our competition. We were the first racetrack in Ontario to introduce triactor betting, which is a more generous form of gaming than the win, place and show. We did that because the United States did not have it. We initiated that back in 1982 and ever since that time we have always attempted to stay one step ahead of our counterparts in Michigan. We know for a fact that they attempted to get slot machines into the Michigan racetracks this past year and they were defeated. Instead, the governor gave them what I mentioned earlier, which was full card simulcasting. That was devastating to us and, as the previous speaker has indicated, what we want to do now is just leapfrog to the next step, which is to get VLTs, which hopefully will allow us the opportunity to get a window of maybe a year and a half, two years, three years on Michigan.
Interjection.
Mr Millson: He was a great mayor.
Mr Kormos: Mr Millson, relax. You could have stayed in Windsor because it's a done deal. Jim Flaherty said down in Fort Erie that this government is committed to the introduction of VLTs and permanent charitable casinos and the first place they will go is the racetracks. He's described as a legislator and top official in the Ministry of Consumer and Commercial Relations. That's before Norman Sterling called the editor and had the second edition revised. So you got the slots.
Mind you, although Harris has reversed himself, and Ernie Eves, trust me, these guys are not going to break contracts. With the kind of people they're dealing with for the purchase of these slots -- you don't break contracts with those guys, and Jim Flaherty and Norman Sterling know it. You don't screw around with the sort of people they're going to be dealing with from the States, from Baton Rouge, Louisiana, or Las Vegas.
Mr Young: What are you talking about?
Mr Millson: Mr Kormos, as a matter of fact, Windsor Raceway has been anxiously working with the government and providing various types of information to them in an effort to educate the government, as we have the other governments -- your government included as well -- to educate them on a continuing basis as to the concerns, because our only ambition is to be successful. When we are successful, then your government -- the previous government, the government today -- is a success as well. Everyone has the same ambition and all our ambition is, sir, is just to provide employment and --
Mr Kormos: And you're going to get the slots.
Mr Millson: Well, you've indicated that. However, I'm not sure that's actually the case. In fact, that's why it is our right to be here today and to voice --
Mr Kormos: Of course, and I've enjoyed listening to you.
The Chair: Thank you very much, Mr Kormos. We must move on to Mr Rollins.
Interjection.
The Chair: Mr Kormos, we have a plane to catch, if you would cooperate, just for once. Mr Rollins.
Mr Rollins: Thank you very much for this presentation. From the experience I've had while I've been on this committee, you certainly move into first place with the kind of presentation and the kind of gusto that you have for your establishment, the Windsor Raceway.
Mr Millson: Thank you.
Mr Rollins: That kind of input is certainly the kind of input this government wants to encourage and those are the people who will be successful. How many horses do you have come in from the States? Very few?
Mr Millson: Yes, we have quite a few. There's a good relationship here between the Ontario horse people, Michigan horse people and Ohio horse people, and they race back and forth. Cara Paroian, my assistant, was over in Toledo last evening racing and I know we have a number who come in and race here, so there's a good relationship back and forth. But the majority of the horses on site are, of course, Ontario horses and the money stays in Ontario.
Mr Rollins: Well, keep up the good work. I'm sure success with the machines will at some time find its way to your place.
The Chair: Thank you very much, Mr Millson.
Mr Millson: Thank you, Mr Chair.
ARLINGTON TAVERN
The Chair: Arlington Tavern, Mr Zenon Levitzky?
Mr Zenon Levitzky: That's right.
The Chair: Welcome.
Mr Levitzky: Thank you. I'm really caught off guard here. I thought it would be maybe a two- or three-person deal on one. But my idea in coming here was to say I'm in favour of it.
I own a small bar in a town called Ridgetown. We have a Legion in town, we have a restaurant in town. In Ridgetown we find that there are a lot of stag and does, there are a lot of baseball tournaments and a lot of hockey tournaments and dances. It doesn't matter where you go, they're always having these games of chance. It's something you can't stop and it's raising money for a good cause, obviously; for the bride and groom if it's a stag and doe, and if it's for a hockey dance or a baseball dance, they're raising money for the hockey teams.
Our situation is that we're trying to survive based on a population of 3,300, and when they do have a stag and doe or one of these dances, we sit empty in our bar because everybody is over there. Consequently we lay off a bartender, we lay off a waitress, and I usually have to man the phones myself.
I know you folks have had a long day. My theory here was to come in and show you a photocopy of my profit and loss statement from last year. That will tell the story. We did $440,000 in volume last year and we had a $14,000 loss overall. If this thing could generate an extra $100 a week profit for us, which is not a real dirty word I don't think, we could have broken even, or pretty close to that, based on the volume of our share of the take plus people sitting in our bar having a meal, having a drink.
1700
As I say, I'm by myself here. I'm not representing any major group other than some of the independent people in Ontario. That's about all the case I have. I think it's good for the industry because we are taxed to death with liquor taxes and high insurance premiums for liability insurance and that. We could sure use a break somewhere along the line, and this is one of the ways we could do it. Where I live, there are a few bars out of town that do have the illegal machines, the green machines, and all I want is a level playing field on this.
The Chair: Thank you, sir.
Mr Kormos: Thank you for your interest in coming. I've been to Ridgetown on more than a few occasions and know the town reasonably well. It happens down where I come from too. In smaller-town Ontario, when you've got a couple of big stags and does thrown in with, let's say, the Lions Club, which runs their beverage room in their hall, selling beer at -- what is it? -- two bucks a pop?
Mr Levitzky: Now it's about $3 a glass.
Mr Kormos: At a stag and doe?
Mr Levitzky: Yes.
Mr Kormos: Okay, three bucks a bottle. The taverns, I don't care if it's Friday or Saturday night, are virtually empty, haven't got that big a market.
Mr Levitzky: That's right.
Mr Kormos: Again, in smaller-town --
Mr Levitzky: Ontario.
Mr Kormos: I don't know what the case is on Yonge Street, but I'm sure it's a little bit different. People have raised the same concern about, in effect, what are subsidies from government -- and, again, not just this one; historically -- to, for instance, the charitable organizations that serve beer, be it the minor hockey -- they're getting government funding, if not directly, indirectly, as proposed through the charitable funding, because they're competitors too. They're selling beer at cost --
Mr Levitzky: Volunteer service. Nobody's getting paid there.
Mr Kormos: That's right. So part of what you're talking about embraces that problem as well, doesn't it?
Mr Levitzky: Yes, it does. As I say, if it happens 10 times a year, that's 10% of my business gone right there for the whole year. The other thing is -- and I've been to these stags and does and to these dances -- there are no checks on kids going in. There are minors going in, there's gambling going on, there's drinking going on, there's drugs going on. These things are charity fund-raisers and you've got 2,000 or 3,000 people attending some of these big does. There's no way to control it, whereas if it's in a bar, you've got to be 19 to drink in a bar. We have a policy in our bar that after 9 pm no minors are allowed, period. If they want to come in before 9 o'clock with their parents to have a meal, great. At 9 o'clock, they're out of there.
Mr Kormos: I've got to tell you, I have regard for that type of control.
Okay, you know what my position is on slots.
Mr Levitzky: Yes.
Mr Kormos: I'm not a supporter of slots. I hear what you're saying. You know that the government's made a commitment for racetracks and charitable casinos.
Mr Levitzky: I think it's a great idea.
Mr Kormos: Okay, they've made that commitment. The hotel, motel is down the road. You've got the big players, though. You've got the hotel-motel association with its high-priced lobbyists attending all these meetings --
Mr Levitzky: God bless them.
Mr Kormos: -- preparing slick submissions for all of its participants. You've got Days Inn, and some of the other big players have lined up. I'm anti-slot. My concern for you, though, is if and when the day comes, you may be at the end of the list. I don't know how small operators put themselves on par, with this government, with the big contributors and the big funders. So I wish you well on that.
Mr Levitzky: I'd rather be a sloppy second behind some of these big guys, because I think if there's a ray of hope, it will help us.
Mr Kormos: Okay, I hear what you're saying. Good luck to you.
Mr Levitzky: We're at the mercy of a lot of different situations beyond our control. Something like this, I feel, would just be a good shot in the arm and give us a little bit of a cushion, if you will, when we have to compete with the other organizations in town.
Mr Kormos: I appreciate what you're saying. Thank you, sir.
Mr Klees: Mr Levitzky, thank you very much for taking the time to be here today.
Mr Levitzky: My pleasure.
Mr Klees: It's really this kind of very practical input that's important to us, and I'd be interested in your opinion. Obviously, from the standpoint of a businessperson, you would welcome the VLTs as a support for your business. I'd be interested in your thoughts as to how you feel the people of Ridgetown would feel about VLTs being at your premises. Do you have any thoughts on that?
Mr Levitzky: We have in Ridgetown a large number of churches. The funny thing is they're against gambling, but they're the first ones in there with the bingo. It's sort of hard to justify that they can take money from people playing bingo, which is a form of gambling, I guess.
My customer base in Ridgetown is mostly farmers. They're hardworking people. From April through about October I don't see a whole lot of them. After the harvest is done in October, they've got nothing but time on their hands and they'll sit at the bar pretty well all day, come in for a few drinks, come and go. I know they would entertain the thought of having a VLT to put a few loonies in or whatever, rather than driving down to Windsor, which is a good hour's drive from Ridgetown.
You're always going to have some opposition to it from various groups, but I think that the basic people who are our clientele would be more than happy to have an extra additional entertainment going on.
Mr Klees: Generally, your view is that the community wouldn't object and would see it as another form of entertainment.
Mr Levitzky: Exactly.
Mr Klees: From your standpoint, it would certainly add something to the bottom line. By the way, the word "profit" is not a dirty word.
Mr Levitzky: I'm glad to hear it.
Mr Klees: I know that businesses around the province certainly got the message under the last government that it was and we are committed to providing support to businesses in this province, at least providing the level playing field that so many people have been talking about.
Mr Levitzky: Exactly.
Mr Klees: Once again, I want to thank you for your input here today.
Mr Levitzky: My pleasure.
Mr Kormos: I don't know, Chair. Last time we heard so much talk about level playing fields from the Tories, we got Brian Mulroney.
The Chair: Thank you for your comments, Mr Kormos.
Mr Levitzky, I thank you very much for taking the trouble to attend before us today.
Mr Levitzky: Okay. Would you like to have a copy of my statement?
The Chair: Actually, I was going to ask you a question. When did you start losing money? I assume at somewhere along the line you were making money.
Mr Levitzky: My first year in business I made a $500 profit based on the same volume. Then I decided to take a bit of a chance and I hired live entertainment. That cost me an arm and a leg and that took my profit away from me.
The Chair: So you've only been in business a couple of years at this location.
Mr Levitzky: Three years, yes.
The Chair: I don't think we have to see it. We believe you.
Mr Levitzky: Okay. I did bring it with me.
The Chair: Thank you very much.
This hearing is adjourned to Monday at 9:40 am at the Delta Hotel.
The committee adjourned at 1707.