Agenda Index City of Vancouver

POLICY REPORT
OTHER

TO:

Vancouver City Council

FROM:

City Manager

SUBJECT:

Relocation of Casinos and Introduction of Slot Machines

 

CONSIDERATION

CITY MANAGER'S COMMENTS

COUNCIL POLICY

· On January 27, 1987, Council asked the Attorney-General to begin a review of the regulations governing the operation of casinos as soon as possible, and that the City, and other concerned groups and individuals, be given the opportunity to express in detail their concerns and suggestions for improvements. Council also expressed its concern that revisions to casino gambling regulations adhere to basic principles, including that the maximum financial benefits accrue directly to the social service agencies sponsoring the events; and that appropriate, strict controls be in place to discourage or prevent possible negative social consequences, such as compulsive gambling or criminal activity.

· On July 26, 1994, Council requested that the Provincial Government ensure that there will be municipal participation in the evaluation of community impacts for any expansion to gaming activity, including video lottery terminals, gaming on First Nations lands and major casinos. Council further requested that gaming legislation or regulations include municipal endorsement of specific gaming locations prior to approval, and that approval of any new gaming activity be conditional on a portion of the revenue being available to local government for mitigation measures.

· On November 1, 1994, Council passed a resolution opposing gaming expansion including the introduction of video lottery terminals (VLTs) and, that the City of Vancouver considered gaming expansion a matter of determination by the people of British Columbia through appropriate broad and local involvement in a meaningful consultation program.

· On March 25, 1997, Council reiterated its demand to the Provincial Government for a comprehensive Gaming Act before expanded gaming activity goes forward. Council further advised the Minister of Municipal Affairs and the Minister of Employment and Investment that Vancouver opposed the addition of slot machines as an expanded gaming option.

· On October 7, 1997, Council adopted amendments to the Zoning and Development By-law to permit a limited number of charity-operated casinos in certain areas of the city and to prohibit casinos with slot machines. The amendment prohibiting casinos with slot machines was challenged by the B.C. Lottery Corporation and the City successfully defended the By-law in the B.C. Supreme Court and Court of Appeal.

· In January 1999, the Province introduced the White Paper on Gaming which recommended legislation changes which could have drastically limited historic municipal powers in relation to casinos and other gaming establishments. On March 9, 1999, Council responded to the Provincial White Paper, by reiterating its stand on the preservation of municipal powers on issues surrounding gambling expansion.

· On September 12, 2000, Council indicated to the Province, a number of concerns regarding the Gaming Control Act (Bill 30-2000) introduced to the Legislature in July 2000. Some of the concerns raised at the time related to commitments made by the Province through the Memorandum of Understanding signed with UBCM in June, 1999.

· On March 12, 2002 Council informed the Minister Responsible for Gaming in B.C. that it had serious concerns with Bill 6-2002, the Gaming Control Act, and submitted a staff Report outlining these concerns to the Provincial Government and to the UBCM, as the City of Vancouver's response to the Gaming Control Act.

UBCM POLICY

· On September 23, 1994 the UBCM unanimously endorsed the resolutions submitted by the City of Vancouver:

· On June 17, 1999 UBCM signed a Memorandum of Agreement with the Province, whereby the Province fully affirms the municipal powers related to casino location, relocations and scope and type of gaming in gaming facilities within municipal boundaries.

PURPOSE AND SUMMARY

The Report is in response to a recent decision made by the provincial Cabinet to allow two Vancouver casinos (the Royal Diamond Casino and the Grand Casino) to relocate and introduce slot machines and a recent letter from the BC Lottery Corporation which is attached as Appendix C.

The BC Lottery Corporation has asked Council to confirm its position with respect to slot machines in casinos in Vancouver. In its letter, the BCLC indicates that, if the City of Vancouver remains opposed to the introduction of slot machines in casinos, the Corporation will respect that decision, but in all likelihood the Royal Diamond and Grand casinos would relocate to another jurisdiction. The BC Lottery Corporation, the casino operators, and the City would get important financial gains by implementing the Provincial Cabinet's decision and allowing these casinos to introduce slot machines.

This Report provides Council with an analysis of the existing state of affairs related to casino gaming at the regional, provincial, and the national level. It also considers the implications of either allowing slot machines, or continuing to prohibit slot machines, in casinos in Vancouver. Should Council wish to consider changing its current policy prohibiting slot machines in Vancouver, a public hearing would be required to amend the Zoning and Development By-law as described in this Report.

BACKGROUND AND DISCUSSION

In the January 16, 2002, Open Cabinet meeting, the provincial government discussed the item of "No Expansion of Gaming." This discussion related to a commitment made in the New Era document to "stop the expansion of gambling." Three options were presented to Cabinet by the Solicitor General, outlining the best ways to live up to the "no expansion of gaming" commitment, while respecting the legal obligations towards casino operators who have made significant investments or taken important steps towards relocation or expansion of business capacity.

The provincial Cabinet decided on the option that allowed four casinos to relocate and/or expand, including the addition of up to 300 slots to each of these casinos. The four casinos are: the Hollywood Casino in Prince George, the Royal Towers Casino in New Westminster, the Royal Diamond Casino and the Grand Casino in Vancouver. No other casinos would be allowed to relocate or expand.

The BC Lottery Corporation, which is responsible for casino business in British Columbia, is now proceeding with their business planning and has written to the City, requesting confirmation of the City of Vancouver's position on slot machines by June 30, 2002.

Under the Memorandum of Agreement between the Province and UBCM signed in 1999, and under the new Gaming Control Act (Bill 6-2002), municipalities are recognized as having the power to decide whether to accept or to reject the location or relocation of casinos into their jurisdiction. Municipalities however, have no power to impede the relocation of a casino from within the municipality to another city.

Casinos have operated in the City of Vancouver since the mid-1980's, with five casinos making Vancouver their permanent home. The five Vancouver-based casinos are:

· Great Canadian Casino at 709 West Broadway
· Great Canadian Casino at 1133 West Hastings
· Gateway Casino at 611 Main
· Grand Casino at 725 S.E. Marine Drive
· Royal Diamond Casino at 750 Pacific Boulevard

These casinos have always operated with table games only, even though the Province attempted to introduce slot machines into Vancouver's casinos in 1997.

The province has been sharing casino revenue with host municipalities since June, 1999. The City of Vancouver has benefited to the tune of $10.2 million so far.

Council's existing casino policy

On October 7, 1997, Council adopted amendments to the Zoning and Development By-law to permit a limited number of charity-operated casinos in certain areas of the city and to prohibit casinos with slot machines. The amendment prohibiting casinos with slot machines was challenged by the B.C. Lottery Corporation and the City successfully defended the By-law in the B.C. Supreme Court and Court of Appeal.

The Grand Casino and the Royal Diamond casinos have received the endorsement of Council to relocate to new locations within the City. These endorsements, however, were to relocate Class 1 casinos which do not have slot machines. Given the provincial changes that have recently taken place, it is quite likely that both of these casinos will want to relocate to another Lower Mainland city should Vancouver remain opposed to slots. If the City decides to allow slots, a new relocation process (outlined later in this report) for each of these two casinos will have to take place.

Casino Gaming in British Columbia

The casino industry in British Columbia has evolved significantly in the last few years, particularly since 1997, when several destination casinos were approved and slot machines were introduced.

At present, there are 18 casinos operating in British Columbia with the potential development of five more destinations casinos which have been approved in-principle (located in Cranbrook, Wells, Campbell River, Merritt and Penticton). British Columbia casinos employ more than 4,000 people.

The majority of casinos have slots. Twelve casinos have slot machines while six casinos are without slots: five in Vancouver, and one in Richmond. Another casino without slots in the City of Victoria (the Mayfair Casino), closed down in January 2002.

In the Greater Vancouver area the trend has been to accept slots. There are casinos with slot machines in Burnaby, New Westminster (2) and Coquitlam. In total, these Greater Vancouver area casinos have 1,172 slot machines.

The City of Surrey has a policy permitting slot machines, even though there are no casinos located in Surrey at this point. The City of Richmond is in the process of reviewing their policy towards slots. We anticipate a decision will be made by Richmond Council by May 31, 2002.

National Trends

The gambling industry in general, and casinos in particular, are becoming an increasingly important source of revenue for most provinces in Canada. According to a study conducted by the Canada West Foundation (a Calgary-based research organization), provincial governments in Canada are taking over $5.5 billion in profits arising from gambling (Gambling in Canada, An Overview, August 2001). In British Columbia, the BCLC revenue target for 2002 is $600 million. This amount is to be increased to $660 million, $715 million, and $765 million for the years 2003, 2004 and 2005 respectively.

All provinces with casinos have slot machines. Some provinces also have slot machines at horse racetracks (Ontario and Alberta) and eight provinces also have Video Lottery Terminals (VLTs). The Province of British Columbia does not allow slots at racetracks or VLTs anywhere in the province. Representatives from the racing industry have indicated in the recent past a desire to introduce slots at racetracks.

The following chart indicates the number of slot machines in casinos in different provinces:

Province

Number of casinos

Number of slot machines in casinos

Alberta

18

4871

British Columbia

18

2999

Nova Scotia

2

1038

Quebec

3

5590

Ontario

8

10609

Manitoba

2

2309

Saskatchewan

5

1240

Source: Canadian Gaming News, March, 2002

In summary, the presence of slot machines in casinos is a reality at the regional, provincial and national level. It is a trend that most likely will continue.

Vancouver's' Opposition to Slot Machines

The City's opposition to slots machines occurred due to two main reasons: the opposition to gaming expansion, and concerns related to some particular forms of gambling, particularly electronic gambling.

The City's opposition to gaming expansion was first enunciated in 1994, during the Province's attempt to introduce a commercial casino to Vancouver's waterfront (the Seaport proposal). This position was reiterated again in 1997, when the Province announced their Request for Proposals (RFP) to expand casino gaming in British Columbia. The opposition to gaming expansion was in part due to what at the time was the lack of recognition of municipal powers on land use matters, and the absence of a comprehensive gaming legislation.

The opposition to the introduction of electronic forms of gambling, particularly video lottery terminals and slot machines, was in part due to the fact that, according to gambling addiction literature, continuous forms of gambling present a special challenge because of their immediacy, ability to increase play, perception of skill, mesmerizing effect, and the fact that losses seem painless. The City feared at the time that the introduction of slot machines would present an additional problem for those afflicted with gambling addiction.

What is different now?

The provincial government has recently enacted a new Gaming Control Act (Bill 6-2002) that brings some elements of a comprehensive approach to gaming activities in the province. Municipalities, including the City of Vancouver, have indicated concerns about some aspects of the legislation (particularly as they relate to definitions in the legislation), but overall it is staff opinion that the legislation moves forward significantly in terms of providing a consistent framework for the gaming industry in British Columbia. Municipal powers related to location and relocation of gaming facilities are fully recognized in the legislation. Municipal powers related to gaming issues, were also recognized earlier in June 1999, through the Memorandum of Agreement that the Provincial Government signed with UBCM.

All host municipalities with casinos in their jurisdiction receive a portion of casino gaming revenue (ten percent from community casinos and 16.6% from destination casinos). This addresses a long established request from both the UBCM and the City of Vancouver. The latest data from the 2001 fiscal year (April 1st, 2001 to March 31st, 2002) indicates that municipalities in the Greater Vancouver area received $21 million, dispersed as follows:

Municipality

Number of Casinos

Annual Municipal Revenue

City of Burnaby

1

$6.27 million

City of New Westminster

2

$6.58 million

City of Coquitlam

1

$2.27 (open Oct. 2001)*

City of Richmond (no slots)

1

$1.95 million

City of Vancouver (no slots)

5

$3.6 million

* Annual projections for Coquitlam are $3.5 million - Source: BC Lottery Corporation

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As indicated previously, slot machines are now a fact of life in most casinos in British Columbia. Casinos with slots in adjacent municipalities are already attracting players from Vancouver who wish to engage in this type of gambling. A recent study conducted by the BCLC indicates that an estimated 45,000 Vancouver residents visit casinos with slots in the region. The following table indicates the percentage of casino players from Vancouver visiting those casinos:

Estimated percentage of casino players from Vancouver

Burnaby

Coquitlam

New West RCStar

New West R. Towers

12%

8%

10%

5%

Source: BCLC, Trade Area Analysis, 2002

Problem Gambling

Addiction studies conducted in different provinces, including British Columbia, indicate that on average there is an estimated 4% of the adult population that suffers from gambling addiction problems (Gambling in Canada, An Overview, Canada West Foundation, August 2001). The most recent studies available are from Saskatchewan and Alberta (January and February 2002) where problem gamblers are estimated at 1.2% and 1.3% respectively. These recent studies also estimate moderate risk gamblers at 4%. (Measuring Gambling and Problem Gambling in Alberta, Garry Smith & Harold Wynne and Gambling and Problem Gambling in Saskatchewan, Harold Wynne). The latest study conducted in British Columbia is from 1996.

About half of those afflicted with problem gambling are considered probable pathological gamblers, which could be defined as "a progressive disorder characterized by a continuous or periodic loss of control over gambling; a preoccupation with gambling and with obtaining money with which to gamble; irrational thinking; and a continuation of the behaviour despite adverse consequences." (R.J. Rosenthal, Pathological Gambling, Psychiatric Annals. Vol. 22 (2) pp. 72-78, February 1992.)

Unfortunately, there is not a great deal of analysis in Canada, on the general social impacts arising from this level of addiction. According to a recent study published by the Canada West Foundation: "Policy makers need to be aware of the impacts of gambling to balance the trade-off between the desire to provide gambling opportunities and the desire to minimize the harm to individuals." (Triumph, Tragedy or Trade-Off? - Considering the Impact of Gambling, Canada West Foundation, August, 2001). The study call for a continuous review of the effects of gambling and the success or failure of related policies.

The B.C. provincial government does have a gambling addiction program available to those who suffer from this condition. This program has a $4 million annual budget and includes public awareness, prevention, information, referral and treatment components. There are several agencies in Vancouver providing problem gambling prevention and treatment services.

Some of the steps that the provincial government has taken to address problem gambling are:

· Prohibiting minors under the age of 19 from participating in gaming activities.
· Prohibiting video lottery terminals in B.C.
· Restricting gambling machines to specific gaming facilities.
· Prohibiting alcohol at gaming facilities.
· Prohibiting extension of credit to patrons at gaming establishments.
· Requiring casinos to participate in the "self-exclusion program".

There is a Problem Gambling and referral toll free number available to British Columbians: 1-888-795-6111.

Neighbourhood Impacts

Concerns related to impacts on neighbourhoods motivated the City to define in the 1997 amendments to the zoning by-law that casino use would only be permitted in some non-residential areas. Vancouver casinos are relatively small. In fact, under the casino guidelines for Vancouver, the maximum area permitted for a casino is 16,150 ft.

Other casinos in the region with slots require gaming space and parking facilities that are bigger than the casinos that we presently have in Vancouver. Feedback received from Lower Mainland municipalities that have authorized full-fledged casinos in the last few years (Burnaby, Coquitlam, New Westminster) indicates that neighbourhood impacts are manageable. These full-fledged casinos are located in industrial areas and distance away from residential neighbourhoods.

A survey conducted by the Vancouver Police Gaming Unit indicates that casinos with slots do not seem to present additional policing concerns. The fact that casinos and surrounding parking areas are very well lit and patrolled by security personnel contributes to a sense of safety in those areas. There is a good collaborative system between Police, casino operators and government regulators.

Financial Implications to the City

The City has been receiving its portion of casino revenue since June 1st, 1999. As of March 31st, 2002, the City has received an accumulated total of $10.2 million. As reported earlier, during the 2001 fiscal year, Vancouver received $3.6 million.

If Vancouver-based casinos relocate to other municipalities in the region, casino revenues for the City will diminish. On the other hand, the estimated potential City revenue increase arising from casinos with slot machines is estimated somewhere in the vicinity of $10 to $12million a year. The existing contracts for revenue sharing still have nine more years with a renewing clause for another ten years. In other words, the City could potentially receive $200 million during the life time of the contracts.

Amendments to Zoning and Development, Parking and License By-laws

Casino-Class 2 is already defined in the Zoning and Development By-law as a casino with slot machines. The By-law currently prohibits Class 2 casinos throughout the City.

Should Council choose to permit limited introduction of slot machines into Vancouver's gaming facilities, then the following by-law amendments will be required:

1. The Zoning and Development By-law

A public hearing will be required should Council wish to consider these changes. Also, for Council's consideration at the public hearing would be the adoption of guidelines that would limit Casino - Class 2 establishments in the city to two, limit sites to the same areas where Casino - Class 1 is currently permitted, establish a maximum size of 3 000 m² (32,300 sq. ft.) and require that Casino - Class 2 may only be permitted by way of rezoning to CD-1 (see Approval Process).

2. Parking By-law - Consequential

3. License By-law - Consequential

Approval Process

Should Council approve the necessary by-law amendments to permit Casino - Class 2, staff believe the appropriate process to consider where this use should be located is by way of rezoning to CD-1 Comprehensive Development District. Staff expect that the introduction of Casino - Class 2 with slot machines, at the site-specific level, will be highly controversial. This warrants a guarantee not only of a typical public process managed by staff, but of a formal public hearing held by City Council. A CD-1 rezoning application has a minimum $17,000 fee that would assist in cost recovery. Should a rezoning application be successful, a development permit process would be required to finalize all the details, resulting in formal approval by Council of the form of development.

Staff would caution that while there is no problem in bringing the necessary by-law amendments to a public hearing for consideration and, if approved, enactment prior to the Civic election, it may not be possible to complete a controversial CD-1 rezoning application through to enactment during this period, given the extreme short time line, other rezonings in the system and already-committed staff resources.

Relocation of the Royal Diamond Casino and the Grand Casino

In November 1998, Council endorsed the relocation of the Royal Diamond Casino from the Plaza of Nations to 800 Terminal Avenue. In October 2000, Council endorsed the relocation of the Grand Casino from 725 S.E. Marine Drive to 26 S.W. Marine Drive. Council endorsed these relocations under the Casino-Class 1 pre-site clearance application procedure under the Casino-Class 1 Guidelines. Neither Casino has relocated yet.

In both cases, Council endorsed the relocation of a Class 1 Casino (without slot machines), not a Class 2 Casino (with slot machines). Should the Zoning and Development By-law be amended as discussed in this Report, and should either the Royal Diamond Casino or the Grand Casino wish to have slot machines at their proposed new location, they would be required to apply to rezone the site. A public hearing would be part of that rezoning process.

Options

1. Allow slots

The introduction of slot machines into two of Vancouver's casinos would have both positive and negative implications.

Positive:

a. It would maintain casino-related jobs in the city and would likely require additional hires. A full fledged casino employs 350 people on average.
b. It would permit Vancouver residents and visitors who like gambling at a full-fledged casino to stay in Vancouver.
c. A new, properly designed casino, would provide tourists with another entertainment option and ensure their dollars are spent here vs. in another municipality.
d. It would provide the City with additional revenues, which Council could allocate for specific priorities within the city.

Negative:

a. It would provide another close-to-home venue for those suffering from gambling addiction to engage in gambling activities.
b. It may impact other sectors of the entertainment industry, drawing dollars away from existing, established venues which may include other gaming venues such as bingo halls.

2. Do not allow slots

Positive:

a It would not establish closer to home venues for those suffering from gambling addiction to engage in machine gambling activities.
b. It would send a message to the provincial government that the City continues to be concerned with gaming expansion.

Negative:

a. It would, most likely force casinos to move outside the City, with a resulting loss of jobs.
b. Loss of tourism dollars.
c. Municipal casino revenue would diminish.

CONCLUSION

The BC Lottery Corporation has asked Council to revisit its policy related to slot machines in casinos. This is a "one time only" opportunity since the Lottery Corporation has indicated that should Vancouver remain opposed to slots, the Royal Diamond and Grand Casinos in all likelihood will relocate elsewhere.

The regional, provincial, and national trend is to accept slot machines as part of casino gaming. Should Council wish to consider changing its existing policy against slot machines, amendments to the Zoning and Development By-law will be required. A referral of the by-law amendments discussed in this Report to a Public hearing would give members of the public an opportunity to express their views on this issue.

* * * * *

APPENDIX A

PROPOSED BY-LAW AMENDMENTS TO PERMIT CASINO-CLASS 2 GENERALLY IN THE TERMS SET OUT BELOW ALONG WITH ANY OTHER BY-LAW AMENDMENTS NECESSARY TO PERMIT CASINO-CLASS 2

Zoning and Development By-law

Section 2 (Definitions)

Casino - Class 1, which means the use of premises for the purpose of playing or operating games of chance or mixed chance and skill on which money may be wagered, for which a licence has been issued by British Columbia Lottery Corporation to a casino operator, but does not include video lottery terminals, slot machines, bingo, electronic bingo, pari-mutual betting, non-player-operated lotteries or Casino - Class 2.

Casino - Class 2, which means the use of premises for the purpose of playing or operating games of chance or mixed chance and skill on which money may be wagered, for which a licence has been issued by the British Columbia Lottery Corporation to a casino operator, and may include slot machines, but does not include video lottery terminals, bingo, electronic bingo, and pari-mutual betting.

Section 10 (General Regulation)

10.31 Casinos

10.31.1 Wherever the words "commercial", "commercial uses", "social, recreational and cultural", and "cultural and recreational uses" appear in this By-law or any other by-law passed pursuant to this By-law, such permitted use shall not, unless otherwise specifically provided by this By-law or any other by-law passed pursuant to this By-law, include a Casino - Class 1 or a Casino - Class 2 as defined in section 2 of this By-law.

Delete existing 10.31.2.

Parking By-law

Parking
Include Casino - Class 2 as a building classification in Sub-Section 4.2.4 (Cultural and Recreational) and require a minimum of one space for every 9.3 m² (100 sq. ft.) of floor area used for assembly purposes (same as Casino Class 1, Theatre, Auditorium, Hall or Club).

Loading
Include Casino Class 2 in section 5.2.3 and require a minimum of one Class B space for each 2800 square metres of gross floor area (same as Casino Class 1).

License By-law
Establish a license fee of $3,534.00 for casinos.

APPENDIX B

DRAFT AMENDMENTS TO CASINO GUIDELINES

The Casino Class-1 Guidelines are amended to include Guidelines for Casino Class-2, generally as set out below.
Casino Class 2 can only be permitted upon a site being re-zoned to CD-1 for that purpose.
Number
The number of Casino - Class 2 establishments in the city should not exceed two.
Location Restrictions - I-2 and FC-1 Districts
Re-zoning should only be considered on the north side of Grandview Highway between Renfrew Street and Boundary Road, the south side of Marine Drive between Laurel and Chester Streets, and on Terminal Avenue between Quebec Street and Glen Drive (excluding Thornton Park).
Size
The gross floor area, including accessory uses, should not exceed 3000 m² (32,300 sq. ft.). The gaming area should be shown on submitted plans.

LINK TO APPENDIX C

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