ADMINISTRATIVE REPORT

Date: April 17, 1998

Author/Local: M. Lee/6034

CC File No. 2633-1

TO:	Vancouver City Council
FROM:	Director of Community Services, Social Planning, in consultation with the Director of Community Planning and Director of Legal Services
SUBJECT:	Changes to Charitable Gaming.

INFORMATION

The Director of Community Services, Social Planning presents this report for information.

CITY MANAGER'S COMMENT

The City Manager presents this report for INFORMATION.

COUNCIL POLICY

·On November 1, 1994, Council passed a resolution opposing gaming expansion including the introduction of VLTs 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 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.

·In addition, between January 27, 1987, and April 22, 1997, Council passed several additional related resolutions, including the following: that maximum financial benefits accrue directly to the social service agencies sponsoring casino events; that controls be in place to discourage or prevent possible negative social consequences, such as compulsive gambling or criminal activity; that revenues be made available to mitigate community impacts; that there be by-law amendments to prohibit electronic gaming devices; and that Council object to the Provincial Government’s approval of an increase in the betting limits and expansion of gaming hours.

·On October 11, 1997, Council made amendments to the Zoning & Development By-law and approved new policies and regulations to deal with casino use in the City of Vancouver.

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 recently announced changes to the charitable gaming model in British Columbia, and how these changes could affect City regulations and charities in the City of Vancouver and other potential implications.

BACKGROUND

On January 14, 1998, Mr. Justice Owen-Flood of the British Columbia Supreme Court handed down a decision that held that the method implemented by the provincial government for the collection and distribution of charitable gaming money was invalid. In response to this decision, the provincial government appointed Frank Rhodes to:

·implement measures to ensure a continuation of charitable gaming;

·initiate a review process that will lead to the establishment of an interim gaming regime; and,

·identification of longer term objectives.

The Frank Rhodes’ report, containing a number of options for a new model of charitable gaming was released on March 2, 1998. Then on April 9, 1998, Minister Farnworth announced which new model had been selected by the government.

Council’s Request

At the Council meeting of the City Services and Budgets Committee, April 9, 1998, Council requested a report back from staff to provide information on the implications arising from the announced changes to the charitable gaming model.

DISCUSSION

A. Summary of Minister Farnworth’s announcement

1. Casinos and electronic gaming under Section 207(1)(a) of the Criminal Code

Under the new model , the B.C. Lottery Corporation will manage and conduct casino table games, slot machines and electronic and linked bingo. Previously, this responsibility (with the exception of electronic gaming) lay with the charities that received short duration licenses.

As required by the Criminal Code, electronic gaming must be conducted by the Provincial Government; therefore, the most significant change is that government will take control of casino table games as well. It is not clear yet the nature and form of the relationship that the B.C. Lottery Corporation will engage in with the private casino operators. One possible outcome, is that casino operators will be made redundant. It is possible that in the future, we may witness theimplementation of a completely new model for gaming in British Columbia, namely the "Quebec model", whereby the government has total control of casino operations, including ownership of facilities.

2. Bingo under Section 207(1)(b) of the Criminal Code

Bingo facilities will continue to operate through charitable licensees and will retain net proceeds, including those from electronic and linked bingo (even though electronic and linked bingo will be operated under the jurisdiction of the Lottery Corporation). Minister Farnworth also indicated that a strategic analysis of the bingo sector is going to be conducted as part of a consultation process leading up to the introduction of new provincial gaming legislation.

3. New role for B.C. Gaming Commission

A new Chair, Mr. Richard James (Jim) Carter and new Commissioners have been appointed to B.C. Gaming Commission.

The B.C. Gaming Commission will continue to be the sole agency for charity access to gaming revenue. The difference is that the Gaming Commission will now be handing out money (grants), rather than licenses for casinos. The Commission will also continue to license charitable access to gaming revenue through bingos, ticket raffles, social occasion casinos and wheels of fortune events and gaming at fairs and exhibitions.

The Minister also indicated that appointments to the Lotteries Advisory Committee (LAC) will be allowed to lapse, with another administrative structure within the Ministry to handle policy co-ordination and support functions. We don’t know at this point, the full implications of this move.

4. Trust fund of the $125 million guarantee

A trust will be established to guarantee charity revenues of $125 million in 1998/99. This is slightly higher than the guarantee of $118 million for the 1997/98 period. The $125 million guarantee will be indexed annually until 1/3 of net win exceeds the guarantee amount. Charities then get 1/3 of the net win.

Charitable access to gaming revenue will vary depending whether charities will need a license or not. As mentioned above, access to money will depend on wether a charity is participating ina licensed activity, like bingo, or applying for a grant. Provision of volunteers will also change. Charities will no longer be required to provide volunteers for casinos.

The following table that was attached to the Minister’s Press Release, explains the difference for charities as they access revenue through traditional licenses or grants:

Licensed charitable access to gaming revenue

Direct charitable access to gaming revenue

1.Charities fill out application form requesting access to gaming for $$.	1.Charities fill out same application form requesting access to gaming for $$.
2.Application form submitted to B.C. Gaming Commission for approval.	2.Application form submitted to B.C. Gaming Commission for approval.
3.B.C. Gaming Commission applies eligibility criteria to applicant.	3.B.C. Gaming Commission applies same eligibility criteria to applicant.
4.B.C. Gaming Commission determines level of demonstrated need.	4.B.C. Gaming Commission determines level of demonstrated need.
5.B.C. Gaming Commission approves license for amount of demonstrated need.	5.B.C. Gaming Commission approves access for amount of demonstrated need.
6.Charities required to provide volunteers at gaming event.	6.Charities not required to provide volunteers at gaming event.
7.Charities receive their share of revenue from the facility pool, plus any top-up from the trust necessary to satisfy the guarantee.	7.Charities receive their share of revenue directly from the trust.

5. Consultative process for Legislation

The announcement also includes a commitment on the part of the Minister, to introduce new gaming legislation in 1999. To that effect, Frank Rhodes has been appointed to carry forward consultation with gaming stakeholders and municipal leaders. It is not clear how the consultation will be carried out.

This is not the first time that the need for a Gaming Act has been announced by the provincial government. It was first announced in 1988, then again in 1992, 1994 and 1997.

6. Slots

In the April 9, 1998 announcement, the government did not clearly announce any new changes in relationship to the slots program. Minister Farnworth has indicated however - at a meeting with UBCM representatives, that the goal of government is the full implementation of the slots program in all existing casinos in the province.

It is staff understanding that up to 2,000 slots will be installed in the province by the end of 1998. Presently there are 760 slots in operation (none in Vancouver). Provincial policy is that the maximum number of slots per facility is 300. There are five casinos currently in operation in Vancouver.

B. Implications

1. Zoning Control

Currently under the City's Zoning and Development By-law, gaming is regulated as a casino use. Two classes of casinos are defined: Class 1-Casinos - charity casinos without player-operated VLTs and slot machines are permitted in several zones; Class 2-Casinos - non-charity casinos with or without slot machines are prohibited anywhere in the City. Both classes of casino require that a license be issued by the B.C. Gaming Commission. Since the Gaming Commission will no longer be issuing casino licenses, the definitions will ultimately need amendment. However, staff feel it would be premature to initiate amendments until more clarity has been provided on the role of the B.C. Lottery Corporation and the private casino operators.

The new policy changes the existing relationship between the provincial government and the casino operators. A fundamental change is the movement of a substantial portion of gaming activities (including table games at casinos) which are currently managed and conducted by the charities under s. 207(1)(b) of the Criminal Code to have them conducted and managed by the government under s. 207(1)(a) of the Code. This could have fundamental ramifications on the City’s powers to regulate what could become essentially a provincial crown operation. However, the new policy is not clear on the specific nature and form of the relationship between the Lottery Corporation and the casino operators. Therefore, the implications in terms of the City’s power to regulate is also not clear.

With respect to slot machines, the recent amendments to the Zoning and Development By-law creating two classes of casinos had the effect of prohibiting slots in Vancouver. The new provincial policy which apparently will give management and control of casinos, generally, to the province, could have fundamental ramifications in terms of the City’s powers to regulate what could become essentially as provincial crown operation.

2. Charity concerns - Social Services repercussions

Some charities, particularly those that rely on bingo revenue, have indicated support for the new policy. The are many charities however, that have indicated concerns as the government takes over the operation of casinos and direct distribution of some gaming revenues to charities. Some of the charities stated concerns are:

·Government priorities may change over time, thereby changing the distribution of funds and threatening the financial stability of organizations that get left out.

·Government control of all charitable gaming dollars may be subject to political interference in the distribution of grants.

·Revenue going to charities may be reduced over time. Unless the charity rights are entrenched in legislation there is no guarantee that revenues will remain constant.

·Government control of charity gaming may increase bureaucracy and administration costs, and therefore reduce charity revenue.

·Problems that have been identified with the previous licensing process have not been addressed; rather they have been passed on to the new grant process.

·Public support for gaming may diminish or even disappear, as the original intent of the gaming system was to support charities.

Some of these fears and concerns may not be resolved until such a time when there is a Gaming Act that entrenches the rights of charities in the Legislation.

If revenue to charities is jeopardized over the long-term, the services that many of these organizations provide may be underfunded, which in turn may put extra pressure on City resources. Vancouver 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.

3. UBCM role

The Union of British Columbia Municipalities (UBCM) is also concerned with the development of a new gaming policy. It has indicated its views to the Provincial Government on many occasions, including a letter to the Minister Responsible for Gaming sent by the President of UBCM, Mr. Steve Wallace, on March 27, 1998. The UBCM position is summarized as follows:

·provide local governments with the opportunity to participate in the evaluation of community impacts of any expansion to gaming activities and that gaming policy require municipal endorsation of specific gaming locations and types of activities prior to approval.

·support the review (ie. development of a Gaming Act, etc) and conditionally agree to participate on an Advisory Committee.

·that the Lotteries Advisory Committee not given responsibility for the review and that it be placed with a more "arms length" Task Group.

·that a more ambitious timeframe be adopted, recognizing the amount of previous work by government, industry and others that would see a discussion draft in the fall of 1998 and legislation in the spring of 1999.

CONCLUSION

The new gaming model introduced by the province attempts to brings the operation of casinos into compliance with the Criminal Code. Casino operations will be conducted and managed by government under s. 207(1)(a) of the Criminal Code. This change may impact our ability to regulate casino use. Staff feel, however, that it is premature to initiate amendments to City By-laws until more clarity has been provided on the role of the B.C. Lottery Corporation and the private casino operators.

It appears that funding to charities will remain relatively the same for the short term. However, the change in the gaming model could bring about significant funding changes in the long run.

Staff will continue to monitor the situation and will work together with the charities and other municipalities in anticipation of possible impacts arising from the implementation of the new model for charitable gaming. * * * * *

(c) 1998 City of Vancouver