CITY OF VANCOUVER M E M O R A N D U M FROM: City Clerk's Office DATE: June 23, 1997 FILE: 2633 TO: Vancouver City Council SUBJECT: Charitable Gaming Jeff Brooks, Director of Community Services, Social Planning and Mario Lee, Social Planning Analyst, will provide a report reference on Charitable Gaming. The attached Administrative Report, dated June 23, 1997 refers. CITY CLERK TT:li ADMINISTRATIVE REPORT June 23, 1997 C.C. File No. 2633 TO: Vancouver City Council FROM: Director of Community Services Division, Social Planning SUBJECT: Charitable Gaming INFORMATION The Director of Community Services, Social Planning presents this report for Information. GENERAL MANAGER'S COMMENT The General Manager of Community Services presents this report for Information. 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 1st, 1994 Council passed a resolution opposing gaming expansion including the introduction of Video Lottery Terminal (VLT s) in charity casinos and licensed drinking establishments, the expansion of electronic bingo, and an increase in the number of charity casinos in the City of Vancouver or in adjacent areas where the City could be impacted, and furthermore, that the City of Vancouver consider gaming expansion a matter of determination by the people of British Columbia through appropriate broad and local involvement in a meaningful consultation program. - On October 22, 1996 Council passed a resolution: THAT the Director of Legal Services bring forward an amendment to the business bylaw to prohibit the operation of electronic gaming devices, including CLUB KENO, as defined in the previous amendment dealing with Video Lottery terminals in liquor licensed establishments; and Council reiterated its concern over the lack of consultation on gaming expansion; and as Council authorized, a delegation of the Mayor and Council met with the Minister responsible for Gaming to communicate Council s position. - 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 opposes the addition of slot machines as an expanded gaming option. - On April 22, 1997, Council strenuously objected to the Provincial Government s approval of an increase in the betting limits and expansion of gaming hours within the Greater Vancouver Regional District; and further requested the Provincial Government to reverse both those decisions and to hold discussions on gaming with municipalities. UBCM POLICY On September 23, 1994 the UBCM unanimously endorsed the resolutions submitted by the City of Vancouver: "Be it resolved that the UBCM request the Provincial Government to ensure that there will be municipal participation in the evaluation of community impacts of any expansion to gaming activity, and that gaming legislation or regulations require municipal endorsement of specific gaming locations prior to approval; And be it further resolved that the UBCM request the Provincial Government ensure through policy that any new gaming activity, including First Nations, be conditional on a portion of the revenue being available to local government for mitigating measures, and that any proposals for new gaming activity specifically address the potential effects on charity gaming." PURPOSE The purpose of this report is to inform Council of changes related to the charitable gaming model in British Columbia, and how these changes could affect charities in the City of Vancouver. In previous reports, staff provided Council with a detailed explanation of the current model of gaming, as well as with an inventory and history of such a model. (for a full detailed explanation please see APPENDIX A) BACKGROUND AND DISCUSSION The Present Charitable Model In 1995/96 of the $668.4 million wagered on casinos, bingos and raffles, $436.2 million were prize payouts and the remaining proceeds were divided among charities, management companies and government. Total proceeds allocated to operating costs were $85.2 million, the provincial government received $15.4 million in the form of License Fees, and proceeds for charities were $131.6 million. The proceeds for charities came from the following categories: bingo: $67.5 million casino: $44.4 million ticket raffles: $16.7 million other sources: $3 million The British Columbia Gaming Commission received more than 8,000 License applications from charities in the year 1995/96. There were 5,763 Licenses issued, and about 1,000 of those licenses were issued in the City of Vancouver. These licensees represent thousands of volunteers. The range of activities in which these charities are involved touches upon most sectors of society. The types of charities that benefit from gaming revenue are varied. The following table indicates the revenue distribution for the year 1995/96: Charitable Gaming Revenue By Purpose - British Columbia - 1995/96 Purpose Type Licenses Revenue Percentage (million) Poverty, 980 30.26 23% Disadvantaged Public Safety, 798 21.06 16% Facilities Service Clubs 1,277 21.06 16% Amateur Athletics 971 19.74 15% Education 807 17.13 13% Culture and the Arts 577 14.47 11% Religion 119 3.94 3% Aboriginal 124 2.63 2% Youth Activities 110 1.31 1% Total 5,763 131.6 100% British Columbia charities depend on gaming revenue. A study conducted by the United Way of the Lower Mainland (Greater Vancouver) indicated that on average, organizations and agencies in the voluntary sector depended on 6.1% of their revenue coming from gaming. The study indicated that 32% of the agencies receive between 15% and 50% of their total revenue from gaming activities. The City of Vancouver funds through its grants programs, many of the organizations and agencies that rely on gaming revenue for the delivery of their services. The annual grants allocations to the non-profit sector from the City of Vancouver is over $7 million dollars. A New Model for Charitable Gaming On Friday June 20, 1997, at a by-invitation-only meeting with charity licensees, the Lotteries Advisory Committee (LAC) of the provincial government, released further information regarding the expansion of gaming in British Columbia. It is staff opinion that the announced changes are not just a minor expansion, but rather the development of a complete new model for charitable gaming in the province of British Columbia. The Provincial Government announced the expansion of Gaming activities in the Province of British Columbia on March 13, 1997, including the expansion of Charitable Gaming and destination style casinos . The expansion of charitable gaming includes: higher betting limits for charity casinos (introduced on May 1, 1997). Betting limits are now $500 for most games. longer hours of operation for charity casinos (effective since May 1, 1997). Hours of operation are now from 12:00 noon to 2:00 am. up to 300 slots machines per charity casino site will be introduced. electronic and linked bingo will be offered to all bingo halls by the BC Lottery Corporation. introduction of new charity casinos. These changes will generate increased revenue for both the casino and bingo operations. The most dramatic increase however, is expected to come from the introduction of slots. The Lottery Advisory Committee, which is implementing the changes, estimates that the revenue potential (net win) for charity casinos and bingo operations could grow from the present $200 million to more than $700 million once the expansion is fully implemented. The rationale given by the Lottery Advisory Committee to justify this approach to gaming expansion includes: more revenue needed by government need to stop loss of revenue to Washington State tribal casinos and bingo operations declining bingo revenue public opposition to VLTs and Las Vegas style casinos Revenue Splits The new information learned at the meeting with the Lottery Advisory Committee relates to the government intent to change the split of revenues. Currently, the split for casino operations (net of prizes) is 50% to charities, 40% to operators and 10% to government. The split for bingo is slightly different, with charities getting over 60% of the revenue (net of prizes). The new revenue split being presented by the Lottery Advisory Committee, for all charitable gaming, indicates that one-third of the revenue (this time, revenue is defined as net of prizes and expenses) will go to the charities, and two-thirds of the revenue will go to the provincial government. Note, however that with the anticipated increased revenues from gaming expansion, the actual money allocated to charities is projected to increase. Owners/operators are not part of this 1/3 - 2/3 split because their revenue is taken before the split between government and charities takes place. The revenue split for casino owners/operators will be 40% of table games and 25% from slot machines. With the anticipated significant profits to be generated by slots, owners/operators will see a tremendous increase in their revenue. At present, the government revenue generated by the casinos and bingo operations is $14 million, the owners/operators revenue is $73 million (operation costs are paid out of this portion), while charities receive $112 million from both activities. Once the expansion is fully implemented, the Government revenue from charitable gaming could increase to $344 million (a 2,457% increase), owners/operators revenue could increase to $284 million (a 383% increase), while the charities portion could increase to $172 million (a 53% increase). The one-third to charity will be deposited in a trust account prior to distribution back to the individual charities. This trust account will be the responsibility of a newly created organization representing the charitable organizations, called the B.C. Association for Charitable Gaming (BCACG). At present, the Ad-hoc Committee Directory of BCACG is co-chaired by Randall St. Godard from the Health Action Network Society, and Elaine Ridout from the Canadian Red Cross Society. The Directorship of this Association will be elected in the future. The BC Lottery Corporation has provided seed money to get the organization established. Historically, charitable licensees were able to get whatever revenue was generated on the nights to which they were license holders. Last year that was changed to the current practise of location pooling of revenue, and soon to be replaced by provincial pooling, in part due to the fact that the new expanded model will most likely see a bigger revenue increase for casino operations over bingo operations. In other words, casino operations will subsidize bingo operations. Bingo revenue has been declining slightly on the last few years, and if slots are introduced, it is quite possible that many bingo players will cross over to play the machines instead. To phase in the change in split, government will provide a guarantee of revenue for charities based at $112 million plus a growth factor of five percent for fiscal year 1997/98. Revenue for charities will continue to be indexed until the 1/3 split is achieved ($590 M total). The following table indicates the projected charities, owners/operators and government revenue flow as gaming continues to expand: Net Bingo/Casino Charities Owners/Operators Governmen Win (including operation t costs) 199M 112M 73M 14M 270M 118M 95M 57M 550M 118M 196M 236M 630M 135M 225M 270M 700M 151M 248M 301M 800M 172M 284M 344M Lottery Advisory Committee Tenure to casino and bingo owners/operators will be offered by the government (10 years), to provide for continuity and upgrading of facilities as required. Note that the BC Lottery Corporation will be buying all the new slot machines, at no expenses to the owners. Questions The charitable model that has successfully existed in British Columbia for the last 10 years is dramatically changing. A new partnership is being developed between the charities (with a new organization), owners/operators, the BC Lottery Corporation and the provincial government. Many questions are still unanswered, including: 1. Why are all these changes being done in secrecy, away from public discussion? 2. Do all charities agree to these changes? Many charities have already indicated concerns over the pooling of bingo and casino revenue. 3. What happens to those not accepting slots? Many charities, particularly church groups, view bingo activities as having a mitigating social component. They are particularly concerned about the introduction of slots and the associated high degree of addiction to them. 4. If the gaming market doesn t grow to the levels anticipated by government, how long is the charities revenue going to be guaranteed? 5. What about the charities that choose not to belong to the new BCACG? How do new ones get involved? 6. Many charities object to the longer hours required for their volunteers. With the pooling of revenue, there will be no direct relation between volunteers effort and money earned. How long can it continue? CONCLUSION Staff will continue to monitor the situation and will work together with the charities and other funders in anticipation of impacts arising from the implementation of this new model for charitable gaming. Charity revenue will increase only if massive expansion takes place, and if indeed this expansion materializes, City Council needs to consider effects of permitting or restricting expansion. APPENDIX A Gaming Inventory The Gaming Industry has expanded significantly over the last 20 years, both in British Columbia and in the City of Vancouver. Although the population of the City of Vancouver represents only 15% of the total provincial population, the level of gaming activities based in the City represents almost one-third of the total dollars wagered provincially. The City of Vancouver continues to be the dynamic centre for business and entertainment activity not only for the Region but for the entire province as well. It is not surprising then that a significant part of the provincial gaming inventory is located within the city boundaries. Gaming Inventory B.C. Vancouver Casinos 17 5 Bingo Halls 41 3 Major Race Tracks 2 1 Lottery Outlets 2,300 380 Lottery - Pulltabs 1,137 67 Accounts Type of Gaming Historically, most forms of gambling have been illegal in Canada, but a series of reforms to the Canadian Criminal Code in 1969 has allowed for expanded public gaming activities to take place. Under section 207.1a and 207.1b, public gaming is allowed if conducted and regulated by a provincial government or if done for the benefit of established charities (but regulated by the provincial government). Before 1970, Horse Racing was the most significant form of gambling activity taking place in British Columbia (regulated by the Federal Government). But that year, an Order In Council was passed to permit the province to conduct public gaming and a Licensing Branch was created in the Ministry of the Attorney General. A few years later, in 1974 British Columbia became a partner with the other three Western Provinces in the creation of the Western Canada Lottery Foundation. It wasn't until 1983 that the Province established its own Lottery Corporation under the B.C. Lottery Act. The lotteries component of the British Columbian inventory of gaming is by far the most financially significant, with close to $800 million wagered in the last reported year (1995/96). With the creation of the British Columbia Gaming Commission in 1987, casinos and bingo operations have become better regulated and organized. That same year, the Gaming Commission enacted a moratorium on the numbers of charitable casinos allowed in the province (a maximum of 18 are allowed). Of the 17 charitable casinos presently in operation, 5 of them are located in the city of Vancouver. These casinos operate under a partnership between government (regulator), charity organizations (holders of the licenses) and management companies. A revenue-sharing formula offers 10 percent of casino proceeds to government, 40 percent to the management companies and 50 percent to the non-profit, charitable organizations. Historically, the City of Vancouver has accepted and cooperated with the development of this industry, even though as early as 1987, Vancouver City Council expressed concerns to the Attorney General of B.C. on possible negative consequences arising from casino gambling. At the time, City Council also indicated its support for the concept of gaming revenue supporting charities. Illegal Gambling A significant amount of illegal gambling is also present in British Columbia and in Vancouver. According to the Vancouver Police Department, many of the illicit operators are criminals in their own right or closely tied to organized criminal groups. Some of the illegal gambling activities include: Video Gambling Machines Horse Racing Bookmaking Sports-bet Bookmaking Illegal Poker Clubs Midnight Casinos Lottery Ticket Reselling Amounts Wagered Gaming activity in British Columbia has been growing rapidly over the last few years. The total amounts wagered only three years ago, during the period 1992/93 was $1.2 Billion. By 1995/96 it has grown to $1.7 Billion, with more than $500 million of that being wagered in Vancouver. The breakdown of monies wagered in British Columbia during 1995/1996 is presented below: Amounts Wagered 1995/96 - British Columbia Lottery $797 million Horse Racing $266.3 million Charity Gaming $668.4 million When prize payouts are deducted from each of the categories we have a total win of $684 million for the year 1995/96. It is divided in the following fashion: Lottery: $396.8 million Charitable Gaming: $231.2 million Horse Racing: $54.7 million Per Capita Spending Because of its limited gaming expansion (compared to other provinces) the province of British Columbia has the lowest amount of per capita spending in the entire country at $231 dollars per capita. The national average stands at $350 dollars per capita, and with residents of some provinces, such as Saskatchewan and Alberta spending $448 dollars per capita.