An official publication of Global Gaming Expo

NOVEMBER 2002 

Sweet Charity

Ontario's charity casinos grow into destination resorts, guaranteeing revenue for worthy causes

By ALBERT WARSON

The charity casinos of Ontario, Canada, despite their name, are definitely not the poor cousins of the upscale Casino Windsor or Casino Niagara. Rather, they are sophisticated, creatively designed properties with enough entertainment sparkle to draw discerning American visitors from nearby border communities.
The five casinos - in Ganonoque, Sault Ste. Marie, Point Edward, Thunder Bay and Brantford - produce C$100 million (US$63 million) annually for hundreds of worthy causes across the province, and the money is guaranteed by the Ontario Lottery and Gaming Corp. (OLGC), which built, owns and operates the casinos. 
Ontario's charity casinos, which opened between May 1999 and this past June, differ from Las Vegas-style commercial casinos in that they have fewer slot machines and lower betting limits. Each has up to 450 slots and 60 table games; betting limits are $100 for table games, compared to $10,000 on table games in commercial casinos.
But quite apart from the gaming, which is regulated, monitored and supervised up to OLGC standards, the casinos have become destination resorts because of their locations, amenities and overall design, including restaurants and bars.
* Casino Sault Ste. Marie, in a rugged part of northern Ontario, is done up in a wilderness hunting and fishing theme, with a small aircraft inside the casino for a bush pilot accent. The first charity casino in Ontario, it opened in May 1999.
* In November of that same year, Brantford Charity Casino opened, with a theme based on the Milky Way galaxy and represented by a lighting tower on the roof that depicts a shooting star.
* Point Edward Charity Casino, which opened in April 2000 on Lake Huron, has a nautical theme with a view of passing boats for 20 kilometers on either side. 
* Thunder Bay Charity Casino opened four months later on Lake Superior, also with a nautical theme that is expressed in a lighthouse, iron railings and anchors from lake freighters.
* The newest and smallest of the properties, Thousand Islands Charity Casino, opened at Gananoque this past June, with a "map of the islands" interior decor and nature theme.
Dividing the money
Although there are charity casinos in other provinces, Ontario is the only one that guarantees a fixed income to charities.
Ron Barbaro, OLGC's chairman and CEO, said even if revenue at the five casinos dropped precipitously, OLGC would draw on revenue from slots at racetrack facilities and lotteries to make up any shortfall.
Indeed, the way attendance has been building, he thinks any revenue over the combined C$100 million might this fiscal year start turning into significant contributions to the government's treasury and likely would be applied toward education and health care, by far the two biggest items in the provincial budget.
(The lack of a road affected revenues at the Sault Ste. Marie casino during its first 18 months of operation. The casino couldn't meet OLGC's attendance projections because access to the casino's front door from the nearby international bridge to the United States wasn't completed and visitors had to creep around to the back. Barbaro said revenue was down during that period but has bounced back nearly 25 percent since the road to the bridge was completed.)
Grants financed by revenues from the casinos cover a range of purposes, including these recent examples: 
* $100,000 over two years to establish an after-school program for teen-agers with physical disabilities to provide opportunities for socialization and develop skills needed for independent living as adults.
* $113,000 over two years to strengthen the capacity of the organization of a municipal art gallery, enabling it to develop a stable source of revenue, higher quality of programming and serve a wider and more diverse audience.
* $210,000 over three years to support the development of the Nikkei Culture Centre, depicting the culture, history and legacy of generations of Japanese-Canadians and their contribution to Canadian life.
* $73,100 over one year to create a rooftop garden that will be used for recreational purposes and to grow produce at a transitional shelter for refugee claimants.
Five percent of the charity casinos' gross slot machine revenue goes to the five host municipalities themselves: Sault Ste. Marie and Point Edward, both near the Michigan border, Thunder Bay on Lake Superior not far from the Minnesota border, Gananoque amid the popular 1,000 Islands tourist area across the St. Lawrence River from upstate New York, and Brantford, deep in southwest Ontario dairy farm country - the only one that isn't readily accessible to U.S. visitors.
"The municipalities have so many ways to spend the money they have trouble achieving consensus about what to do with it," Barbaro said, "but often it's turned over to local hospitals for three years, or given to local charities."
Barbaro also noted that 2 percent of the gross revenue from slots at these casinos and provincial racetrack facilities is spent on problem gambling prevention, research and treatment. OLGC estimates that will amount to about C$29 million during the fiscal year ending March 31, 2003 - the most, it claims, that any North American gaming jurisdiction currently spends for those purposes.
Modest beginnings
Ontario's five charity casinos replaced three-day roving Monte Carlo gaming events conducted in rented premises all over the province. They were run by OLGC-licensed, private operators who turned over about C$10 million a year to the charities that hired them.
These events were plain, low-key and staffed by volunteers from the host charities, hardly the kind of gaming opportunities that would bring Americans swarming across the border.
It was during that transition from transient, homey and loosely audited to permanent, glamorous and professionally managed casinos that Ontario's government made an expensive miscalculation.
In 1997, OLGC, on behalf of the provincial government, invited proposals for the development of permanent charity casinos. Much of the response came from Monte Carlo operators who teamed up with other gaming operators and developers. OLGC awarded eight licenses to Canadian and U.S. consortiums, which quickly set about opening 44 charity casinos.
So far so good, except there was a public backlash against the casinos in most of the municipalities where they would have been located. 
"We realized there would be an overkill of permanent casinos, but by this time the groups which had been awarded licenses were well along in their arrangements and had invested quite a bit of money," Barbaro recalled. 
OLGC paid out C$50 million to settle all its claims for aborted development costs and some lost revenues, and cut back to the five charity casinos now in place. 
There were also consolation prizes. In late 1998, OLGC granted licenses to some of the losing consortiums to operate slot machines at racetracks around the province. By late March 2000, nine of them were in operation. Between the charity casinos and racetracks, "nobody [in Ontario] is too far away from a slot machine," Barbaro said. 
Is there any room for more charity casinos, now that they have proven so popular in five communities and thrown off so much cash for charities?
"I imagine municipalities who didn't get the casinos would love some, although it's up to the provincial government to decide whether to allow another referendum on the issue during the next round of municipal elections [this month]," he replied. The government hasn't yet spoken on that subject.
Charitable detractors
Not everybody is enthused about charitable gaming. Even some charities that benefit from the casinos have mixed feelings about the source of their revenue.
Canada West Foundation of Calgary released a report on the ethics of charitable gambling in May, based on the foundation's August 2000 survey of 647 charitable organizations. The report was prepared by Jason J. Azmier, a foundation senior policy analyst, and Robert Roach.
The report noted that the organizations regarded gambling revenue as better than taxation, by a margin of 3-to-1.
Azmier also noted that "some nonprofits [organizations] and charities have been asked by their boards to stop using gambling-related funds. High dependency on gambling revenues renders nonprofits vulnerable to policy changes beyond their control and prevents long-range planning."
Moreover, the report found:
* Increased gambling revenues and high-profile grants can lead to reduced funding from other sources, including individual donations.
* The focus of charitable fund-raising has shifted from broader community-based support to gamblers and problem gamblers.
* 58 percent of those the foundation surveyed who used charitable gambling would prefer not to use that source, but can't make up the shortfall without it.
* Among organizations that didn't use charitable gambling for fund-raising, 63 percent said "ethical concerns" were a factor. Only 20 percent said that they agree or strongly agree that charitable gambling is ethical.
* Respondents favored raffles and bingos more than, for example, slot machines and video lottery terminals.
Some charities would rather not use gambling revenue but feel they have no other choice, Azmier noted. Some are resigned to the fact that gambling will take place anyhow, so the money might as well end up in the charitable sector.
The report recommended creating alternative funding sources for charities that object to gambling; providing more nongambling funding that can be used for infrastructure spending; promoting diversification of funding sources within the charitable sector; and involving charities in the gambling policy-making process.
Foundation president Roger Gibbins said: "Our study finds that the [charitable] sector is opening its eyes to the potential downside of gambling, and this abundant source of revenue does not look as appealing as it once did."

  

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