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Friday, September 21, 2012

Ontario Place and Slots At Racetracks closings linked

Desperate Liberals relying on deceptive backroom deals

I am saddened and dismayed by the lack of unity among Ontario horse people, and particularly troubled by Woodbine Entertainment Group (WEG) and OHRIA's apparent willingness to sell out the farm system and their complicity in the province's plan to reduce the number of racetracks from 17 to 7. Let's look back half a year to when our difficulties began.

In late winter of 2012, Ontarians were hit with two bombshells from the Ontario Government within weeks, and the two events appear to be inextricably linked. At the beginning of February the government stunned GTA residents by announcing the closure of the much-loved Ontario Place, and then at the end of the month they shocked the Ontario horse racing industry by declaring the Slots At Racetracks (SAR) partnership a dead duck, even though the program contributes over $1 billion annually to Ontario's coffers and has been the OLG's most consistent and biggest winner over the past decade.

The Ontario Place and SAR debacles have served to take some of the spotlight away from the provincial Liberals' E-Health and Orange fiascos and diverted attention from Ontario's record $14 billion annual deficit, which will soon be $15 billion or higher if the slots are removed from racetracks.

The Beginning of the End

February and March 2012 will go down in history as either the beginning of the end of the McGuinty-led Liberal government, or it will mark the end of an Ontario that embraces “community”, and be hugely symbolic of the corporate takeover of our province.

Big lie #1 - Ontario Place is dying, we must close it - Feb 2012

Fact: Ontario Place attendance was up 89% lat year, and the park was in the middle of a revitalization program that was meeting with great success.

Big lie #2 - We will transfer the 300 million dollar “subsidy” from Ontario horse racing to hospitals and schools - Mar 2012

Fact: The funds were never government revenues in the first place so cannot be deemed a subsidy. The proposed strategy is impossible for that 300 million cannot be transferred if the program is ended and the money goes away; the horsemen and racetrack share can be renegotiated, however it cannot be transferred elsewhere. In reality, ending the Slots At Racetracks partnership will serve to enlarge the provincial deficit by $1.1 billion per year (the amount horsemen currently provide to provincial government coffers as Ontario's share of our business partnership agreement for slots on our land), as the OLG have no plans in place to replace that revenue by the proposed closing date of March, 2013.

The municipalities that host the Slots At Racetracks facilities currently receive 5% of the profits and this goes a long way towards balancing municipal budgets and providing essential community services. By de-funding Ontario municipalities through cancellation of the hugely successful and mutually beneficial Slots At Racing business partnership, the towns and cities are left in the lurch. The OLG have no plans to replace this revenue next March, so in addition to increasing the Ontario deficit by $1.1 billion in 2013, the Liberal government is also taking $80 million out of the budgets of communities across the province.

The horse world was shocked and alarmed to hear of the sudden and unprecedented closure of the slots facilities at Fort Erie, Windsor and Sarnia (Hiawatha). The workers received 30-day notices and a month later the buildings were closed, even though OLG is still paying the tracks an amount equivalent to their slots revenues for another year! ALL of the remaining SAR facilities are scheduled to close in March, 2013.

OHRIA report and response from Burgess family

The Ontario Horse Racing Industry Association (OHRIA) responded a few months later with a detailed response that many in the harness racing world felt failed to address the actual problem and therefore offered flawed solutions. My own major problem with the OHRIA is that it essentially asks for an annual subsidy, when mutually beneficial business partnership agreements have been empirically proven to offer a much sounder economic base. Subsidies can be changed or even pulled at any time, and we have tremendous resources to offer both the provincial slots industry, and the coming sports book betting market. The B tracks being sacrificed on the big city altar (due to backroom deals with Vegas mega-corporations) have contributed tens of millions of dollars annually to provincial coffers and yet the OHRIA proposal abandons them, which is unfair to the tracks, the horse people and is detrimental to Ontario taxpayers.

The Burgess Report, which came out in response to the OHRIA paper, is more representative of sentiment in the harness racing camp. The proposal by the son-father combo of Blair and Robert Burgess accurately states that an equitable deal must involve some allocation of slot machine revenues at the tracks. The current Ontario model is being copied with great success in new York, Pennsylvania and other states and the model is not going away, especially not with the sports book coming. Many sports bettors already visit racetracks, and for the rest, if they had an option to utilize a sports book at their local track and/or a Woodbine Entertainment Group (WEG) or Canadian Gaming Corp (CGC) operated website, they'd use both.

Returning to the destruction and over-commercialization of Ontario Place that appears to be well underway, things were not always so crass down there. Throughout the 1970s and the 1980s the wonderfully egalitarian Ontario Place Forum was host to summer after summer of legendary, inspired concerts. Chuck Berry, Teenage Head, Neville Brothers, Bruce Cockburn; it was a place of magical musical moments, and the corporate atmosphere of the Molson Amphitheater rarely comes close to the ambience that was offered by the Forum. If sanity returns and the park re-opens, one way to bring back some of the fun would be to have several concerts per week at Echo Beach that were included with park admission.

First, the closure of Ontario Place was announced, and justified by an array of false, misleading and outdated statistics (see Òntario Place Wasn`t Dying, by Bob Hepburn, Toronto Star, 09AUG). This manipulated data was used to make a case that Ontario Place was foundering and on its last legs, when in fact attendance had risen almost 90% in 2011, with renovations and modernizations (including an expansion of the water park for kids) setting the stage for further increases in attendance and revenue in 2012. A brand new water slide has never had a child slide down it, and the thousands of urban families whose children previously bought Summer Fun passes were now left without a major recreational facility, as were tourists visiting Toronto. The closing of Ontario Place is an epic embarrassment created by a pack of lies.

From Autumn 2010 through late 2011, Ontario Place was being revitalized. Over $10,000,000 in provincial capital funds were spent on the property during this 12-month period. Among areas being refurbished:

- The children's water park Soak City added a new water slide, a spa pool and over 100 metres of new beach and walkways. None of this has yet to be enjoyed by the public who paid for it.

- A new ecology, conservation and animal care exhibit called Eco-Learning Centre, which attracted 300,000 visitors in its first year of operation.

- The world`s first Imax Theatre, Ontario Place Cinesphere, was restored and upgraded with a new digital projector plus a new sound system, seating, concession areas and interiors.

On February 1, 2012, the Government announced closure of the public areas of the park, for redevelopment scheduled to be completed in 2017. Yet nobody had or has agreed on what is to be built, and to add insult to injury, three of Toronto`s top architectural firms have submitted beautiful and leading edge plans (I work in the industry and have viewed one proposal) to expand and redevelop the park as a world-class community, family and tourism facility, and these have all been kept secret and unreleased by the Liberal government. Shockingly, in recent weeks the Liberals have announced plans to build CONDOS on the west island of this PUBLIC PARKLAND!

Returning to the origins of the attack on horse racing, let`s take a step back a few years and examine some of the problems OLG has had with its casinos in Niagara Falls (they opened a second one and forgot to close the first one, leading to huge overhead), and Windsor (they chose such an unstable partner that they were forced to lend Caesars $170 million to upgrade the facility), which will provide historical context for understanding why Fort Erie, Windsor and Sarnia were first targeted by the OLG and their Ontario Government in their unprecedented attack on Ontario`s world-leading harness racing industry. Fort Erie and Windsor were closed to cover up casino mismanagement and a foolhardy attempt to lower losses in Niagara and Windsor, while Sarnia was closed because OLG needed to boost their Point Edward Casino (which was being outperformed by the slots at Hiawatha Racetrack) numbers and Sarnia also has a mayor (Mike Bradley) that was willing to organize Ontario mayors last year and challenge the OLG when they tried to claw back a portion of the 5% that municipalities currently receive from Slots At Racing.

The OLG wants to cancel the SAR program AND re-allocate the money, which is technically impossible because if the program doesn't exist in the future, then there is no money to re-allocate. The OLG imagines that their new partners will somehow be more beneficial to Ontario, so let's examine who they want to do business with. The slots are currently hosted by the primarily not-for-profit Ontario horse racing industry and this business deal provides over $1 billion per annum to Ontario, as the province gets a 75% cut of all profits. The new plan involves partnering with Tanenbaum's bingo parlours (Boardwalk Gaming, which will take 47% versus racetracks and horsepeople share which is 20% total), and reduces the province's take from 75% down to 20-25%. Also, do we really want slot machines in residential neighborhood bingo parlours, after being snuck in under the guise of bingo hall Trojan horses?

The province is also being courted by giant USA casino companies, who have already told the OLG they cannot be expected to operate on the measly 20% that tracks and horsemen get, and they are looking for at least half the pie. Instead of paying 20% of net profits back into the Ontario economy via 17 racetracks and 60,000 horsemen, the OLG will pay 50% or more of profits to the likes of MGM Resorts, Caesar's (troubled, debt-burdened operator of Windsor Casino) and Sands (CEO Shelley Adelson of Las Vegas Sands is anti-union and the biggest financial supporter of Newt Gingrich and Mitt Romney; Sands and Adelson are also under investigation for bribing government officials in China), while Ontario rural communities will become ghost towns.

Poverty, addiction, foreclosures on the way

All that money leaving Ontario for Vegas means the end of the multiplier effect. While it is true that racetracks and horsemen receive $300 million annually from the agreement, that money is spent in Ontario, generating over $200 million of income tax, sales tax and other economic benefits to the province, in addition to the $1.1 billion horsemen provide directly to the provincial treasury each year via SAR. If Ontario chooses centralized, foreign-owned mega-casinos rather than continuing a mutually beneficial business agreement, the pain will be felt by more than just Liberals running for re-election. Poverty, addiction, foreclosures and higher social and medical costs will be the result of such a near-sighted and uneconomic strategy.

It is important to understand the closings of Ontario Place and the SAR program in the context of pending federal legislation that will allow the operation of sports betting books in Canada. Vegas is spending big money to get in on this action and if they are successful, their inclusion will mean Ontarians lose tens of thousands of jobs and billions of dollars in annual revenue. Every year, several billion dollars that should be going to Ontario's treasury and to the economies of cities and townships across the province will instead go to Las Vegas accountants, lawyers, shareholders and corporate executives. The financial resources that now go toward making our province functional and enjoyable are proposed by the OLG and the Ontario Liberals to go to paying the executive salaries, interest charges and dividends of a few large US-based corporations. Transitioning from a well-functioning and equitable province-wide system to a few giant casinos operated by American companies will be nothing less than the sellout of small town and rural Ontario, and Ontarians will pay the price for generations.

Ontario horse racing tracks such as Woodbine, Mohawk, Georgian Downs, Fort Erie, Windsor, Flamboro, Hiawatha, Rideau Carleton and Western Fair are all ideal locations for a sports book operation, in addition to Niagara Falls and the proposed Metro Convention Centre casino in downtown Toronto. This would appear obvious to most Ontario horsemen and gamblers, yet the confluence of the sudden closure of Ontario Place and the cancellation of the hugely successful SAR partnership (rivaled only by the LCBO as a major contributor to Ontario`s treasury) would make one wonder if Vegas money is already influencing OLG bureaucrats the public counts on to provide unbiased advice to the Government of Ontario.

The OLG has proven they can lose money operating casinos, however sports book betting, if properly diversified across the province, has the incredible potential of returning money to Ontario that currently goes to offshore websites like Betfair.com and Bodog.com. In this scenario, if even a portion of the online gambling from Ontario that is already taking place is re-directed to websites that provide a small percentage (eg 0.5%) to preserve racetracks, then that money will re-circulate again and again within our province. In addition to operating physical sports books at their tracks, WEG (Woodbine, Mohawk, Fort Erie) and CGC (Georgian Downs, Flamboro) could each build and operate an online sports book that also contributes to the B tracks. If slots are restored and extended at Ontario racetracks, and physical and web-based sports books are added into the mix, the Ontario horse racing industry will soon be able to offer upwards of $3 billion per year to Ontario's treasury, up from the $1.1 billion Ontario horse people currently provide annually.

The sudden closures of both Ontario Place and the Slots At Racing program indicate heavy lobbying by Vegas interests ahead of the legalization of a sports book in Canada. The Slots At Racing partnership between Ontario horsemen and the OLG has been a huge success for the people of Ontario, providing over $10 billion to the Ontario Treasury during the past decade, with the remainder of funds generated being re-invested in Ontario communities and the agricultural sector. Hundreds of millions in income taxes and sales taxes are paid by the 60,000+ employed full or part-time in Ontario horse racing, and about half of these jobs are at risk because of current government plans, which would likely see closures (or severely reduced race dates) of racetracks such as Fort Erie, Windsor, Sarnia, Sudbury, Dresden, Hanover, Grand River, Woodstock, Qunite and Kawartha Downs.

In 2006 and 2007 the OLG brought in new management to overcome the insider lottery wins scandal, and after those folks ran up big expense accounts in 2007 and 2008, another management shakeup took place in 2009. Throughout all of the troubles at the OLG, the Slots At Racing partnership has provided the largest revenue streams in the most consistent, trouble-free manner. The story reminds one of when the CBC canceled their number one rated show, Don Messer`s Jubilee (live from PEI). At the time it was the network`s most profitable and most popular show, but other CBC producers grew tired of explaining why they could not produce such numbers with a similar $25,000 per program budget. The CBC killed off a golden goose to make their other shows look better, and the OLG is attempting to kill of Slots At Racing as a way to cover up its casino incompetence and pave the way for Vegas-controlled gambling in Ontario.

Dale Lastman (Larry Tanenbaum's lawyer) was appointed to the OLG Board of Directors in 2010, and less than two years later, the SAR agreement that pays out 10% to mostly not-for-profit racetracks and 10% to Ontario horsemen (via race purses) was being canceled in favour of a new agreement that pays Tanenbaum's Boardwalk Gaming (a bingo hall company back-dooring its way into slots) 47%, vastly reducing the share for the Ontario treasury. Coincidence, or more evidence of a corporate takeover of our province?

There is a serious risk of the big players in Ontario's horse racing industry striking separate deals with the OLG and essentially hanging the smaller tracks out to dry. This strategy (see the OHRIA Report) has the industry begging for a $200 million annual handout while also accepting track closures across the province. What can be done to prevent this disastrous outcome? Here's the existing arrangement:

Existing arrangement:

2012 – 75% Province / 20% Track (10%) and Horsepeople (10%) / 5% Local Municipality

Ontario and the horse industry must agree in coming weeks to do one of two things:

A) Agree to a two-year extension of the existing Slots At Racing partnership. This will allow time for cooler heads to prevail, and provide ample opportunities for the racing industry, the local municipalities and the provincial government to come to mutually acceptable terms on a new deal.


B) Replace the existing structure with a 10-year agreement designed to shift more of the slots dollars generated into the provincial treasury and into local municipal budgets (increasing them to 7-8% from current 5%), while also providing a small percentage to racetracks and horsemen for agreeing to host and operate sports betting books at racetracks.

Giving up a billion plus a year guaranteed in exchange for a few bingo halls and a waterfront casino dream was never the real story of the OLG / Ontario Government announcements, as the pending arrival of the sports betting book casts a shadow over all their excuses and deceitful plans to “modernize” (read “sell out to Americans”) the provincial gambling industry. There is zero chance that OLG will give up its $700 million per year from Woodbine Entertainment Group, so you know Woodbine and Mohawk slots are safe. OLG would also like to strike a deal with Canadian Gaming Corp, so Georgian Downs and Flamboro will escape the chopping block. The question now is, will horsemen from the big tracks support the B tracks that feed into the system, and will they protect Ontario taxpayers and the tourism industry by not letting the SAR program end without at least a two-year extension to explore alternatives that would save the regional, more rural tracks?

Ontario is the leading Standardbred horse racing market on Earth, and the overall horse racing industry employment would continue growing if not for government interference, deception and the illegal, premature ending of a business partnership agreement that the Government was obligated to review and report on every year, which it did not do. As recently as 2010 both the OLG and the Ontario Liberals were praising SAR as the model public-private partnership that it is.

If we build on the existing Slots At Racetracks agreement by extending it and expanding it, provincial government revenues can rise to over $1.5 billion per year (current rate is $1.1 billion annually from us) from our partnership, even before any sports book revenue is added, and also while increasing the existing 5% rate for local municipalities to the 7 to 8% range. By reinforcing our world-leading position in Standardbred racing and world-class, highly prominent status in Thoroughbred and Quarterhorse racing, the net result will be growth in horse racing industry jobs plus more revenues for local tourism, municipalities and the provincial treasury.

Whether we achieve a two-year extension to the current SAR deal or sign a new ten-year agreement, something needs to be done to prevent the devastation that closing many racetracks will wrought, as tens of thousands of jobs and dozens of communities are at risk.

As things stand, the OLG is out of control and they are attempting to sacrifice rural and small town Ontario to cover up their massive casino mismanagement. Unfortunately, the provincial Liberals have bought into this madness, and though the Ontario Government is hanging by a thread, so we are suggesting, as a first step, they announce a two-year extension to the current deal as a sane stopgap until longer term agreements can be entered into.

Their current plan involves shutting down efficient, lucrative, made-in-Ontario solutions to bolster OLG's money-losing and unwanted foreign-owned casinos and bingo hall dreams, and that will not go over well with voters. It is a preventable train wreck that can be avoided if clear-thinking taxpayers in Ontario revolt and put a stop to the OLG's muddled thinking and misguided proposals.

Please call, write or email your local MPP and ask that Ontario's horse farms, historic racetracks and rural tourism industry be preserved via an extension of SAR. The Slots At Racetracks program provides over $1.1 billion per year to our provincial treasury, and with an annual deficit now exceeding $14 billion, Ontario cannot afford to increase the deficit further by prematurely ending the highly rewarding and widely beneficial SAR joint venture.

Joe Trainor is a former Standardbred horse owner and is the Publisher of Horses and Hockey Blog.

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