The recent Ontario budget contemplates significant increases in
revenue to be contributed by the Ontario Lottery and Gaming
Corporation (OLG) to the provincial treasury, on the order of
C$600-million over the next three years. OLG is expected to
contribute C$1.737-billion to the Ontario government's revenues
for the current year 2012-2013, representing approximately 1.5% of
all Ontario government revenues (including taxes).
The budget provides that OLG will generate more than
C$600-million in additional revenues between 2012-2013 and
2014-2015 based on OLG's recently announced modernization
reconfiguring the number and location of gaming sites and
tailoring the type of gaming activities at those sites, the
benefits of which the budget says will be enhanced by ending the
slots at racetracks program by March 2013;
implementing a new fee model for municipalities hosting gaming
introducing a new sales channel for lottery products; and
increasing operational efficiencies at OLG by broadening the
role of the private sector and shifting to private-sector
investment for the development and ownership of capital assets
OLG has announced it is considering the establishment of a new
commercial casino in the Greater Toronto Area, presumably part of
the proposal to relocate gaming sites. Although the budget does not
say so explicitly, it may be that expected incremental revenues
from such a new facility are part of the C$600‑million
projected increase in OLG's contribution to the provincial
government over the next three years. As indicated in our March
Blakes Bulletin: What Will the Rules Be for Establishing a Toronto
Casino?, existing regulations would have to be amended or
replaced for a new casino to be established. The existing
regulation provides that municipalities designated as
"eligible" would be considered for casinos after approval
through a municipal referendum and meeting other conditions.
However, OLG's authority to designate "eligible"
municipalities under the existing regulation lapsed in 2003.
Although not explicitly stated, it also appears that the
Province is expecting that OLG will contribute more to provincial
revenues, in part, through reduced fees paid to municipalities
which host gaming sites.
Currently, municipalities hosting OLG casinos (excluding the
casino resorts at Windsor, Niagara Falls and Rama) and slots at
racetracks receive 5% of slot machine revenues from the first 450
machines and 2% from each additional machine. The budget implies
that such arrangements may be modified, decreasing what host
communities receive, and generating more revenue to OLG, and thus
the provincial government.
Given existing OLG agreements with the host communities of
casino resorts, the new fee model for municipalities hosting gaming
sites will apparently not apply to Windsor, Niagara Falls and Rama.
Windsor and Niagara Falls each receive as host communities for
casino resorts C$3-million each year in compensatory payments from
As well, it may be that OLG expects greater revenues will be
retained by it with the end of the slot machines at racetracks
program. Historically, 20% of gross revenues from slot machines at
racetracks have been used by OLG to support the Ontario horse
racing industry. The budget indicated that this initiative has
provided over C$3.7-billion since inception to this industry. As
previously announced, this initiative will end in 2013-2014
– this announcement predictably produced a fierce
reaction from industry participants.
The current budget expects C$340-million to be provided by OLG
to the horse racing industry for 2012‑2013. The end of
this program may also contribute to the estimated C$600-million
increase in OLG revenues to go to the Province; however, the budget
is not explicit in this regard.
For the current 2012-2013 year, the budget actually projects a
loss in revenue from OLG of C$100-million arising out of the fiscal
actions taken under the budget. This may suggest that OLG is
incurring costs to enhance its revenues in the future, such as the
costs incurred with the closure of some facilities and investment
in new initiatives, such as Internet gambling.
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