Thursday 26 August 1993

Ontario Casino Corporation Act, 1993, Bill 8

Racetracks of Canada Inc (Ontario Division)

Roland B. Roberts, executive vice-president

Hugh M. Mitchell, director

Dorothy McCay

Ontario Federation of Agriculture

Roger George, president

Women in Harness Racing

Dr Moira Gunn, secretary-treasurer

University of Windsor

Dr Ron Ianni, president

Institute for Policy Analysis, University of Toronto

Dr Arthur Hosios, research associate

Coopers and Lybrand Consulting Group

John Farrow, project partner

Bill Rutsey, project partner

Michael French, gaming specialist

Daniel Webster, gaming specialist

Carl Zeitz, regulation and control specialist

Gordon Phillips, economic impact and tourism specialist

Rowan Faludi, economic impact specialist


*Chair / Président: Johnson, Paul R. (Prince Edward-Lennox-South Hastings/

Prince Edward-Lennox-Hastings-Sud ND)

Vice-Chair / Vice-Président: Wiseman, Jim (Durham West/-Ouest ND)

*Caplan, Elinor (Oriole L)

Carr, Gary (Oakville South/-Sud PC)

Cousens, W. Donald (Markham PC)

Jamison, Norm (Norfolk ND)

Kwinter, Monte (Wilson Heights L)

*Lessard, Wayne (Windsor-Walkerville ND)

*Mathyssen, Irene (Middlesex ND)

North, Peter (Elgin ND)

Phillips, Gerry (Scarborough-Agincourt L)

*Sutherland, Kimble (Oxford ND)

*In attendance / présents

Substitutions present / Membres remplaçants présents:

Dadamo, George (Windsor-Sandwich ND) for Mr Jamison

Duignan, Noel (Halton North/-Nord ND) for Mr North

Eves, Ernie L. (Parry Sound PC) for Mr Cousens

Martin, Tony (Sault Ste Marie ND) for Mr Wiseman

McClelland, Carman (Brampton North/-Nord L) for Mr Phillips

Tilson, David (Dufferin-Peel PC) for Mr Carr

Clerk / Greffière: Grannum, Tonia

Staff / Personnel: Murray, Paul, research officer, Legislative Research Service

The committee met at 1004 in the Huron Room, Macdonald Block, Toronto.


Consideration of Bill 8, An Act to provide for the control of casinos through the establishment of the Ontario Casino Corporation and to provide for certain other matters related to casinos / Loi prévoyant la réglementation des casinos par la création de la Société des casinos de l'Ontario et traitant de certaines autres questions relatives aux casinos.


The Chair (Mr Paul Johnson): We continue our second week, fourth day in Toronto. Our first presenters today are representing the Racetracks of Canada Inc, Roly Roberts, the executive vice-president, and Hugh Mitchell, the director. Gentlemen, you have 30 minutes within which to make your presentation and field some questions from members of the committee. If you would like to proceed when you're comfortable, please identify yourselves so we know who's who for Hansard.

Mr Roland B. Roberts: Thank you, Mr Chairman and members. I'm Roly Roberts, executive vice-president of Racetracks of Canada Inc, and Mr Hugh Mitchell is the director of this organization and is also the events and facilities manager at Western Fair Raceway in London.

We do appreciate this opportunity to present to you today the concerns of our 17 Ontario member racetracks with respect to the imminent introduction of commercial casino gaming in the province of Ontario.

Racetracks of Canada Inc is an association whose membership consists of 36 thoroughbred and standardbred racetracks, which are located in each of the provinces of Canada in which racing is conducted; 17 of these tracks are located in Ontario. The mandate of Racetracks of Canada is to further the interests of the parimutuel horse racing industry in general and the interests of racetrack operators in particular.

My mandate on this particular occasion is to make representation on behalf of the 17 Ontario member tracks, but not, I must emphasize, to express the independent views of any particular racetrack operator or to present a futile argument against the opening of the Windsor casino. My intent is not to be argumentative but to be constructive.

We are concerned that the ramifications of introducing commercial casino gaming, particularly as they affect the horse racing industry in Ontario, are being seriously underestimated by the Coopers and Lybrand report -- a copy of which I received just recently -- commissioned by the government of Ontario. The suggestions made on page 45 of the report are partial and rather simplistic responses to the adverse effects which casino gaming will have on racing, but are not of themselves the solution to our concerns. Other means of accomplishing the government's commitment to ensure that the horse racing industry remains a full and active player in the gaming industry must be found.

Our concern is that to date we are not aware of how the government plans to fulfil this commitment. The concerns of many of our member tracks are compounded due to the involvement of the Ontario Jockey Club in the casino bidding process, which prohibits it from sharing its insight or guidance in relation to the casino issue.

The Coopers and Lybrand report, which refers to horse racing under the caption "Mitigating Impacts on Existing Forms of Gaming," seems to base its conclusions, which endeavour to minimize the negative effect of casinos, upon an evaluation prepared for the government by a Dr Arthur Hosios. It would seem that Dr Hosios's evaluation attempts to discredit the several reports prepared in recent years by internationally accredited accounting and consulting firms.

This 1993 report also appears to conclude that the opening of several casinos in the province of Ontario is a given by its reference on page 46 under the heading "The Risks Must be Weighed," which states that: "Annual direct provincial revenues from casinos are estimated to be in excess of $850 million. It has been estimated that more than 97,000 full-time permanent jobs will be created in Ontario by casino gaming." I don't believe that the Windsor casino will provide those types of numbers.

The report does, however, go on to state that, and I again quote, "The introduction of casino gaming in Ontario must be structured to ensure, to the greatest extent possible, both the maximum amount of sustainable economic activity and the healthy survival of all forms of legal gaming."

It is also encouraging to note the government's commitment to the racing industry, which I quote from the July 26 issue of Casino Update, as follows: "The government is fully committed to the horse racing industry remaining a full and active player in the gaming industry," and it goes on to state, "Studies suggest that perhaps as many as 28,000 Ontario residents have full- or part-time jobs attributable to horse racing. Government and industry officials have an obligation to these employees. We must work together to see that the industry remains competitive."

Our concern, as stated previously, is that we have not been advised of any government initiatives to provide the opportunity for constructive discussions which will provide the model to safeguard the economic integrity of the racing industry. Time is of the essence. The Ontario division of Racetracks of Canada will be pleased to work with the government on such a project.


The horse racing industry is an integral and material segment of the social and economic fabric of this province and of Canada. Racetracks are the driving force and the marketing arm of the racing industry. To the extent that racetrack attendance, revenues and employment are negatively impacted by casino gaming, a ripple effect will be experienced by the rest of the industry. Experience has proven that a declining revenue base will cause racehorse owners to reduce both the quality and quantity of their horse inventory, thereby causing breeders to reduce the quality and numbers of foals produced. These reductions will, in turn, result in reduced levels of employment. Obviously, such reductions will result in less demand for supplies and services normally provided to each segment of the industry.

It is of interest to note that the Coopers and Lybrand report does state, "The quality of its product" -- that is, racing's product -- "will ultimately depend on its competitiveness within the North American racing community." The product referred to is the quality of the horse.

Racehorse owners form a significant part of racing's employment base -- in fact, according to an Ernst and Young report, approximately 21,500 persons, which Dr Hosios and Coopers and Lybrand chose to arbitrarily eliminate, for whatever reasons. Many racehorse owners are like owners of small businesses who, when forced out of business for economic reasons, become part of the mass of unemployed seeking other avenues of employment. Also, in today's environment part-time employment is becoming more important to the welfare and maintenance of the family unit. Therefore, in our opinion, the potential adverse effect upon the racing industry may far exceed the estimates presented by Coopers and Lybrand.

The current rate of tax on wagering in Ontario is unrealistic in today's competitive environment. Other industry organizations have submitted reports and have provided you with detailed comparisons with other racing jurisdictions with which Ontario racing competes. I have not provided it in my report. While a reduction in the rate of tax would be beneficial, it would not of itself satisfy the government's commitment to the industry. The contribution of the racing industry to the provincial economy and the losses which will likely result from the introduction of casino gaming should not be underestimated, nor, I might add, should the contribution of casinos be overestimated.

The future of several thousands of employees and their families, a world-class breeding and racing industry, and racetrack facilities acknowledged internationally to be equal to the best in the world are dependent upon the will and the sincerity with which this commitment is addressed. Indeed, because of the major influence of Ontario racing, an opportunity is presented to the government and to the industry to not only ensure the viability of the racing industry but to provide the basis for renewed growth. The recent commitment to the 1996 running of the Breeders' Cup by the government, in concert with the Ontario Jockey Club, is an example of the benefits which may be derived from working together for a common good.

I repeat, Racetracks of Canada (Ontario Division) is anxious and willing to participate in discussions for the purpose of achieving this desirable end. Thank you.

Mr David Tilson (Dufferin-Peel): Thank you. I appreciate your submission and I think we will look at it. We've listened to you and we'll look at the report more carefully. I'm also interested from a personal point of view. I notice that one of your members is from my riding of Orangeville and I am interested in that.

Of course I've experienced, talking to the people in Orangeville -- there's a track in Orangeville. There's a number of farms that deal with animals, that deal with feed in both the county of Dufferin and the town of Caledon. I'm sure that members in this committee, particularly the rural people, have similar experiences, where for many of these people who work in these areas, specifically on the farms, that's all they've ever done. They're not trained for anything else. That comment's been made in the media and at this committee, the fear, not only in the racing industry but in the agricultural industry. I notice Mr George is coming a little later this morning. Could you comment a little more on the specific loss of jobs that you perceive? Do you have anything to add to the debate?

Mr Roberts: I think, as you mentioned it, it has been and will be covered more by the people closer to the actual operations who are the owners and breeders and run the horse farms. There's no question, and we have made this argument on many occasions, that there is a significant segment within the racing industry who will find it very difficult to find employment in other areas. I think it will be difficult in today's environment because they may not have the wherewithal to be able to attune themselves to the technical requirements of today's society.

Mr Tilson: In your discussions -- and I assume you've had some -- with the members of the government, be it political or the civil service, what is their response to that, to all these people who are simply going to be out of work?

Mr Roberts: It's interesting that the Coopers and Lybrand report, which I believe depends in large measure upon Dr Hosios's report, seems to discount this ripple effect which I referred to in my report as affecting the farm base or the breeders and owners base. They don't think there will be a reduction in the number of horses operating at racetracks. Indeed, there may be fewer racetracks at which to operate.

Mr Tilson: I'm looking at page 4 of your report, specifically the sentence that stated, "Experience has proven that a declining revenue base will cause racehorse owners to reduce both the quality and quantity of their horse inventory, thereby causing breeders to reduce the quality and number of foals produced," etc.

I've read something of what's gone on in Manitoba and some other Canadian jurisdictions. I'd like to know what you mean by "experience has proven." Can you give us any other facts, to your knowledge, specifically from the American jurisdictions, that would lead you to those conclusions?

Mr Roberts: Right at the moment, with a number of racetracks closing, and certainly the economy is having its effect, the number of horses being bred in North America has reduced significantly both within the thoroughbred and standardbred industries over the last two to three years particularly.

I guess from my own personal standpoint, I've spent approximately 35 years within the horse racing industry, and from observation -- and this may not count for a great deal -- certainly experience shows that, yes, there is this ripple effect. There's no question. The GST I guess is an example of it, on which I was quite involved with Racetracks of Canada, and the concern within the owner and breeder segments of this industry has had, I think, quite a devastating effect, particularly in the standardbred business. Many of them have opted out.

Mr Tilson: You've mentioned the report. Coopers and Lybrand will be spending some time this afternoon on that report. The report will be reviewed. We on the opposition side have got the impression that the government hasn't liked the other reports that it's had, so it keeps on trying and finally gets a report that it likes. I might get some heckles from the government side, but that's certainly the impression that we in the opposition have, that if you don't like it, you hire somebody else.


Mrs Irene Mathyssen (Middlesex): Is that what you do, David?

Mr Tilson: That's what it appears you do. You don't like what you heard before and so you got a report that you liked.

You've made some reference to the Coopers and Lybrand report. Have you got anything more to add? Unfortunately, Coopers and Lybrand will be talking after you have.

Mr Roberts: I would sooner approach it on another basis. What you have said could just as easily be said about consulting firms the racing industry may hire. Consultants tend to produce what is requested of them. At the same time, there have been several reports -- and I'm sorry, I don't have their names with me, but I could provide them -- that have been done by independent universities and people who have not been specifically hired by the racing industry to produce these reports. I don't think it's by accident that they agree. I'm not expert enough to know what theory Dr Hosios has used, but it apparently is divergent from what all other groups have used.

Mr Tilson: I have certainly watched experts in the past, and our problem is that in Ontario I don't think any of us are experts in gambling casinos, and I get the impression that we're going to be led down the garden path. I mean, what do we know? So we're signing everything over to some other groups to handle all these things. We've had police groups come before us and tell us how crime is going to be on the increase etc.

I'd like to ask you one more question, and that has to do with the issue of revenue, because obviously, being in the racing business, you're taxed quite heavily with respect to revenue. The theory has been put many times that there's so much money available for gambling, although this bill and this type of legislation is going to encourage the people of Ontario to gamble more than they've ever dreamed of gambling. It will be made more accessible and easier to gamble and all the problems that go with it.

The Treasurer and his colleagues, government members of this committee, have come to that conclusion: It's going to bring great revenue to the province of Ontario, aside from the additional costs it will take. The issue is, are they dreaming? In other words, if there's so much money for lotteries, so much money for the racing industry, if you look at the revenue that's generated from lotteries, if you look at the money that's generated from the racing industry, you're telling this committee that with the job losses etc there's obviously going to be a decline in revenue going to the government from the racing industry. If you look at the big picture, which this government rarely does in anything it does, is the revenue really going to be as good as it seems?

Mr Roberts: I think it's very debatable. That's why I made the references to the numbers that I did, the $850 million, the $97,000, and made the further comment that the benefits should not be overemphasized any more than the adverse effects should be underestimated in the case of the racing industry.

There is a pool of discretionary income. I don't think anybody can argue or disagree with that, no matter what it's being spent on, and certainly there is a segment of that discretionary income that's inclined towards gambling. There is a finite number of people who are inclined towards gambling. There is even a smaller number who are inclined to gamble heavily, and I think this is an area where again the Coopers and Lybrand report has not been terribly effective in addressing the problem that there is a very small percentage of racetrack attendees who bet a very significant amount of the total wagering dollars. It's something in the order of between 5% to 10% of attendance and between 50% to 60% of the total wagering at the racetrack, and these are the people, I believe, who are inclined to be gamblers at casinos. Certainly from surveys that have been done in the States, I've seen that this is certainly the case.

Mr Kimble Sutherland (Oxford): A point of order, Mr Chair: Since the official opposition is not here, will their time be divided between the two other parties represented?

The Chair: In fact that's what I've done already.

Mr Sutherland: Okay. Thank you.

Mr George Dadamo (Windsor-Sandwich): There are critics out there who say that the racing industry has a lot of woes, and one of them is trying to keep the imagination, trying to keep people's attention span and holding them at the racetracks for a little while. How do you respond to people who say that you're not imaginative enough to keep the people there?

Mr Roberts: I would disagree wholeheartedly. I think racing here in Ontario has proven itself to be very imaginative, very creative, a very vital and enthusiastic group, even though we have shown our differences more than we should at times. But overall there's been a lot that racing in Ontario has done, and that's why it's so well recognized around the world. We've got the top breeding. We've got the top racehorses that can compete anywhere in North America effectively. I just saw in this morning's paper where the Molson's Cup is attracting, from a nomination standpoint, the best in three-year-olds up to Toronto here to race in September. We have introduced a parimutuel system that is now recognized worldwide that eases and makes more economic the operation of the racing industry. We have been the initiators of intertrack betting; we were the first in North America to initiate that. Simulcasting: We have certainly been very aggressive and continue to be very aggressive in that area.

Mr Dadamo: In the Globe and Mail yesterday there was an article on your industry and they were referring to people being bored with 10 races and they want something new, they want something exciting, different, teletheatre -- I don't know. What's the answer?

Mr Roberts: I would suggest that is what the purpose of discussions with this government with casinos should be all about. I think unquestionably there's going to be a new player in the marketplace, and it was my intent in my presentation to say, look, we're not putting our heads in the sand, as has happened in other racing jurisdictions. We're wanting to work on a fair and reasonable basis, and if that means bringing casinos into a more closely adjunct operation with racing, that may be the answer. There's any number of things that will have to be looked at.

The gentleman to my left is Mr Mitchell, with the London operation. They operate a casino, a Monte Carlo operation, which is an adjunct to their racing. If you like, he may be able to make some comment on that.

Mr Dadamo: In the last two and a half years I've come to know Tom Joy, the owner of the Windsor racetrack, quite well. He was quoted in the Windsor Star on August 13 this year saying that the racing industry in Ontario shouldn't and doesn't speak for him as owner of the Windsor racetrack. He says that what you want is for him to roll over and die, and what he has always said to me and to other Windsor members is that he wanted to work intimately with the casino operation. He didn't see it as a foe necessarily, but he saw it as an avenue, if you will, to try different things, to expand somewhat, but to try to work cohesively with the casino industry in Windsor and hopefully with bringing more people to his racetrack on the periphery of the city of Windsor.


Mr Roberts: I do not believe Mr Joy was making that reference to Racetracks of Canada in terms of representing his racetrack. He is, as you say, a member, and I think he's saying what I'm endeavouring to say. I have no disagreement.

I know there are segments of this industry that are reluctant to take a position. They look at it as a death knell. I think we have to be much more optimistic and imaginative and, as I said in my report, look at this as an opportunity to make this industry vital, indeed make it more vital, and an opportunity for greater growth. But it's got to be done on a cooperative basis.

Mr Dadamo: That's great. I wanted to end by saying that I find your comments, after hearing many groups in the last couple of weeks, especially from your industry, very refreshing.

Mr Sutherland: I have just two points of interest.

(1) On page 4 of your presentation, you talked about, "Many racehorse owners are like owners of small businesses who, when forced out of business for economic reasons, become part of the mass of unemployed, seeking other avenues of employment." Could you give us some handle -- and maybe we should asked have one of the other organizations -- on what percentage of people who own horses do that for their full-time living versus those who may own them as a hobby?

(2) We had some comments yesterday about the amount of betting, an average bet --

Mr Roberts: If I may interject a second, I'd like to deal with one question at a time.

Mr Sutherland: Sure. The second one may be more for Mr Mitchell.

Mr Roberts: I cannot give you explicit numbers. I don't know whether Hugh knows. Okay, Hugh doesn't have that available either. I would suggest from my experience that it would certainly be far higher than 50%. I'm guessing it could be 75% to 80% of the owners in racing are dependent upon that as their livelihood, or a very significant part. If they're a farmer, they own a farm, this is a means of supplementing their income.

Other organizations, I believe, have indicated the benefits that racing contributes to the agricultural society. It enables farms to be maintained that would otherwise go dormant. Gosh, I'm sure you all see, as I do, travelling through Ontario, that the number of farms that are closing is of great concern.

Mr Sutherland: An additional question then is, what is the average bet, say, at Western Fair Raceway and what would be the average bet placed at your racetracks? And what percentage of bets placed at your racetracks would be $100 and above?

Mr Roberts: You're speaking of per capita betting?

Mr Sutherland: Yes.

Mr Roberts: I'll let you speak about London.

Mr Hugh M. Mitchell: At Western Fair Raceway -- live racing, that is -- our per capita bets now are averaging around $80.

On intertrack, when we accept simulcast racing from the Ontario Jockey Club, our per capita is somewhere around $170 or $180, which indicates that you have more core handicappers and fewer casual wagerers participating in the ITW product.

Mr Sutherland: When you say "per capita," is that per race?

Mr Mitchell: No, that's per head, per person, per every bet.

Mr Roberts: I think that is an example of what I was saying earlier to Mr Tilson. Hugh referred to the increase in per capita betting when they take the intertrack from the Ontario Jockey Club. Again, we're talking about quality. I think I would be fairly safe in guessing that the people who are causing that increase from $80 to $170 per capita betting on the same number of races are people who would otherwise be going to the Ontario Jockey Club to bet.

Mrs Mathyssen: I was interested in the customer who comes to a track like the Western Fair Raceway. I will admit to having gone to enjoy the odd race from time to time, and it seems to me that it's entirely different from what you might expect of casinos, horse racing being active. The customer goes having to know about the drivers, their records, the horses' handicaps, that kind of thing. It is much more active and, I would imagine, stimulating than just passively sitting or going to a one-armed bandit or whatever they have in casinos. In terms of the customer of the racetrack, is he or she not likely to be more faithful to the racetrack inasmuch as it's such an entirely different kind of entertainment?

Mr Mitchell: Horse racing is a two-dimensional product. There is the sporting entertainment side of the product presentation and then there are the four numbers on the board, the gambling and wagering side of the product. Interestingly enough, in some of our very raw experiments and surveying of customers at our Monte Carlo three-day events, as well as our live racing, there is a strong overlap. About 30% of our casino or Monte Carlo event customers are actually our track patrons. Interesting enough, they are core handicappers. This gets back to the gambling aspect and Mr Roberts's comment that about 20% of our patrons drive about 70% of our handle. You have to be careful about numbers when you're counting heads. In gambling, you have to look at the per capita and the wagering spending on an individual basis. Those are the key numbers to work with.

The Chair: Mr Roberts and Mr Mitchell, thank you very much for presenting before the committee today.


The Chair: Our next scheduled presenter is Dorothy McCay. Welcome.

Ms Dorothy McCay: Mr Chairman, members of the committee, ladies and gentlemen. Thank you for the opportunity to address this committee as a private citizen and voice my concerns regarding Bill 8, casino legislation.

The current government was elected without a platform to implement casino gambling. They have no mandate to do so from the people of Ontario, and before they prematurely proceed with ill-fated legislation which will have a moral and economic impact on the long-term future of this province, the people of this province should have a right to an Ontario-wide referendum on this issue.

A complete, all-encompassing economic and social impact study should be done before proceeding. This report should be released to the public before proceeding. Failure to do so will leave citizens questioning the credibility and prejudice of those responsible. This report should address the validity of potential casino revenues. There are only so many expendable gambling dollars available. The proposed casino format for Windsor does not compare to those in Las Vegas, Atlantic City or Manitoba.

Also, as we speak now plans are under way to add casinos in US jurisdictions, which can only decrease potential forecasted revenue through competition. Therefore, I question the validity of projected revenues. Also, when Minister Churley was in Windsor she was asked why she thought Americans would cross the river to gamble. Her reply was to the effect that for one thing they don't have to pay taxes on their winnings. Americans are legally required to report their winnings to the IRS, and it would be an offence for them not to do so.


The report should address the impact on the horse racing industry and agricultural community, and also should address the effect on crime in this province.

The horse racing industry has been a viable, self-sustaining industry. It generates in excess of $2 billion in annual economic activity. It is labour-intensive and supports many peripheral industries. Its decline would cause extensive economic damage to rural Ontario. The government has not considered the impact that casinos will have on the annual racing wagering, which is subject to Ontario's parimutuel tax.

When casinos have opened in other North American jurisdictions, there is an immediate decline in wagering at adjacent tracks. In Winnipeg, the winter harness racing season was cancelled and betting and attendance for thoroughbred meets dropped 30% to 40%. When casinos came to Atlantic City, wagering at the Meadowlands and Garden State dropped 34%. Wagering at the tracks will decline, which will result in reduced parimutuel taxes and incidental sales taxes collected by the federal and provincial governments and the loss of jobs in the horse racing and breeding fields province-wide.

A report prepared by Ernst and Young estimated that there are 49,000 persons employed full- or part-time in the horse racing industry. A study by Price Waterhouse estimated between 9,500 and 18,500 jobs would be lost with the implementation of casino gambling. The majority of workers have no transferable skills and very limited education. They would become immediate additions to the unemployment ranks and eventually permanent additions to Ontario's welfare programs. At the current rate of Peel region's social assistance program for a single adult, $7,956 a year, or two adults and two children, $18,360 per year, the displacement of only 6,000 workers would translate to a cost of $100 million a year.

The Windsor casino's anticipated revenue, as has been reported in the papers, is $120 million to $140 million a year. This is apparently based on fiscal performance of major casinos in Atlantic City and Las Vegas, which are not comparable gaming venues. I also hope that the possibility of increased competition from Indian-run Michigan casinos is considered.

The $120 million to $140 million, less the estimated 30% decline in racing wagering -- approximately $27 million -- the estimated social assistance cost of displacement of 6,000 workers -- $100 million -- additional policing costs of $6 million plus additional losses -- lost sales tax revenue and a decline in charity-operated gaming profits and other revenues -- will result in a net loss to provincial coffers. The casino may be temporary, but its implementation will create a permanent, devastating effect on the horse racing industry.

Should the horse racing industry be sacrificed for the questionable attempt to revitalize Windsor by the implementation of casino gambling? The government states that the Windsor casino proposal must include ways in which the operator would work with the horse racing industry. Can you imagine Ford or Chrysler helping each other sell cars?

Minister Churley has stated that the government is fully committed to horse racing remaining a full player in the gaming industry. No new initiatives have been proposed. Rhetoric will not save the horse racing industry.

Also, on the issue of crime the Toronto Star, Wednesday, August 4, reports that the long-awaited report prepared by the Windsor police service predicts a massive increase in crime following the opening of a casino there later this year. The report details how crime increased in several US cities after casinos opened nearby.

Consumer and Commercial Relations Minister Churley pledged that the province will pick up the cost of policing needed. The Toronto Star states on Tuesday, August 17, that Minister Churley dismissed opposition charges that Ontario casinos would attract organized crime and increase criminal activity such as prostitution and drugs.

I have in my possession from Statistics Canada crime statistics for 1989, 1990 and 1991 for the province of Ontario. The report has the following categories for crime incidents: crimes of violence, breaking and entering, theft, fraud, prostitution, gaming and betting, drugs, offensive weapons and other. The overall per cent increment between 1989-90 was 10.7%; in 1990-91 it was 10.8%.

It is ill-advised to disregard the predictions of those directly involved in policing. The ministry finds it acceptable for the Coopers and Lybrand study to base its revenue conclusion on the fiscal performance of major casinos in Atlantic City and Las Vegas, where the operation differs from the proposed Windsor casino, but to make crime comparisons in those cities is considered unrealistic. The reality is that Ontario has a rising crime rate which is totally unacceptable.

This is an issue which has the attention of the business community and populace in general and has been put on the agenda of various political forums. Casino gambling will bring additional crime. It is of no consolation that the ministry will pay the additional costs of policing. Questionable forecasts in increased revenue for the province's coffers do not and will never justify any decline in the quality of life in Ontario. We do not want any increase in crime in Ontario.

In summary, I ask this committee to please do the following: take a province-wide referendum on casino gambling in Ontario and, number two, prepare a complete economic and social impact study before proceeding and release this to the public.

Mr Sutherland: Ms McCay, I'm interested by the nature of your presentation in something that has interested me throughout this entire debate as we hear different presenters. We've heard the horse racing industry come in and say about the impact it's going to have on it, we've had the charitable gaming industry come in and say this is going to have an impact upon it, and yet it seems to me gambling is gambling is gambling, whatever different area. Why should one form of gambling take precedence over another form of gambling, whether it's wagering at a racetrack, going to the charitable gaming or going to the casinos?

Ms McCay: Gambling at a racetrack differs in that it is a combined gambling and sport entity. I think you've had some people involved in counselling gamblers say that the worst form of gambling is the compulsive gambling that goes on at casinos. The limitations differ.

The fact is that right now we have this existing; it is part of our heritage. I just feel very strongly that we should not change this, we should just not allow any more gambling. We know and we've been told it's going to increase crime -- the social impacts on our towns and cities. We just won't be able to turn back. We have a problem now. Let's not make it worse.

Mrs Mathyssen: I was interested in your concerns about the casino attracting more of the criminal element. We had groups from B'nai Brith in. They do charitable activities in terms of Monte Carlo nights and they said they had no problem inasmuch as their casinos were well run. They'd taken precautions and the whole issue about an increase in crime in the neighbourhood simply wasn't there.

There seems to be a contradiction in this, but if what you say is true, that this activity attracts an unsavoury element, then wouldn't that same group be present at a racetrack? Isn't there a contradiction in all of this?

Ms McCay: To some extent, when you mention B'nai Brith, that is strictly a temporary casino set up for two, three days for the purposes of making money for charitable affiliations. I can't see major crime elements moving in for a three-day venue. If it's going to be a permanent casino, they will set themselves up permanently, especially in the area of drugs and prostitution.


Mrs Mathyssen: What about the racetrack? If a permanent fixture attracts the criminal element, wouldn't we expect that a racetrack would too?

Ms McCay: I'm sure those exist and I'm sure they've been covered by our police sources. I'm just concerned that we're going to add more.

Mrs Elinor Caplan (Oriole): We've had some other presentations that I would refer to where there were quotes that were given and I thought you might want to have some comment on them. One was a 1984 report that was written by Howard Hampton, former Attorney General and now a minister in this government, along with Margaret Beare. A quote from their report says:

"Wherever casinos are found, they are inseparable from organized criminal activities. Virtually every study undertaken in the United States, Britain, Australia and elsewhere points out that casino gaming, whether illegal or legal, encourages organized crime activity.... If a jurisdiction is not willing to accept this involvement it should not get involved in legalized gaming."

That was a quote from a minister of this government, Howard Hampton.

The second quote I think was also quite an interesting one. This was -- by the way, just for other committee members -- a presentation that we heard yesterday from the Mennonite Conference of Eastern Canada and it was making the same point you were making. The second quote was actually from Donald Trump, who was one of the owners of the three Atlantic City casinos and had at one point been interested, I understand, in bidding on the Windsor casino. His quote is:

"Gaming doesn't come cheap and 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's a big cost to pay...most jurisdictions have considered gaming and most jurisdictions, even though right now it seems to be the craze...have rejected it. And the ones that have accepted it, many of them if you gave them their choice again, they would have turned it down."

Those two quotes were included in this report.

It seems to me from your presentation, your concern is that this government, without a mandate, embarked on this with only the Coopers and Lybrand study before it. Having considered those kinds of implications, because of the attitude displayed by Mrs Mathyssen and also Mr Sutherland, the attitude that, "Gambling is gambling and therefore casinos aren't going to make a difference," I thought you might just want to comment on what your expectations as a citizen are of the kind of debate you would have expected the government to have before it proceeded to offer casinos to a city like Windsor, which is really suffering right now and is looking for anything that it believes will offer it economic activity.

Ms McCay: In reference to something like Windsor, Windsor is suffering like a lot of areas are suffering. Because of the depressive state we are in, government is trying to find new initiatives that will make money. Some of these appear to be: make tax dollars quick. I don't think some of the long-term effects have been thought out or they have had enough time to work on them properly. This is why I am asking for, and I would like to see, a province-wide referendum on this issue. Introducing casino gambling in Windsor is just a start there. There has been a recommendation that it go to various other jurisdictions. I think we should have a right to that decision. Let the people speak.

Secondly, I feel Windsor has an opportunity to try and revitalize its town in other aspects. I don't think casino gambling is their answer.

Mrs Caplan: What do you think will happen? Right now, there are a lot of restrictions on the casino in Windsor. Frankly, a lot of people in the Windsor area are very supportive of using the casino to try and revitalize their economy and it seems that the government's decided to go ahead with this. But what do you think is going to happen in Windsor if Detroit opens up one or two casinos without all the restrictions that Windsor has?

Ms McCay: I don't think Windsor will have the market. They may get people. I think they'll have people from Toronto. Compulsive gamblers will go to a casino, but I don't think they're going to get the market which they are using to generate their forecasted revenue figures. They will be in direct competition with what will be, in all likelihood, unrestricted casinos. The venue that is projected to be played in the Windsor casino compared to Las Vegas or Atlantic City differs greatly. I guess the best comparison will be Atlantic City, and all those casinos did nothing for that town. It did not revitalize Atlantic City. If you've been to Atlantic City, you don't walk down that boardwalk or go into town. It has done nothing.

Mrs Caplan: I guess one of the concerns we've had from those who have looked at some of those centres in the United States is that it hasn't revitalized the economy and has created a crime centre as well. There has been a concern as to how that is then responded to by the community. I think there are probably a lot of very disappointed people in Atlantic City and my hope is that the people of Windsor are not disappointed because of the expectations that have been raised about what this is going to do for them.

Ms McCay: It will help the economy, but it can't do that alone.

Mr Tilson: Thank you for your excellent comments. I don't seem to have a written statement but I can assure you members will be looking up Hansard because you've certainly summarized many of the issues --

Mr Sutherland: You'll be checking the facts.

Mr Tilson: Yes, I will be looking at Hansard because I think members will be using your comments in an attempt to try and persuade the government to change its mind.

I was particularly interested in the emphasis on the need for an economic impact study. In other words, that is our party's major concern: Let's see where we're going before you get into it. Let's not just blindly jump into these things. Look at the impact on agriculture, look at the impact on jobs, existing industries, the increase in crime. I'm starting to repeat your speech.

It's interesting. There have been some articles that came out in the press when the topic of the electronic slot machines came out, and there was comment specifically with respect to Nova Scotia. This is indirectly related to casinos, but it's a point I'd like you to comment on. Their 3,600 machines apparently made, from a report that I have, $1 million a week. However, the government looked at all the associated problems that developed as a result of those machines and it yanked all those machines except for certain exceptions. They introduced a $500,000-a-year prevention and treatment program for gambling addicts. They're also going to set up a commission to take a hard look at gambling policy in general.

Although this doesn't deal with gambling casinos as such, it does deal with related topics. In other words, you get into this thing and you create this mess. Obviously, the NDP, when the topic of lotteries came up -- one of the things it talked about was addiction centres, that people are going to have awful problems. Could you comment on the topic of addiction centres. Do you have any thoughts on that?

Ms McCay: I'm aware that we have very few facilities here. I'm aware that the problem does exist. Right now, Ontario health services do not pay for these people to go to the US to get help. I think it'll increase.

When sports betting was introduced -- I'm a mother. I have young teenagers. These children are gambling under age. There are no controls in the corner grocery stores to limit these children. They're spending their allowances. I'm referring to high school children, grade 9, grade 10 boys. They're wagering in the corner grocery stores. There are no restrictions there.


Mrs Mathyssen: That's not true. It's against the law.

Ms McCay: It is against the law, but they're doing it.

Mr Tilson: That's the whole problem. You people don't know what you're doing over there.

Mrs Mathyssen: You claim there are no restrictions, but it's against the law. There are restrictions.

Ms McCay: The restrictions are not being enforced.

Mr Tilson: I agree with almost all of what you say. One topic I do agree with but I have some reservations about, and that is the issue of the referendum. I may not even be speaking for my party on this. There's no question that this legislation is designed to increase gambling, to encourage people to gamble, no question. They want everybody to gamble so they can get more and more revenue. They're broke. To use their line, it's the tax on the poor, the people who think they are getting something for nothing, and they're not.

At the same time, all you've got to do is go to the CNE. We're talking minor gambling, but whether it's throwing nickels to try to win presents or whether you're looking at the casinos at the CNE or the flights to Atlantic City or Nevada, there are an awful lot of people out there who like gambling.

Having said that, how popular do you think gambling is? I'm relating to your suggestion that there be referendums in various municipalities around this province. How popular do you think gambling is in Ontario?

Ms McCay: Gambling is very popular. I don't have any access to numbers to say how many people gamble.

Mr Tilson: No, of course you don't.

Ms McCay: I really can't speak on that issue. I think gambling should be restricted so that it has to be a premeditated situation. It should not be open. People should not have the ability to have their grocery money in hand and be able to gamble at the same time. It should be treated as a sport or a recreation entity but should have restrictions.

Mr Tilson: The major thesis of what you're saying is that there don't appear to be sufficient restrictions on where this government's going.

Ms McCay: No.

The Chair: Thank you, Ms McCay, for presenting before the committee today.


The Chair: Our next presenter is Roger George, president of the Ontario Federation of Agriculture. Mr George, you are no stranger to committee hearings.

Mr Roger George: Thank you for the opportunity of being here today. My name is Roger George. I'm the president of the Ontario Federation of Agriculture, which represents over 20,000 farm families in the province of Ontario. The OFA is also a member of the Ontario Agriculture and Horse Racing Coalition, which in turn has a combined membership of 47,000 farmers and horse racing people.

We in the OFA are extremely concerned with the potential effect of a proliferation of casinos and the effect that would have on the farmers of the province of Ontario. You may ask, why are the farmers concerned? The farmers are concerned because they have $350 million on the line, $350 million that horse racing people spend directly with members of my organization in their purchases of hay, straw, feed and other services. That is a very significant part of our gross farm income. In fact, it's 6%. Very nearly 6% of Ontario's gross farm income comes to us directly from people connected with the horse racing industry. I'm not prepared to sit back and watch the horse racing industry diminish, because that will have a direct impact on the net farm income of my members. That's why I'm here today, because experience shows that in other jurisdictions where we have a proliferation of casinos the horse racing industry will contract by upwards of 30% to 40%. That means fewer horses and less money, ultimately, in farmers' pockets.

Along with that lost rural income -- and that's what it is; it's rural income we're talking about here that's going to be lost -- will go lost rural jobs, because nearly 50,000 people are obtaining some form of income at the moment from horse racing. We believe that between 9,000 and 18,000 of these may lose their jobs or that source of income. That's very significant. Again, a large portion of that is rural income.

Many of these people also have skills that are not readily transferable. They're very skilled at what they do in looking after horses and livestock, but those skills are not easily transferable, and there's going to be absolutely no training program that any government is going to be able to put in to make most of these people rocket scientists and computer experts. Many of those people in turn will end up on the welfare rolls of those very same rural municipalities that I'm talking about.

I want to know, where is the study, the complete study, that shows the social cost of this misguided venture? The fact is that it hasn't been done.

The municipalities are also extremely concerned about, as I say, this misguided adventure. This week I attended the AMO convention in Hamilton, the Association of Municipalities of Ontario, where there were 600 or 700 delegates representing every area on a municipal basis across this province; not just rural municipalities but also large urban municipalities. These municipal leaders of Ontario overwhelmingly passed a resolution supporting the points that I have made thus far. They also called for a complete study on the impact of casinos on farming and on the rural communities before this is allowed to go any further than it already has. They expressed grave concern over the wellbeing of the horse racing industry and the future of agriculture.

I was very pleased to see the tremendous support we got from mayors of large urban centres. The mayor of Mississauga made a very impassioned plea to the delegates at the AMO convention concerning the importance of keeping this province whole and not building everything on the backs of our rural communities and destroying them, because once again I believe that rural Ontario is going to be the whipping-boy for these misguided politics. The people of rural Ontario I think have had enough of being second-class citizens. We want an equal chance to play our part in the economic recovery, not to have part of our income stripped away from us and have an extra burden imposed on our welfare rolls.

Those people who seek their thrills in a casino, I don't believe they're shoppers or tourists; they're not hunters or fishermen. They're not going to leave one red cent in my municipality. Not one red cent of this casino money is going to end up in my municipality from these people as an economic spinoff. All that's going to be left of rural Ontario from a proliferation of casinos will be a trail of lower incomes, lost jobs and social upheaval.

I think what we have to be looking at in this province and in this country is to create some new wealth. We need some economic policies that create new wealth, and we need to bake a bigger pie instead of picking up the crumbs from one that's already there and is badly burned, at that. Where is the economic vision of the government of Canada? Where is the economic vision of your provincial government? Why would we ever try to build an economic recovery for our border towns on a concept that will cause greater harm and greater grief beyond the glitz and glitter and neon lights of these temples of chance?

Let me talk for a second or two, if I can, about the $2 bet, which is the basic bet of the horse racing industry. I think I have distributed a sheet of paper which shows where the 18 cents of that $2 bet that eventually gets back to the horse owners goes to. The money goes to grooms, farmers, veterinarians, transportation people, equipment dealers, blacksmiths, taxes, farm help, new buildings, hardware supplies, utilities, breeding fees. This money is spent in the rural areas. It drives part of the economy of the rural areas.

These casinos will not create any new wealth at all. I believe that the one-armed bandits which will appear in Windsor will just transfer cash to the two-armed bandits in the treasury here in Toronto.

This country was built on resources, by men and women who worked the land, by men and women who harvested our natural resources. People like Donald Trump are not nation-builders; they pillage and rape.

I will remind those on the government side that in 1990 your party won 27 rural seats. Many of those seats you traditionally had not held before. I am very concerned about the impact this policy will have on those rural constituents, and I would suggest that these seats you have on loan are looking like they could well be called. The loan could well be called by the rural residents in the future if this policy goes through and the effect is to the detriment of the rural communities.

I'm going to close by giving you a statement that I've used before, and it's directed to Premier Rae. I say to Premier Rae that if he wants to get into the gambling business, to come and see me. I'll fix him up with a 15-year-old tractor, a thousand acres of land, a truckload of seed corn; then he'll be in the farming business and he'll know what gambling is really all about.


Mr Carman McClelland (Brampton North): Mrs Caplan's going to go first.

Mrs Caplan: I thought I would be a little irreverent, if I could. Rather than asking a question, I'd just add a little something to your quote. I think all you'd have to do is provide Premier Rae with a manure spreader.

Interjection: That sums it up.

Mr Dadamo: You own the manure spreader, you have the boots, you designed it.

Mrs Caplan: He'll bring his own manure is what I'm suggesting. I'll yield to Mr McClelland.

Mr McClelland: Mr George, I appreciate your being here. One of the concerns that the opposition has had has not, I think, been adequately addressed, and we've asked from time to time for I suppose exactly what you have referred to in your presentation, a cost-benefit analysis, a comprehensive impact study. We have found the fact of the matter is that the initiative was driven by the Ministry of Revenue and a mandate was given to the ministry that is now in charge of the responsibility. It became an after-the-fact process: "We're doing it anyway. Now let's find out what the impact is and let's massage it accordingly to minimize any downside effects," and that's, quite frankly, my view.

One might say I'm a cynic and I come to it with a particular bias. I admit that. I come with that bias that I suppose is born in part from opposition, but I think in part from experiencing the sense of mismanagement and incompetence of not knowing where this government is going and its changing from day to day in terms of its tack. You know quite well what the position of the government was prior to the election in terms of its view with casino gambling and the change.

I would like you again, if you can in some way, to try and emphasize to my friends in government the impact on the racing industry, because what we hear time and time again is some passing reference to the fact, "We're doing a lot to help the race industry, we're doing a lot to help agriculture and we're meeting with them and they're happy." Over and over again the minister, the parliamentary assistant and other members of the government caucus will say, "People in that particular segment are satisfied," and yet we hear time and time again people coming, such as yourself, saying they're not satisfied.

We ask them to show us some evidence in terms of the resolution of some of the issues, and they come up with the logic that somehow it's more like, "I saw a ghost last night and I chased it out the window, and if you don't believe me, there's the window I chased it out of." That's the kind of logic we hear. "We are doing it, trust us, believe us," and we hear the contrary.

Is there some way you can try and emphasize again that you have some very legitimate concerns and you need to have them addressed, and what needs to be done to mitigate the impact on your industry and all the support people, whether it be a moratorium, cost-benefit analysis, something that tangibly, concretely can be done that can address some of your concerns?

Mr George: Certainly I hope that this experiment doesn't go beyond Windsor. If it is to be that we are going to have the interim casino in Windsor, then for goodness' sake, let's use that experiment and analyse that very carefully before we build another 10 all around the province, as has been suggested we might by other studies.

I'm not really the one to be commenting on what the government is doing or should be doing for the horse racing industry, but very clearly, if we carry on with this casino experiment, the horse racing industry's tax structure is going to have to be addressed. There's no question that they're overtaxed in relation to how these casinos will be taxed. I believe that the tax regime dates back to the days when they had the monopoly on gambling, and so very clearly that will have to be addressed. I think it should be addressed anyway, regardless of the casino issue, because there have been lottery systems and whatever come in in the meantime. But I think the horse racing people are the best ones to determine what should be done for their areas.

Certainly from the point of view of the rural people for whom I think I speak, and particularly the farmers of Ontario, we have been telling government after government about the need to get on with some rural economic development. I don't think it's just downtowns and our border towns that need some economic revitalization; it's our entire province, and our entire province includes the rural areas. I get so frustrated with governments when they can blindly go on about the need for infrastructure, say for the Toronto transit system, and heaven knows we need it, but for goodness' sake, there's infrastructure needed out in the rural communities too.

If ever the time is right for these sorts of things it is now. I really believe that the people of Ontario are in the mood now to help themselves, and certainly in the rural areas we know that we have people there, farmers included, who do have money saved away and we want to find some ways and means to get that money into our rural communities to help to build those things, but we need government to free us of some of the shackles of rules and regulations so that we can get on with it. But I think that becomes part of an overall picture.

What really bothers me is if we've got this concern out there, I really believe that the Treasurer thinks he can build an economic recovery on casinos and the tax grab, and that is, as I say, not creating any new wealth. I want him to get into the business of creating new wealth, because that's the only way at the end of the day that this country will ever regain its former economic status.

Mr Ernie L. Eves (Parry Sound): It's good to see you again, Roger.

It's interesting to note that the government in its Coopers and Lybrand study and in fact in a review done by a professor at the University of Toronto seems to be downplaying quite a bit the impact that casino gambling will have on horse racing and directly or indirectly on the agricultural industry in the province of Ontario.

I'm finding it hard in my own mind to put two sets of figures together. Coopers and Lybrand decides to opt on the side of the U of T professor who says that there are probably not 18,000 people employed in the horse racing industry in the province of Ontario. They say -- this is Coopers and Lybrand's statement, "In the absence of current hard data..." We've been given all kinds of presentations, both by the agricultural industry and by horse racing. Standardbred Breeders and Owners yesterday said that there are 21,300 people licensed by the Ontario Racing Commission, and yet we have a U of T professor who says that there can't be 18,000 people employed in the industry.

He comes to the conclusion, and Coopers and Lybrand adopts it, that the impact on the industry will be 5% to 10% maximum. Every other experience in North America says it's between 27% and, in the case of Minnesota, 100%, because they don't have any racing program there because it's closed down with the advent of two casinos there. The experience in Manitoba's a 40% decrease. The experience in Wisconsin's a 50% decrease. The experience in New Jersey is 27% in attendance and 33% in wagering.

What are your thoughts on this matter?

Mr George: I'll start off by saying that nobody from Coopers and Lybrand had the decency to call me up and ask the Ontario Federation of Agriculture what the impact was going to be on that industry. We could have given them some figures. We could have given them this $350-million figure and a whole bunch of other economic data to go with it.

I don't have the figures, Mr Eves; I don't know exactly how many people are licensed for horses or whatever. All I know is that on the occasions that I've been to the racetrack, all I see is hustle and bustle and people -- young people, old people -- working. Every time I see a horse I know that there are at least two people to go along with that horse. You don't see that two people go along with a slot machine. All I see there are jobs. I see economic things happening there.


I don't know where Coopers and Lybrand got all their data from, but I just know that was a slanted report. I haven't read it fully yet. I know it was a slanted report and I know it was designed to do a specific job for the government. All I'm saying is, let's get to the truth of this matter and do the full economic impact before we go ahead with this misguided venture.

Mr Tilson: Thank you, Mr George. I too appreciate meeting you again. I come from a rural community and I've met you several times in my riding, and your last comment is most interesting, that Coopers and Lybrand had not consulted you, particularly when we all know -- I mean, we may dispute the figures, but we all know that the farmer in this province is going to be affected by this legislation, either directly or indirectly. The feed people are going to be affected, either directly or indirectly. Certainly, the horse racing industry is going to be affected, directly or indirectly.

I gave the example to one of the previous people who appeared this morning of the fact that it's been drawn to my attention that, notwithstanding that the government hopes that even more people will start gambling -- of the people who gamble in lotteries or racing, that will expand -- on the other hand, it's a feeling that there's only so much money out there to gamble and that if you start emphasizing casinos, which is what this government is doing, the effect -- and I appreciate your effect on the $2 bet; that's a most interesting comparison -- is that it's not there, that the whole initial premise of the Treasurer saying, "We're going to get all kinds more money," is not there. Common sense tells us it's not there, that people aren't going to put as much money into lotteries and they're certainly not going to put as much money into horse racing.

In fact, one of the earlier people who came -- I don't know whether you heard him or not -- said that the big gamblers in horse racing are also now going to move into casinos. They are gamblers, and I'm not saying that in a derogatory sense. The fact of the matter is that there are big gamblers in the horse racing industry. Those people are going to go into gambling. So it makes common sense that the racing industry and hence, as you go down the farming industry, the feed industry and the tack and all those other industries of which you are more aware than I am are going to be affected.

I'm essentially giving back what you have said but, in the light of the fact that you and I know that there are farms around this province, farms in my own riding that you know of personally, that are barely holding on to the edge of the cliff for fear they're going to fall off, could you elaborate on some of those things?

Mr George: Well, sure. I agree with you that I think there is a finite amount of money out there to start with and when people have to pay their mortgages and feed the family and whatever, we've got people out of work, I don't believe that we're going to get a -- you know, the pie for gambling cannot, in my mind, get bigger.

When you start talking about the farm families that are hanging on -- I'll give you a personal example. Now, I'm not hanging on, but this spring I sold about $1,500 worth of oats and hay to some horse owners in my township. That was the difference for me between having that cash in my hand to go out there and buy my seed grain for this spring for cash and having to go to the bank and borrow that operating money. That was very important to me. It was a welcome injection to my cash flow. I didn't really expect it. Somebody just came in off the street; they were horse owners. And that is the effect it has on my operation.

So that was very important to me, and I think you could multiply that many, many hundreds if not thousands of times across the province of Ontario with farmers. One of the largest corn farmers in this province, the former chairman of the Ontario Corn Producers' Association, who farms 5,000 acres of cash crops, sells a tremendous amount of hay and straw and feed to the horse racing industry. Given the fact of all the trouble we've had in producing grain for profit in this province for the last 5 or 10 years, I know from the former chairman of the corn board's conversations that that has been of vital importance to him in maintaining his cash flow.

Mr Sutherland: I just want to state a couple of things before I ask you a question. First of all, for the Coopers and Lybrand study, the horse racing coalition was consulted; you said that you are a part of the coalition, so input was had that way.

Mr George: I am here today as a representative of the Ontario Federation of Agriculture.

Mrs Caplan: They were not consulted.

Mr George: The OFA was not consulted.

Mr Sutherland: I understand that. I'm just saying the coalition was, and you're a part of that coalition.

Mrs Caplan: Unbelievable that you would say that, Sutherland.

Mr Sutherland: You also talked about rural economic development and, as you know, Bill 40 --

Mrs Caplan: You're a little defensive about this.

Mr Tilson: You're in big trouble.

Mr Sutherland: -- the Community Economic Development Act, is also being debated this week. We know from both Jobs Ontario Community Action and a significant number of water and sewer projects that were financed this year that a great deal of that money did go to rural communities and did go to smaller rural communities to help them with infrastructure.

There was an article in yesterday's Globe and Mail by the columnist who follows the horse racing industry, Neil A. Campbell. He highlights some of the issues in the industry, talking about a dispute between the jockey club and Flamboro Downs about who should be providing simulcasting for the Little Brown Jug race. He talks about how technology and the government legislation have made it possible for tracks anywhere to pick up and wager on races. He talks about the dispute. He goes on to say: "Many thousands of jobs are going to be lost in racing in Ontario during the next few years. It's going to happen one of two ways. Either tracks will do the sensible thing and cut back live racing on their own, or the fans are going to continue to desert the sport in droves, fed up with inane repetition."

Mr Campbell seems to be implying there are problems facing the industry and that there's going to be significant job loss outside of the issue of casinos and that there are issues facing the racing industry -- increased competition for the entertainment dollar, in general, is a significant issue far outside the issue of casinos. I'm wondering if you had any comment on that.

Mr George: I think it's fair to say that there are pressures on all sectors, all industries, which may necessitate cutbacks and whatever. All industries -- agriculture is among those; horse racing is probably among those -- are going to have to make changes in the way we go about doing business. I think that's just evolution. That's the pressure of the state of the economy, whatever. I don't dispute any of that.

What I'm saying, though, is there's absolutely no point in making an existing problem even worse, and if we accept the fact that the industry needs to change, then for goodness' sake let's not put another weight on their back and make that change even more. Sure, we're all going to change. I'm going to be changing the way I do business in agriculture too.

Mrs Mathyssen: I think Mr Sutherland's reading my mind here. I have to change my question a bit. Roger, you said something quite interesting in terms of needing many fronts, and very clearly, we need to find the solution to the problems of rural, urban, all Ontarians. It's been a tough 10 years in rural Ontario.

Mr Sutherland mentioned the committee that both of us were on last week, the committee that's looking at the financing of projects in Ontario so that we can get more communities going and also the community economic development. Now, I know that the OFA has worked diligently with government. The ethanol project is just an example. Can you describe other areas where the OFA is currently working in order to find those many fronts that we need to bring this province and agricultural communities back to life?

Mr George: Well, I think you're absolutely correct that there are many fronts here. It used to be that when we spoke about agriculture our only real contact was the Minister of Agriculture and Food. I find myself more and more talking to the Minister of Municipal Affairs, the Ministry of Economic Development and Trade, the Ministry of Environment and Energy. All these things become interrelated because when we talk about rural development there are so many ministries that have their finger in the pie, so to speak.

The real danger in this whole thing, as we attempt to bake a new pie, is the fact that either through interministerial jealousy or competition or overregulation, it makes it impossible for those local people to move ahead with some of their projects, so that if I, as a farmer, decide I'm going to diversify somewhat and put in a value added operation on my farm, a little processing plant or whatever, the last thing I need is 10 ministers coming in, each with their set of rules that make it just about impossible for me to ever get a stone laid.


That's the challenge we face. That's part of what I told the AMO convention this week. We have to free the local people, who know best how to deal with their municipalities, so that they've got more flexibility to plan and make their own rules, and get rid of this top-down government. It's impossible to have one set of rules for the entire province.

Mrs Mathyssen: So in terms of our community action planning, putting the community back in charge and saying, "All right, community, you know what you need in order to make the community viable. We want you to develop the plans and tell us, government, how to make it work," we're on the right track there?

Mr George: That's a step in the right direction.

Mr Wayne Lessard (Windsor-Walkerville): In your presentation, you made reference to many predictions and opinions and results of consultations and your disagreement and agreement with some of them and some of the problems that are facing not only agriculture but many business here in Ontario. I, as a member from Windsor, can indicate to you one statistic that I really agree with, and that is that we expect that 80% of the people who would be coming to the casino would be from outside the province of Ontario, and that is going to have an impact on the community that we've never seen before.

I'm reading from an article that was in the Windsor Star on August 11, 1993, by Dr Mageed Ragab, who made a presentation before this committee last week when we were in Windsor. He's talking about the positive impact that would have on business. He says: "Take food, for example. Imagine the millions of pounds of meat, poultry and fish that will be consumed. Then there are those who will supply the food suppliers with what they will need, from auto and truck leasing to electrical and plumbing works." So it would seem to me that there would be an opportunity for a positive impact on food growers, food suppliers and food processors from this initiative in Windsor. I wonder whether you can give me some idea of how your industry can benefit from that.

Mr George: We can all benefit from increased tourism if indeed that's what it is. I just hope that these people will stay long enough to actually eat a meal in Windsor. I hope the mayor of Detroit doesn't build a casino across the river a year after you build yours.

If these things come to pass, if it works, yes. I mean, clearly as farmers we're interested in working with the restaurant trade in providing the type of foods that consumers want. Again, I think it's kind of important that we recognize that the restaurant trade in turn, and consumers for that matter, patronize domestic product wherever they can as well. I think we do have a major ongoing education process to get Canadians to have some pride in the product that they grow and process here, because from the agrifood sector point of view -- and I talk more now about agrifood than I do about agriculture, because I think that's where the future lies. This $6-billion industry which I'm involved in directly, agriculture, spawns a $50-billion spinoff industry. That's where the future of our farmers lies, in making sure that we are ultimately supplying the consumers. So if you can bring me some more consumers to feed, then that's fine with me too from an agriculture point of view.

The Chair: Thank you very much, Mr George, for presenting before the committee.


The Chair: Our next presenter today is Dr Moira Gunn, secretary-treasurer of Women in Harness Racing.

Dr Moira Gunn: I'd like to thank you for the opportunity to appear here today. I'm here as a representative of Women in Harness Racing. We are a group of women who are extremely concerned about the effects of casino gambling on our livelihoods and on our families. Everything that we have seen so far points to casino gambling being a negative influence not only to our industry of horse racing, but to our families and friends. The reasons for our concerns are multiple.

There's no mandate for this government to introduce casino-style gambling here. The NDP government was elected by democratic process. That appears to be where the democratic process ended. The NDP had always declared itself opposed to casino gambling; that is, until after the election. Since then they've made a complete reversal in policy with their introduction of casino-type gambling. The government has no mandate from the people of Ontario to proceed with Bill 8.

Casino gambling is a controversial issue. Surely such controversy deserves either a referendum or to be delayed until the next election, where it can be an election issue. To proceed with an agenda that has never been presented to the people is not commendable. To proceed with an agenda that is a complete reversal of previously stated political policies after you are elected is, in my opinion, deplorable. This in itself should be adequate reason to stop Bill 8 until after an Ontario-wide referendum or until the next election. However, there are many other reasons why Bill 8 should not proceed.

One of these is horse racing and agriculture. The committee should be aware of the damage that casinos will inflict on the horse racing industry, agriculture, and the numerous smaller industries that feed from the horse racing industry.

An Ernst and Young study prepared in 1989-90 showed horse racing in Canada was responsible for 72,000 jobs, 49,000 being in Ontario. Compare this to 55,000 jobs in logging and forestry or 53,000 in mining and quarry. This shows horse racing is a major industry.

The Price Waterhouse study in September 1992 indicated a potential 33% decrease in wagering, with between 9,500 and 18,500 jobs being lost in horse racing and agriculture.

The Coopers and Lybrand study suggests that the level of decrease in wagering could be held to a 5% to 10% level. This is vastly different from the conclusions of studies done by Price Waterhouse and the University of Louisville. Why would this study, commissioned by the current government after the announcement of a Windsor casino, differ so drastically from other reports and from previous experience in other jurisdictions?

I am not an expert in statistical methodology, nor do I claim to be. I believe that the majority consensus is more often right than wrong -- this is the theory of democracy -- and I also believe that history repeats itself. Both New Jersey and Manitoba experienced marked decreases in wagering after the introduction of casinos there. This experience can be expected in Ontario as well.

The Coopers and Lybrand study is the only one suggesting limited damage to racing. It even suggests a 5% to 10% decrease in wagering. All the other studies suggest severe decreases in wagering, and I believe this majority opinion of severe decreases in wagering will hold true.

While I openly admit to making minor presumptions about majority consensus being right and about historical repetition, I believe they are less presumptuous than some of the conclusions and comments of Minister Churley and her study team. For the study team to presume that it can obtain the necessary information to comprehend our industry without talking to all groups concerned -- most notably absent was the Horseman's Benevolent and Protection Association, and I also know that Mr George was not consulted -- and to presume that the casino will be profitable like Las Vegas but not result in the criminal activity present in Vegas are far larger presumptions than my own.

The Coopers and Lybrand report bases much of its findings on a comparative study. In making a comparative study, a company such as Coopers and Lybrand must make presumptions in that comparison. That is what a comparative study is based on. However, those presumptions made should be reasonable, and epidemiological protocol demands that assumptions should be conservative.

Presumptions made by the Coopers and Lybrand report are, in my opinion, unreasonable. For Coopers and Lybrand to come up with the highly quoted figure of $850 million in revenue is based on a seriously flawed comparative study. This makes their entire report open to criticism, which in my opinion is justified criticism.

Some of the comparisons which I object to are basing the comparison of this study to that of Atlantic City. The correct part of the comparison in comparing Ontario casinos to Atlantic City is that, yes, Atlantic City has a base of day visitors. In fact, the average stay in Atlantic City is approximately five hours. However, Atlantic City casinos are major entertainment centres containing far more than gambling. The gambling there contains craps, keno and Pai Gou, which Ontario will not have. Ontario casinos cannot accurately be compared to this.

The Coopers and Lybrand study presumes we will have a unique monopolistic position. This is inaccurate. We will be competing with the entire North American gambling community.


Secondly, the study presumes that Ontario casinos would be able to achieve a win-per-gaming unit premium of 25% over the average of Atlantic City. They base this on Ontario's unique monopolistic position; again, inaccurate. This is an unrealistic presumption and we will be competing with casinos in numerous other close locations.

If you presume that we will only do 75% as well as Atlantic City, this immediately drops your $850 million generated to $500 million. If I could use an earlier presented figure here from, I believe, Mrs McCay, who suggested that, based on some numbers, with 18,000 unemployed, this would cost us another $300 million in social expenses, this reduces the Coopers and Lybrand net profit to $200 million. Take into account increased policing around the seven new casino sites and decreased retail sales in Ontario with lost economic drive -- after all, Coopers and Lybrand's study says that 40% of money will come from Ontario residents, and they will be spending less in our stores -- and basically, the Coopers and Lybrand study ends up with a net zero profit. I repeat: net zero. I would not wish to base a political career or party future on such a questionable study. The government needs further research.

Another reason for not considering casinos in this province is that of crime. Introducing casinos in Ontario will result in increased crime. This is inevitable. Total crimes increased 75% in Atlantic City in the first five years of casino gambling. This compares to a 17% increase in the same time period in Detroit. In Black Hawk and Central City there was a 300% increase in drunk driving arrests and citations after the introduction of casinos, and 75% of all local police reports there are now related to disturbances involving casino patrons. Atlantic City, with its population of 47,000 residents, has a police force of 400. They had to develop a casino crime unit due to stress on the police force when casinos opened. It appears obvious that casinos bring crime and further pressure on an already stressed police force.

Another reason for not having casinos in Ontario is economics. It is an unrealistic idea that the gambling dollar is infinitely elastic and that the market will keep expanding. Casino gambling has been legalized in many states. The Oneida Nation opened a casino in Verona, New York, in July, located two hours east of Buffalo. It now appears that Detroit may soon have a casino in or near that city. While it is hoped that casino gambling in Ontario will attract tourists, it is more likely that as gambling opportunities proliferate across North America, the majority of customers will be local.

Investment analysts in New York and Toronto are suggesting that casino gambling stocks available on the US stock exchange are no longer good investments. They report that growth in the industry has slowed while gambling outlets continue to multiply. They indicate that the gambling bubble is about to burst, with only the strongest surviving, primarily those who have diversified into an all-inclusive mega-entertainment centre. Minister Churley may have been more accurate than she realized when she said Ontario was behind the times in entering casino gambling.

While I keep hearing that the people of Windsor want a casino, I am unaware of any referendum indicating this. I suggest such a referendum include all Ontario residents, not just Windsor. Having spent the earlier part of this week as an observer at the Association of Municipalities of Ontario conference, my experience talking to people there is that the majority of municipalities do not want casinos in Ontario, but I would of course welcome a referendum on this issue.

It must be realized that putting a casino in one municipality affects all of Ontario, not just the single municipality. AMO overwhelmingly passed a resolution calling on Premier Rae and his government to study the impact of casinos on the economy of rural Ontario before allowing a proliferation of gambling establishments. Why is the government rushing into casinos without an economic impact study evaluating the effect on racing, agriculture and rural Ontario?

I have also heard criticism that the racing industry has been slow to respond to the competition of lotteries. The government only need look at its taxation of the racing industry and it is remarkable that it has done as well as it has. Prior to the introduction of lotteries, the racing industry had a monopoly on gambling in Ontario. For this privilege, they paid a heavy tax. Once lotteries were introduced in 1981, the monopolistic tax remained while the horse racing share of the gambling market fell to 27%. This crippling tax has been the number one reason why racetracks have been only moderately aggressive in marketing and promotion. When you are economically strangled by paying an excessive tax, it is difficult to find money for progressive steps.

If Ontario reduced the current provincial tax to half of 1% that would return in excess of $50 million to racetracks for growth. While the NDP government appears critical of racing, it continues to assure us that maintaining our viability is a very important priority and will receive the serious attention it deserves. No concrete initiatives have resulted from this. Even worse, the government appears determined to hand over our future to our competition by asking casino bidders to give Windsor Raceway some consideration.

What other industry would tolerate, let alone survive, what the Ontario government has done to horse racing? With the introduction of lotteries, that would be the equivalent of the government opening a government-run car plant in Windsor next door to Ford, but telling Ford they will pay taxes in excess of what is realistic, then 10 years down the road, criticizing Ford for being cash-starved, with poor promotions, so now the government is going to open a second car plant next door and they expect us not to be concerned.

I maintain that the government has rushed into casinos without proper studies and with unclear plans. The government has wasted taxpayers' money by its unclear and shifting direction. An example of this is in its request for proposals for the interim casino location. The RFP was quite clear regarding the number of dedicated spaces required for parking. While submissions were received by the government from the Windsor Art Gallery, Cambridge Shopping Centres and on behalf of Windsor Raceway Inc, only one location guaranteed the dedicated parking spots and this was not, I repeat, not the art gallery.

One hour prior to the closure deadline for the RFP, both Windsor racetrack and Cambridge Shopping Centres were informed that the interim casino would be located in the art gallery and their proposals were no longer required. This resulted in two disastrous economic consequences: First, both Cambridge Shopping Centres and Windsor Raceway have been offered financial compensation up to $50,000 each and I understand this is quite inadequate. Secondly, the choice of the art gallery, with its smaller floor space and on a multilevel design, will have far less revenue prospects than the proposed larger, better-designed buildings by the two other proponents. With this type of government decision-making, Ontario could be left with multiple white elephants while irreparable damage will have been done to the horse racing and agricultural industries.

In summary, I have some suggestions that could perhaps improve the Bill 8 legislation. I would, of course, prefer a referendum or that the bill be held to an election. However, if that is not the case, if Bill 8 will not be put on hold until a provincial referendum or a general election, I would suggest the following.

If Windsor is to truly be a study model it should be legislated as such for a minimum of a two-year study period. Racetracks should be allotted central space in casinos for wagering and that wagering should be owned and controlled by racetracks. Order-in-council powers should be eliminated from this bill. Video lottery terminals should be excluded from Bill 8; they should be covered by separate legislation. Provincial tax on horse wagering should be eliminated to allow recovery of this abused industry.

I would certainly be happy to answer any questions that I can for this committee.

Mr Eves: Again, I go back to the recurring discrepancy we have about the number of persons employed by your industry. You've again said here today, as many in your industry have, that the number is somewhere between 30,000 and 50,000 in the province of Ontario, yet Coopers and Lybrand and others say there is no more than 18,000. They discount owners, they eliminate automatically racehorse owners and they also apparently eliminate anybody who works for an owner. How do you account for this huge discrepancy?

Dr Gunn: Part of the discrepancy, as you say, is that they have eliminated racehorse owners as employed in the industry. They have not recognized that many racehorse owners work full-time owning and training their own stock and there are a number of examples of people who do that.

Mr Eves: I am intrigued by your comments about video lottery terminals. We had a representative of the Ontario Hotel and Motel Association in yesterday or the day before indicating that association would like to see VLTs in all licensed establishments in the province. What's your reaction to that?

Dr Gunn: VLTs have shown themselves to be the most addictive form of gambling. They are the most difficult to regulate with controls. I think the experience that was shown out east with problems with the VLTs where they were removed, except from licensed premises, showed that a lot of time and consideration will have to be given to this issue before they are even considered. I don't think this bill is the time or the place to do that.


Mr Eves: Why would you suppose the government does not want a referendum on the casino gambling issue, if it's as popular as they believe it is?

Dr Gunn: I'm sure their reason would be that they're trying to save taxpayers' dollars or whatever. My true opinion is that they do not want a referendum on this issue because they would lose.

Mr Eves: Only one way to find out.

Mr Tony Martin (Sault Ste Marie): I understand the concern you bring and the tremendous strength of feeling that comes with your presentation. However, having been a New Democrat officially since 1975, there is no policy on the books in our party re the question of casinos.

Dr Gunn: No, I have taken it from Hansard extracts.

Mr Martin: Certainly, there have been those who have spoken out against casinos, as there have been on almost every issue that confronts the country and the province. There are things on the books in the New Democratic Party that I certainly challenge at appropriate opportunities, conventions and things like that, but there is nothing on the books in the New Democratic Party that is either for or against casinos.

However, my question for you and my concern in all of this is the fear -- and I guess I do understand it -- of competition. You talked a lot about democracy and it seems to me that with democracy goes the importance of a free marketplace. A marketplace is often dictated by the wants of people --

Mrs Mathyssen: Fair trade.

Mr Martin: And fair trade.

Mr Eves: Free trade.

Mrs Mathyssen: Fair.

Mr Martin: If people want to and are interested in buying a certain commodity, they will do that. I think the people of Ontario have shown in great numbers that they're interested in wagering and games of chance through the lotteries and the fact that so many of them take off every weekend to places like Vegas and Atlantic City.

I live in Sault Ste Marie and we're certainly very interested in a casino. We have already some competition across the river. However, the folks across the river don't see it so much as competition as an opportunity to build a critical mass of attraction to our area so that people will come in and spend some dollars on not only the gaming opportunity but so much else that we have to offer by way of tourism.

I guess I would be hoping that the racing industry would look on this as well as the same kind of opportunity, and I would ask your comment on that.

Dr Gunn: Yes, I'd like to comment on a number of the things you said. First of all, on the NDP policy, I have always presumed that what party representatives said in the House was what they felt and believed, and the NDP has been recorded many times in Hansard as being against casino gambling.

In terms of our industry being afraid of competition or wanting a monopolistic position, I would say that is what the government has. Will you allow racetracks to sell lotteries and have casinos? That is open and free trade. For you to have an individual style of casino with a government monopoly is not free trade or open competition.

I also believe if you want open competition in this industry, then the design of the government casino is not designed to help that.

So I really object to saying that we are looking for a monopolistic position. I would say that the government is more responsible for ensuring that what it introduces in the way of casinos is going to have some benefit. Otherwise, why would the government be doing this? If a private individual wishes to invest money in a casino and either lose it all -- pay for the building and have great losses, that's one thing, but when you're dealing with taxpayers' money, that's my money. I object to your opening up casinos, which I do not feel will benefit the economy.

Mr Martin: As a point of clarification, Mr Chair, there is no taxpayers' money going into this.

Mr Noel Duignan (Halton North): Absolutely not.

Mr Martin: It's going to be run by the private sector.

Mr Duignan: Exactly.

Dr Gunn: Excuse me, who is paying for the studies that are going into this?

Mr Duignan: The casino project.

Dr Gunn: And who is paying for the casino project team?

Mr Martin: The enterprise itself, which is what I'm talking about here. There is no government money going into that enterprise.

Dr Gunn: Excuse me, in any form of development, company development, there is research that goes into that and that is part of your product cost.

Mr Martin: We do studies of various sorts and sundry through the Ministry of Economic Development and Trade, as did the opposition when it was in government, on all kinds of things, but the enterprise itself is going to be invested in and funded by the private sector.

Dr Gunn: That I am aware of.

Mr Sutherland: If there should be a referendum on casinos, should there not be a referendum on lotteries, bingos and all other forms and, for that matter, wagering at the racetrack?

Dr Gunn: I take your point. Again, the government introduced lotteries in 1981 without a referendum. Horse racing has been established for the longest period of time. I'm not sure it would be fair to go back to the car industry and say we're going to have a referendum on whether we're allowing car plants here. I think established industries do have a priority. I think new introductions and changes, such as casinos, would demand a referendum.

Mr Sutherland: But it's a form of gaming. You have a couple forms of gaming and you just have another form of gaming right now.

Dr Gunn: I do not object to gaming.

Mr McClelland: I suppose, Dr Gunn, you sense some of the frustration we felt in opposition with the little sort of side arguments that really don't address the substantive issue.

Let me use an example, and you term it as an example on page 5 of your brief, but I think it's illustrative. We talked about the development of the interim casino as an issue. We had heard in response, "That's all right, the people overwhelmingly in Windsor in fact wanted it downtown," and that therefore justifies, retroactively, if you will, the mismanagement in the process it went through, this charade of putting together a proposal, having people invest a considerable amount of time and money and effort in going through that and then, as you say, pulling the plug about an hour before the requests for proposals were even opened.

After the fact, the government says, "Well, that's okay, we maintain the right to do that," and that is supposed to give people some sort of comfort level in terms of the management. Then you hear questions with respect to my friends over here. They talk about gaming and somehow that's comparable to the issue of the horse racing industry and the impact and the economic impact.

I suppose what I'm trying to drive at here is -- and you use it as illustrative of the issue -- what level of confidence do you have when the government says: "It's okay. Trust us. We're going to manage cooperatively the impact on the horse racing industry and all of the ancillary industries and support behind that"? That's the message we've heard in this committee: "It's okay. We're going to take care of it. We have a plan. Trust us." How do you respond to that?

Dr Gunn: I have serious concerns and I used the RFP for the interim casino as an example of indecision and poor management. Coming from the private sector, good management is the only way you survive out there. I have no problem with the interim casino going in downtown Windsor. Why did you put these companies to the expense of doing an RFP for the proposal when, if you'd just taken a little more time and assessed the situation, you would have known you wanted it in the art gallery in downtown Windsor? It would have saved a great deal of time and money for these companies. If that is the type of management and overseeing and responsibility you're going to show when dealing with the private sector that's going to run these casinos, it's not going to work.

Mr McClelland: How does that reflect in terms of your confidence level, in terms of the management, the cooperative management, that is being promised to you with respect to the horse racing industry?

Dr Gunn: I have zero confidence at this point.

Mr McClelland: I just wanted to sort of get a sense of the weight of representation that you have. Women in Harness Racing -- how many women are associated with the industry? You may have mentioned that in your brief and if you did so, I apologize, I missed it. How many people do you represent?

Dr Gunn: Women in Harness Racing is a non-profit, volunteer organization and horse racing is one of the few industries where women have probably a larger percentage of the employment opportunities there. There's also an excellent number of women who have excelled and exceeded in this industry, so in that way it is also unique from a woman's point of view.

Our representation: We have approximately 500 active members and beyond that there are many loosely -- how do I put it? Members who are not intimately involved with the organization but who do from time to time come in on issues such as this -- and there's been an incredible response to this issue.

Mr McClelland: Just for the record, I presume it to be correct but I'd like you to affirm if in fact it is correct, that this is principal employment, this is the gainful employment of those individuals. This isn't just a hobby, a part-time little sort of hobby at the racetrack. This is the bread and butter, if you will, of --

Dr Gunn: It would be their main source of income.

Mr McClelland: Are many of those in a situation where they would be the sole supporters of a family or individuals who are self-supporting?

Dr Gunn: There are many instances where female grooms are single mothers and this industry, because of its time frames where you start early in the morning and can get off for the afternoon -- many women can pick up their children at school and it's well suited to women who have children.

Mr McClelland: So it's a reasonable assumption -- and perhaps more than an assumption -- it's a reasonable extrapolation that the impact on those 500 or so women would have multiple impact in terms of their families and their children and so forth.

Dr Gunn: That is correct.

The Chair: Dr Gunn, thank you for presenting before the committee today.

Committee members, I just want to let you know that the clerk has given me some information she'd like me to share with you, that your tickets and itinerary for next week will be hand-delivered to your offices this afternoon. Next week's agenda will be presented to us after lunch. I just want to remind all the committee members that we only have one hour for lunch today. This committee is recessed and we'll resume at 1 pm.

The committee recessed from 1201 to 1303.


The Chair: Our first presenter this afternoon is Dr Roy Ianni, president at the University of Windsor.


The Chair: Oh, I'm sorry. Dr Ron Ianni. Welcome to the committee. You have 30 minutes within which to make your presentation and field some questions.

I'm glad to know that you're representing the University of Windsor and not the art gallery. There was a little confusion over that, and as you know, we have not allowed anyone to present twice on behalf of any particular agency. So you may proceed.

Dr Ron Ianni: Thank you very much, Mr Chair and members of the standing committee. I appreciate the opportunity to be able to address the committee. Unfortunately, I was not in Windsor when your hearings were held there and therefore I took advantage of this opportunity to say a very few words to you.

I know these are the last hours of your hearings here in Toronto, so I don't intend to repeat a lot of what has been said, particularly by those briefs which I support. However, let me introduce myself first and my activities in Windsor, and I say so not claiming any special merit for either myself or the University of Windsor. It used to be desiderata that universities provide some service to their local community. That's no longer desiderata. In fact, all universities contribute positively to their communities and it's considered to be a responsibility to enrich the debate, if possible, and certainly make sure there's some critical analysis to public issues of the day.

In addition, as has already been mentioned, I am currently the president of the Art Gallery of Windsor and was a member of the original committee which led up to the proposal for casino gambling in the province, and indeed one of my colleagues in the faculty of business administration was responsible for drafting the business plan that was presented to the government.

The university is the fourth-largest employer in the city of Windsor, employing over 1,700 people, with an annual operating budget of $127 million, and on a very conservative estimate, contributing more than $80 million to the local community on an annual basis. We have 16,000 full- and part-time students in 10 faculties and a post-graduate faculty of some 900 students.

You might say that as far as impact on the local community is concerned, of course this particular project has been of great interest to myself and my colleagues. I guess in response to other briefs that you may have heard that are not supportive of this particular legislation, let me say that I think in human affairs it has been proven abundantly, for those who are prepared to look at history, that prohibition has seldom had the desired effects. In fact, they've had the very opposite effects.

So in these activities where people have already expressed a desire to participate, I think regulation and systems in place to help those who might be addicted to some kind of abusive behaviour would be much more important than pure prohibition. Indeed, in some other current affairs, we might look with some interest and I think some benefit at the experiments that are going on in substance abuse in countries such as the Netherlands.

That said, I certainly have some difficulty with the Ontario Agriculture and Horse Racing Coalition in the province. Once again, I guess I can suspect that for those industries that have the privilege of a monopoly, the whole concept and ethos of competitiveness and ability to move with the times has not been characterized in those particular industries.

I might say that certainly our committee was committed to working with the horse racing industry and will continue to do so. We consider, of course, once again, that this particular project is not only a revenue-generating project for the province but would be a very important project in ensuring a completion of the convention and tourist industry in the Windsor area. We certainly will impress upon those who ultimately will be given responsibility for operating the permanent casino to cooperate the best they can with the Windsor Raceway.

I would like at this point just like to congratulate the government for its initiative. It is obviously a courageous step and one which I think, if properly controlled, will lead to not only increased revenue but an operation that will enhance, as I've indicated, some other industries in this particular province.

Let me say there was a vigorous debate in the city of Windsor with regard to casino gambling, and I trust it was followed by other communities. I think it was an informed debate and in the final analysis less passionate than one might have thought and certainly informed with a good deal of reason and, as one might have said, a little bit of hope.

We have been trying to tell our colleagues that the expectations might be overly large and that it is important for us, at this stage, to ensure that this particular project has a balance between revenue generation on the one hand and social impact on the other.

Once again I think it's important that, while the generation of revenue in this day and age is a very important consideration, one must also of course look upon it as employment opportunities for young people and, more importantly, that if properly monitored, we can avoid the excesses of those experiences we see south of the border in the United States and in other jurisdictions.

Once again, speaking on behalf of my colleagues, we are very concerned about the social impacts of this particular industry on the local community and on the broader provincial community. I'll have something to say about that in a minute in my recommendations.

Once again I'd like to incorporate by reference some of the recommendations that have been made in the R.C. Pruefer brief, which was very extensive and which was given to you in Windsor. I'm not quite sure that I agree and I don't have the technical background to agree with one of the recommendations that deals with the whole question of extension of credit in casino gambling, but it's one that you might want to question other experts on as you continue these hearings in the rest of the province. I still have a question in my mind and I certainly would not be in a position to criticize the appearance of that in the legislation.


My recommendations are fairly brief, but let me go through them seriatim for your purposes. I would hope, as recommendation number one, that the legislation will provide for community involvement in decision-making not only in Windsor, but in the event that this pilot project is considered to be a successful one, in other communities as well, and that there be representation on the board of directors, representation on committees established to monitor the impacts of casinos -- I'll come back to that again -- and representation on the regulatory agencies.

My recommendation number two is that the legislation incorporate sound principles of checks and balances which will ensure integrity in both fact and appearance, and primarily that there be a separation of the audit and control from day-to-day management, even if this means placing the audit control function in a separate ministry from the crown corporation. I think this is of the utmost importance.

Number three is that the legislation ensure that the crown corporation is as serious about minimizing social risks as it is concerned about revenues and economic development. That just underlines a point I made earlier. More specifically, I hope that we would incorporate a statement that recognizes that the public good is the first overriding consideration of gaming policy and its enabling legislation, and that there be an incorporation of a statement of operating philosophy and objectives which will guide the formation of regulation and operating principles.

The Legislature should consider that the one difficulty in turning principles such as I've just announced as minimizing social and cultural risk into effective policy is measurement. Here, there is a specific recommendation which I'd really like to highlight: that is that Bill 8 needs to incorporate the creation and funding of an independent and objective committee to monitor both the social and economic impacts of the implications which will take place as a result of this particular activity.

Of course, coming from where I do -- you will not be surprised by my offering to have the University of Windsor, in collaboration with our other universities and colleges in the south and west of Ontario, to volunteer our particular services and also some space, if necessary, to make sure that this monitoring agency take place. I think it's very important. In fact, if there's only one message I can leave with the committee, it would be this one.

The next recommendation is that the legislation recommend that the statutory justification for this legislation is economic development and revenue generation by the province, and that there are risks which accompany provincial dependency on this source of revenue. The province should be aware that the social consequences of aggressive competition with the industry which derive from increasing profitability will really have to be taken into account.

Bill 8, therefore, should include specific legislation concerning the expansion of casino gambling, a strong voice for municipalities in the expansion process, with the ability to accept or reject recommendations for the existence and the nature of casino gambling in an individual community, and that legislative limitations on a casino win tax and other demands and dependency for revenue from casino gambling be instituted.

Also, in these recommendations, I would place this in the second category, that is, ensure that there be something in the regulations, or in the legislation if considered appropriate, to ensure the implementation of the provincial commitment to provide 1% of the construction cost of buildings for purposes of art acquisitions. The provincial government has already committed itself to that and of course has implemented it. I think it would be important, whoever builds the casino, that this same commitment come forth as an important contribution to the cultural life of the province.

Let me just conclude. These are suggestions. Obviously, the jurisdiction of the federal government is not within your purview, but it certainly is something that you can recommend to the government, to take immediate action to ensure that there be some amendment to the Criminal Code to allow table gambling -- dice, for example -- and that those provisions be amended or there be an agreement between the federal and provincial governments to allow that in the relatively short term.

I say this as a kind of competitive thing, because I understand that the Chippewa band is about one step away from establishing a casino in Detroit. Once again, competition in my view is never harmful, but it seems to me it would be nice to have an equal playing field, and to that extent, if there's any possibility of putting some pressure and working with the federal government to ensure that these particular activities, which are certainly normal in most casinos, are available to the patrons of Ontario casinos.

Secondly -- and I think I'll leave you with this one; it is most important, and of course Mr Lessard knows this better than most -- we've seen the difficultly in border crossing. Once again I will only quote these figures as approximations. I do not know as a fact that these are the accurate figures, but I understand that one is expecting anywhere from 8,000 to 12,000 visitors a day. That will mean enormous traffic at both the tunnel and the bridge. I think certainly that with the expansion of the bridge plaza out by the university it will be in a position to handle a good deal of traffic, but we've had some experiences recently with cross-border shopping where a number of people were going across to Detroit and then coming back, and it just could not handle that. I think it's important as an early warning system that the provincial government be talking to the federal government about having the appropriate agents and facilities available when the casino is opened on the first of the year, as is expected.

I leave that as my presentation and certainly would be prepared to answer any questions members of the committee may have on any elements I've raised in my presentation or other elements they may believe I have a possibility of responding to.

Mr Lessard: Dr Ianni, thank you very much for attending and making your presentation here in Toronto. I know that you're probably here on some other official business as well, and I know that you were unable to be with us when we were in Windsor last week. I know that you make your recommendations not only as the president of the university but also as someone who is involved in the community on a number of different levels and has a good sense of what it is that we should do to benefit the city of Windsor in the best possible way. I really appreciate the specific suggestions that you offered today.

One of the things that we heard from the chief of police when we were in Windsor -- and I know that as somebody who has been involved in the university for a long time you've had a lot of experience in dealing with young people especially -- was the age restriction on persons being permitted to gamble. He suggested that it should be 21 rather than 19. I wonder if you had any thoughts on that.

Dr Ianni: It seems to me that we expect more and more in terms of responsibility from our young people. If we allow them to drink at the age of 19, drive cars and do other things, I think we must have enough confidence in them and certainly provide whatever guidance we can, but it seems to me that 19 is the age which has been certainly in a number of pieces of legislation considered to be the age of majority, and I don't see any reason why it should change. I understand the dangers involved, but I think we have to ensure that our young people have the responsibility and are given responsibility at an early age and understand and are tutored to the extent possible by educational institutions in the dangers of these particular practices and in moderation in all respects.

Mr Lessard: You also mentioned the importance of having some sort of statement with respect to operating principles and specific reference to the public good for the community. I wonder if you had any ideas about the sorts of things that would be included in such a statement, whether you've actually come up with some ideas that we could incorporate.

Dr Ianni: Let me undertake to present it to the clerk, Tonia. I promised that I would give her a copy of these written comments for circulation. There are a lot of hortatory statements that are made at the opening of pieces of legislation in kind of preamble, but I think it is important to indicate that this is a human activity, and it's a human activity which people are going to engage in, and if not in a regulated sense, they will go in a non-regulated sense in this jurisdiction or will go elsewhere for it.

I think it's important for people to understand that there are dangers in this activity as there are in other activities, drinking and a number of other activities, for example, and that the purpose of the legislation is to ensure that there's moderation and will outline that there are agencies available, first of all, to educate people on this particular activity and then to provide services, remedial where necessary, to help people who may be subjected to some kind of compulsive behaviour.

We know that compulsive behaviour is extant in the community in some cases. I think that we've had some experience in dealing with that. The departments of psychology both in our university in the doctoral program in clinical psychology and in cooperation with other universities I think can come up with programs which can both prevent and I hope remedy where the cases arise.

I think there should be some statement made in the legislation indicating that the main purpose of course is to allow for this activity to take place but within a controlled environment, that one is expecting there will not be more than one casino per location and that it will be an availability to enhance the convention and tourist business but will not be considered to be a business which is going to dominate any particular economy. I think some statements can be made and certainly the legal drafters that we've trained in our law school should be able to come up with much more elegant language than I can come up with at this particular time.


Mr McClelland: It's a pleasure to see you, as always. I want to pick up on what Mr Lessard said and ask for your comment and reflection with respect to the age of 19 versus 21. I certainly understand the philosophical premise upon which you base your response. However, in light of the fact that it's estimated that some 80% of the traffic will be cross-border traffic, I wonder how you square that with your suggestion, and I think an appropriate suggestion, that there be a component of education, indeed a social responsibility of the government of the day in terms of education and dealing with the issue of responsibility that is confirmed with legislation granting privileges at an age of majority.

I see the dilemma, in short, as follows: that we have a population that we'll be drawing upon, the concerns of the chief of police and others being largely, I think, rooted in the fact that 80% of the traffic will be cross-border, and the suggestion that you have in terms of balancing that risk factor is really, for all intents and purposes, out of the hands of the jurisdiction in which the casino will be situate.

I wonder if you might reflect on that in part and perhaps offer some suggestion and comment.

Dr Ianni: Let me first of all claim no special expertise in this area, but it seems to me that certainly the way in which the casino is managed, the services that are provided, are kinds of exhibitions, if I can, of what the philosophy of the operator is, and I think it is important that the operator who will be chosen will obviously be an operator who's had extensive experience. There are, I guess, nine currently in the running. I'm aware of some of them, and they've all had extensive experience. Some have had a better track record than others, and in this respect, I would just hope that the committee that's making the selection -- and I have the greatest respect for it -- and the advisers will take that into account to make sure there's some element of responsibility on the part of the operator to ensure that these programs -- and there's an identification of what they will see early on as compulsive behaviour of people who are acting in a manner which is indicative of some aberrant behaviour, and try to ensure that those people are referred to the proper sources.

In this day and age, the control of young people is obviously problematic, but given their exposure to television and everything, I'm not quite sure that you can merely close your eyes to it. The difference in this day and age between 19 and 21 I'm not sure is as significant as it might have been in earlier days. I think people mature much more quickly and are exposed to many more diversions, distractions and, might I say, evils than might have ever been the case in earlier times. I'm not quite sure you can shelter those people from it, and once again it may be that the educational institutions, including the high schools, are going to have to do some work, and we may have to of course cooperate with our neighbours in the United States to make sure that whatever programs have been developed are made available on both sides of the border.

I should say that the University of Windsor, and here once again not to be too specific, has a long record of cooperating with American universities, for example, and we have, as you know, one of the only joint LOBJD programs in the country. We have a number of other programs that work very closely with Wayne State and the University of Detroit, and in the event that an institute dealing with some kind of compulsive behaviour were to be instituted, we would certainly draw on the resources that we know and are familiar with in Detroit.

Mr McClelland: In response to that, I might just say that I think a fallback position might be that, and by way of hopefully a positive and helpful recommendation, the parliamentary assistant could convey to the ministry the possibility of exploring together with the chief of police some sort of reciprocal education program or put in place the social structures that might eventually be required or necessary if there is no resolution of the issue with respect to age.

You mentioned the independent committee. I wonder if you'd comment on how that might interface with the operator, whichever operator is ultimately chosen for the operation. Would you see it as a fixed relationship, a monitoring relationship, or have any type of authority and be in a position to recommend to the legislative body or act -- and I use this word in a very generic sense -- policing the operation and, secondly, how would you see it financed, the independent committee? Would it be financed out of the proceeds or out of general revenues?

Dr Ianni: Well, it seems to me it should be financed from the proceeds of this particular activity. I see it having a recommendatory power which can recommend. Obviously, the operator is going to have to report to the government; the government is the owner of the business, and the project, the people who are operating it, are project managers and working on it. It seems to me that the committee is important in that it is a monitoring agency but I, once again, think it is important that the line relationship between the government and the permanent operator be a line relationship in that there not be interference in that, in my view, but there be strong recommendatory powers to the government and to the operator and that the government be given the responsibility for ensuring, and that the recommendations which it agrees with, and certainly taken, I'm sure, responsibly those recommendations, that that matter then is for implementation of the people to whom the permanent operator reports.

I don't see, myself, at least for the present, that being a double reporting structure for the casino operator; I think that might be a little cumbersome. I think you have to have a casino operator reporting to government and its agency, the appropriate authority there, and I think you've got a group out here which provides guidance, assistance, recommendations, suggestions, both to the government and to the operator. But I think the responsibility really has to be with government, to whom the permanent operator will report.

Mr Eves: I want to thank you for your suggestions. I think the one that you've made about an independent committee to monitor is a very thoughtful and well-presented suggestion indeed.

You mention local representation, and this is something we heard several times in Windsor, as you may or may not be aware. It was also suggested by many people in the municipality, and I believe the mayor and Mr Duncan as well, that there be some form of direct revenue-sharing on behalf of the municipality, as is done in most other jurisdictions, if not all, where they have casino gambling. I wonder what your thoughts were on that matter.

Dr Ianni: I'd certainly like to support the mayor and members of city council -- very important, particularly in my capacity at the art gallery. However, I understand full well the difficulty of regulating the appearance of these activities in specific municipalities and then letting those municipalities share in the revenues, to the detriment of other municipalities. So I guess in terms of equity I would have some difficulty in the share of revenue, although let me make it very clear that I think it would be very important that the attendant costs, both the security costs and for the institute and the regulatory costs we're talking about, be covered obviously from the revenues that are generated from that activity, that specific casino, for example.

Mr Eves: Mr Duncan, I believe, when he appeared before the committee went even one step farther and he suggested that the local municipality should have some very direct input into who the successful proponent may be; have some say in the decision-making. He found it also somewhat unusual that the Legislature of Ontario would not have some input into that decision as well, and I just wondered what your thoughts were on those comments by him.

Dr Ianni: I must say that, as a general principle, I agree very strongly with the question of representation, particularly by those people who are going to be affected by any given decision. In this particular case, I think the representation on the monitoring agency, if I were giving you my druthers, would be more important than the representation on the actual committee.

Let me tell you that the pressure that will be brought to bear on a committee of this nature by very significant players is, I think, a real danger. Let me say that not in a cynical way, but with the amount of money that you're talking about and the influence of these particular players in this field, I think it's very difficult to shelter people from the kind of influence and the kind of pressures that are attendant upon making a decision.

These decisions involve hundreds of millions of dollars in the long run, and I guess my concern is that, while I have great faith in representation, I think that exposing people to that kind of pressure -- even those of us in the Windsor community now have some idea of the jockeying for position and the currying of favour -- does bear some dangers.

In the monitoring group I don't have any problem whatsoever, but I think it has to be very carefully guarded and you have to protect those people who might be given some representation, and I think it would have to be limited, obviously, in the question of the selection of operators.

Let me just, in closing, congratulate not only the government, but I want to pay tribute to the casino project team of the government. We've had an opportunity to work with them, and once again I think we've been very impressed, not only with their industry but with the expertise that they've come up with in very short order. While they've given us a difficult time with the art gallery, we recognize good opponents when we see them. Thank you very much.



The Chair: Next is Dr Arthur Hosios, representing the Institute for Policy Analysis, University of Toronto.

Dr Arthur Hosios: Thanks. Last fall Atam Uppal at the Ontario casino project asked me to look into the likely impact of the introduction of casino gambling in Ontario on racehorse wagering and employment in the racehorse industry. I submitted a report at the end of the year, last December, and what I'd like to talk about today is really the findings of that report.

As I think many of you know, the commercial gambling market in North America has undergone significant changes during the past decade. Most prominently, parimutuel horse race wagering appears to have lost market share as attendance and sales have declined, while alternative forms of legal gambling have become increasingly popular, especially lotteries, charitable games and now casino games.

At the time that I undertook this study, some analysts claimed that there is a causal relationship between these two observations, which is to say the decline in the demand for horse race wagering is due largely to the introduction of these alternatives and competing forms of legal gambling.

The same evidence upon which this link to competing forms of gambling to horse race wagering was offered in Ontario to support the view that the introduction of casino gambling here would have a large negative impact on the demands for horse race wagering.

The assertion that casino gambling is a close substitute for other gambling activities relies upon the assumption that one form of gambling is pretty much the same as the next. A rose is a rose.

In a report I prepared for the Ontario casino project, I examined the economic evidence from the United States and from Ontario concerning the substitute ability of casino gambling and horse race wagering. The object of the exercise was to evaluate the potential impact of casino gambling on horse wagering and racehorse industry employment in Ontario.

Really, I could alternatively have titled this A Tale of Two Numbers. There are two sets of numbers you have to keep in mind here: the ones that were bandied about at the time and I think guided most thinking on the issue. It was claimed, first of all, that there are approximately 50,000 workers in the racehorse industry in Ontario; secondly, that the introduction of casino gambling will cause a decrease in horse race wagering in the order of 20% to 40%, and therefore the horse race industry will experience a proportional loss of about 10,000 to 20,000 jobs.

In the report that I prepared, I argue that the number of full-time equivalent jobs in the industry doesn't likely exceed 25,000 to 28,000, and an argument can be made that there are less than 20,000.

Secondly, the impact of casino gambling on racehorse handle, sales, will be considerably more modest than has previously been suggested. Numbers in the order of 5% to 10% are certainly credible. If I use the same proportional rule that I suggested earlier, these numbers translate into a full-time equivalent job loss in the order of 1,000 to 2,500 jobs.

I should just point out there that this is not for one casino in Windsor, for example, but for the introduction of casinos in general in the province.

Now, since the demand for jobs concerned with the care, training and breeding of race horses depends on the stock of horses and does not respond, at least in the short run, to fluctuations in track attendance, it's inappropriate to convert projected wagering reductions into employment reductions.

In fact, since the ratio of workers in horse operations to those in track operations is typically three to one, you can make an argument that the loss of full-time equivalent jobs will be much smaller than this 1,000 to 2,500 range, possibly numbering in the hundreds.

In addition, these projections would be reduced by actions taken to mitigate the impact of casinos and tracks. Actions that have been proven successful elsewhere include expanding the gambling product line at tracks, introducing off-track betting at casinos, casino gambling at the tracks, joint marketing efforts etc. In fact, if you read the literature carefully, the claim is made that the decline in horse race attendance over the past 10 to 15 years is in large part attributed to poor marketing, and that's where the effort should be devoted.

The other issue, of course, is the potential increase in employment from the introduction of casinos. New Jersey provides a nice example of where there was a net overall employment gain.

Overall, the report concludes that the impact of casino gambling and horse race wagering and racehorse employment will be considerably milder that has previously been suggested.

The report itself is divided into many sections. The bulk of the issue deals with this substitutability between alternative forms of gambling. One section toward the end deals in particular with employment in the racehorse industry.

I'd like to describe for you very briefly the conclusions of these different sections. At one level, in asking whether lotteries, casinos and horse race wagering activities are substitutes, you can just look at the attributes of the products and see how they differ, and that's what I undertook to do.

It turns out that although there are similarities casino games and parimutuel horse race wagering are actually quite distinct forms of gambling and entertainment.

The key features you want to keep in mind are, first, that many casino games are games of pure chance with no skill components. Roulette and slot machines are obvious examples. Second, parimutuel betting is a competition among bettors in which an individual's success depends on his handicapping skills. In fact the analogy is often drawn to the stock market, betting in the stock market compared to going to the track. Third, horse race wagering is distinguished from other forms of commercial gambling in that the betting object is a sporting event, and acquiring knowledge concerning that event is in itself an enjoyable activity.

These observations suggest that casino gambling and horse race wagering may not be close substitutes. After I completed my project, a survey was undertaken by the Ontario casino project and it turned out, in line with these observations, that over 85% of track patrons claimed that their horse race wagering would not decrease if a casino were open nearby and that approximately 70% of track visitors considered the track to be a more satisfying gambling activity.

Having pointed out some of these attributes, it's clear that while this type of descriptive analysis is helpful and suggestive, the real question of substitutability is an empirical question. That is the best guide concerning the impact of introducing casino gambling on the demand for horse race wagering in Ontario is the historical record, and that's why I attempted to look at the next couple of sections of the report.

The experience of lotteries in the United States is often cited and is interesting. If one conjectures that lotteries, casino gambling and horse race wagering are close substitutes, it should follow that, for example, different lottery games are often closer substitutes.

A recent study from the United States showed that the introduction of Lotto 6/44 and 6/49 does not appear to have this effect. In 9 of 13 states, the introduction of Lotto was associated with an increase, rather than a decrease, in the competing numbers and instant games. In the state of Massachusetts in particular, although the size of Lotto jackpots has a positive effect on Lotto sales, which is not surprising, it had no discernible effect on the demand or sales of the other lottery products.


This raises a question: If Lotto is not a close substitute for other lottery products, is it still obvious that lotteries, casino gambling and parimutuel wagering are themselves such close substitutes?

The other source of information on horse race wagering is a series of demand studies undertaken in the United States. The basic empirical exercise there is to estimate a demand function, a demand for gambling function, in the case of parimutuel horse race wagering. Now, this function simply describes some measure of the gambling activity, whether it's attendance or sales as a function of the price, income and other variables that are thought to be important.

The reason this type of quantitative exercise is important is it can answer or put numbers to the following question: Holding the price of horse race wagering and all other factors fixed, by how much does the introduction of, say, lotteries or casino games affect the demand for horse race wagering?

The numbers that I quoted to you right at the beginning, the 20% and 40% reductions come from exactly these types of studies. Now, in the report I argue that there's a methodological problem with these studies and, in consequence, one should view the results with some degree of scepticism.

What I'd like to do now is to describe, very briefly, the nature of the problem and how the results can be very misleading. Now, the problem is that one or more of the variables that are meant to explain horse race wagering itself are driven by a set of underlying variables that affect horse race demand. Because some of these underlying variables are not observed by the researcher, too much of the variation in demand is attributed to explanatory variables that are observable.

Having delivered that little bit, maybe an example would help crystallize the issue. The price in these demand studies is called the takeout rate, and the takeout rate is simply the gross fraction retained from wagering pools. It includes taxes, operating expenses, purse disbursements etc. Now, a higher price should decrease demand. I think we'll all take that as given. In particular, a higher takeout rate should depress horse race wagering. The key question is, how responsive is horse race wagering to price changes or to changes in the takeout rates?

The takeout rate is effectively set by the state government. In almost all discussions of the role of government in legal gambling and especially in horse race wagering, two concerns are always highlighted: first, the government's tax revenue interest in horse race wagering; and second, its political interest in the viability of this industry in the face of the declining demand I mentioned earlier.

On either count there's an incentive for the government to adjust the takeout rate over time in response to changing market conditions. Let me paint for you a very extreme example. Suppose it's the case that the demand for horse race wagering, whether sales or attendance, is in fact very unresponsive to the takeout rate. Then if some event occurs -- an increase in unemployment, a change in distribution of income, whatever -- that gives rise to a contraction of demand, a government concerned solely with revenue issues would respond by raising price to raise tax revenue.

If you look at the data, what you would observe is that price goes up and demand falls, leading one to conclude that in fact demand is sensitive to price. But in fact the causality works in reverse. It's the decline in demand that induced the government, in my example, to take the action of adjusting price. In fact demand is not sensitive to price at all. That's the premise here.

Because these studies in the United States don't take into account the response of price, and some other variables we'll discuss soon, to market conditions, they lead to biased and misleading estimates of the effect of price and these other variables on demand.

The other variables included in demand studies include track attributes -- for instance, the number of race days per year, the number of stakes races -- but when you think about it, it becomes clear that those are variables set by track operators and those are variables that will change in response to demand. In fact it's often described that stake races will be increased in response to a decline in demand to make the product more attractive.

The other set of variables that has been described is the introduction of lotteries -- they're all over the United States now -- and casino gambling in New Jersey. The same issues arise in how these variables have been introduced as well. Let me give you the example of the lottery studies, in which there is a cross-section of 40-plus states, some of which have lotteries, some don't, and you're looking for what is the effect of lottery on attendance at the track.

The problem is that the introduction of a lottery is an action taken by the government. It in itself can reflect local market conditions. So the lottery then proxies for the state of the economy that the government is responding to rather than the effect of the lottery per se on demand. That leaves me very sceptical of these 20% to 40% contraction numbers.

What could I do? Well, we don't yet have casinos in Ontario. We have had lottery experience for a while. Why don't we look and see what has been the effect of the introduction of a lottery in Ontario on racing here? It will give some perspective on the comparability of these US numbers to the local experience. And that's exactly what I did. Using numbers from 1966 to 1991, I estimated the impact of the provincial lottery on annual real per capita horse race wagering in the province. In fact at the end of this talk I've included a picture. It describes the actual pattern of horse race wagering in the province, which you can see peaked in 1975 and has declined almost continuously since then.

What I do is I ask, what would have been the pattern of racehorse wagering in the province had a lottery not been introduced in 1976, and those are the dotted lines described in the diagrams. What you can see is that the effect is no more than, let's say, a 2% to 3% decline associated with the introduction of a lottery. The same numbers in the States suggest 17% to 36% declines.

The conclusion I reach, then, is that either the situation in the States for some reason is very different from the situation here or in fact that the bias in the studies I describe in the States actually is substantial and leads one to severely overestimate the likely impact of lotteries, in that case, on track wagering, and then I would have to conclude that the same methodological problems that arise with respect to casino gaming in the States suggest the numbers should be much smaller here. Numbers in the order of 5% to 10% that have been accepted by the Chicago Gaming Commission seem to me to be more than reasonable.

In the last section of the report, I look at employment in the racehorse industry. There are two key questions: First, how many workers are actually employed in that industry and what is the number of full-time equivalent workers? That's very important.

The first point I make is that unlike employees, shareholders, equity holders, in the racehorse industry and most other industries do not generally occupy jobs and are hence largely irrelevant to the discussion of job losses. Previous examinations of employment in the racehorse industry failed to make that distinction between owners and workers.


From the owners' perspective, or shareholders' perspective, we note their assets, whether it's land, farms or horses, have some alternative uses, either in the same locale or to the extent that they're mobile they can be used elsewhere, so their capital value is not wholly dependent on developments in the local industry.

Lastly, to the extent that future contractions of provincial horse race gambling are anticipated -- and I think for people who've been following the industry over the last 20 years, the decline in the mid-1970s, which is certainly not unique to Ontario, was in part predictable -- that effect has already been capitalized into the value of the assets.

From the worker point of view, the breakdown is kind of interesting. The 49,000 individuals associated with the racehorse industry reduces to about 27,500 after you eliminate owners. At the end of this handout, I also describe the breakdown in terms of employment. So 21,500 owners in Ontario -- of these, it's true that about 5,000 describe themselves as owners-trainers, owners-drivers. So from 49,000 -- we can argue about the numbers -- you're down to in the order of 32,000 to 27,000 individuals.

To highlight the importance of the racehorse industry, I've often seen comparisons between number of workers in the racehorse industry versus number of workers in the automobile industry, mining etc. The difference of course is that workers in the auto industry, for example, usually do work 240 days a year and eight hours a day, and that's why this issue of determining the number of full-time equivalent workers in the industry is important. There aren't numbers on this at all, and so what you have to do is estimate what you think the degree of part-time employment is, and it's a difficult task.

What guided me were two simple ideas: First, for a large fraction of workers, the number of days per year that they are employed increases with the number of days the tracks are open per year -- it seems reasonable -- and second, on any given race day, larger tracks should have more workers than smaller tracks.

Based on those two assumptions, I used the 1991 race day and attendance figures to estimate the degree of part-time employment for various groups of individuals. Track workers are an obvious example. I estimate that the average worker is employed, under certain assumptions, only 40% of the time of a full-time worker. However, if you change the hypotheses concerning the average number of hours worked per day, the amount of fixed and variable employment per track and the number of tracks that any one worker is employed at, the numbers can range from as low as 30% to as high as 50%. In addition, the people who are included as employees in the industry are reporters, newspaper reporters, veterinarians, tradespeople, people who certainly undertake alternative activities much of the time and can substitute to these other activities.

Now, you can obviously argue with whatever assumptions I've made in the paper, but what you can't get away from is the fact that if you look at the tracks and you think of this number, 240 days that a typical auto worker, let's say, works, given one month off a year, the class A standardbred supervised tracks are on average open 144 days, the class 2 tracks 123 days, the class 3 tracks 64 days, class 4 tracks 21 days. The unsupervised tracks are only open a day and a half on average, the thoroughbred tracks 98 days.

So I think that one could come up with alternative ways to derive reasonable estimates of part-time employment. It's clear that a significant number of the workers in this industry are in fact part-time workers.

So where did I start? I started with two numbers: 49,000 jobs, 20% to 40% reduction. If you look at the numbers very carefully, the number of full-time equivalent jobs are much more likely in the 25,000 to 28,000 range, the per cent decline in the 5% to 10% range and the net job loss in the order of 1,000 to 1,500 workers.

The Chair: Thank you very much. We have about five minutes in total for questions. I just want to put it to the committee as whole that that doesn't allow any of us a whole lot of opportunity to ask questions. Would you like me to extend a little time here? It's up to the committee members, if they choose. If they choose not to, that's fine. You have otherwise about 45 seconds to make a comment.

Mr McClelland: I'll make a comment and perhaps the doctor would like to respond.

It just seems to me, sir, and I say this with the greatest respect to the person, whether he or she works 20 or 30 hours a week or 40, when they lose the principal source of their income, statistically they're out of work. They don't really care whether one factors this -- and maybe I misunderstand your methodology and maybe I'm being too simplistic -- but I guess at the end of the day, if somebody is out of a job and they've lost their source of income and what they depend on, it would seem to me to be irrelevant to them whether they were working 20, 30, 200 or 300 days a year. There's a dislocation, and it's a human being and he or she can't, if you will, parcel off percentages of themselves to adjust statistically.

I just share that. I'm not trying to be offhanded or trite.

Dr Hosios: You're not the first person to suggest an economist is inhuman.

Mr McClelland: No, sir, I'm not suggesting that, and please understand what I'm saying.

Dr Hosios: Okay. The question is, when you compare employment in one industry versus another, if you're going to compare 20,000, 30,000, 40,000 workers in the racehorse industry to comparable numbers in other industries, you want to make sure you're not comparing apples and oranges.

It is true that somebody who works 10 hours a week, if they lose a job, that's 10 hours of employment gone. That doesn't mean their income has dropped to zero. Often the people have alternative activities.

Mr McClelland: Conversely, though, they may not. That may be their source. If a journalist writes for 10 hours and he or she is successful and it only takes 50, they still do their job, and that's what they're paid for.

Dr Hosios: The question is whether the journalist only writes on --

Mr McClelland: And economists. Some people do their job in 50 hours, some will take 100, some will do it in 20.

The Chair: It's regrettable we don't have more time for debate. Mr Eves or Mr Tilson?

Mr Eves: I just have a few comments I'd like to make. Perhaps you could respond, perhaps even at a later date if you want to.

I note that in your presentation you indicated, I believe at the outset, that the client in horse racing's share of gaming -- horse racing says they've declined over a 20-year period from a virtual monopoly in the province of Ontario to about 27%. I believe you indicated at the outset that you thought their decline in share was due more to poor marketing than competition from other forms of gaming.

I note that you say you completed this study for the casino project team in December 1992. I'd like to know if you know of any reason why it was not made available to us until today, why the minister would not have tabled it. Did you request her or the casino project team not to table it, or was that their decision?

I note that for your definition of what a full-time worker is, you've compared it to the automotive industry and you've said that if a person doesn't work 240 days a year, basically, you're saying they're not a full-time worker, and you've based the number of days worked on the number of days tracks are open.

Would it be fair to say then that school teachers in the province of Ontario are not full-time workers, seeing as how schools are only open 183 days of the year? Therefore none of them would qualify as a full-time worker either, according to that definition.

In the presentation made to this committee by the deputy minister on August 16 when we started this, they are extracting from your study and saying -- these are their words, the ministry's, not yours -- that the number of full-time equivalent jobs does not exceed 25,000 and may in fact be less than 18,000. That is contrary to what you just told the committee. I believe you said that it's probably more in line between 25,000 and 28,000.

Dr Hosios: I wouldn't argue.

Mr Eves: Decreases in wagering in the order of 5% to 10% at a maximum, and proportional job losses in the 900- to 1,800-job range. That is their interpretation of what your study says, and I just wanted to know if you thought that was an accurate or fair summation of what your study does say.


Dr Hosios: I do.

Mr Sutherland: Just to clarify on the point of the full-time equivalent jobs: What you're saying is that when people from the horse racing industry compare it to other industries -- you set a standard of a 40-hour work week based on 240 days to ensure that you have some basic standard. Whether teachers are considered in that category or not is irrelevant. You've got a standard there, you've established that as the standard, and what you're saying is that when people come in and say 45,000, they're including owners, many of whom may not be deriving their principal source of income from it; they're talking about all the people who, at my racetrack, only work Tuesday nights because that's the only night of the week that the racetrack is actually operating, but they're coming in and saying it's a job. I don't think any of them are saying full-time jobs but they said a number of jobs. What you're saying is that we need to put it in a full-time equivalent basis to have an accurate understanding.

Dr Hosios: That's right.

Mr Duignan: Just a quick comment, Mr Chair. Mr Eves raised the point of the making of the study available to other members. I pointed out to Mr Eves that on the introduction of the bill, there was a briefing done to the Tory caucus and the report was made available at that time to Tory research.

The Chair: Thank you, Dr Hosios, for presenting before the committee today.


The Chair: Our next presentation is from the large party that just entered the room, a group of individuals representing the Coopers and Lybrand Consulting Group. I welcome you all collectively to the standing committee on finance and economic affairs.

Could as many as possible come forward to the table across from me, those who are going to be making the presentation. When you have made yourselves comfortable, could you carefully and slowly identify yourselves for the purposes of the committee members and especially for Hansard, that's going to try to keep a record of what you say.

Mr John Farrow: We had arranged for a slide projector and a screen, because we thought some of the things we're going to present will be easier.

The Chair: And you are, sir?

Mr Farrow: I'm John Farrow.

The Chair: Thank you very much. Maybe you can just wait for a minute until they set everything up.

Mr Bill Rutsey: We seem to have been done in by technology.

The Chair: We can probably come up with another bulb. Is that right, John?

Interjection: This was your projector.

The Chair: Well, thank you. I'll be glad to take it home when I leave. Let me just explain to you that the projector creates some problems for the technicians if it sits on the table with the mikes. It's unfortunate that the bulb doesn't work; hopefully, we can get another one. How paramount is it to the beginning of your presentation? Very much so, I suspect.

Mr Rutsey: We have some introductory remarks to make and then we go right into the presentation. We have 53 slides and we'd like to lead you through with the slides, so they're integral to what we're trying to do.

The Chair: Well, what if we at least identify ourselves as a collective group for Hansard and the committee members and then make your introductory remarks? Hopefully, the bulb will make its appearance here very shortly thereafter.

Mr Farrow: Okay. Thank you very much, Mr Chairman and committee members. My name's John Farrow. I was the partner from Coopers and Lybrand responsible for this team, most of whom come from Coopers and Lybrand, but a few don't. Let me introduce them to you. Michael French is going to deal with the market potential for casinos, how to service that market and how the casino operation should work. That's going to be the first part of our presentation: market potential, how to service the market and how the casino operation should work. Michael will be assisted by Dan Webster.

That's the first part of the presentation. We expect that to run about 30 minutes and our intention will be to stop at the end of that time and take questions on that particular part. I should also mention that these gentlemen have a flight at 6 o'clock so they'll be leaving at 4:30, unless there's an urgent reason they shouldn't.

The next part of the presentation is going to be by Gordon Phillips, and he's going to deal with the economic benefits to the province and then strategies to enhance tourism. Then I'm going to stop for questions; I thought it'd be a good idea if we stopped for questions after all that. We've broken our presentation up because we thought it would be hard for you to carry all that information and ask questions at the end.

Then we're going to deal with regulation and control, and Carl Zeitz is going to deal with that. Part 8 is going to be dealing with impacts on other forms of gaming, and Rowan Faludi is going to deal with that. Then we're going to deal with the social costs at the very end, and Bill Rutsey will deal with that.

I should mention that Bill Rutsey was assisted by Rachel Volberg in writing this section and unfortunately we couldn't bring her. She had another commitment, and now she's flying off to Hong Kong or something around 2, so we apologize. It's a bit hard to get her back from Hong Kong.

The Chair: Thank you very much. We have about two hours. You have indicated you could stay here till 4:30. In order to try and allocate the time fairly among all the committee members -- and they're very keen to get as much time as they can to ask questions, let me tell you -- I would like to know how long your total presentation is, approximately, then I will have some idea of how much time I can allocate.

Mr Farrow: Our intention, in terms of the presenting time, was to try and conclude this in something between an hour and 15 minutes, an hour and a half, in terms of time we'd spend talking to you, but we take very much your direction around this and we'll stop when you tell us to stop.

The Chair: You have about an hour and 15 minutes or an hour and a half presentation approximately?

Mr Farrow: Yes, that's right.

The Chair: Broken down into how many parts?

Mr Farrow: It's broken down into nine different parts.

The Chair: How many breaks will you have?

Mr Farrow: I thought we'd break six times; six stops for questions, okay?

The Chair: Six times. I think I can probably figure out the mathematics on that.


Mr Eves: If we have a two-hour time period, could we try to have the presentation in approximately an hour so it will leave the committee with about an hour to ask questions, divided among the three caucuses?

The Chair: Sure, if that's agreeable with all.

Mr Dadamo: Our questions are probably the integral part, the questions we want to ask you.

Mr Farrow: And you do have a copy of the report, I believe, so you've had a chance to look at it.

I want, as part of my introductory remarks, just to remind people of what the objectives were here and the status of what we've done.

First of all, this is a report we prepared. We have had discussions with the casino project staff about our recommendations in here and provided additional information and so on and so forth, but it's very much our report: It isn't something that is written for the government, for someone else; it's our report to the government. That's the first thing.

Secondly, I just want to remind you that we aren't dealing with everything. There were clearly four objectives in undertaking this study, and I'd just remind people what they were.

The first one was to look at the size of the casino market in Ontario and the demand from within Ontario and from other jurisdictions which would create that market demand. That was the first objective; there are four of them. The second thing was to make a recommendation on the number of casinos and how much gaming space would be compatible with the demand we identified coming from the various market areas. Thirdly was to look at the economic impact on Ontario's economy with respect to tourism and existing gaming industry; and lastly was to look at tax revenues if the recommended number of casinos were built.

Those were the primary objectives that were put down for the study. As a result of the work and trying to meet those objectives, we got into other things like regulation, because that's part of the impact that you would see.

I'm inclined, as far as we're able, even though we haven't got all the slides, and knowing the committee's got limited time, for you to roll into section 1, Mike, which is talking about the market potential for casinos. That will allow you to get your questions put.

Mr Michael French: Hopefully, we can get these slides. They make it easier for us, by the way. I direct the hospitality consulting practice out of Philadelphia. I also direct the casino gaming consulting practice for Coopers and Lybrand in the United States.

Just briefly, we've done a significant number of these economic impact studies, performed a portion of the research for Gary, Indiana, the state of Connecticut. We've been involved with the New Orleans project, as well as Chicago. Because of our accessibility to Atlantic City and our involvement with some projects in Las Vegas, we've accumulated a significant database. I've been in Philadelphia since 1977, so I was there for the introduction of casino gaming into Atlantic City there.

We were also the accountants and the consultants for the Pequot tribe, the Foxwoods casino in Ledyard, Connecticut, probably the single most successful casino operation in the world today. I will also mention that I'm a Canadian citizen from Ontario, which I'm proud to say.

With me, and really the project manager through this whole process, is Dan Webster, who has been a manager in my group for about eight years. Dan has prepared and put together the concentric financial model which we used as the basis for our estimates of visitation levels as well as the basis for our estimate of, ultimately, the levels of casino win which we believe will be achieved in Ontario.

What I'd like to do, and I hope we'll get these slides in place soon, is turn it over to Dan. Dan's presentation was going to be a little longer than 30 minutes. We're going to do as best we can to capsulize our methodology. Dan, if you could take over.

Mr Daniel Webster: Since we don't have our slides, if you happen to have your thick report that we issued, in section 9 there's a map at the beginning of that section, after the index, and that's the first page I'll be referring to. Also, in the presentation outline that we provided to you, after our agenda and the scheduled speakers is what will be our second slide: gateway and destination market area regions evaluated. That lists the market areas.

Inherent in the policy objectives for casinos in Ontario is the generation and capturing of new spending as opposed to simply creating a venue for the redirection of existing spending within the province. We identified the most likely sources of such new spending as being new tourist visitors to the province, existing tourists and Ontario residents that might have gone to other casinos in other jurisdictions now staying in the province of Ontario. The location of casinos readily accessible to these three sources of demand is essential in order that the new spending be maximized.

It was initially agreed between the Ontario casino project and Coopers and Lybrand that there would be an initial evaluation of 13 different market area regions. Those market area regions are presented in the first slide in our presentation manual. Within these regions, we selected centroids that were used to establish concentric bands emanating from the centroid up to 240 kilometres, which is approximately 150 miles. We used the existing populations in tourist, resident or visiting these concentric bands as a basis for our win estimates.

The identification of a community as a centroid of a region does not necessarily mean that that community is specifically where we are recommending the casino be located, but rather that to proceed with our analysis we needed to select a centroid. The casino is expected to be properly sited with regard to site success factors, which we've identified in our report, somewhere within the region.

The capacity of a facility to both accommodate a large number of people and offer a wide variety of gaming opportunities is fundamental to its attractiveness as a tourist destination. Therefore, we judge that the major market area regions identified would be critical in supporting individual casinos of a size that would allow them to serve as a magnet for attracting tourism and new visitation to the province. The size of what we consider to be major market area casinos was approximately a minimum of 60,000 square feet; 60,000 square feet is the average size of the 12 casino hotels in Atlantic City, and it's the minimum size of the largest casinos in Las Vegas, downtown and on the Las Vegas strip.

The first task of our team was to identify which market areas could support casinos of that size. We identified those market areas as major market regions. Among the selection criteria we used were: access to a large market of casino attendees, visitors to the casinos; professional management of the casinos; and proper regulation of the industry.

On the next slide, titled "Site Success Factors," we list those factors which the consultant team believes are most important to a casino being successful in terms of its location. In choosing major casino sites our efforts were focused on identifying the markets which met the site success factors which had the potential for attracting both large numbers of visitors from outside the province and Ontario residents who visit casinos in other jurisdictions and could support at least 60,000 square feet of casino gaming floor area.

The primary selection process was further refined to achieve a balance among the regions selected for casino development by minimizing the overlapping of market areas that are expected to be serviced by the casinos. Under tab 9 is the map which I referred you to earlier, and that gives you an indication of the 240-kilometre radius from each of the --

Mr Farrow: Tab 9 of the large report.

Mr Webster: I'm sorry, tab 9 of the large report, our major report with the red cover. That identifies the 240-kilometre radius around the centroids that we selected for the casino regions. The bands that we selected for our analysis were zero to 40 kilometres, 41 to 120 kilometres and 121 to 240 kilometres. Those are approximately 25 miles, 75 miles and 150 miles.


Our research indicates that the attendance at the casinos is directly related to the distance people reside from the casino. Based on interviews with casino managers, primarily in Atlantic City, and research and analysis that we have completed with respect to the legalization of casino gaming in other North American jurisdictions, we developed factors for Atlantic City patrons in terms of their propensity to visit, both the number of adults who would be expected to visit and the number of times that they would come to the casinos, and those factors were based on the Atlantic City patrons. The basis of our analysis was applying those factors with different adjustments -- which I'll talk about later -- to both the visitors to the regions and the existing residents within each of the bands.

The next slide, for lack of a better term, presents the factors that we developed through our interviews with casino operators for the Atlantic City area. I'll discuss those at greater length later.

The following page, titled "Major Market Area Net Populations," is what I'll discuss next. Our analysis resulted in the identification of four major market areas: Windsor, Niagara Falls, Toronto and Ottawa. The market area regions overlapped and serviced by these four major market area regions included Cornwall, Huntsville, Kingston, Sarnia and London-Kitchener.

While our analysis indicated that these regions exhibit potential to support a casino, each was judged inferior to the next closest primary market area I identified as the four major market areas. These regions are not recommended as potential casino sites at this time as each would to some extent fragment the gaming market for the major market area casinos, thereby reducing their potential to act as destination tourism magnets. In our report under tab 5, in the large report, is a further discussion of why we have that feeling.

Once the casinos in the four major market area regions are developed, operating, and operating successfully, then we believe that the potential for the additional casinos in these five smaller market areas, and even possibly in other market areas, should be revisited.

The primary market area for each of the casino sites, as I indicated, was 240 kilometres. Our research indicates that the majority of the visitors to these major market areas are expected to drive in, play at the casino and then drive home. A 240-kilometre radius represents a realistic day-trip market based on the experience of Atlantic City, a day-trip market being people who just come in for the day, gamble for a period of time and then leave without staying overnight. Also a 240-kilometre radius minimizes the overlap with competing casino gaming jurisdictions in the northeast United States and the midwest United States and also to a large extent in Ontario. Again the large pullout map in our report under tab 9 gives you an indication of the fact that these areas don't overlap too much, with the exception of Toronto and the surrounding market areas.

The current slide, which is titled "Major Market Area Net Populations," lists the four major market area regions in order of decreasing population within that first 40-kilometre band. It also provides comparable information for Atlantic City, Ledyard, Connecticut, which is where the Mashantucket Pequot Foxwoods Casino is located, and Minneapolis, which is home to a number of Indian/native American casinos.

For the smaller market area regions we undertook an analysis to determine their potential to support casinos no smaller than 10,000 square feet. We chose the minimum size of 10,000 square feet because that's the approximate average size of the smaller casinos in Nevada for which existing financial information is available. The importance of that will become more apparent when we talk about the economic benefits of the casinos. Also, that size casino, 10,000 square feet, is slightly larger than the existing competitive gaming facilities in bordering US communities, for example Sault Ste Marie.

We developed a generic operating model for a 10,000-square-foot casino to establish a break-even casino win level. In other words, we looked at the financial characteristics of operating a casino that size and determined what win levels would be necessary to support that size casino. That analysis led us to the conclusion that a win level of approximately $17 million would be necessary. "Win," as you may be aware, is also known as casino revenue.

In terms of the smaller market area analysis, we identified Sault Ste Marie, Sudbury-North Bay and Thunder Bay as the three areas having the potential to support casinos of 10,000 square feet in size. This slide presents the populations within the market catchment areas for those three market areas, adjusted for the overlapping of the catchment areas.

This slide indicates the results of our analysis of the 13 market areas evaluated; 12 exhibited the preliminary potential to support casinos. If the government of Ontario wishes to expand casino gaming in the province, it is suggested that only seven of these market areas be initially developed in order to maximize the development of casinos as tourist destinations.

The remainder of our analysis is predicated upon the existence of casinos in each of the seven market areas that we've recommended. Once casinos in each of these seven market areas are established, the potential for additional casinos located within the five other market areas identified as preliminarily supportive of casinos should be addressed. So we're recommending four major market area casinos in Windsor, Niagara Falls, Toronto and Ottawa, three smaller casinos in Sault Ste Marie, Sudbury-North Bay and Thunder Bay and then preliminarily, based on the success of those casinos once they're developed and operating, the five other market areas that I discussed earlier.

In terms of our casino visitation and casino win or gaming revenue analysis, before I discuss the methodology that we applied I'd like to discuss the significant assumptions on which our analyses are based. They're presented in appendix 6 of your report, but I'll read off the most significant ones.

An industry which doesn't incorporate these assumptions is less likely to realize the magnitude of the economic benefits that are estimated in our report.

In terms of master planning, the provincial and local governments must be explicit in what they expect from the gaming industry and to what extent tax proceeds from the industry will be utilized for the support and regulation of the gaming industry and the betterment of the region and the province. Carl Zeitz can discuss this in greater depth, should you desire, during the question-and-answer period. It may be more effective after he's given his presentation to ask him about that. Likewise, the industry must be explicit in what its economic and social contributions to the region and to the province will be and what it expects in return.


In terms of competition, we have assumed that no other jurisdiction in the United States or Canada, or in Ontario, other than at those facilities identified by the consultant team as our initial seven recommended regions, will legalize casino gaming beyond those that already exist, with the exception that the estimates contained herein assume development of two previously announced casinos in Quebec and development of a casino in the metropolitan Detroit area.

We assume that each market area region will be able to accommodate on one site the amount of casino and ancillary development required to generate the level of win estimated; that the licensing process will ensure that only experienced, operationally competent and financially capable casino developers and operators will participate in the development of a casino gaming industry in Ontario; that food and beverage outlets and entertainment facilities normally associated with a full-service casino will be developed; that an all-encompassing and powerful provincial regulatory system will be in place; that the casinos will be open 24 hours per day, 365 days per year; that the minimum gambling age for gambling will be 19; that the Ontario casinos will be operated similarly to those in Atlantic City, including credit, complimentary policies and advertising policies, complimentary policies including the ability of the casinos to give out free food and beverages and rooms, primarily; and that there will be no infrastructural constraints on the casino markets.

The factors that were identified by successful casino operators whom we talked to and have talked to in the past are proximity to gamblers and the creation of an attraction people will want to visit. The underlying foundation for our visitation and casino win analysis therefore is the size of the potential gambling population approximate to the casino regions. To those populations we applied adjustments, either qualitatively or quantitatively derived, to address certain other factors which I will discuss.

Based on the Atlantic City experience, the area within 240 kilometres comprises the primary day trip market. The proximity of the four major market area region casinos -- again, Windsor, Toronto, Niagara Falls and Ottawa -- to each other will require that consideration be given to the overlapping of their respective market areas.

We address this overlapping by allocating populations within the overlapping areas to the casino region to which the population is most proximate. For example, Kitchener is approximately 80 kilometres from Toronto and 110 kilometres from Niagara, so it becomes allocated in our analysis to Toronto for the purpose of determining our market sizes.

The propensity factors with respect to both the visitation and wagering were then calculated based upon the existing casino operations in the United States. Those factors include the propensity of adults within each zone to visit the casino; the average number of annual visits each gambler is likely to make to the casinos; the method they'll use to get to the casinos, whether it be auto, bus or air; and the average amount each visitor is likely to wager per day that they visit.

We applied the information to the concentric zones I had already identified around Atlantic City. The testing method that we used resulted in win estimates that were within 1% of the actual Atlantic City win in 1992 and within 3% of the published visitors' statistics for Atlantic City in 1992. So we have a high degree of confidence that the propensity factors that were given to us by casino operators are accurate for a day trip market such as Atlantic City and such as the major market area casinos in Ontario.

We made certain adjustments to these factors based on about eight different factors.

The extent of the industry: The marketing clout of a single casino in a single region in Ontario may not be as great as that of 12 casinos in Atlantic City.

The relative strength of the Ontario casinos: Certain Ontario casinos may capture visitors residing closer to other Ontario casinos as a result of a more attractive mix of casino facilities and/or other attractions to attract visitors.

The relative proximity to the markets: Casinos that are closer to the populations in their catchment areas may have the ability to increase trip frequency, what we refer to as a major urban area trip frequency reduction, which is our term for saying that a casino located in a major metropolitan area such as Windsor or Toronto may not have the same drawing power on the people in the first concentric band, which is 40 kilometres, as, say, Atlantic City, where people are going to be coming a greater distance. The casino is a little bit less accessible to them.

Generally there, we thought that the trip frequency factor would probably be reduced. The casino will be another entertainment attraction within a major metropolitan area. There are other entertainment/amusement alternatives for people within that first band. We adjusted downward the Atlantic City factor by 75%, from approximately 20 visits per year for people in that band to 5.

There are potentially infrastructural limiters or enhancers in the market area regions. For example, Toronto has an excellent transportation infrastructure with its airport. Atlantic City does not. Its airport is a good airport but very underutilized, so that it'll be easier to get to Toronto by air than it will be to get to Atlantic City.

Competitive gaming jurisdictions: Atlantic City is relatively immune from riverboat gaming in the Midwest, for example. A casino in Windsor will be more susceptible to that competition.

The existing economic base and diversity of the market area regions: Atlantic City had essentially no diversified economic base. It was a tourism destination prior to casinos. To a large extent it's still primarily just a tourism destination. Toronto obviously is a tourism destination, but it's got a very diversified economic base.

Based on these considerations, we made adjustments to the Atlantic City propensity factors, which are in figure 6 in the report. We didn't reproduce it on a slide because it's a lot of information and we could spend two hours just going over that.

The visitational win estimates for Ottawa and Windsor were further sensitized by assuming that competitive casinos would be located in Montreal and in Detroit. Obviously, the Montreal casinos are already approved. The Detroit casinos are not approved. The mayor of Detroit has been a very strong proponent of casino gaming for a number of years. Michael and I were involved in a study in 1988 to identify the potential of casino gaming in Detroit. It's been defeated several times, but we made the assumption that if a casino opens up in Windsor, it's very likely that Detroit will make a competitive move to stem the flow of casino gambling dollars to Windsor and open up a casino.

The frequency of visitation: The Ottawa win in the outer two bands, from 40 kilometres to 240, was reduced by approximately half to take into consideration that some of those people will be going to the Montreal casinos. We reduced the Windsor casino win by 60% to account for the fact that a Detroit casino could very likely be developed.

The potential gaming demand from the existing tourists was factored into the analysis. We gathered information from the program of the Ontario Travel Associations. We made certain adjustments to avoid doublecounting of existing tourists. If they originate from within the existing 240-kilometre radius, we have excluded them from our analysis. If they originate from another travel region within Ontario that we have assumed will have a casino, then we've eliminated them from the analysis, assuming that they will satisfy their gaming needs in their originating region. If they originated from a catchment area that's overlapped by another casino area, I've already discussed how we've adjusted for that: We adjusted the catchment areas, which is why you don't have total circles around all the different areas.

The gambling expenditures for the local residents are estimated to be substantially less than those for people coming from a considerable distance for the specific purpose of gambling. Our estimates of casino visitation are presented on this slide for the four major market areas, and on the following slide, for the smaller market area regions. That's a total of approximately 32 million visitors on an annual basis to the casinos.


This table summarizes what we consider the incremental tourist visitations, excluding existing tourists to the region. These are people who will be making trips specifically for the purpose of casino gaming. It's approximately 24 million total incremental visitors.

The casino win is defined as the gross wagers placed by gamblers less all the winnings paid out to the gamblers. It's the net amount the casino earns as gaming revenue equal to the net amount that gamblers lose. We estimated that the Ontario casino gaming industry will generate over $2.3 billion in casino win annually upon stabilization. These two slides show the total win for the major and the smaller casino market area regions.

The following slide, and this slide is out of order in your presentation package, shows that the number of visitors is expected to be about 44% from the US and 44% from Ontario, but the following slide shows that more win is expected to come from the United States, primarily because people will be coming from a greater distance specifically for the purpose of gambling.

In terms of casino sizes, we developed the supportable casino gaming floor area for each of the casinos through an analysis of the win per gaming unit of existing jurisdictions most comparable to those proposed for Ontario, again specifically Atlantic City. Through interviews with casino operators and analysis of the existing casino win information, which is available publicly from both Atlantic City and Nevada, we estimated that Ontario's casinos, operating in a monopolistic environment -- that is, within Ontario -- and professionally managed, which is a very important assumption, would be able to achieve a win per gaming unit -- that is, per slot machine or per table game -- a premium of approximately 25% over the averages for Atlantic City. That assumes that the mix of games will be similar to Atlantic City, with the exception that poker will be permitted -- poker was not available in Atlantic City prior to this summer -- and that craps will not be permitted but will be replaced with a mix of other table games.

We estimated the average amount of space required by slot machines and table games through a review of the various North American gaming jurisdictions and discussions with casino operators and regulators. Using our average square footage per game, plus the mix of games that we estimated, we came up with a weighted average estimated win per square foot, which would be gaming revenue per square foot of casino space. The sizes of the casinos that we estimated are as presented on the slide.

A different approach was used to estimate the gaming area for the smaller market area casinos. The weighted average win per square foot was used as a test of the capacity of the casinos. The estimated average win per square foot was lower than that. In other words, we developed win estimates based on the population within the catchment area and the existing tourist visitation, and then we tested that against the average win per square foot for the major market area casinos. For the smaller market area casinos, it was lower on a per-square-foot basis. We determined that the capacity of a 10,000-square-foot casino would be acceptable for the amount of gaming win that we estimated; no capacity constraints.

Each major market area region should contain only one casino, with the exception of Toronto, which should contain somewhere between one and three casinos inclusive. The following slide is just an estimate of the mix of gaming equipment. Just to provide some perspective, we've estimated a total of approximately 13,000 slot machines in the entire province of Ontario. There are 22,000 slot machines in Atlantic City's 12 casinos.

We estimated our annualized cash flows for each of the seven market area casinos based on the estimated visitation, the resultant casino win and the required casino gaming floor area. Cash flow is defined as the operating income of each casino net of the win tax, which was assumed to be 20% based on input that was provided to us from the Ontario casino project, and fixed charges, which would include a management fee, property taxes, a reserve to improve the casino facilities after a period of time and debt service.

The estimated cash flows are subject to considerable uncertainty, given the fact that the proposed Ontario casino industry is going to be unique within North America. There are as-yet-unknown site locations for each of the casinos. There's an as-yet-undefined regulatory structure of the industry. There will be uncertainties with regard to the development, timing and establishment of casinos in each of the seven market area regions. Each of those could have a significant impact on our estimates.

For the major market area casinos, Ontario, as I discussed earlier, will be unique in North America, but we believe most comparable to Atlantic City, given the presence of a substantial potential day trip market. Therefore, we believe it is a reasonable assumption to use the annual financial operating results of Atlantic City as the most comparable basis for developing estimates for Ontario. We used the most recent publicly available financial information for both Atlantic City and the larger casinos in Las Vegas. That information is very reliable.

For the smaller market area regions, we took a different approach. We developed a generic operating model based on the cost to develop the facilities and operate the facilities. For that model, we used the publicly available, reliable financial information for Nevada casinos of approximately that size. This figure shows the estimated win tax which would be generated by each of the seven different casinos. That information is summarized on the next slide, which also summarizes the net provincial cash flow from each of the casinos.

That concludes my portion of this presentation. Thank you.

Mr Farrow: We can stop for questions here.

The Chair: We're a little more than halfway through your total time allocated for presentation, so maybe we can take about half the time to divide that time up for questions, I guess.

Mr McClelland: Sir, I just wanted to touch base on a couple of things. Going back to the slide you just referred to, distribution of casino win by place of origin, it shows approximately 38% Ontario. I'm wondering if there's been any analysis of the ideal percentage of out-of-jurisdiction gaming to maximize the benefit as opposed to the inherent cost associated with bringing a casino into a jurisdiction.

Is there, from your broad experience in the US markets, an ideal ratio? At what point in time do you, if you will, cross the threshold of making it viable in terms of offsetting the associated costs, bringing new money into the jurisdiction?

I take it that the casino win by place of origin is strictly a function of dollars spent. So if it's a function of dollars spent, at some point in time there are costs associated with operating the casino, additional costs, a social services network, policing and so forth. Is there a break-even threshold? Is there, if you will, a minimum for an ideal operation of out-of-jurisdiction moneys being expended?

Mr Webster: First of all, I believe your question relates to the costs of actually policing the gaming industry and quantifying the social costs.

Mr McClelland: Policing the gaming industry, social service costs, costs to health care system and so forth.

Mr Webster: The quantification of those costs was not part of our engagement.

Mr McClelland: Okay, so none of that has been done in your study.

Mr Webster: That is correct.

Mr McClelland: Fine, thank you. Again, is there any experience to draw from, an ideal threshold from the United States, offhand? I don't want to belabour this, because I've got a couple of other questions.

Mr Webster: Not that I'm aware of.

Mr McClelland: Okay. The assumption of a casino in Detroit -- was there an assumption in terms of one casino size, square footage? Is there some assumption upon which your data are extrapolated?

Mr Webster: Yes. The assumption there is that it would be a casino comparable to that developed in Windsor, approximately 75,000 square feet.

Mr McClelland: Okay. I don't want to be impertinent but are you doing this -- I see seven of you, no doubt highly paid and no doubt worth what you're being paid in terms of your professional expertise -- are you being paid on a project fixed-cost basis or a fixed-cost plus hourly, or what is the method by which you are billing the government of Ontario?

Mr Farrow: I think I should answer that. It was a fixed-price contract for $250,000.

Mr McClelland: Fine, thank you. You also reminded us that your analysis is predicated on the establishment of a casino in seven market areas, essentially eight or nine casinos, two or three of those being in Toronto. Obviously there is some time frame and shelf life in terms of your report. When do you envisage the expiration of the shelf life of this report?

What I'm leading to, quite frankly, is, to make all these numbers relevant and have any shelf life, when is that casino coming to Toronto? Let me tell you why I think it's probably going to come to Toronto and you might want to comment on it.

If I read the numbers correctly, there's about a 2.5 or 250% ratio of return, a 250% return of dollars to the treasury vis-à-vis Windsor and Toronto. So it seems to me that if you're doing this for a revenue-driven enterprise, Toronto would be the next place you'd want to come, whether it'd be one, two or three casinos. When do you have to do that to make these numbers still relevant and, secondly, have you done anything with respect to site-specific analysis, albeit preliminary, for location of those one, two or three casinos in Toronto?


Mr French: I think I'll comment on that. First of all, as it relates to the shelf life, the shelf life of our report -- first of all, we assume a stabilized year of operation.

Mr McClelland: One year.

Mr French: One year, and that stabilized year of operation could be potentially the first year.

Mr McClelland: Including interim?

Mr French: I beg your pardon?

Mr McClelland: When you're talking about a year of operation -- I'm sorry to interject. I don't mean to interrupt. I just want to clarify. Are you speaking about the full-time casino or the interim casino?

Mr French: I'm talking about a full-time casino, a hypothetical full-time casino, say in Toronto. The first year could potentially be the year of its highest performance, simply because of the novelty and the monopolistic situation that that casino will be in. So as it relates to the shelf life of this report, it's largely dependent on what other new gaming jurisdictions legalize casino gaming in contiguous markets.

Mr McClelland: So it's fair to presume that there'd be considerable pressure to get wheels on this and get it moving.

Mr French: For example, our research was conducted over the last six months and our fieldwork was conducted about three months ago. Since that time, a compact has been awarded to the Oneidas outside of Syracuse. Now, that particular native American tribe does not overlap with any of our concentric bands, as Dan has outlined. However, they will have a 40,000-square-foot casino that some patrons will go to rather than travel to Niagara Falls.

The impact of that Indian casino, which will not have slot machines, which will be 40,000 square feet of table games, will have some effect. My immediate guesstimate will be that it will be relatively small, but that's an example of an operation that has opened. They were awarded a compact since we started our work.

So the shelf life is largely dependent upon other gaming markets. For example, I also believe that if New Orleans and Chicago at some point in time develop a land-based casino, that will have a negative effect on existing casino gaming operations, as well as potentially a land-based gaming operation in Toronto.

Mr McClelland: Have you given any advice or do you have any advice to give the project team with respect to when they should proceed with the establishment of a casino in Toronto and the other six market areas, Windsor being number one?

It seems to me that's very pertinent information, and it would also seem to me -- correct me if I'm wrong -- that the government would want to know from yourselves a critical path in terms of establishing in the markets, regardless of the political considerations, from the economic realities that will drive the projects elsewhere in the province.

Mr French: We've not been asked to comment or prepare any time line at this point in time.

Mr McClelland: If you were so asked, what would your advice be to the government of the day to move ahead with a casino in Toronto specifically and Niagara Falls as the probable -- and that's just an assumption on my part -- next locale for a casino?

Mr Farrow: Why don't I answer that question? I think what you're involved in here is competing jurisdictions, and I think when you look at this from a competition point of view to go early is better. As soon as possible with your best opportunities is the strategy, if in fact that's what you decide you want to. If you decide you want a casino in Toronto, then for it to be successful and to maximize revenues, you'd go early.

Mr McClelland: So it's reasonable to presume that with the advent of a casino in Windsor the pressure will not only increase, it will probably accelerate, perhaps exponentially, to get a casino up and running as quickly as possible in other jurisdictions.

Mr French: We can only speak to experience in other markets. Generally the first casino in has made windfall profits because they've created a captive market and they've also created goodwill among gaming patrons. Certainly that's what's occurring all over the country in the United States with Indian gaming, river-boat gaming and land-based gaming.

But I also think it's important, and probably Carl can speak best to this, that certainly a strategic, very well-thought-out time line and plan is put in place to make sure the proper controls are in place.

Mr McClelland: I guess, in short, yes, there will be increasing pressure. The pressure will considerable.

Mrs Caplan: I have one question that relates to the competitive nature. We've heard a number of people express concern about what will happen when Detroit opens, and you made the assumption in your report that in fact Detroit will compete as soon as, or sooner than, we think.

What effect do you think Detroit's competition will have on a Windsor casino, given the fact that Windsor will not have, according to Criminal Code provisions, dice, which is 38% of revenues out of Atlantic City which you've used as a comparison and that likely Detroit will; as well as the restrictions that have been placed on the Windsor casino, which in the American model will likely not be there if Detroit is going to actively compete with Windsor? Have you factored that into your analysis not only for Windsor but for the rest of the province?

Mr French: The Windsor market is extremely dynamic. We anticipate that that market alone in a stabilized year of operations would achieve casino win levels of in excess of a billion dollars. We've estimated that with a competitive gaming facility, albeit developed after the Windsor facility is up and running, will siphon off, for lack of a better word, 60% of that demand.

Mrs Caplan: Say that again. I just want to make sure I understand what you just said.

Mr French: We believe that a competitive, Detroit-based gaming facility will siphon off 60% of the gaming market for the Windsor market defined by those concentric bands, and as we've said before, we believe it to be a more than $1-billion market in a stabilized year of operations.

So we think we've been reasonably fair with how Windsor will be impacted by a competitive gaming market. Interestingly enough, and I think Rowan can probably speak to this, we had focus groups and we did a lot of surveying, and a number of individuals from that particular market would prefer to come to Windsor to participate in games of chance.

Mr Farrow: It's safe.

Mr French: It's safer. So we think the safety factor may have some positive impacts for Windsor. But certainly if they were to develop multiple casinos or other attractions which would lengthen the stay for people in Detroit, which I would say would be a monumental task with the problems that are being experienced in Detroit, that would have an increasing impact on market share in Windsor. But we still believe, and this has been very, very consistent, the fact that you are the first casino in operation is going to be a significant advantage to generating a loyal following.

Mr Eves: Most of my questions really have been asked about the impact of a Detroit casino, which I think is a very logical one. Most of the questions I'd like to ask are impact on charitable casinos, horse racing industry, that type of thing. Would you prefer that I deal with that later on?

Mr Farrow: Yes, please.

Mr Eves: And also societal costs. Mr McClelland briefly talked about things like policing cost, cost of pathological gambling or compulsive gambling as the Canadian foundation refers to it, and they were here I believe two days ago. Do you want leave those to the end as well?


Mr Farrow: We're going to deal specifically with that, so we'll --

Mr Eves: So I'll pass on to my colleague Mr Tilson, and perhaps if we have any time left I'm sure the Chairman will save it for us. Thank you.

Mr Tilson: Your report is dated two days ago -- the first part of August -- which I find interesting. From the government we create a pilot project, in fact a whole procedure to develop a gambling casino in the province of Ontario and then we hire a consultant to see whether it was a good idea or not.

I have trouble with that, specifically when I look at the mapping. I understand the principles of it. I would rather a consultant such as your firm -- none of my comments are meant to be derogatory remarks -- had come with a clean map, a clean sheet. Instead of picking out areas such as Windsor, Niagara Falls, Toronto, Ottawa, Sault Ste Marie, Sudbury, North Bay, Thunder Bay, all of which have been suggested for many, many, many months in the past as potential sites, I would have rather you had come to present a report to this government suggesting specific areas, specific sites for whatever reasons that you have just given.

You have indicated that your firm is quite experienced and has spent a considerable amount of time advising other states. Were you retained before these states got into these ventures or --

Mr French: I think I can understand your questions. It depends. We like to be retained before, but the furore of casino gaming in North America sometimes doesn't make it possible. For example, the state of Connecticut had us do a study four years ago prior to the development of casino gaming at Foxwoods. We have conducted a major economic impact study for Gary, Indiana, prior to any casinos being developed or any siting of casinos.

We would prefer it to be that way but oftentimes, if you've been reading about what's going on in Louisiana with New Orleans, the process does not get us involved. I can also assure you that we try to get involved very early because it's good business for us.

As it relates to the sitings of these casinos, we were informed of 13 potential sites, and we tested every one of these sites based on the concentric financial model that Dan has outlined to you. If in fact these were not the most appropriate sites, we would have clearly made that available to the gaming commission. We believe that these sites that we've identified, these seven, are the best potential sites that will meet the goals that have been outlined to us. I know people have said Toronto and Niagara Falls and Windsor, and maybe that's obvious, but we've confirmed that they would generate these win levels we've estimated.

Mr Tilson: I'd like to speak about your concentric financial model, the plan that you follow. I understand the results that you conclude with. I guess some of my questions have to deal with how you arrive at your initial presumptions. In other words, if you take red paint and blue paint presumably you'll come up with some sort of purple paint, but that's assuming that the initial presumption is that you have red paint and blue paint to start off with.

I start, for example, going through your executive summary, just talking about presumptions that you make:

"Inherent in the policy objectives for casinos in Ontario is the generation and capturing of new spending as opposed to simply creating a venue for the redirection of existing spending within the province....Both tourism gateways (road, air, rail) and areas currently experiencing large numbers of tourist visitations were identified as locales for the highest potential and therefore were used as a starting point for more detailed analyses."

Then you go on as to how you arrived at your conclusions. I understand that. However, it may well be that in specific areas such as the pilot project that's being chosen now -- and Mr McClelland has spent some time on it and I'd like to return to that -- that assumption may not be correct.

We've got aboriginal reservations around Windsor; we've got American Indian projects around Detroit. We've got all kinds of political things that have been going on in Detroit for some time: "Are we going to have casinos?" It appears that they may or they may not. And there are all of these other factors: You have a whole different type of society south of that border as opposed to north of that border -- the social impacts of crime, the predictions, all kinds of things, not just populations.

So I guess I get back to my initial question. It's fine to come up with these conclusions, assuming your initial presumptions are correct, but I would submit that there's a tremendous amount of guesswork being put forward by you as to what those initial presumptions are.

Mr Farrow: Can I just respond to that? As to the first part around the determination of the market areas, that they were given to us. Windsor, we knew, was a given, but for every other situation we looked at the market area and looked at the potential so that an area -- and we specifically said in the report that we're not picking Niagara Falls. We're saying that there's a potential in the region of Niagara Falls for a facility. We've done that, and that was done on a basis of a logical analysis concerning access to the populations in the market. So that's the first thing.

The second thing is that we're very sensitive to the issue that a lot of the hard data that we're drawing on are based on US situations. We have done work to verify that, made adjustments in terms of demographics, socioeconomic profiles, behaviours etc. We've cross-checked it by running focus groups, by accessing surveys about what the gambling habits and intentions of Ontario residents are.

Mr Tilson: How do you do that?

Mr Farrow: How do we do that? We do that by accessing the survey data which say about Canadians, "What do you do? What would you intend to do?" and by looking at the exit data about tourists who go down and what their intentions are in terms of gambling or not. So that's the way we do it. We look at the situations elsewhere. We say, okay, here was a population where the average income was $25,000 a year, and they had these education characteristics; what happened when you introduced a casino into that?

So it is a projection and therefore cannot provide certainty, but within the evidence and information that's available to us right now, we've done the best we can to verify that what has been observed in one jurisdiction would be true in an Ontario jurisdiction and then made all sort of allowances for underestimates or overestimates.

Your caveats, I think, are well founded, but we haven't taken those issues lightly; we haven't just guessed. We have looked critically at some of those conclusions and tested them among ourselves, and that's how we deal with that.

Mr French: If I could just add briefly to that, we interviewed all the major gaming companies that we've worked with in the past, and our baseline of information is really the Atlantic City experience where, within a 300-mile radius -- I'll use miles, because I'm most familiar with miles -- there are approximately 50 million people. Within a 300-mile radius of Toronto, there are approximately 40 million people. To simplify this, it's largely a day-trip market, and people who travel to Atlantic City, day-trippers, generally travel x number of times per year, generally stay x number of hours and generally spend x number of dollars. All that information is quantified by additional research we've conducted in other markets, as well as with the casino companies. We've taken that as our baseline information, and we've adjusted it for the difference in the eco-demographic situation here in Ontario.

Mr Tilson: I don't profess to be a consultant; nor does anyone on this committee. That's why we have you here to talk to us. But at the same time, I look at Canadians and Americans, and if you were going to go and gamble, you're going to go and gamble where the best product is. There are many Canadians who fly to Nevada or they go down to Atlantic City because there are all kinds of glitz and lights and good games and all kinds of other things.

Mr Dadamo: And Wayne Newton.

Mr Tilson: Exactly. I'll tell you, Wayne Newton isn't going to come to Windsor, and that's the very point I'm trying to say, that that's another assumption you're making, that Americans are going to come north, whether it be to Windsor or whether it be to Niagara Falls or whether it be to any other of these cities. It's another assumption and, I submit with due respect, it is fallacious. Do you really think the Ontario government is going to create a product that's similar to Atlantic City or Nevada?

Mr French: I will tell you that Frank Sinatra will be performing in Aurora in a river boat in two months, and at Foxwoods you're going to have some headliner entertainment that's going to be coming there. If you can pay these people enough money and your casino is that successful, these top-line headliners will attend. If you have professional, blue-chip operators -- and these casino gaming companies are Fortune 500 companies, some of them -- if you have them running your casino, it will be run professionally, and we strongly believe that the numbers that we've estimated are achievable.

Mr Tilson: I guess what I get --

The Chair: Your time's up. You've used it up very effectively, I might add. Mr Martin, you're up.

Mr Martin: I was wondering about your concentric circles. I'm not an economist. Did you use your little compass or what did you base that on?

I have to apologize for being a bit parochial. I'm certainly interested in the Sault Ste Marie opportunity, and when you draw your circle, you miss, for us, a fairly major market. If you look at the skiing industry, for example, we're attracting folks in ever-larger numbers from the Chicago area, but that Chicago area doesn't fall within the concentric circle. Did you consider that? What emphasis did you put on the fact that there's already an existing casino across the river which is doing quite well, which I believe right now is, what, around 45,000 square feet?


Mr Webster: No.

Mr Martin: I was talking to some of the folks last night, and they assure me that it's significantly more than 10,000. They've had three additions in the last --

Mr Webster: Six months.

Mr Martin: Six months, yes.

Mr Webster: We didn't consider the additions in the past six months. I was not aware that they had expanded since we began our analysis back in March. That casino, to the best of our knowledge, is very successful. We did make accommodation in our estimates to reduce the people who would be coming from that portion of the catchment area to reflect the competition from that casino. I can look up the specific number, but I believe we probably reduced it by about half in terms of the total concentric band, because a great number of those people live on the US side of the border.

The research shows that people tend to go to areas that are most convenient to them for casinos if they have comparable gaming opportunities. The size of the casino in Sault Ste Marie was one of the reasons that we assumed a minimum-size casino of 10,000 square feet, because if you put a 3,000-square-foot casino there, the likelihood of that being competitive, because it wouldn't have the same facilities, the critical mass, the advertising clout as the US Sault Ste Marie casino, the chance that it would be competitive is diminished. You have to have a comparable facility.

Again, our basic assumption is that people will go to the casino that's closest to them. In Chicago -- that's probably about 300 miles from Sault Ste Marie?

Mr Martin: Yes.

Mr Webster: There's a possibility people will travel there. I think there's probably a greater possibility that if they have a desire to gamble at a casino they'll probably drive to Windsor instead, because people who are that dedicated to gambling are going to want to go to a facility that offers more.

Mr Martin: Did you look at all at the strategic mass of a recreational opportunity in an area? We have a fantastic ski area in Searchmont that attracts thousands of people, again, from the Chicago area. The folks across the river running the casino are certainly seeing the casino on our side as adding to that strategic mass of attraction that would bring people up. Did you do any analysis of that sort?

Mr Webster: We did consider the fact that existing tourists already come from the Chicago area in our analysis. They're factored into our analysis in terms of visiting the casino and generating casino win.

Mr French: We did not get into a situation where we looked at a lot of the seasonal characteristics of markets. That would be, I think, very subjective and would be very difficult for us to do.

Mr Duignan: I'd like to make a comment on the fact that Canadians can't compete. I believe the Windsor casino, what will be built there, will be very competitive for the Ontario market and indeed it will be very competitive for the US dollar. This whole doom-and-gloom scenario that what we're going to build in Windsor is going to attract huge amounts of crime or prostitution etc is just not there. Whether a casino opens in Detroit or not, it will still be very attractive for the US market.

Mr Tilson: All the police chiefs around this province are saying no, there's all kinds of crime going on, contrary to your predictions. You've got to listen to somebody.

Mr Duignan: It's a pity, Mr Tilson, you didn't listen to the optimistic people in Windsor last week who want the casino, who want the business.

Mr Tilson: I'm listening to the people who are trying to police this thing, and the police are saying you're in for big trouble.

Mr Dadamo: He wasn't there.

Mr Duignan: You weren't there.

You basically made your projections within an area of about 150 miles of the projected casino site. Did you look beyond that market, say around the 500- or 300-mile market as well?

Mr Webster: We did not look beyond 150 miles. When we put our map together of the major market area regions, the overlapping of the casino areas and the proliferation of casino gaming throughout the United States led us to believe, and it may be a conservative assumption, that to go beyond 150 miles would be less supportable in our analysis, though it may make our analysis more conservative, because of the other gaming options that are developing around the country. The 150-mile radius -- if you look at the Pequot casino in Connecticut and the Atlantic City casinos, the circles, the radiuses, almost come together. So it leaves very little untapped or unserviced demand in the northeast region there.

Mr French: We did make accommodation for the existing visitor base. So many of those visitors who do go to Windsor are from outside that 150-mile concentric zone. All those visitors and all the conventioneers and all the tourist people who do come or have historically come to these markets, we have made accommodation for them.

Mr Webster: I'd like to make one more statement too about the facility that we've assumed will be developed in Windsor. We've assumed that obviously an attraction that people will want to visit -- and that's stated in our report -- is going to be developed. If you open up the warehouse and you put slot machines in there, some people will come, but it's not going to be a competitive facility and it leaves you much more susceptible to competition from Detroit. We're assuming a facility comparable to those in Atlantic City. I don't know how many have been to Atlantic City here, but these are large casinos, they're very interesting for people to visit, and they produce a certain type of atmosphere that propels people to gamble. We're assuming that type of facility. The Pequot casino in Connecticut was a much different type of facility but it's a very attractive facility. It's been very successful.

Mr Duignan: I notice you made a presumption of overseas visitors of about 2% visiting the casinos. Is that because the overseas visitors are here and will visit casinos? Was it based on that assumption?

Mr Webster: Yes. Those are the existing visitors. That's capturing the existing overseas visitors.

Mr Duignan: But there always is the potential to market overseas and to market beyond the catchment area of 150 miles.

Mr Webster: Correct. We're not suggesting at all that there will not be any demand coming from outside 150 miles. There will be demand from outside 150 miles. We thought it more prudent to look only at 150 miles because of the competition throughout the US.

Mr Farrow: Mr Chairman, I know you're watching the time, and I'm trying to watch the time as well. I'm just concerned about the other parts of our presentation and how the time is going on.

The Chair: As soon as Mr Dadamo poses his question, and however long the answer may take, we're going to continue on.

Mr Farrow: You're saying shorter answers will be helpful.

Mr Dadamo: I'm a Windsor member, by the way. The interim casino will be in the riding which I represent, so it's very important to me.

I wanted to talk about the 12,000 visitors per day. That's a figure that's been bandied around for a long time now and I'd like to find out how that was derived and how that will parlay into day trips, overnight trips and things like that.

Mr Webster: We developed the visitation by looking at the concentric band and applying our propensity factors: what percentage of the adults will gamble, how many times they'll visit a year, and then for win, how much they'll spend. We developed an annual number. We didn't look at a per-day number. The per-day number is just the average divided by 365 days. That again is developed from the Atlantic City propensity factors, with various adjustments.

Mr Dadamo: When the permanent site on Riverside Drive is done, hopefully in a couple of years from now, I believe it will have one hotel and three restaurants. There's a lot of curiosity about whether people will venture out from that particular site. Once they're in, will they venture out to the downtown, to other restaurant establishments? Will they buy newspapers? Will they go out and go into that clothing shop or areas like that?


Mr Webster: I prefer to let one of our tourism specialists address that.

Mr Farrow: It's part of the presentation on tourism, so we'll come back to that if we might.

Mr Dadamo: Very good. Thank you.

The Chair: Then if I might ask you, Mr Farrow, to take us further into this presentation.

Mr Farrow: Thank you, Mr Chairman.

Mr Carl Zeitz: Excuse me. I was asked to clarify one thing. In one of her first questions, Mrs Caplan asked about Detroit and the impact on the Windsor market, and because of the restrictions on dice games here in Canada by federal law, she asked what the impact would be because of that restriction, basing that on the basis of the report saying that 38% of the revenue in Atlantic City is from dice games. That is inaccurate; 38% of the revenue in Atlantic City is from all table games. The dice or craps game is probably about a quarter of the table games; therefore, it accounts for approximately 9% to 10% of all revenue in the casinos in Atlantic City, but not for 38%.

The Chair: Thank you for that clarification.

Mr Farrow: Thanks, Carl. The next part is that Gord Phillips is going to talk about the economic benefits to the province and the strategies to enhance tourism. Gord, I think you're going to have to run through this in about five and allow time for questions.

Mr Gordon Phillips: Thanks, John. I'll do my best.

I'm with the Economic Planning Group. Our company specializes in tourism. We work exclusively in that field. We're based here in Toronto. We also do a lot of work on assessing the economic impact of tourism projects, tourism development.

I'm going to be making some references in the tables that you're going to see to direct effects, indirect effects and induced effects. Just to clarify what we're talking about, direct effects -- this is economic impacts -- relate to the impacts that are immediately apparent from the first round of expenditures. In other words, if a visitor spends $100 on a trip, those direct expenditures create jobs immediately in those establishments and in the suppliers to those establishments. Those are the direct effects.

Further, however, as you're aware, a dollar flowing throughout the economy over time is spent again and again, and so we get indirect effects caused by subsequent spending of that new dollar in the economy and we accumulate more and more employment and taxation and everything else. So that's just a definition that I wanted to get clear.

There's also the reference to induced effects. They're similar to indirect effects. They have to do with what employees do with their wages from their new jobs: buying automobiles, buying new houses and so on, and that's sort of inducing new economic activity again.

So the cumulative effect of all these things is fairly dramatic and very substantial and the numbers are very large, but the actual direct expenditure or the direct effects of the casinos themselves are only a portion of that. I'll try and clarify that as I go ahead, and I'll try to keep it as brief as I possibly can.

The economic impact analysis really had four components. First of all, the casino win analysis that Dan has led you through gave us the information on the expenditures of visitors to Ontario and Ontario residents at the casinos themselves. What money they lose becomes revenue to the casino. Then what we did is we ran the operating expenditure of all these casinos through an economic impact model and measured the impacts throughout the economy of those operations.

Then we did supplementary analysis, which is represented on this slide that you're looking at here, which is to try to determine what sort of offsite visitor expenditure might be generated in the Ontario economy. What this is is other spending in the economy, not at the casino, so it's staying in hotels, eating in restaurants, buying gas on the way, renting cars, all of that sort of thing. For the purposes of conservatism, we only measured the offsite spending of people who are not residents of Ontario, on the presumption that Americans or other Canadians, international visitors -- that that spending was new spending in the economy, but for an Ontario resident to go to a casino, our assumption was that those dollars are being taken away from some other economic activity and do not represent new economic activity in the Ontario economy as a whole. So that's a highly conservative assumption. Most of the numbers you're looking at in the report have to do with incremental economic effects. This is new tourism activity, not displacing existing tourism activity, so it tends on the conservative side.

Basically, what we're projecting is that for new visitors to Ontario and extended trips of existing visitors, added time and added spending would amount to $1.1 billion a year, and that in addition to that -- this is another, separate analysis that we did -- with Ontario residents who are now leaving the province to go to casino gaming elsewhere, we're going to repatriate some of that activity, that casino gaming expenditure and tourism activity, and that's going to generate another $26 million in new tourism spending. That's not gaming spending; that's tourism-related: accommodation, travel costs, that sort of thing.

Further to that, we've got $300 million that we're projecting the casinos will spend on behalf of their customers on accommodations and meals and such things as inducements to bring them here. We have treated that as visitor expenditures for the purpose of analysis, because from an economic standpoint, that's the kind of expenditure it is. So we have removed that from the win analysis just to make sure we weren't double-counting that figure. So in total, the visitor spending that we project to be generated will amount to an annual amount of $1.421 billion annually in the Ontario economy over and above the casino win.

Now, for the purposes of illustration, in the casino win analysis from the operation of the casinos, we ran the numbers with the entire expenditure of the casino, but we have to recognize that some of the casino win is being generated from Ontario residents. It's one thing to leave the Ontario tourist expenditure out, but it was harder to leave out the casino win coming from Ontario residents, so the numbers do include the Ontario casino win. The percentages of Ontario and non-Ontario resident casino win expenditures are on the next table. As you can see, in Toronto, for example, 54% of the casino win is going to come from Ontario residents, whereas in Windsor only 5% will come from Ontario residents, and 95% from visitors to Ontario.

The next slide indicates the economic impacts, and this is a summary that from the construction of the casinos -- and this is purely the construction alone; these are one-time effects that will occur during the development period -- there will be a total of 12,800 person-years of employment generated in the economy and employment income of $601 million. Those are direct, indirect and induced. They are the ultimate cumulative economic benefits in the economy from the result of that construction.

The next slide, then, and this is perhaps the more significant one, talks about the permanent, sustained employment and economic activity in the economy as a whole from the annual operations. Now, if you'll notice on the right-hand end of this slide, we're talking full-time jobs from all seven locations of 45,000 year-round, full-time job equivalents. There will be more actual positions than that because some of them will be seasonal, some of them will be part-time, but in terms of full-time equivalents, 45,000 from the direct expenditure. Of those, roughly half we would guesstimate would be at the casinos themselves, so maybe 22,000 jobs in the casinos and another 22,000 jobs created in direct suppliers to the casinos, and then all the indirect and induced effects through the spending of those dollars as they run through the economy will create another 51,000 jobs for a total of 97,000 sustained jobs in the economy and employment income in Ontario of $4.2 billion annually.

The next slide has a quick summary of the spending: $578 million on building the casinos; annual sustained spending from casino operations of over $2 billion. Now, the casino win is higher than that; it's about $2.4 billion. We've taken out the next item, which is complementary expenditures, $297 million, and treated them separately, so the total of those two is the casino win. Then $1.1 billion in increased visitor spending in the economy, plus another $26 million annually in Ontarians staying home to gamble instead of going to other destinations, so we're looking at total new spending in the economy of $3.458 billion annually.


Mr Farrow: I think we can go straight on to talk to tourism strategies and then stop.

Mr Gordon Phillips: We were also asked, in addition to doing the economic impact analysis, to look at strategies to enhance tourism. Basically it was evident to us that really there were two strategies that seemed to be in conflict with one another.

One is to maximize the amount of non-resident casino win and that would say, "Let's put them all on the borders and get the Americans rather Ontarians spending at these casinos," but on the other hand, to benefit the tourism industry, the extent that the casino is located away from the border in a destination within Ontario, then there's going to be a greater proportion of secondary spending created. So we're basically recommending a mixture of border point casinos and inland casinos to maximize tourism on the one hand, but also to get the benefit of maximum non-resident casino win, from the US particularly.

There are two markets basically. One is the dedicated casino gamer, and that's going to be in the bulk of the market available to us, and we're basically saying the strategy there is to attract the maximum number of casino visits, and in tandem with that to promote packages and travel products that are directly complementary to a casino trip. It's all casino travel.

For the broader tourist market, we're basically suggesting to use the casinos in Ontario as an attraction to promote new trips and extended stays in the province. For example, in convention promotion, the casino becomes an attraction, gives an extra reason for a convention organizer to hold a convention, so that becomes a further strategy.

Basically, the markets and products to be targeted for promotion and packaging efforts, we're suggesting, are first of all casino day trippers living within 240 kilometres. You've already heard the analysis that is predicated on that in large part. Casino day packages by motor coach from the same area and motor coach packages to Atlantic City are a major factor in their market. Casino-based getaway packages of one to three nights: Let's try to induce people to spend more time in the community. Pass-through travellers: These are people who are already coming to or through Ontario. Let's try to induce them to extend their stay for a short time, stay a night, visit the casino and do other complementary things, and then also regional meetings, tying in a visit to the casino; we think that's going to be an important strategic element.

For those destinations which we've defined in the report to be established tourist destinations, and this is not black and white by any means, but clearly the city of Toronto, Niagara Falls and to a little lesser degree the city of Ottawa are established vibrant tourist destinations, and there are some additional strategies we think they would be successful with as well, and that is multi-day packages in which the casino plays a part but is not necessarily the dominant element; packages in association with attractions, special events, sports events, theatre, national and international meetings and conventions; and also incentive travel packages, a very lucrative market. Ontario has not been a major player in it. We think that with casinos we could start to become a serious player.

The report, as you're aware, dealt with each of the seven communities and the types of specific strategies within this overall framework that we felt to be most appropriate for those individual communities.

Mr Farrow: I think I'd like to stop and take questions on just that part now, the economic impact on the service sector.

The Chair: Okay, we'll use an additional 15 minutes, five minutes per caucus.

Mr Eves: I want to ask a question with respect to appendix 1, the people you interviewed to do your study. How did you decide which people you would interview?

Mr Farrow: Without looking at the list that we have there, we decided on whom to interview by looking at the information we needed, by talking to the casino project and hearing about people who had indicated that they wanted to be interviewed or consulted, and they were the two criteria we used really to select people. Some people had asked to be spoken to and some we thought we needed to talk to because they had information that we wanted.

Mr Eves: On page 2 of appendix 1, there's an individual, the second name down I believe -- I don't know if I'm pronouncing the name properly -- Danny Leung of Danny Leung Enterprises; does anybody know who he is and what his level of expertise is?

Mr Rutsey: Danny Leung arranges junkets and trips to Atlantic City. He was instrumental in arranging I believe in excess of 50,000 visitations to Atlantic City over a period of time, principally to the Trump Taj Mahal. He as well arranges package tours to Las Vegas. He was an individual we became aware of during the course of doing research and he assisted us in assembling a focus group and allowed us to do a mailing to his list of clientele for whom he has arranged trips to both Atlantic City and Las Vegas. That's who Mr Danny Leung is.

Mr Eves: Is Danny Leung from Toronto?

Mr Rutsey: Yes, his office is in Toronto.

Mr Eves: Is he one and the same Danny Leung who is the vice-president of Canadian marketing for Trump Taj Mahal Casino Resort?

Mr Rutsey: I believe he was. I'm not sure if he still is.

Mr Eves: Is he one and the same Danny Leung who is identified on a chart prepared by the US subcommittee on investigations and identified by them, I might add, not by me, as an Asian organized crime figure? Is that one and the same Danny Leung from Toronto?

Mr Rutsey: If that's the same Danny Leung, that would certainly be news to us.

Mr Eves: I'll give you a copy of this chart. You might want to look at it. Because if it is, I find it highly unusual that Coopers and Lybrand would be contacting such an individual to --

Mr Rutsey: Carl, can you address that? Explain your background, Carl, and maybe you can address whether or not that's possible.

Mr Zeitz: My name is Carl Zeitz. From August 1980 until December 1988, I served as a member of the New Jersey Casino Control Commission. As a commissioner, I was not permitted any other employment or source of income. I had, at the end of my term of service, a four-year post-employment restriction on employment in the casino industry and a two-year prohibition in terms of representation of the casino industry, so I've never been employed by or represented the casino industry in any fashion in Atlantic City.

I do not know who this individual is, and he may very well have come before the commission while I sat as a member. I don't know his history in the industry. However, if he was at any point licensed in New Jersey, and apparently the individual that Coopers and Lybrand is familiar with was licensed and may still be in New Jersey, then he had to go, especially if he held a junket licence, at some point through a number one key licence investigation which requires the submission of a form of application that is over 60 pages in length, assuming it has not changed since my term of service.

He had to be investigated by the New Jersey division of gaming enforcement and the New Jersey state police, which would have had access to and probably, I presume, the cooperation of police authorities here in Ontario. In any case it can certainly be checked and confirmed with the New Jersey Casino Control Commission as to the licensing and regulatory history of any individual named Danny Leung who is from the city of Toronto, and his present status can be ascertained. Is there anything I can say further to elucidate on this?

Mr Eves: I just wondered if it was one and the same individual. Indeed, there may be two or more individuals by the same name, but if it is, I have some difficulty putting weight to the evidence of such a witness, if indeed it is somebody who is considered to be part of the organized crime element, not by me but by the US subcommittee on investigations.

I am also a little concerned, and I understand that you made it clear at the outset that it wasn't Coopers and Lybrand's mandate to look into the impact of casino gambling in such areas as policing, for example, but I think those are very important societal costs. There are lots of costs that you've identified and very accurately and appropriately, I think, in your document, but surely part of societal cost is the cost of the possibility of crime and are policing costs, as indeed are other societal costs such as compulsive gambling.

I note that in the presentation you made to us today and in the smaller document you do allude to some of those social costs, and you talk about pathological gambling and the lack of expert evidence that's available, or information I guess is a better way of putting it, and that you say that information is desirable upon the incidence within Ontario and the cost of pathological gambling. But those surely, as crime and as policing, are costs, and I don't know how we can have a comprehensive study on what the impact is going to be, in the province of Ontario, of casino gambling without dealing with, I think, those very relevant and very substantial elements.


If we're going to listen to individuals, if it is one and the same individual, then why wouldn't we listen to a comparable number of experts and individuals in police forces, in law enforcement forces and experts in those areas as well and get some kind of a handle on or impact analysis of what the costs in those areas are going to be?

The Chair: Okay. I just want to say, Mr Eves, that I've been very generous with the time. You'll have another five minutes at the end of this proceeding, and you may choose to answer now or maybe you can answer that in your upcoming continuing presentation.

Mr Farrow: I think I'd like to answer is now while I remember the question and the point. First of all, with the issue of policing, the casino project has retained advice around the policing and we got input from casino project staff around policing issues and Mr Zeitz is very conscious of that. So I mean it wasn't ignored, but what I'm saying is that we didn't push down into the level of detail of saying, "We're going to have it," because we weren't addressing where a casino would actually go on a particular site. I'm sympathetic with the point you make that there's maybe more work to be done around that in certain situations, but it's just not something that we did.

Though, on the issue of social costs generally in pathological gambling, we did retain Rachel Volberg, who is one of the North American experts on that, and you refer to a couple of lines there, but in our report we've got a dozen pages which summarize a much more extensive work that was done, that we commissioned from her, around that whole issue. I don't know whether you find that satisfactorily dealt with there, but it certainly wasn't ignored. We were very conscious of it and we've drawn attention to, I think, things that should be done to address that issue.

Mr Eves: So would it be fair to say that aspect is something --

The Chair: Thank you, Mr Farrow. Mr Duignan.

Mr Eves: -- you think the government should consider further?

Mr McClelland: He can use my time to answer that.

Mr Farrow: Our recommendation in the report is that the issue of how to address pathological gambling or the impact -- yes, it does require further examination and study and further work.

Mr Eves: As well as policing and crime. Is that fair to say?

Mr Farrow: We didn't say that in our report because we thought that in fact was being -- there were people being retained in getting good advice around that. For example, we need baseline data around the habits of gamblers in Ontario right now, which are not available, and we recommend that this be started right away. I mean, that's one of the things that's in there.

The Chair: Thank you. Mr Duignan.

Mr Rutsey: Excuse me. Might I speak to our interviewing of Mr Leung? Our interviews with Mr Leung were principally confined to arranging these focus groups and mailing out our questionnaire to Ontario residents who go to Las Vegas and Nevada on gaming trips, and that was really the extent of Mr Leung's involvement in the process.

Mr Zeitz: My role in this is to address regulation -- you may not get to me before I have to leave and, begging your permission, make a plane -- but reference has been made to the policing of the industry. By that, I take it to mean the establishment of a regulatory system to deal with this kind of an issue: Who is this person? What is his background? Do we want to admit him to a gambling industry, a legal casino industry here in Ontario or not? That is up to you, to write the strictest, most rigorous form of regulation. I recommend the New Jersey system. It is recognized universally now as the toughest. The industry doesn't particularly care for it. They would prefer to have other systems, but it's become the heart of one state after another in the United States in terms of adopting a very rigorous system, because the first role of a regulatory system is licensing to determine suitability and to provide a system of sterilization to prevent unsuitable people from being involved. That can be achieved through your police authorities and a strong statute.

Mr Duignan: Since a number of your team have to leave in about three quarters of an hour and since we still have a number of areas we haven't touched on yet, we're not going to ask any further questions at this time except to say maybe if we just could move on and get the rest of the areas covered before your team leaves.

Mr McClelland: Just by way of information, Mr Chair, I think the point was well taken about New Jersey having the strictest commission and screening procedures. I regret I don't have it with me; I'd like to introduce to the parliamentary assistant and committee members an article from the Wall Street Journal of about two weeks ago. Notwithstanding that, one of the major operators had some difficulty with an individual who had apparently passed the screening process and none the less ended up 48 hours thereafter being dismissed from his employment because of security concerns with respect to organized crime. I think that speaks volumes that one can go hand in hand with the other.

Having said that, I want to get to spending in Ontario, the slide that was up with respect to the incremental offsite expenditures of non-resident visitors, an approximation of $1.1 billion. I'm wondering if some of the data were extrapolated from Atlantic City. I know that Atlantic City was used for other data, in extrapolation of data from Atlantic City experience. Is there some relationship between that $1.1-billion projection and the experience of Atlantic City which, I think, if my anecdotal evidence is accurate, indicates that it did not in fact realize significant secondary economic benefit in the community beyond the walls of the casino, if you will? Perhaps you can help me with that.

Mr Gordon Phillips: The person visits -- that whole analysis came from the win analysis and was not rooted directly in the Atlantic City analysis, but in large part the estimates of visitor expenditure that would occur for casino gambling --

Mr McClelland: I'm thinking specifically offsite, if that helps.

Mr Gordon Phillips: Okay. As well as offsite expenditure, we used a survey that was done by a Toronto-based company, Longwoods International. They have a client in the state of New Jersey and they have been doing annual survey research for the state of New Jersey. We were able to buy from them some of the results of that research. Basically we used day-trip data and overnight-trip data of people going to Atlantic City in terms of their offsite expenditure. We converted that to Canadian dollars and we used that as a model for the daytime, same-day and overnight expenditure likely in Ontario.

It was quite interesting, however, that the expenditures on offsite were quite high. Even on same-day trips there was a significant amount of offsite expenditure. There is a table in the report that I could find if you want me to that illustrates the actual numbers on per capita expenditure. It is an exhibit. But you're right, it is rooted on the Atlantic City behaviour model.

The Chair: I just want to let you know, Mr Farrow, at this time that if we should continue until 4:30 -- and the members have indicated they would like at least another 15 minutes for questions -- that only allows you about another 25 minutes to complete your presentation. I just wanted to make you cognizant of that.

Mr Duignan: On that point, I wondered -- I know there are many areas you haven't touched on yet -- if we could proceed through the rest of all the areas without any further questions.

The Chair: That's what I just suggested.

Mr Farrow: I take your guidance on it. What I was proposing was to have Carl Zeitz now talk about regulation and control. Carl, you've just got a few minutes -- I think, perhaps, questions to allow the committee members to direct you to the areas of their most concern. So just a few introductory comments.

The Chair: If you could go completely through your presentation, the members are very adept at understanding what's transpired and they can save those questions to ask you at the end.

Mr Farrow: I'm very conscious about Carl; he's one of the people who's got to catch an airplane.

Mr Zeitz: Mr Chairman and members of the committee, I think I've already been introduced to you out of order a bit, but I am a former regulator in New Jersey and that's one of the causes of my involvement with Coopers and Lybrand in this consulting assignment.

My contributions to the report involve the sections which deal with regulation and with the subject titled "Benchmarking." I'm going to try to abbreviate this. I have prepared remarks and I hope they're here. They're supposed to be up here and they'll be distributed to you.

Concerning regulation of casino gaming, it's fair to say, as the report indicates, that a sound system of regulation is a requisite to the establishment of a legal casino gambling industry. A casino regulatory system has the following objectives: It safeguards public and private integrity; it tracks public and private investment in casinos and the returns earned on them; it ensures control over assets; it tracks and controls all moneys wagered in casinos, paid out as winnings by casinos and distributed by casinos for fixed and operating expenditures, for debt service, return on equity and the like. The regulatory system will ensure the honesty of the games offered to the public.


These objectives are then met by undertaking the following regulatory functions. Number one: As I indicated before, the primary function is licensing to screen, approve and monitor the participation in casino gambling of all owners, operators, investors, employees and vendors; regulatory authority to borrow or extract from legal gambling any person or business entity who initially or later fails to meet rigorous standards for integrity.

I should say that in the course of my eight years' service on the commission, we sat on hundreds of hearings involving individuals. We sat on lengthy hearings, some of them lasting as long as eight weeks, five days a week, nine to five, in the hearing room. These are in terms of the licensing of corporations and operating entities, several of whom were barred from operating in Atlantic City by the commission during my period of service. The point is that these are detailed administrative hearings and trials.

Other regulatory functions that are vital are establishing control systems. These, at a minimum, involve controls over accounting in casinos, security, surveillance, auditing, operations, gaming equipment and management. They must be segregated to assure that there are multiple levels of supervision and that there are checks and balances between them; one system of controls serving as a brake on the next to assure that nothing is evaded or slips by.

Finally, an important function of gaming regulation is the creation and monitoring of fair rules of the games with notice to the public so that you require the regulators to write detailed regulations as to how the games are to be offered for play; how they're to be exposed for play; how they're to be operated. The least little details should be set down in black and white so that nothing varies. What you don't want is variation, or you at least want notice to the public officials, the regulators, of any variations before they occur.

In the two largest gaming jurisdictions in North America, Nevada and New Jersey, the regulatory authority reposes in the dual-agency system. In both states, the gaming control statutes establish police investigative and enforcement authority in one agency and rule-making and administrative judicial authority in a second agency.

The dual-agency concept is reflected in Bill 8, which is before the Ontario Legislature. While this legislation is predicated on the creation of a third entity, which is a public corporation that would own the casino or casinos established by the province, the notion of a dual-agency regulatory system, committed to the missions I have outlined, is no less applicable or appropriate than it is for a model that would be predicated on private ownership of casinos.

The government of Ontario would never have, for a moment, any less interest in the gaming operators chosen to manage the casino or casinos proposed by the province than, for example, the state of New Jersey has in the suitability of the individuals and businesses that own and operate casinos in Atlantic City. That goes without saying.

I would sum up gaming regulation this way: It's not stated explicitly in my work in the report, but you have to understand that a casino is a complex financial institution through which flow vast sums of cash and cash equivalents. At all times, there is a public interest in knowing how much money there is, where the money has come from, where it's going, how it's going to get there, who is going to receive it and what share is due the government in percentage fees and/or taxes.

A proper regulatory system will monitor the private conduct of gambling to give a complete, accurate public accounting of all funds, assure the full payment of all public receipts from gambling, assure the integrity of the people and businesses engaged in casino gaming and ensure fairness to the public regarding the activity that occurs in casinos to produce the stream and movement of funds.

I had some additional remarks on the benchmarking sections. I think I will forgo those for the time so that you may move along.

Mr Farrow: Rowan Faludi is going to talk about the impacts on other forms of gaming which we looked at.

Mr Rowan Faludi: I'm a manager with the Toronto office of Coopers and Lybrand. As John mentioned, I'm just going to be talking briefly about the impact of casino gaming on some of the existing forms of gaming in the province. To keep things brief, I have an abbreviated format for my presentation. If there are any questions regarding methodology and so forth, you're free to ask them at the end.

This is one area that we found somewhat difficult to quantify. What we did in looking at other forms of gaming was undertook a number of interviews with organizations such as the Ontario Jockey Club, the Ontario Lottery Corp, the Ontario Racing Commission, bingo operators and the Ontario Agriculture and Horse Racing Coalition.

We reviewed an extensive number of reports dealing with the impacts in other jurisdictions such as Atlantic City, Connecticut, Minneapolis and Winnipeg. There were a number of surveys that had been commissioned by the casino project dealing with gambling habits in the province of Ontario. They also formed considerable input into our analysis. As Bill has mentioned before, we also undertook our own survey of high-stakes gamblers and we undertook a focus group. These are really the principal tools of our analysis.

I'm just going to briefly touch upon some of what the existing forms of gaming are and what their extent is right now. I think the current extent of recreational gaming in Ontario is roughly $4 billion distributed among lotteries, horse racing, bingo, break-open tickets and charity casinos. The largest portion of that is lotteries, followed by horse racing, bingo, break-open tickets and charity casinos.

As you can see from the slide, lotteries are participated in by about 80% of the Ontario population. The other forms of gaming are somewhat less popular. As you can see, horse racing ranked second at 26%; bingo, 19% of the Ontario population participates; break-open tickets roughly the same and charity casinos, which are a new concept to Ontario; we estimate that only about 1% of the Ontario population is participating in those.

Basically, I'm going to summarize our conclusions. The table there lists each of the various recreational gaming opportunities. We've ranked them from greatest impact to least impact. As you can see, the greatest impact we feel is going to be on charitable casinos.

I'm not sure how many of you are familiar with this concept but, basically, it's a very low standard of casino gaming, offering only blackjack, wheels of fortune and break-open tickets. They are operated on a three-day licensing period, at a temporary location. They're held in places such as hotels, convention centres and shopping centres. The environment is very substandard by normal casino standards. We feel there'd be very little reason for these types of facilities with full-scale casinos. Their only function would really be to serve smaller markets that aren't directly accessible to the larger casinos. So, what we've identified here is: They could face possible elimination, at least in respect to the larger markets containing full-scale casinos.

Horse racing is, as we've indicated there -- we're looking at about a 5% to 10% impact on total wagering. This is really based on an analysis of other studies and particularly, we've relied on Dr Hosios's work, who you just heard from. We feel his study is the only one that really focuses on the Ontario situation and looks at what the true employment picture is in Ontario and really looks at possible ways horse racing can mitigate the impacts of casino gaming.


Following this, we don't feel bingo is going to be substantially impacted unless bingo is allowed in casinos. Bingo has marketed itself very much as a community event. It has a demographic profile comprising a large number of women, and the demographic profile for bingo is quite different than that of casino gaming. So we feel that bingos will probably not be significantly impacted unless bingos are permitted in the large-scale casinos.

Lotteries: Basically the Ontario Lottery Corp has been very successful in marketing itself very recently by the addition of new games, particularly their Sport Select, and every few years they introduce new games so that they're continually revamping their product and they've been very successful. In recent years they have undergone quite a substantial amount of growth. The impact of casinos, we say, will likely be to impair this growth, but we don't think it's going to really cut into lottery sales significantly.

Also, with lottery tickets, they're highly accessible. There are 3,000 retail locations for lottery tickets. Basically, you can go anywhere and buy a lottery ticket; however, casinos are only going to be located in four primary locations and seven secondary locations, at least as a first start.

Finally, break-open tickets: In a manner very similar to lotteries, we feel they probably will not be impacted significantly.

Mr Farrow: I'm going to do the final part of the presentation on social costs, and I'm not going to use the slides, as I'm going to shorten it down somewhat.

As a result of the work we did here, we thought the area of study of problem gambling and pathological gambling was underdeveloped. It's not a well-studied area in terms of having lots of data and studies that one can go back and rely on. A lot of people have written about it and a lot of people conjectured about it, but they've gone back to a very few basic studies and they're very thin on the ground. That's the first thing. It's an underdeveloped area where there are a lot of opinions and there aren't a lot of hard data.

Secondly, I think I should say that there clearly is an issue, something concerning pathological gambling; it clearly is a problem for a number of people. We acknowledge that and recognize that this is something that is there and we believe, urge and recommend that recognition be given to this fact and this problem, that it is a problem that occurs.

Next we should point out that clearly the incidence of pathological gambling rises with accessibility. Obviously, if one's talking about casinos, one's talking about a new product and one is going to increase accessibility; therefore, one is going to expect some increase in the incidence of pathological gambling.

However, what we don't know currently in Ontario is the extent to which there is problem gambling going on right now as a result of people being involved in various legal and illegal forms of activity. There haven't been any studies done in a comprehensive and satisfactory way about that, and we think that's urgent and important if one's going to get a handle on this.

Another thing to point out is that the typical casino gaming patron, from a sociodemographic point of view, is highly educated, and it's higher than the average etc. It doesn't fit the image of the problem gambler, but it's an emotional issue, and obviously other people are drawn into these environments as well.

The next point is -- we're really sort of jumping ahead to a recommendation here. We recommend that it be recognized, that it be planned for in advance, that we be prepared to respond to the problems that will occur as a result, and the problem is that there's almost nothing known about how to treat and what to treat. It's an understudied area and it's an area that we think needs to be studied some more.

Particularly important is that there is a need for information on the incidence right now within Ontario of pathological gambling. All the studies show or would suggest to us that right now, within Ontario, there's some sort of problem which we haven't acknowledged, and it's important to do that.

Secondly, we think there should be further study on how to treat it and then how to allocate the cost of that. Our recommendation in the report is clearly that the cost of prevention and treatment, which seems to be largely, all the suggestions are, springing out of education and regulation and guidelines -- for example, a number of casinos now don't allow their employees to gamble because they're the people in some sense most at risk; they're exposed all the time. The cost of prevention should be borne by all forms of gambling, not just casinos, because it's a problem that's there right now.

In summary, it's a poorly developed area that needs further study. It's clearly an issue that's worthy of further study and we recommend that be done.

The measures we recommend are the ones that Carl said, about a firm regulatory environment; that there be instituted appropriate public education and prevention measures; that there be services established to treat pathological gambling where it's identified, probably integrate it into the local social service structure; that underage gambling be prevented; that there be a focus on the attraction of tourists rather than on attracting local residents; and that casinos should be located in urban areas which contain multiple entertainment options. We did identify in some jurisdictions that casinos were the sole form of entertainment in some of the more remote locations where problems could occur.

That's the end of our presentation. We have at least 20 minutes for questions. Only some team members have to leave at 4:30, Mr Chairman.

The Chair: Very good, and thank you very much, Mr Farrow. If we are to conclude at 4:30, that would allow about seven minutes per caucus.

Mr Sutherland: I just wanted to pick up a little bit regarding the comparisons with the horse racing industry, and we had Mr Hosios in before you. We've had a lot of presentations from a lot of different groups involved in the horse racing industry who have cited the New Jersey example, that casinos were the death knell or certainly played a significant impact on the horse racing industry there. I'm just wondering what degree of analysis was done of the New Jersey situation and whether anyone could give some comment to clarify what the impacts actually were in New Jersey.

Mr Faludi: We did review the report that dealt with the New Jersey situation and we felt that the impact of 12 full-scale casinos all in one location in Atlantic City was not directly comparable to the Ontario situation, where you've got four dispersed casinos. I think the impact identified in the Atlantic City study was roughly 37% impact on horse race wagering. In that study they used a time-line sequence and basically it worked out to be about 2.9% per casino. Every time a new casino opened up it impacted on horse race wagering by about 2.9%. If you extrapolate that to the Ontario situation, I don't think it's directly comparable. You really have about four large-scale Ontario casinos; four times three is 12%.

Mr Sutherland: Just to add then, what about Manitoba, the situation there?

Mr Faludi: In the situation in Manitoba you also had video lottery terminals impacting and you're really only dealing with one race track in Winnipeg which is very close to the Crystal Casino. At the same time, you were also dealing with video lottery terminals, and I believe the impact in that study was roughly 20%.

Mr Lessard: One of your slides is called "Summary of Recreational Gaming in Ontario" and you talk about the percentage of the population that participates in lotteries and horse racing, bingo etc. What do you mean by participating? Is that people who have done those things once this year?

Mr Faludi: Basically those data came from a survey done by Insight Canada in 1992. They asked members of the population at large if they had ever participated in such-and-such event. They also dealt with the number of times. On the chart there, that would represent people who had participated in that event at least once.


Mr Lessard: In their life.

Mr Faludi: In their life, yes.

Mr Dadamo: When Detroit in three years comes to be considering some of the games it may have and we may not have in the Windsor casino, will it be fiercely competitive? I've heard reports back home that they would complement each other. I'm not so sure about that. Can you comment on that?

Mr French: There's a lot of subjectivity to my response, the biggest one obviously being the timing. We had worked for the mayor four or five years ago in Detroit, when he was very aggressively proceeding with casino gaming, and it was fiercely defeated by the public-interest groups, as you know.

My sense is that it's going to probably be difficult for them to complement each other unless they have a completely different focus. Understanding the demographics of Detroit and Windsor, it's unlikely that you're going to be able to create a destination, some kind of a theme-oriented, potentially amusement-oriented casino. My sense is that the games may differ slightly -- they'll have craps; we won't in Canada -- but they will be competitors.

The feeling we have and all research indicates is that the market is significant. The captive market within 150 miles -- and Dan alluded to the fact that we took a conservative approach -- indicates in the stabilized year that there's potentially $1 billion in win in that market. Now, if for some reason Detroit can effectively redevelop its waterfront to a higher degree, it may capture more than 60% of that market. That still leaves potentially $400 million in casino wins for the city of Windsor. I believe what I repeated before, that the competitive advantage certainly is in first open, first up and running.

Mr Farrow: Could I add to that a couple of things to bear in mind that give Windsor some advantages? One is the Canadian dollar; two is the relative safety of the environment, and that came through; and three is the different tax regime here, the possibility of US citizens avoiding tax on their wins in the Canadian jurisdiction.

Mr Dadamo: But you talked about the environment, and I was born and raised there, so I know well that the environment in Windsor's a lot different than it is in downtown Detroit within minutes of the tunnel or the foot of the bridge. Will that environment be altered once the casino's full-fledged? Is that up in the air? Then we'll have the same kind of environment, which we don't want.

Mr Farrow: I'd suggest that you look at something like the Crystal Casino in Winnipeg, where, when you go there for the first time, it's hard to find where it is. I mean, it's stuck up on the -- so I think the impact on the streets is going to be minimal. The strength of the Windsor community and infrastructure overwhelms that, and I don't think that you're going to see a negative impact at all. I think it'll be quite positive.

The situation we look at when we look at Atlantic City is that if we took 12 and we put them all together, it might be great for attracting tourists from Toronto but it's not the way to do community development.

Mr French: I think also that a lot of lessons have been learned from that Atlantic City experience. Hopefully those lessons will be taken hold of. In Atlantic City -- and Carl knows; he was there as well -- there was a lot of strategic planning, there was a lot of development planning that was done prior to the opening of the first casino.

Unfortunately, with the furore over the success of Resorts International, all the infrastructural improvements that were proposed, all the destination-oriented amenities that were anticipated never happened and all people wanted to do was open a 500-room hotel with a 60,000-square-foot casino. Hopefully, I believe that more experienced minds will prepare for the infrastructural issues, as well as the ancillary facilities that are necessary to make it a better destination.

Mrs Mathyssen: Your suggestion that we need to do some work in terms of the problem gambler may be addressed. We do have a plan to develop a strategy to address that, and I think that's important.

Obviously, the chart showing the amount of recreational gambling that goes on in Ontario suggests that gambling is very, very popular, and I wondered if you had a sense of how big the illegal market is and, secondly, if the entry of the government into controlled, regulated gambling is going to address that issue of illegal gaming and perhaps have a beneficial or more positive effect than some might lead us to believe?

Mr Rutsey: We have been advised by police authorities, and it's published, that their estimate is that $1 billion was bet last year in Ontario on illegal sports bets alone and that there are approximately, I believe, 20,000 or 30,000 grey machines, VLTs, in bars, things of that nature.

It's our belief and feeling, after having spent some time talking with people who go into casinos, that all of these people know of the existence of these opportunities to gamble, and when you ask them, they all suggest that casinos in Ontario would cut down to a great extent on that kind of illegal activity.

Our information is from the police sources and the reaction we had from people who do go to casinos and will admit, in a room where no one is taking names, that they know where these games are, they know how to access them, and they certainly wouldn't be accessing them to the degree that they would if there were casino gaming here in Ontario.

Mrs Mathyssen: Would regulated gaming mean greater safety for the customer?

Mr Rutsey: We believe it would, yes.

Mr McClelland: Sir, you indicated that you had relied significantly on -- I'm sorry, I just drew a blank on the name: the gentleman who appeared --

Mr Webster: Dr Hosios.

Mr McClelland: Thank you. To what extent did you rely on and take into consideration information that was presented to you by Dr Glen Brown, for one, Mr Frank Drea, Rod Seiling, by way of example? I was just wondering in terms of the balance; you didn't say a bias but a reliance upon a particular document. I'm sure you've been monitoring this well so you would know that there has been some controversy, and I think that if some of those individuals were present they may take some issue with you with respect to the 5% to 10% impact. I don't think that can be resolved here and, quite frankly, I don't think I'm qualified to enjoin in any debate on it, but I'm just curious to what extent their views were incorporated into your findings.

Mr Farrow: I don't think anybody's views were incorporated into our findings as such. We apply the intellectual test and say, "Let's look at this and how do we analyse it, and let's look at each bit of analysis that was done."

I met with Rod Seiling, his US consultants, and other members of his staff on three separate occasions, and we reviewed a stack of reports that either they'd commissioned or other racing commissions had brought forward from around the United States. We looked at some and said, "This is a good piece of work and analysis," and we factored that directly in or adjusted for the situation we saw here, and with others we said, "I can't see how they got here," and we couldn't get comfortable with it and we didn't use it. I can't specifically pick out which one was in and which one wasn't, but we looked at that whole thing and we looked at it very seriously. Our conclusion after looking at that was, as we mentioned to you, around -- I'd be happy to go back, and have done with Rod already, and go through the various reports and comment on which ones found favour and which ones didn't, and then it comes down to a debate and argument about why.


We're not wedded to any point of view around what's good and what's not and what the impact's going to be, and we made our best judgement on the evidence that was there, the way you're trying to do.

Mr McClelland: Yes, and I can only hope for the sake of the literally thousands of people who are concerned that the more modest projections of impact turn out to be prophetically accurate as opposed to the more severe, but I suppose that goes without saying.

I don't really have a question, and I want to say thank you to each and every one of you. The presentation did raise some questions that I would like to put to the parliamentary assistant and/or staff. The slide that indicated the potential impact on the gaming market indicated that charitable casinos would be possibly -- I'm not sure whether I heard the word "probably" eliminated, but it's certainly written as "possible elimination." I wonder what, if anything, you're doing to mitigate that and deal with that, if you could let me know at some point in time, perhaps introduce that at an appropriate time, in the interests of the gentlemen who have to leave. I think it would be interesting to see what documentation has been commissioned by the ministry, if any has been done.

I heard from your colleague Mrs Mathyssen that a plan to develop a strategy is in place. I'm not sure what "a plan to develop a strategy" means with respect to the whole issue of pathological gambling and social costs. We've heard from these gentlemen as well that it would be advisable to have some study undertaken. I guess the question is: Have you done it? Are you going to do it? If not, why not? If you are, when? Could you advise us of that accordingly?

If you'll allow me a personal indulgence, what are high stakes? I know I'm not a high-stakes gambler the few times I've been in the doors. I'm just curious, quite frankly. I don't know where that cutoff is -- you referred to it from time to time -- and how you measure that. That's just as a point of interest.

Mr Rutsey: Actually, there's no numeric measure of that. What we consider to be a high-stakes gambler would be someone who would be treated in a complimentary fashion by the casinos in either Atlantic City or Las Vegas, so what we started with were the lists of people who were given complimentary or VIP treatment. These are the people who go to casinos quite often with relatively large gambling budgets, make multiple visits and play the higher-limit games.

Mr McClelland: Out of a population of 100 potential gamblers, how many gamblers would fit that category? Do you know? Secondly, how important are they to the viability, the key being that you've got to attract that segment of the gambler?

Mr French: That segment is extremely finite. I'll give you an opinion and my guesstimate. In Atlantic City, for example, I would say that 90% of the people who patronize the 12 casinos are day trippers. They would not be characterized as high-stakes gamblers or high rollers. They generally spend probably about $40; I think it's $37 per visit. Probably anywhere between 1% and 3% of the gambling patrons in Atlantic City might be considered high rollers, high-stakes gamblers who would get complimentary privileges, would have a credit rating with the casino and would be able to gamble on credit. That number is, I would say, probably maybe 20% or 15% in Las Vegas and Reno, but the impact of a high-stakes casino player can obviously be material, particularly if he's lucky. The casinos in Atlantic City, for example, have had weekends where a high roller may win $5 million, and that can have a material impact on that particular weekend. For the most part, they typically lose more than they win.

Mr McClelland: The issuing of credit is essential, I understand, from the perspective of good marketing, to be competitive in the industry. Does it present some problems as well?

Mr Zeitz: That is covered extensively in New Jersey's statute and regulations, and I'll give you some examples. I sat on hearings when I was put on the commission to change those regulations. For example, you must provide a detailed application to the casino. They have an affirmative obligation to check and verify the employment and financial information that's presented to them. There are statutory rules for the collection of the gaming debt. I don't remember the precise holding periods but, for instance, I think if it's $1,000 or less, it has to be collected at the end of seven days, up to $5,000 I believe was 14 days, and for anything above $5,000, the casino at the end of 45 days had to collect, which meant it takes what's commonly called in gamblers' parlance the marker, and in our regulatory vocabulary it's a counter cheque. They take that, which you've endorsed, if you haven't already paid it down and retrieved it, and they deposit it against the accounts you've given them on your application. A major control we have in our law in New Jersey is that only a licensed employee or an attorney can collect a casino credit debt, which is to ensure against the kind of horribles that you've heard in the ancient literature.

Mr Eves: I'd like to touch on the issue of the effect that casinos in the province of Ontario may have on charitable casinos, their possible elimination, because we have had a few witnesses appear before the committee. Yesterday or the day before we had the B'nai Brith Foundation in Toronto, which currently raises -- I was astounded -- some $4 million a year with charity casinos. What is the impact on charitable organizations such as theirs going to be, in your opinion?

Mr Faludi: As I indicated previously, from a casino patron's point of view, there's very little interest in going to a substandard casino if a full-scale casino is readily available. We have had some evidence from the charitable casinos that a number of their patrons may be more interested in going to the charitable casino only because they know the money is going to charity; for example, people who belong to B'nai Brith and their friends and so forth may patronize those casinos. But as a general rule of thumb, it would appear as though there's not much potential for this type of product in a major market served by a major casino.

Mr Farrow: In terms of charitable casinos, we'd agree with the comment you heard that it would have a big impact, and the closer those charitable casinos are physically to an existing casino, the greater the impact. That's our conclusion.

Mr Rutsey: We did, however, interview casino operators in British Columbia as well, where charitable casinos are operated in a similar fashion. They suggested that they thought charitable casinos could continue to operate in some markets and perhaps even in larger markets, given the fact that the atmosphere is less intense, the games are limited, a perhaps slightly friendlier environment, as far as they're concerned, and that the proceeds were going to some good work. That might be a little speculative, but there are people within that industry who feel they would continue to be able to be successful, even in a larger casino market area.

Mr Eves: The other issue I wanted to touch on briefly was the effect on the horse racing industry. I think there's not much more to be said. Everybody's talked about the various and in some cases conflicting reports or studies about what the impact could be or would be. We've had the Christiansen/Cummings report and Price Waterhouse. The Standardbred Breeders and Owners Association presented a report here the other day; the Canadian Thoroughbred Horse Society introduced one. We have your report. We have Dr Hosios's report from the University of Toronto. The Canadian Thoroughbred Horse Society outlined the impact in Manitoba, and that's been explained to a certain degree; it indicates that the decrease in wagering at Assiniboia Downs was in the neighbourhood of 40%, and somebody indicated that there are VLTs in that mix, which perhaps we won't have here.

I'd like your comments about VLTs, because we've had directly contradicting points of view on that issue, quite contradictory. We've had several witnesses who said, "Absolutely not, under any circumstances, and don't include that in the mix with Bill 8." We've had others who said, "Oh, yes, we want them in every liquor-licensed establishment in Ontario." I think that has to be thrown into the mix as well.

But regardless of who is more accurate in their projection about the impact on the horse racing industry, I think it's fair to say that there will be an impact, ranging -- a pretty broad range -- anywhere from 5% to 50%, which are pretty divergent points of view. I thought perhaps one of the best suggestions came from the Standardbred Breeders and Owners Association, who suggested that if you take all these figures, perhaps a 20% compromise figure might be a more effective way of arranging what the impact may be.


Be that as it may, whatever the ultimate figure is, should the province consider adjusting its parimutuel tax? I don't know if you've looked into that issue or not, but we've also had a very divergent point of view about what parimutuel taxes are. I realize there are different ways of calculating them and there are rebates in some jurisdictions and there aren't in others, but many people representing the horse racing industry presented to us that the rate in New Jersey, for example, is one tenth currently of what it is in the province of Ontario, that is, 0.5 of 1% as opposed to 5.0%. I thought I'd like to get your comments on that.

The last thing I'd like to touch on is that I take very seriously the comments that were made about having in place a very stringent regulatory system. New Jersey was alluded to, and perhaps it is the best example; I don't know, I'm not an expert in the field. But as my friend Mr McClelland pointed out last week when we were in Windsor, there was an article in the Wall Street Journal where the New Jersey commission had licensed somebody and within a matter of days that individual was forced to retire because of their potential connection with an undesirable element, for lack of a better description.

I think that is going to be crucial to whether or not the casino project or projects in the province of Ontario operate effectively and whether they're successful.

I realize I've touched a lot of bases there. I wouldn't mind if you would just comment on a few of them.

Mr Farrow: I got three things, really: VLTs, horse racing and regulation.

First of all, with respect to VLTs, if you think about introducing casino gambling into Ontario in a way which benefits Ontario best, you're looking at focusing it and concentrating it in casinos. Our objective is not to get Ontarians to gamble more. Our objective is to get more tourists and more tourist dollars; that's our objective. Therefore, I think the idea of focusing and concentrating in casinos is the right one, and VLTs, which are spread around generally, are not the way to go, from a strategic point of view. When you read our report, we're very much thinking about the strategy of how to do it best in Ontario. That's the first thing.

I'll deal with the regulation, then I'll make a comment about horse racing and turn over the balance of the answer to that question to Rowan.

First, about regulation: We've got a different society here. In some respects, I think in the public sector we run our affairs better than they might do in Atlantic City, notwithstanding what Mr Zeitz thinks -- now that he's left -- and we can also learn from their experience. Yes, they've made some mistakes, and what you've got to do is make sure you learn from that and introduce regulation that doesn't.

If you look at what happened in Atlantic City, they set up a rule and everybody could go. You could have one casino successful with a hotel, and then you had 11 more. The steadying hand of government is more firmly on the tiller here and I think will prevent that sort of thing, to ensure you don't get the adverse effects and you maximize the benefits. I think we should look at that issue of regulation and guidance very carefully and learn from their mistakes and not do what they did. That's the second thing.

The third thing, with respect to the horse racing industry, and it's always difficult to look at the impact, is that we are offering a new gambling product to Ontarians and to people close to Ontario and it's obviously going to impact adversely here, and that's the first thing I would acknowledge. One of the things that concerns me when you look at all of the reports, though, is that they assume the horse racing industry is a stable industry. In fact, I think one could argue that it may have some difficulties already -- it is a very complex and difficult thing for people to come to grips with -- and therefore you've got to discount some of the impact, because I think the declines in Manitoba may have occurred anyway. When you look at jurisdictions where new gambling product was not introduced, you also see a decline in the attendance at the track as well, so you've got to allow for that. That's one thing: You can't take the horse racing industry as being a stable industry. It's already faced competition from the Blue Jays, the Phantom of the Opera, and this is just going to be another problem it has to deal with.

Mr Faludi: Yes, I do. As John indicated, I think you all heard that horse racing is a declining industry across North America, both in terms of wagering and in terms of attendance. Sports attendance in various sporting activities can be very cyclical. Twenty years ago, basketball was on its deathbed, and through a new marketing strategy, the National Basketball Association has basically taken itself to the top of the four major sporting events. Horse racing is in the same situation; it's really got to look at a way to market itself in order to compete with all these different types of products.

In terms of the parimutuel tax, when the tax was conceived, horse racing really benefited from somewhat of a monopoly environment. You didn't have the same extent of lottery ticket purchases and casinos were way out of everybody's mind. So maybe it is time to consider modifying the tax. We haven't looked at that specifically, but certainly the things that guided that tax in the first place are not prevalent today.

Mr Rutsey: Another thing we thought around that is the introduction of teletheatre wagering in April 1992. The Ontario Racing Commission believes and estimates that, properly instituted and managed, perhaps the handle for horse racing in Ontario could double. That might be a little speculative, but it seems to us or to me that teletheatre wagering really hasn't gotten off the ground perhaps in the way that it should or could. There's a deal on the table with ITT Sheraton; perhaps that will start the ball rolling and get that moving again. Simply, what they've got to do is create opportunities for people to be exposed to and experience their product more often than currently exists.

The Chair: Thank you, to all the representatives of Coopers and Lybrand who are still here, for presenting today. Mr Farrow, perhaps, on behalf of the committee, you could thank those who had to leave early.

Mr Farrow: I certainly will. Thank you, and thank you for your good questions. We do appreciate it.

The Chair: Before the committee members depart, Mr Duignan wanted to respond to some questions Mr McClelland had posed to him.

Mr Duignan: I will respond to the number of questions raised by Mr McClelland in written form to the committee in a couple of days, possibly early next week. At this point, I think that's the best way to do it.

Mr Eves: I've talked to the parliamentary assistant directly; I just wanted to clarify for the record. I talked about the availability of Dr Hosios's report earlier. I talked to both individuals who went to the briefing meeting, and neither one received a copy of the report. I do understand, however, that Mr Alfieri undertook to provide a copy of the report. That has not been done, to the knowledge of the two individuals. They've never received one and certainly I haven't until today.

The Chair: Thank you, Mr Eves. That's noted.

The committee is adjourned until 9 am, Monday, August 30, in Sault Ste Marie.

The committee adjourned at 1640.