Socio-Economic Study of the Expansion of Gaming Facilities at Ajax Downs

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1 Environment Ajax Downs Final Report Prepared by: AECOM 105 Commerce Valley Drive West, Floor tel Markham, ON, Canada L3T 7W fax Project Number: Date: March, 2015

2 Statement of Qualifications and Limitations The attached Report (the Report ) has been prepared by AECOM Canada Ltd. ( Consultant ) for the benefit of the client ( Client ) in accordance with the agreement between Consultant and Client, including the scope of work detailed therein (the Agreement ). The information, data, recommendations and conclusions contained in the Report (collectively, the Information ): is subject to the scope, schedule, and other constraints and limitations in the Agreement and the qualifications contained in the Report (the Limitations ); represents Consultant s professional judgement in light of the Limitations and industry standards for the preparation of similar reports; may be based on information provided to Consultant which has not been independently verified; has not been updated since the date of issuance of the Report and its accuracy is limited to the time period and circumstances in which it was collected, processed, made or issued; must be read as a whole and sections thereof should not be read out of such context; was prepared for the specific purposes described in the Report and the Agreement; and in the case of subsurface, environmental or geotechnical conditions, may be based on limited testing and on the assumption that such conditions are uniform and not variable either geographically or over time. Consultant shall be entitled to rely upon the accuracy and completeness of information that was provided to it and has no obligation to update such information. Consultant accepts no responsibility for any events or circumstances that may have occurred since the date on which the Report was prepared and, in the case of subsurface, environmental or geotechnical conditions, is not responsible for any variability in such conditions, geographically or over time. Consultant agrees that the Report represents its professional judgement as described above and that the Information has been prepared for the specific purpose and use described in the Report and the Agreement, but Consultant makes no other representations, or any guarantees or warranties whatsoever, whether express or implied, with respect to the Report, the Information or any part thereof. Without in any way limiting the generality of the foregoing, any estimates or opinions regarding probable construction costs or construction schedule provided by Consultant represent Consultant s professional judgement in light of its experience and the knowledge and information available to it at the time of preparation. Since Consultant has no control over market or economic conditions, prices for construction labour, equipment or materials or bidding procedures, Consultant, its directors, officers and employees are not able to, nor do they, make any representations, warranties or guarantees whatsoever, whether express or implied, with respect to such estimates or opinions, or their variance from actual construction costs or schedules, and accept no responsibility for any loss or damage arising therefrom or in any way related thereto. Persons relying on such estimates or opinions do so at their own risk. Except (1) as agreed to in writing by Consultant and Client; (2) as required by-law; or (3) to the extent used by governmental reviewing agencies for the purpose of obtaining permits or approvals, the Report and the Information may be used and relied upon only by Client. Consultant accepts no responsibility, and denies any liability whatsoever, to parties other than Client who may obtain access to the Report or the Information for any injury, loss or damage suffered by such parties arising from their use of, reliance upon, or decisions or actions based on the Report or any of the Information ( improper use of the Report ), except to the extent those parties have obtained the prior written consent of Consultant to use and rely upon the Report and the Information. Any injury, loss or damages arising from improper use of the Report shall be borne by the party making such use. This Statement of Qualifications and Limitations is attached to and forms part of the Report and any use of the Report is subject to the terms hereof. AECOM: AECOM Canada Ltd. All Rights Reserved. Ajax Down Socio-Economic Study_Final Report Docx

3 Executive Summary AECOM was retained by Ajax Downs to complete a socio-economic study looking at potential impacts of proposed expansion plans at the Ajax Downs facility. These expansion plans are being held in advance of the Request for Proposal issued by the Ontario Lottery and Gaming Corporation (OLG) in late 2013 on the operation of gaming facilities in OLG zones C2 and C3. This study looks at the following issues to determine both the positive and negative effects of an expanded facility on the community: Market size and distribution; Problem gambling; Crime; Property value implications; Employment and economic development implications; and Municipal revenue contributions. Key findings in this report include the following: Employment and Opportunities for Growth OLG is a significant revenue source for the Provincial Government. In fiscal year (FY) 2011 the Corporation flowed approximately $1.8 billion to the Provincial Government who in turn distributed these monies to fund health care and culture and recreational initiatives across the Province. In addition to revenue the gaming sector is a significant employer with an estimated 16,900 employees directly and indirectly associated with OLG. A modernisation strategy drive has been implemented by OLG with 29 gaming zones identified across Ontario. Zone C3 includes Ajax, Pickering and Whitby and is home to Ajax Downs. One operator is being sought in the GTA to operate single gaming facilities in each of the zones with the upset game thresholds of 5,000 slot machines and approximately 2,400 live table game positions in Zone C2 and potentially 2,500 slot machines and 1,200 live table positions in Zone C3. Gaming in Ontario The industry is facing changes with new technologies coming to the fore. igaming in particular looks to be a significant entrant into the portfolio of gaming types. OLG recognizes this and is taking steps to incorporate igaming into its product inventory Woodbine Racetrack is the dominant track in Ontario with respect to visitation with more than double the annual count of other venues Most of the smaller tracks showed a steady level of visitation with two exceptions. The first exception was Fort Erie Race Track which showed a steady drop in visitation until it was closed in FY The second exception was Ajax Downs which showed strong growth - particularly after FY When the racetrack portfolio is examined in terms of revenue per machine per day Woodbine shows a dramatic decline over the FY 2008 to FY 2012 period while most of the other tracks show relatively steady performance in the $300 to $500 range. The three racetracks that were closed Fort Erie, Windsor and Hiawatha were performing in the $100 to $200 band prior to closure in FY The strongest performer against this metric is Ajax Downs at the $600 level. Ajax Downs stands out across the entire track portfolio. Its performance would suggest it has access to a very strong market. Ajax Down Socio-Economic Study_Final Report Docx i

4 When compared to OLG Casinos, Ajax Downs also performs very well. This is despite its smaller complement of gaming facilities than Casinos at Brantford and Great Blue Heron. Modernization plans will assist in ensuring a continuation of business and staving off similar attrition seen at other venues. Problem Gambling Problem gambling is an issue for the gaming industry and there is no denying it can have serious consequences. Problem gambling can lead to personal and societal problems. It can lead to bankruptcy, personal health problems, family breakups, financial crime and even suicide. Within the adult population there is a propensity for problem gambling. Numerous studies have been done in Ontario since the early 1990s. These studies have become more focused and refined over time and as result the problem gambling propensity statistics have fallen to the point of current estimation at 1.2%. The OLG is fully aware of problem gambling and last year contributed $53 million to agencies involved with problem gambling diagnosis, treatment and research. Within its operations OLG has put a Responsible Gaming Program at its core and it believes that it is a world leader on this front. It is working closely with the external agencies such as the Centre for Addiction and Mental Health and the Responsible Gambling Council to develop programs and procedures. Some of these programs and procedures include: It Pays to Know Responsible Gambling as part of operations Performance scorecarding against goals and objectives Voluntary self-exclusion with facial recognition Extensive Responsible Gaming (RG) employee training Player analytics Ajax Downs itself is on the cutting edge of programming and procedures being developed by OLG and external partners to address problem gambling. Socio-economic considerations for Ajax Downs Ajax Downs with 800 slot machines attracted 1.74 million visitations in FY It is estimated that an expanded Ajax Downs with 2,500 slot machines and 200 tables could attract 2.67 million visitations in FY It is estimated that approximately 53% per cent of the visitations would be from Durham Region and that 10.5% would be from the Town of Ajax. Problem gamblers will come to the proposed facility. They are there now and more will come to the expanded facility. It is projected that of the 2.67 million annual customer visitations approximately 115,000 (4.3% of total) of these could be associated with problem gamblers and of these 61,000 (2.3% of total) could be from residents of Durham Region. In terms of patrons with problem gambling issues it is estimated for FY 2017 that 660 persons could be from the Town of Ajax and approximately 3,200 from the whole of Durham Region. Studies also suggest however that there is evidence that problem gambling in areas with gaming facilities tends to plateau as the novelty of the venue wears off and people become more knowledgeable about the consequences of irresponsible gambling. It is a common view held by many that crime and gaming go hand in hand. This does not appear to be the case. Numerous studies have found little correlation between increased levels of crime and the presence of gaming facilities. Interviews with police officials in gaming communities also revealed this not to be the case. The majority of policing matters associated with gaming facilities tend to be traffic incidents. Durham Regional Police Services do not currently view the Ajax Downs to be a problem location. With the proposed expansion, it is important that Durham Regional Police Service, The Town of Ajax, Ajax Downs and other community partners proactively work together to ensure a safe enjoyable facility and broader community well being. Ajax Down Socio-Economic Study_Final Report Docx ii

5 At the present time Ajax Downs directly employs about 340 people. If the expansion were to take place at the threshold levels prescribed for gaming positions it is anticipated that this number could approach 700. Additionally another 435 jobs would be created through indirect and induced means. It is anticipated that most of these jobs could be sourced in the local region. Horse racing, is a very important activity at Ajax Downs. It is the only track that offers quarter horse racing in the Province. The breeding, training and racing of quarter horses is centered in Durham Region and it is an important part of the economy particularly in the rural areas of the Region. In Durham Region it is estimated that this sector annually creates $56 million in economic activity and 1,700 full time equivalent jobs. Horse racing, is proposed to be an integral part of the OLG modernization plan. Although direct subsidies to the horse racing industry from slot revenues have been discontinued, a strong and vibrant OLG will help maintain and grow a strong and vibrant horse racing sector (including the quarter horse component). The existing facility is a major financial contributor to the Town of Ajax. In FY 2012 Ajax Downs provided the town with $6.8 million through the OLG revenue sharing formula. In the future with the expansion as proposed it is estimated that this figure could rise to between $9.5 and $12.3 million depending on total gaming revenues. Summary and Conclusions Overall, this report paints a positive picture for the expansion of Ajax Downs. Evidence suggests economic benefits will be substantial and that dis-benefits particularly those associated with problem gambling will be proactively managed through programs and other means to the highest level possible. The Town of Ajax has been host to Ajax Downs and the OLG for quite some time. The relationship has been positive and there is no expectation given the information presented in this report that the relationship with an expanded facility cannot continue on a constructive trajectory. Ajax Down Socio-Economic Study_Final Report Docx iii

6 Table of Contents Statement of Qualifications and Limitations Distribution List Executive Summary 1. Introduction Overview Report Structure Information Sources Gaming in Ontario The OLG OLG Facilities and Venues Slots and Tables The Parent Ministry and Regulator The Distribution of OLG Revenues OLG Plans for Going Forward The Strategic Geographies Observations and Conclusions Business Trends and Facility Profiles Background Industry Trends in North America The Status Quo is Not Sustainable Patronage and Revenue Trends at Racetracks with OLG Slots Annual Patronage Patrons per Slot at Racetracks Revenue per Machine A More Focused Comparison Racetrack Comparison Racetrack Gross Revenue Racetrack Visitations per Machine Racetrack Revenue per Visitation Racetrack Revenue per Machine per Day Racetrack OLG Employees Racetrack OLG Payroll Racetrack OLG Revenue to Municipalities Casino Comparison Casino Visitation Casino Revenue Casino Visitation per Gaming Position Casino Revenue per Visitation Casino Revenue per Gaming Position per Day Casino Employees Casino Payroll Casino Revenue to Municipalities page Ajax Down Socio-Economic Study_Final Report Docx

7 3.8 Observations and Conclusions Problem Gambling The Problem Gambler The Implications of Problem Gambling The Diagnosis of Problem Gambling The Propensity for Problem Gambling The Social Agencies that Deal with Problem Gambling OLG s Approach to Problem Gambling It Pays to Know Responsible Gaming Voluntary Self-exclusion Referrals to Independent Support Services Employee Training and Culture of Care Player Analytics Ajax Downs and Responsible Gaming Observations and Conclusions The Socio-economic Implications of Expansion The Proposal The Market Area Projected Visitation Problem Gambling As a Component of Facility Visitation Problem Gambling in Relation to Facility Proximity Problem Gambling and Adaptation Mitigation Measures for Problem Gambling Summary Crime Property Value Effects Employment and Income The Horse Racing Industry Municipal Revenues Observations and Conclusions Summary and Conclusions References Ajax Down Socio-Economic Study_Final Report Docx

8 List of Figures Figure 1-1: Publication Year of Socio-economic Studies... 2 Figure 2-1: OLG Facilities... 4 Figure 2-2: The Distribution of OLG Gross Revenues (2012)... 6 Figure 2-3: Projected Additional Net Profit to the Province... 7 Figure 2-4: GTA Gaming Bundle... 9 Figure 3-1: Annual Visitation for Racetracks with OLG Slots Figure 3-2: Annual Patronage per Slot at Racetracks with OLG Slots Figure 3-3: Annual Revenue per Slot at Racetracks with OLG Slots Figure 3-4: Racetrack Visitation Ajax Downs, Georgian Downs, Mohawk Raceway Figure 3-5: Racetrack Gross Revenue Ajax Downs, Georgian Downs, Mohawk Raceway Figure 3-6: Racetrack Visitation per Machine Ajax Downs, Georgian Downs, Mohawk Raceway Figure 3-7: Racetrack Revenue per Visitation Ajax Downs, Georgian Downs, Mohawk Racetrack Figure 3-8: Racetrack Revenue per Machine per Day Ajax Downs, Georgian Downs, Mohawk Racetrack Figure 3-9: OLG Employees Ajax Downs, Georgian Downs, Mohawk Racetrack Figure 3-10: OLG Payroll Ajax Downs, Georgian Downs, Mohawk Racetrack Figure 3-11: OLG Revenue to Host Municipalities Ajax Downs, Georgian Downs, Mohawk Racetrack Figure 3-12: Casino Visitation Brantford, Great Blue Heron, Thousand Islands vs Ajax Downs Figure 3-13: Casino Revenue Brantford, Thousand Islands vs Ajax Downs Figure 3-14: Casino Visitation per Gaming Position Brantford, Great Blue Heron, Thousand Islands vs Ajax Downs Figure 3-15: Casino Revenue per Gaming Position Brantford and Thousand Islands vs Ajax Downs Figure 3-16: Casino Revenue per Gaming Position per Day Brantford and Thousand Islands vs Ajax Downs Figure 3-17: OLG Employees Brantford, Great Blue Heron, Thousand Islands vs Ajax Downs Figure 3-18: OLG Payroll Brantford, Great Blue Heron, Thousand Islands vs Ajax Downs Figure 3-19: Figure 4-1: OLG Revenue to Host Municipalities Brantford, Great Blue Heron, Thousand Islands vs Ajax Downs Prevalence Rates for Problem Gambling in Ontario s Adult Population based on Formal Surveys Figure 4-2: Responsible Gambling Scorecard Figure 5-1: Ajax Housing Price Growth 2011-Q4 to 2013-Q Figure 5-2: Housing Market Trends (Pickering, Ajax, Whitby, Oshawa) Figure 5-3: Estimates of Job and Income Generation through Expansion of Ajax Downs Figure 5-4: OLG Revenue Sharing Formula Ajax Down Socio-Economic Study_Final Report Docx

9 List of Tables Table 2.1: Revenue by Business Division... 3 Table 2.2: OLG Casinos and Racetracks with Slots... 4 Table 2.3: Slot and Table Counts in OLG Facilities... 5 Table 3.1: Game Complement Table 3.2: Game Complement Slots, Tables, Gaming Positions Table 4.1: Pinewood Services and Locations in Durham Region Table 4.2: OLG Support Service Referrals Table 5.1: Market Areas Table 5.2: Projection of Visitations to the Expanded Ajax Downs Facility by Area of Residence in Table 5.3: Comparative Projection of Average Annual Visitations per Patron to Ajax Downs Town of Ajax and Durham Region (2012 and 2017) Table 5.4: Problem Gambler, Visitations and Patron Counts at Ajax Downs FY 2012 and Appendices Appendix A. Appendix B. OLG Regions, Zones, Bundles and Threshold Gaming Positions Proposed Host Municipality Funding Formula Ajax Down Socio-Economic Study_Final Report Docx

10 1. Introduction 1.1 Overview In September 2013 AECOM was retained by Ajax Downs to undertake a socio-economic study pertaining to the potential expansion of gaming facilities at the current location. The research and analysis presented in this report are set out in the six chapters that follow. 1.2 Report Structure Following on from this Introduction, Chapter 2 looks at the plans of the Ontario Lottery and Gaming Commission (OLG) for gaming in the Province. Matters addressed include the mandate of OLG, their intentions going forward and the proposed means for achieving their objectives. In Chapter 3 the focus shifts to look at trends in the current portfolio of gaming facilities in the province. This chapter conveys a business perspective. It looks at OLG racetracks and Casinos and specifically compares the performance of Ajax Downs to Georgian Downs and Mohawk Raceway as well as the Brantford, Great Blue Heron and Thousand Island Casinos. The fourth chapter of this report looks at problem gambling. It is now readily acknowledged that problem gambling is an issue in society today. Gambling is a wide spread activity and takes place in many ways through a variety of different means. The creation and expansion of gambling facilities are intertwined with the problem. Also discussed in this chapter are the programs and measures used and proposed by OLG to address problem gambling at their facilities. The fifth chapter of this report specifically addresses the potential socio-economic impacts of the proposed facility in terms of market expansion, problem gambling, crime, real estate prices, employment and municipal revenue. The sixth chapter provides an overview summary of observations and conclusions 1.3 Information Sources The information presented in this report is drawn from discussions and data provided by Ajax Downs; annual reports and statistics from OLG; demographic information including population projections and community profiles from Statistics Canada, the Ministry of Finance and area planning departments; and an extensive review of literature on gambling with a specific focus on problem gambling and the socio-economic implications of gambling. Further information assembled in this report was gathered through interviews with various interests in Ajax and beyond on their experiences and perspectives with gambling and in some cases their views on the potential expansion of gaming facilities at Ajax Downs. In order to undertake some of the analysis, particularly with respect to looking at industry trends within Ontario, market projections, problem gambling forecasts and employment and revenue forecasts a series of purpose built models were developed and calibrated with information from the sources noted above. When Ajax Downs first considered adding slot machines to their facility and made application to the Town of Ajax to permit this activity information on the socio-economic effects of gambling was available but not extensive. Now the body research and documentation has expanded exponentially. Williams et al. (2011) note that 70% of the literature Ajax Down Socio-Economic Study_Final Report Docx 1

11 on the socio-economic effects of gambling has been published since In the latter study alone they identified almost 500 studies. The largest number of empirical investigations (i.e., 62%) is associated with the United States but 16% address gambling in Canada. Among the topics covered in the literature the majority deal with government and non-government revenues and benefits, employment, problem gambling, crime, public service requirements and attitudes. The graph that follows shows the inventory of published studies on the socio-economic effects of gambling over time. Figure 1-1: Publication Year of Socio-economic Studies Source: Williams et al Ajax Down Socio-Economic Study_Final Report Docx 2

12 2. Gaming in Ontario 2.1 The OLG The Ontario Lottery and Gaming Corporation (OLG) is a government business enterprise created by the Government of Ontario who is also its single shareholder. Within Ontario the OLG has the exclusive control of lotteries, casinos and slots at racetracks in the Province. The organization s stated mandate is, to provide gaming and entertainment in an efficient and socially responsible manner that maximizes economic benefits for the people of Ontario, related economic sectors and host communities (OLG, 2012). Under the Ontario Lottery and Gaming Corporation Act, 1999 OLG is required to deliver net revenue from lotteries, casinos and slots at racetracks to the Government of Ontario for a variety of purposes including: The provision of health care and the promotion and development of physical fitness, sport, recreation and cultural activities. Funding the Ontario Trillium Corporation and enabling it to make annual monetary distributions to charitable and not-for-profit organizations. The OLG and its contract management companies employ nearly 17,000 people in Ontario. Approximately 7,900 are employed in the corporation itself and the other 9,000 hold jobs in contract management companies that supply goods and service to the Corporation (OLG, 2013e). OLG s operations and revenue are organized under four business divisions which in combination generated $6.7 billion in gross revenue in fiscal year (FY) The revenue breakdown is set out below: Table 2.1: Revenue by Business Division Division Revenue % of Revenue Lottery $3,207,000,000 48% Bingo $80,000,000 1% Resort Casinos $1,304,000,000 19% OLG Slots and Casinos $2,126,000,000 32% Total $6,717,000, % Source: OLG, (2012) 2.2 OLG Facilities and Venues The OLG operates 16 terminal based lottery and sports games and offers more than 80 INSTANT lottery products through approximately 9,900 independent retailers in the province. OLG Bingo is delivered from six electronic Bingo (ebingo) Centres respectively located in Barrie, Sudbury, Windsor (2 venues), Peterborough and Kingston. Four resort casinos are managed by OLG but operated under contract by private casino operating companies. These facilities include Caesars Windsor, Casino Rama, Casino Niagara and Fallsview Casino Resort. In addition to the above OLG owns and operates five casinos in Ontario and owns and maintains control over the slot machine operation at Great Blue Heron Charity Casino. Additionally, OLG operates slot machine facilities at 14 racetracks. These facilities are identified below and Figure 2.1 shows their geographic distribution along with the resort casinos. Ajax Down Socio-Economic Study_Final Report Docx 3

13 Table 2.2: OLG Casinos and Racetracks with Slots Casinos Racetracks 1. Brantford Casino 2. Point Edward Casino 3. Sault Ste. Marie Casino 4. Thousand Islands Casino 5. Thunder Bay Casino 6. Slots at Great Blue Heron Charity Casino 1. Ajax Downs 2. Clinton Raceway 3. Dresden Raceway 4. Flamboro Downs 5. Georgian Downs 6. Grand River Raceway 7. Hanover Raceway 8. Kawartha Downs 9. Mohawk Racetrack 10. Rideau Carlton Raceway 11. Sudbury Downs 12. Western Fair District 13. Woodbine Racetrack 14. Woodstock Raceway Note: The OLG closed slot operations at Fort Erie Racetrack, Hiawartha Racetrack and Windsor Raceway April 30, Figure 2-1: OLG Facilities Source: OLG, (2013f) Ajax Down Socio-Economic Study_Final Report Docx 4

14 2.3 Slots and Tables At the present time the OLG slots and tables respectively total 22,400 and 562. Resort Casinos account for 9,346 slots and 372 tables while corresponding statistics for OLG Casinos are respectively 2,881 and 190. The total number of slots at racetracks is 10,173. Table 2.3 provides an inventory of slots and tables by facility. Table 2.3: Slot and Table Counts in OLG Facilities Resort Casinos Name of Facility Number of Slots Number of Table Games Windsor 2, Rama 2, Consolidated Niagara 4, Sub total 9, Casinos Brantford Blue Heron Point Edward Sault Ste. Marie Thousand Islands Thunder Bay Sub total 2, Racetracks Ajax Downs Source: OLG, (2013a, 2013b, 2012e) Clinton Raceway Dresden Raceway Flamboro Downs Georgian Downs 1,009 - Grand River Raceway Hanover Raceway Kawartha Downs Mohawk Raceway Rideau Carlton Raceway 1,280 - Sudbury Downs Western Fair District Woodbine Racetrack 2,995 - Woodstock Raceway Sub total 10,173 Grand Total 22, The Parent Ministry and Regulator Within the provincial government the OLG s parent ministry is the Ministry of Finance. Responsibility for regulating OLG activities falls to the Alcohol and Gaming Commission of Ontario (AGCO). The AGCO is a Provincial agency established in 1998 with responsibility for administration of the Liquor License Act and Gaming Control Act. The agency reports directly to the Ministry of the Attorney General and its stated vision is to be a leader in the alcohol and gaming sectors by providing effective regulation and services that are fair, responsible and in the broader public interest. The four fields of jurisdiction for the AGCO are: alcohol, charitable gaming, commercial gaming, and OLG lotteries. Ajax Down Socio-Economic Study_Final Report Docx 5

15 With respect to commercial gaming the AGCO regulates the operation of casinos, slot machine facilities and internet gaming operated by OLG. Key activities include: Approving and monitoring internal control, surveillance, security and other operational systems for compliance with all regulatory requirements; Testing, approving and monitoring slot machines and gaming and lottery management systems; Inspecting and monitoring casinos, slot machine facilities and internet gaming for compliance with the regulations, license requirements and other standards set out in the Gaming Control Act; Approving rules of play for the games of chance conducted and managed by the OLG; Through its Investigations and Enforcement Bureau, which is under the direction of the Ontario Provincial Police, maintaining OPP Casino Enforcement operations at all times while casinos are open to the public; Registering suppliers and gaming assistants. Source: AGCO, The Distribution of OLG Revenues The distribution of OLG s gross revenue is shown in the following figure. The two biggest payouts are to the Province of Ontario and to lottery winners. In the case of the Province, the OLG remits 20 percent of gaming revenues to it. Since 1975 the OLG has contributed in excess of $36 billion to provincial coffers. Figure 2-2: The Distribution of OLG Gross Revenues (2012) Source: OLG, (2012e) Ajax Down Socio-Economic Study_Final Report Docx 6

16 2.6 OLG Plans for Going Forward In July of 2010 the Government of Ontario gave the OLG new direction to modernize commercial and charitable gaming in the Province. In March of 2012 the OLG delivered a report to the Minister of Finance setting out a Modernization Plan. At the heart of this plan were three key objectives: Become more customer focused. Expand the regulated private sector delivery of lottery and gaming. Renew OLG s role to concentrate on the oversight of lottery and gaming. OLG believes that implementation of the plan will help create approximately 6,300 new jobs with 2,300 occurring in the gaming industry and 4,000 in the service sector in hotels, restaurants, entertainment centres and retail. The Corporation further holds that implementation of the plan could stimulate up to $3 billion in new private capital investment in the Province and in deliver an additional $1.3 billion in annual net profit to the Province for key public priorities such as health care and education (OLG, 2012c). Figure 2-3: Projected Additional Net Profit to the Province Improve Efficiencies $260,000,000 IGaming $740,000,000 $100,000,000 Lottery Innovation $180,000,000 Casino and slot moderization and end slots at race track funding Source: OLG, (2012c) The text that follows groups and briefly sets out the key objectives put forward in the modernization plan. Casino and Slot Modernization; Ending Racetrack Funding Modernize and shift day-to-day operation and capital development of gaming facilities to the private sector. Build new facilities and expand existing ones based on customer interest. Renegotiate the funding formula for municipalities to allow for a broader game offering. End the funding formula for slots at race tracks. (Note: this was implemented in the spring of 2013). Ajax Down Socio-Economic Study_Final Report Docx 7

17 Lottery Innovation Modernize and shift day-to-day operation of the lottery network to private sector operators. Make investment in new lottery technologies. Allow the private sector to design lottery games. Expand the distribution of lottery products through new channels. IGaming Deliver a full range of internet games including lottery tickets, interactive casino style games and peer to peer games through an online website. Improving Efficiencies Transform OLG into a smaller organization with its primary focus being on market management and being the industry leader in responsible gambling. Through implementation of the outlined objectives, the OLG believes it can drive higher revenues by widening the appeal of gaming in Province. The organization s stated intentions are to: Broaden the player base Not to increase the amount that current customers gamble Reduce the amount of public capital invested in gaming venues and infrastructure Encourage innovation and efficiency Source: OLG, 2012c 2.7 The Strategic Geographies As part of its implementation strategy for modernization the OLG identified 29 Gaming Zones across the Province. Taken from their website: Gaming Zones are geographic areas where qualified service providers will be permitted to operate a single gaming facility. The design of these Gaming Zones is intended to manage competition between facilities and ensure a sustainable and efficient gaming market in Ontario. The makeup of each proposed Gaming Zone is subject to change. Within each Gaming Zone, service providers will be permitted to operate the existing facility, establish a new facility if one does not currently exist, or relocate the existing facility within the boundaries of the Gaming Zone, all subject to approvals. The current upset threshold for slot machines is 34,250 against the current complement of 22,400. The live table game threshold is 1,300 at the moment with the quota for some facilities yet to be determined. The current level of live table games is approximately 560 (OLG, 2013a, 2013b, 2012e, 2013g). At the present time the OLG has grouped most of the 29 zones into gaming bundles and issued Requests for Pre- Qualification (RFPQ). These bundles include: East Gaming Bundle:... Zones E1, E2 and E3 North Gaming Bundle:... Zones N1, N2, N3, N4 and N5 Ajax Down Socio-Economic Study_Final Report Docx 8

18 Southwest Gaming Bundle:... Zones SW3, SW4, SW5, SW6, SW7 and SW8 GTA Gaming Bundle:... Zones C2, C3 and potentially C1 and C8 Central Gaming Bundle:... Zones C5, C6, and C7 West Gaming Bundle:... Zones C4, SW1, SW2, and SW9 Ottawa Gaming Bundle:... Zone E4 For the bundled zones service providers are being asked to demonstrate their ability to operate multiple facilities in a given region. The OLG has observed that customers tend to be drawn from specific geographic areas, often visiting a number of facilities in the same region. Zone bundling is seen as a mechanism that will allow service providers to take advantage of cross-marketing and co-operation between groups of facilities (OLG, 2013e). Figure 2.4 provides a map of OLG Central Region Gaming Zones. It should be noted that neither the City of Toronto nor municipalities in York Region have indicated a willingness to host a new gaming site. It should be further noted that in Zone C2 only one facility will be allowed with up to 5,000 slot machines and approximately 2,400 live table gaming positions (OLG, 2013g). Figure 2-4: GTA Gaming Bundle Source: OLG, (2014) Ajax Down Socio-Economic Study_Final Report Docx 9

19 For the study at hand, Ajax Downs is located in Zone C3. The constituent municipalities in this Zone are Ajax, Pickering and Whitby and the upset slot machine and live table game thresholds for a single facility in this Zone are respectively 2,500 and 200 (OLG, 2013g). The RFPQ issued late last year for the GTA Gaming Bundle seeks to identify qualified service providers. Subsequently, following a competitive bid process executed through a Request for Proposal (RFP) one of these applicants will become the exclusive service provider for the GTA Gaming Bundle. Additionally the RFPQ advises applicants that the scope of Gaming Bundle 5 could be substantially increased to include Zones C8 and C1 subject to the circumstances cited below. at such time and on such terms as OLG may determine, following consultation with the Mississauga of Scugog Island first Nation, Gaming Zone 8 may become part of the GTA Gaming Bundle. In such event the successful applicant will become the successful service provider for Gaming Zone 8 which consists of the Blue Heron Casino. If during the term of the casino operating agreement and services agreement, a new gaming site is permitted in the Toronto Area (Zone C1) the GTA service provider will have the right of first opportunity to become the operator for the new gaming site. (OLG, 2013g) Following selection of a successful respondent, the latter and OLG will enter into a Transition and Asset Purchase Agreement and a Casino Operating and Services Agreement. Under these agreements the successful respondent will be granted exclusive rights of service provision for gaming zones C2 and C3 for a term of approximately 22 years with the option to extend the term for unlimited periods of 10 years each subject to and in accordance with the provisions of the Casino Operating and Services Agreement. At all times the OLG will be responsible for the conduct and management of gaming (OLG, 2013g). Appendix A provides a breakdown of the OLG Regions, Zones and Bundles and upset slot machine and live table gaming position thresholds. 2.8 Observations and Conclusions 1. Gaming is an almost $7 billion business in Ontario and the Provincial Government is the primary stakeholder in OLG which is the purveyor of Gaming in Ontario. 2. The OLG operates the Lotteries and ebingo within the Province. It also manages four resort casinos and owns and operates another 5 casinos and owns and operates slot machines at a charity casino and 14 racetracks. 3. At present, the total complement of slots and tables in Ontario is respectively 22,400 and The OLG is a closely regulated business. It reports directly to the Minister of Finance and it is over sighted by the AGCO. 5. OLG is a significant revenue source for the Provincial Government. In FY 2011 the Corporation flowed approximately $1.8 billion to the Provincial Government who in turn distributed these monies to fund health care and culture and recreational initiatives across the Province. 6. In addition to revenue the gaming sector is a significant employer with an estimated 16,900 employees directly and indirectly associated with OLG. Ajax Down Socio-Economic Study_Final Report Docx 10

20 7. The OLG has been mandated by the Minister of Finance to grow and reorganize itself. To these ends it is seeking to modernize and expand casino, slot and lottery operations as well as venture into internet gaming. Additionally the organization seeks to become more efficient and cost effective by focusing on management and responsible gamming and turning over infrastructure builds and day-to-day facility operations to the private sector. 8. As part of the modernization drive OLG will renegotiate its funding formula (refer to Appendix B) for municipalities to allow a broader gaming offering. It has also moved forward on one of its objectives to end the funding formula for slots at racetracks. 9. As part of its modernization strategy the OLG identified 29 gaming zones across the province each with tentative electronic game and live table gaming position allowances. Qualified service providers are being invited through an RFPQ to operate existing facilities or establish new facilities in each of these zones. RFPQs have already gone out to 7 Gaming Zone Bundles. 10. The RFPQ for the GTA Gaming Bundle was just released in December This Bundle is comprised of Zones C2 and C3 and may at a later date, subject to conditions and circumstances may also include Zones C8 and C1. One operator is being sought for the GTA Bundle to operate single gaming facilities in each of the zones. In C2 the upset game thresholds are 5,000 slot machines and 400 live table games in Zone C3 the game thresholds are 2,500 slot machines and 200 tables. The facility operator will be given a 22 year contract with renewal options of 10 years terms thereafter. At all times OLG will retain responsibility for the conduct and management of gaming. 11. Zone C3 encompasses the municipalities of Ajax, Pickering and Whitby and it is home to Ajax Downs. 12. Based on all of the preceding gaming will continue to be an integral component of the Ontario Economy. The Government of Ontario through the OLG is aggressively moving forward to expand gaming and drive a higher revenue stream for itself. The OLG has defined the terms and conditions as well as geographies and gaming scope and scale thresholds for private sector participation. Ajax Down Socio-Economic Study_Final Report Docx 11

21 3. Business Trends and Facility Profiles 3.1 Background Lottery and gaming have been part of Ontario s entertainment and tourism industries for decades. In 1975 lottery began in Ontario with the introduction of Wintario. This initiative was designed to raise money for local community projects. In 1994 Ontario s first casino opened in Windsor and in 1998 Slots-at-Racetracks were introduced. As of today, and as discussed in the previous chapter, there are four resort casinos, 5 OLG community casinos, 1 charity casino and 14 slots-at-racetrack operations in the Province. Additionally the OLG offers numerous lottery games and operates 6 ebingo facilities. Gaming in Ontario is big business and the OLG with almost $7 billion in revenue ranks among the top 60 companies in Canada. 3.2 Industry Trends in North America OLG s 2011/2012 Annual Report, the most recent report available, noted that the gaming industry in North America has experienced mixed results in recent years as a result of high levels of unemployment and declining discretionary spend for entertainment. These circumstances have led to revenue declines in most markets. Modest signs of improvement are evident in only a few. Performance in the Canadian casino-style gaming market decreased by 1 percent to $10.3 billion as a result of negative performance in three of the top four Canadian jurisdictions, including Ontario in fiscal year FY Within the United States, analysts have predicted that gaming revenue will see modest but accelerating growth largely fuelled by regional markets as the economy improves. A significant trend that is also being observed in the North American market in general is the migration of land-based players to the convenience, variety and value of igaming. Industry analysts estimate the North American igaming market to be approximately $5 billion, including an estimated $1 billion derived from Canadian residents with $400 million of these monies being sourced from Ontario. The OLG issued a request for proposal from service providers, picked a candidate and is now working with the candidate toward a product launch. 3.3 The Status Quo is Not Sustainable As a business the OLG needs to constantly monitor its performance, its products and its markets. The impetus for its modernization strategy is rooted in its observations that going forward, reliance on status quo is not a viable business path. The current business model is not judged to be sustainable over the long term given rapid advances in technology, changes in consumer habits and shopping patterns, changing market demographics (particularly the trend of an aging population) and the precipitous decline in visits from the US. As was noted in the previous section online gaming is in its infancy but it is already making a significant impact and drawing market share. In the years ahead its influence will grow. OLG sees igaming as an important contributor to its future revenue portfolio. Lottery outlets no longer appear to be in sync with where people shop and as a result adjustment is needed to retain and grow the market. The plan is to move to where the people shop supermarkets, big box stores and large retail venues. Ajax Down Socio-Economic Study_Final Report Docx 12

22 At the moment most of OLG s land based gaming revenue is derived from slot machines however for persons under 45 these machines are not preferred. Studies show that the under 45 market prefers table games like black jack and poker. Over the coming years industry analysts feel that the demand for slot machine gaming will level out. As a consequence facilities need to offer a mix of gaming opportunities to broaden the market base and enable growth. One of the biggest impacts on the Ontario gaming market has been the enormous contraction in US sourced business. In 2002 approximately 23 million US residents entered Ontario. In 2012 the number was roughly 6 million - a decrease of 74 percent. In light of this it is apparent that the Ontario market for gaming is now largely domestic and not cross-border. This perspective demands new strategy on how to go local. Finally, gaming revenues are flattening in the border casinos not only because of the contracting tourist visitation from the US but also because the US market is now served by gaming facilities on its own side of the border. Casinos have sprung up in all of the border-states in recent years. The bottom line to all of this and the driving force behind OLG s Modernization Plan is that change is required to stay viable. A faltering gaming sector is a blow to government revenue and this is well recognized by the Ministry of Finance. 3.4 Patronage and Revenue Trends at Racetracks with OLG Slots Annual Patronage Figure 3.1 shows the patronage trends at OLG racetrack venues since FY There are four patterns of note. First, patronage at Woodbine is an order of magnitude above all the other venues. It showed a fairly steady patronage from FY 2002 to FY 2009 with a slot machine count in the vicinity of 2,000. Over a 3 year period from FY 2010 to FY 2012 roughly another 1,000 slot machines were added and while patronage jumped up over 5 million in FY 2011, in FY 2012 it fell back again to the long term level of 4.5 million. Figure 3-1: Annual Visitation for Racetracks with OLG Slots Source: OLG, ( , 2009a 2012a, 2013b) Ajax Down Socio-Economic Study_Final Report Docx 13

23 The second patronage trend that is evident in the graph is the precipitous fall in patronage for the Fort Erie Racetrack from about 1.8 million in FY 2002 to less than 800,000 in FY 2011 a decline of approximately 55%. The fall in US tourism and increased competition from US based slot machine venues are seen as likely factors behind the attendance decline. The third trend is that most of the smaller race tacks with the exception of Ajax Downs seem to show a relatively steady visitation over the period. This suggests that they have access to a regular customer base in a local market. The fourth trend is the strong growth in patronage at Ajax Downs. At 250 slot machines it generated annual patronage at the 1.1 million level and then with the addition of another 550 slot machines patronage climbed to the 1.7 million mark making it the second best performing venue among the OLG Slots-at Racetracks just ahead of the Rideau Carlton Raceway in Ottawa which has 1,250 machines. This trend underscores the fact that Ajax Downs appears to have an exceptionally strong market Patrons per Slot at Racetracks Figure 3.2 provides a view of patronage per slot at racetracks over the same time frame discussed previously. In this figure there are two trends of note. First, with the exception of Ajax Downs, the general trend regarding patronage per slot machine has been down. On average across all racetracks patrons per slot machine has fallen 25% from a level of roughly 2,000 in FY 2002 to about 1,500 in FY Looking at the Woodbine Racetrack specifically, the fall has been even more precipitous with a decline in excess of 45% going from over 2,700 in FY 2002, to fewer than 1,500 in FY This downward pattern precipitates two observations. One, slots are no longer the attraction they once were which is an observation noted by OLG. Second, there may be an adaptation sequence whereby patronage is initially high when slots are introduced but once the novelty wears off and people become accustomed to the venue, patronage subsides. Figure 3-2: Annual Patronage per Slot at Racetracks with OLG Slots Source: OLG, ( , 2009a 2012a, 2013b) Ajax Down Socio-Economic Study_Final Report Docx 14

24 The anomaly to all of the above is Ajax Downs which shows a startling patronage pattern all its own. There was a huge surge in patronage per slot when machines were initially introduced (i.e., over 4,500 in FY 2006 and FY 2007) and then a dramatic fall to 1,500 in FY 2009 and a rebound after that to over 2,000 from FY 2010 on. This pattern again suggests a very strong market. In the initial period patronage per machine was exceptional but there were relatively few machines and over time in addition to the novelty wearing off patrons may have been frustrated by the inconvenience of being underserved and demonstrated this by not attending. Additional slot machines were put in place in FY 2009 and attendance went up again but not to the peak of former years suggesting that the market is there to support additional machines but that adaptation may have occurred and the novelty of the venue has worn off Revenue per Machine In this next perspective the revenue per slot machine is examined over the period FY 2008 to FY For the most part the revenues for all racetracks remain relatively consistent the average being around $155,000 per year per machine. Figure 3.3 shows annual revenue per slot at racetracks with OLG slots. There are two anomalies in Figure 3.2. The first is Woodbine which shows a decline from just over $300,000 in FY 2008 to less than $200,000 in FY 2009 (a contraction of 38%). The second is the graph line for Ajax Downs which shows a big contraction in FY 2009 (when 450 new machines were introduced) and then a rebound to $225,000 in FY 2012 placing Ajax Downs at the head of all racetracks. Figure 3-3: Annual Revenue per Slot at Racetracks with OLG Slots Source: OLG, (2009b 2013b) Woodbine is the biggest racetrack in the portfolio with the most machines but there are market forces at play that appear to be eroding its performance. It may be faltering because of reduced tourist flows or because the local market has grown somewhat tired of it and other venues are preferred. In the case Ajax Downs it calls attention to itself by showing exceptionally strong performance. Relative the other racetrack with slot machines it is clearly performing above expectations demonstrating once again that it has access to a strong market. 3.5 A More Focused Comparison In this section a more focused comparison of Ajax Downs is done with a sample of race tracks and casinos. The selected racetracks are Georgian Downs in Barrie and Mohawk Racetrack in Milton. Both these facilities are in fast Ajax Down Socio-Economic Study_Final Report Docx 15

25 growing urban areas with Georgian Downs being slightly above of the GTA s northern perimeter and Mohawk Raceway being on the western periphery of the GTA in the Town of Milton. All three facilities are in close proximity to 400 series highways with Georgian Downs being the most visible. The three casinos selected for comparison with Ajax Downs are Great Blue Heron, Brantford and Thousand Island Casino. Great Blue Heron is a charity casino located in Durham Region and it is the closest gaming facility to Ajax Downs. Brantford is located in the City of Brantford and serves a local market. The Thousand Island Casino is located 20 minutes east of Kingston and 10 minutes north of the US border. Its market is likely a combination of local and US tourists. Each of these facilities offer a combination of slot machines and tables. The current slot machine and table complement of the facilities noted in the two preceding paragraphs are set out in Table 3.1. Table 3.1: Game Complement Facility Slot Machines Tables Table Gaming Positions Ajax Downs 800 Georgian Downs 1,009 Mohawk Raceway 856 Brantford Casino Great Blue Heron Casino Thousand Island Casino Source: OLG, (2012c, 2013b) 3.6 Racetrack Comparison Visitation statistics for the three raceways are shown in the graph that follows. Both Georgian Downs and Mohawk Raceway have visitations that fall well below that of Ajax Downs. In FY 2012 Georgian Downs was 29% less and Mohawk Racetrack 35% less. Mohawk Racetrack has shown a decline in visitation since FY 2006 while Georgian Downs has shown a gradual increase over the same period. All three of the venues have shown a slight dip in visitation from FY 2011 to 2012 which may be an early barometer that underscores previous commentary that the existing venues may be starting to falter and that changes and upgrades are needed. Figure 3-4: Racetrack Visitation Ajax Downs, Georgian Downs, Mohawk Raceway Source: OLG, ( , 2009a 2012a, 2013b) Ajax Down Socio-Economic Study_Final Report Docx 16

26 3.6.1 Racetrack Gross Revenue Figure 3.5 sets out the gross revenue trends for the three racetracks. In FY 2012 gross revenue at Mohawk Racetrack was $33 million under that of Ajax Downs and Georgian Downs was $57 million less. Mohawk Racetrack has had falling gross revenue since FY 2008 while Georgian Downs shows a revenue climb between FY 2008 and FY 2010 and then a slight fall since FY In contrast to both of these facilities Ajax Downs shows an increase in revenue across the period with a dramatic spurt of growth from FY 2009 to FY 2010 and then a gradual rate of climb since FY Figure 3-5: Racetrack Gross Revenue Ajax Downs, Georgian Downs, Mohawk Raceway Source: OLG, (2009b 2013b) Racetrack Visitations per Machine The racetrack visitations per machine are shown in Figure 3.6 that follows. For Georgian Downs the visitation trend was relatively stable between FY 2002 and FY 2008 with a band of 2,500 to 2,700 visits per machine. A rather steep decline occurred over the next two fiscal years and since FY 2010 the new visitation band is in the range of 1,250 to 1,300 visits per machine. The picture for Mohawk Raceway shows a steady gradual decline in visitation per machine from FY 2002 to FY 2008 and then a leveling out in the range of 1,300 visits per machine since that time. Ajax Downs shows visitations per machine in the 4,500 range between FY 2006 and FY 2008 and then a fall to 1,500 visits per machine in FY 2009 and a rebound to the 2,250 level since then. The precipitous decline in visitation per machine at both Ajax Downs and Georgian Downs may reflect the recession that took hold at the time and a dramatic cutback by patrons in discretionary spending on entertainment. It may also reflect the fact that both venues added machines in 2009 and that it took some time for the market to adjust to the expansions. In the case of Georgian Downs the adjustment has not yet seen an upswing whereas there has been a positive bounce at Ajax Downs but not back to previous levels. Ajax Down Socio-Economic Study_Final Report Docx 17

27 Figure 3-6: Racetrack Visitation per Machine Ajax Downs, Georgian Downs, Mohawk Raceway Source: OLG, ( , 2009a 2012a, 2013b) Racetrack Revenue per Visitation Raceway revenue per visitation is set out in Figure 3.7. In this Figure both Ajax Downs and Georgian Downs have a fairly comparable trend lines. Since FY 2010, both tracks show a spend of approximately $100 per visitation. Mohawk Racetrack is the high performer on this front and although the spend per visitation has been gradually declining since FY 2008, the current level (FY 2012) is $130 per visit. Figure 3-7: Racetrack Revenue per Visitation Ajax Downs, Georgian Downs, Mohawk Racetrack Source: OLG, ( , 2010a 2012a) Ajax Down Socio-Economic Study_Final Report Docx 18

28 3.6.4 Racetrack Revenue per Machine per Day The revenues per machine per day for the three tracks under consideration are shown in Figure 3.8. Mohawk Racetrack shows a relatively stable trend over the period FY 2008 to FY 2012 at about $500 per machine per day. Georgian Downs started out at $600 but has since fallen by almost 45% to the $340 level in Ajax Downs is again the star performer running around $600 per machine per day since FY Figure 3-8: Racetrack Revenue per Machine per Day Ajax Downs, Georgian Downs, Mohawk Racetrack Source: OLG, (2009b 2013b) Racetrack OLG Employees OLG employee statistics for the three racetracks are set out in Figure 3.9. Mohawk Racetrack shows a relatively stable employment trend over the FY 2008 to FY 2012 period with between 230 and 240 employees. Georgian Downs employee base grew 54% over the same period from 207 to 318 while Ajax Downs increased its number of OLG employees by 35% from 250 to 338. Figure 3-9: OLG Employees Ajax Downs, Georgian Downs, Mohawk Racetrack Source: OLG, (2009b 2013b) Ajax Down Socio-Economic Study_Final Report Docx 19

29 3.6.6 Racetrack OLG Payroll Racetrack OLG payroll is presented in Figure 3.10 that follows. For the period FY 2008 to FY 2012 Mohawk Racetrack s payroll trend was relatively constant between $11.4 and $11.6 million; Georgian Downs experienced a 52% increase in payroll over the period FY 2008 to FY 2009 from $9.3 to $14.2 million; and Ajax Downs underwent a 44% increase in payroll over the same period from $10.5 to $15.1 million. Figure 3-10: OLG Payroll Ajax Downs, Georgian Downs, Mohawk Racetrack Source: OLG, (2009b 2013b) Racetrack OLG Revenue to Municipalities Racetrack OLG slots revenue to host municipalities is presented in Figure Over the period FY 2008 to FY 2012 OLG slots revenue to the Town of Milton has decreased slightly (6%) from $5.8 to $5.4 million; Georgian Downs revenue contributions to Innisfil decreased 16% from $5.0 to 4.2 million; and Ajax Downs revenue contributions to the Town of Ajax increased 31% from $5.2 to $6.8 million. Figure 3-11: OLG Revenue to Host Municipalities Ajax Downs, Georgian Downs, Mohawk Racetrack Source: OLG, (2009b 2013b) Ajax Down Socio-Economic Study_Final Report Docx 20

30 3.7 Casino Comparison In this section the focused comparative analysis shifts to look at the performance of Ajax Downs relative to selected casinos. As indicated earlier on, three casinos have been selected for comparison. Great Blue Heron has been selected as it is the facility closest to Ajax Downs. However, it is a rural Charity Casino operated by the Mississaugas of Scugog Island First Nation. OLG only has control of the slot machine operations so revenue numbers are not available for the 60 table games. The Brantford Casino is an urban facility that largely draws from a local market. It most closely parallels the location of Ajax Downs at the heart of the community. The Thousand Island Casino is located 20 minutes east of Kingston and 10 minutes north of the US border. Its market is likely a combination of local and US tourists. In order to provide some relative performance comparisons of the casino facilities with Ajax Downs we have assumed tables are roughly equivalent to 8 slot machines. This assumption is grounded in looking at a combination of revenue figures for both tables and slot machines at a sample of casino venues in the US. For comparative purposes we have used the term gaming positions when referring to a combination of slot machines and tables. The table below provides the figures for slots, tables and gaming positions at Ajax Downs, Brantford Casino, Great Blue Heron Casino and Thousand Island Casino. Table 3.2: Game Complement Slots, Tables, Gaming Positions Casino Visitation Facility Slot Machines Tables Total Gaming Positions Ajax Downs Brantford Casino Great Blue Heron Casino Thousand Island Casino Source: OLG, (2012c, 2013b) Figure 3.12 shows visitation at the venues under review. Great Blue Heron shows a relatively steady level of annual visitation around the 1.4 million mark. Brantford in the early part of the graph was around the 1.7 million level with a spike to 2 million in FY 2006 and then a fall to about 1.2 million in FY 2008 and since then a rebound to about 1.4 million. In the case of the Thousand Island Casino the trend has been a steady decline from the 1.2 million level in FY 2006 to approximately 0.8 million in FY Ajax Downs is the only facility showing a dramatic rise in visitation and then a levelling out around the 1.75 million mark. Again even when compared to casinos that have gaming position counts that are 16% to 22% higher Ajax Downs has an annual visitation level that is 20% higher. Figure 3-12: Casino Visitation Brantford, Great Blue Heron, Thousand Islands vs Ajax Downs Source: OLG, ( , 2009a 2012a, 2013b) Ajax Down Socio-Economic Study_Final Report Docx 21

31 3.7.2 Casino Revenue The revenue per facility is set out in Figure Great Blue Heron is dropped from this analysis as revenue numbers are not available for the table games. Thousand Island Casino has FY 2012 revenue of approximately $72 million down about $11 million from FY Brantford revenues have grown about $14 million since FY 2008 to a current level of approximately $111 million in FY By comparison Ajax Downs revenue has climbed from $104 million in FY 2008 to $180 million in FY Across all three of the venues just discussed it is also noteworthy that since FY 2010 there appears to be leveling in revenue growth. Figure 3-13: Casino Revenue Brantford, Thousand Islands vs Ajax Downs Source: OLG, ( , 2009a 2012a, 2013b) Casino Visitation per Gaming Position The figure that follows shows the annual visitation per gaming position. The three casinos are currently clustered in a band roughly ranging from 1,200 to 1,400 visits per gaming position. Great Blue Heron has been very steady around this level since FY Brantford and Thousand Island visitations levels both dropped after FY 2006 but they have remained at relatively stable levels since FY Ajax Downs is currently sitting around the 2,200 mark which puts it at the head of the pack by a considerable margin (i.e., 46% above Great Blue Heron). Figure 3-14: Casino Visitation per Gaming Position Brantford, Great Blue Heron, Thousand Islands vs Ajax Downs Source: OLG, ( , 2009a 2012a, 2013b) Ajax Down Socio-Economic Study_Final Report Docx 22

32 3.7.4 Casino Revenue per Visitation The revenue per visitation figures are shown below for Brantford and Thousand Island Casinos and Ajax Downs. The casinos are roughly clustered in the $80 to $90 band while Ajax Downs since FY 2010 is in the $100 to $105 range. Figure 3-15: Casino Revenue per Gaming Position Brantford and Thousand Islands vs Ajax Downs Source: OLG, (2009b 2013b) Casino Revenue per Gaming Position per Day The revenue per gaming position per day is illustrated in Figure 3.16 for Brantford and Thousand Island casinos and Ajax Downs. The casinos show clustering around the $300 to $350 zone while Ajax downs since FY 2009 is around the $600 mark. Once again Ajax downs emerges as the top performing venue suggesting that even though it is not a mixed gaming venue it is able to tap a strong lucrative market. Figure 3-16: Casino Revenue per Gaming Position per Day Brantford and Thousand Islands vs Ajax Downs Source: OLG, (2009b 2013b) Ajax Down Socio-Economic Study_Final Report Docx 23

33 3.7.6 Casino Employees The number of OLG employees per facility is set out in Figure Brantford, Great Blue Heron and Thousand Islands casinos are shown as having relatively consistent employment numbers over the period FY 2008 to FY 2012 while Ajax Downs employee base grew 35%. In FY 2012 Branford possessed the largest number of employees (901), followed by Thousand Islands (415), Ajax Downs (338) and Great Blue Heron (245). Figure 3-17: OLG Employees Brantford, Great Blue Heron, Thousand Islands vs Ajax Downs Source: OLG, (2009b 2013b) Casino Payroll Casino payroll is presented in Figure 3.18 that follows. For the period FY 2008 to FY 2012 Brantford and Great Blue Heron experienced modest payroll growth (13% and 6% respectively), while Thousand Islands payroll decreased slightly (4%). Ajax Downs on the other hand experienced considerable payroll growth over the same period (44%). In FY 2012 Brantford had the largest payroll ($40.7 million), followed by Thousand Islands ($18.6 million), Ajax Downs ($15.1 million) and Great Blue Heron ($13.1 million). Figure 3-18: OLG Payroll Brantford, Great Blue Heron, Thousand Islands vs Ajax Downs Source: OLG, (2009b 2013b) Ajax Down Socio-Economic Study_Final Report Docx 24

34 3.7.8 Casino Revenue to Municipalities Casino revenue to host municipalities is presented in Figure Over the period FY 2008 to FY 2012 casino revenues contributed to the Town of Brantford increased 9%, while Thousand Islands casino contributions to the Town of Gananoque and the Township of Leeds and the Thousand Islands decreased 7%; and Great Blue Heron s contributions to the host community the Mississaugas of Scugog Island First Nation decreased 18%. Ajax Downs OLG slots revenue contributions to the Town of Ajax increased 31% over the same period. With regard to total annual revenue contributions to host municipalities/communities, Ajax Down ranks first ($6.8 million); followed by Great Blue Heron ($3.7 million); Brantford ($3.3 million), and Thousand Islands ($3.2 million). Figure 3-19: OLG Revenue to Host Municipalities Brantford, Great Blue Heron, Thousand Islands vs Ajax Downs Note: * Great Blue Heron contributes 5% of OLG slots revenue to the host community the Mississaugas of Scugog Island First Nation Source: OLG, (2009b 2013b) 3.8 Observations and Conclusions 1. Lottery and gaming are a big business, an important part of the Ontario economy and an important revenue source for the Provincial Government. 2. Gaming in North America will continue to grow as the economy improves. 3. The industry is facing changes with new technologies coming to the fore. igaming in particular looks to be a significant entrant into the portfolio of gaming types. OLG recognizes this and is taking steps to incorporate igaming into its product inventory 4. Gaming in Ontario is facing a number of circumstances that are forcing it to look at how it might move forward. Changing markets, customer behaviours and preferences are all dictating that to stay even it needs to change and to grow it needs to change even more. Ajax Down Socio-Economic Study_Final Report Docx 25

35 5. An examination of all OLG racetracks over the last 10 years reveals: a) Woodbine is the dominate track in visitation with more than double the annual count of other venues. b) Most of the smaller tracks showed a steady level of visitation with two exceptions. The first exception was Fort Erie Race Track which showed a steady drop in visitation until it was closed in FY The second exception was Ajax Downs which showed strong growth particularly after FY c) When visitation per machine is looked at, most tracks show a steady decline. Ajax Downs showed a huge decline after FY 2008 but then a strong rebound after that to become the second ranked facility with about 250 visits per machine behind Grand River Raceway in FY d) In terms of revenue per machine Ajax Downs sits third in the portfolio at around $100 behind Woodbine and Mohawk which are at the $130 level. e) When the racetrack portfolio is examined in terms of revenue per machine per day Woodbine shows a dramatic decline over the FY 2008 to FY 2012 period while most of the other tracks show relatively steady performance in the $300 to $500 range. The three racetracks that were closed Fort Erie, Windsor and Hiawatha were performing in the $100 to $200 band prior to closure in FY The strongest performer against this metric is Ajax Downs at the $600 level. f) Based on all of the preceding Ajax Downs is a standout across the entire track portfolio. Its performance would suggest it has access to a very strong market. 6. A focused comparison of OLG racetracks in and around the GTA (i.e., Ajax Downs, Georgian Downs and Mohawk Raceway) reveals: a) Ajax Downs has the largest level of visitation; about 500,000 more than the Georgian Downs and 600,000 more than Mohawk Racetrack. b) Ajax Downs has superior gross revenues relative to the other tracks approximately $30 million more than Mohawk Raceway and $50 million more than Georgian Downs. c) Ajax Downs is the dominant track in terms of visitations per machine around the 2,200 mark. Georgian Downs is at the 1,200 mark and Mohawk Raceway at the 1,300 mark. d) In terms of revenue per visitation Mohawk Raceway is top at $130 and the other two tracks are in the $100 range. e) Ajax Downs is the top performer based on revenue per machine per day at $600. Mohawk Raceway and Georgian Downs are respectively performing at $470 and $335. f) When viewed against other similar racetracks that ring the GTA, Ajax Downs is the standout performer. These results corroborate observations put forward earlier that it has access to a very strong market which suggests it has room to grow. 7. A focused comparison of Ajax Downs relative to selected OLG casinos, namely Brantford and Thousand Islands and the Great Blue reveals: a) Ajax downs is the strongest entity in terms of annual visitation approximately 25% above Great Blue Heron which is the second ranked facility and 31% above Brantford which is an urban based venue like Ajax Downs. Ajax Down Socio-Economic Study_Final Report Docx 26

36 b) Looking at gross revenues Ajax downs is dramatically bigger than either Brantford or Thousand Islands. Full revenue figures are not available for Great Blue Heron so it cannot be counted. c) In terms of visitation per gaming position Ajax Downs is again the superior performer approximately 60% ahead of Great Blue Heron which is the second ranked performer. d) On a revenue per gaming position basis Ajax Downs at $104 is roughly 12% better than Thousand Islands and 20% better than Brantford. e) Against the metric of revenue per gaming position per day Ajax Downs at over $600 is nearly double the other two venues. f) Viewed against the selected casinos Ajax Downs is the top performer even though it has a smaller complement of gaming positions relative to Brantford and Great Blue Heron. Again this performance underscores the comparative strength of the market around Ajax Downs and supports the view that there is room for both machine and table growth. 8. Based on all of the preceding there appears to be a strong business case for gaming growth. Ajax Downs has outstanding performance on almost every metric when viewed against the entire suite of OLG racetracks, the two similar racetracks (Georgian Downs and Mohawk Racetrack) which ring the GTA and three southern Ontario casinos (Brantford, Great Blue Heron and Thousand Island). At every level and in every comparison Ajax Downs presents itself as a top performer. 9. Ajax Downs is a strong performer now but complacency is a dangerous state and there are strong signs in the graphs that show business leveling and attrition at other venues. Ajax Downs needs to heed the signs (indeed its own charts show a levelling in recent years) and look at what is required to maintain its health and grow the business. To this end there is a need to heed OLG s modernization plan - upgrade the venue, broaden the gaming mix and grow the gaming positions. Relative to many of the other venues, Ajax Downs looks to have the market strength that will permit these initiatives. Ajax Down Socio-Economic Study_Final Report Docx 27

37 4. Problem Gambling 4.1 The Problem Gambler In Ontario today and for that matter across North America gambling is a common activity and most individuals who participate in it do so in a way that does not cause harm to themselves or others. However, for a segment of the population, gambling behaviours can vary over the course of a lifetime moving back and forth between nonproblematic to severely problematic (Levy, 2013). Problem Gamblers are defined as those individuals that have a continuous or periodic loss of control over gambling, a preoccupation with gambling and with obtaining money to gamble, irrational thinking and a continuation of these behaviours despite adverse consequences. Pathological gamblers are also referred to as compulsive gamblers persons who experience a progressive and eventually overwhelming urge to engage in gambling behaviour an urge which at first the gambler fails to resist and later finds him/herself unable to resist. Pathological gamblers are a subset of problem gamblers. Problem gambling is a serious issue for the gaming industry. There is no denying that it exists and there is no denying that it has significant consequences for individuals, their families and society at large. 4.2 The Implications of Problem Gambling Problem gambling can give rise to a variety of negative impacts and these can be both monetary and nonmonetary/social in nature. The literature on problem gambling is now enormous and the cause and effect relationships between gaming and problem gambling are very well documented. Causal links between gaming and problem gambling show end points in bankruptcy, divorce, crime and in some cases suicide (Levy, 2013). A study recently prepared for the Ottawa Board of Health (Levy, 2013) looked at health and social impacts related to problem gambling and noted that as gambling behaviour becomes more problematic, so too do the severity of mental and physical health impacts as well as financial effects. The document also noted that among individuals who develop problem gambling there is a noticeably higher incidence of mental health illnesses, such as depression, anxiety, attention deficit and personality disorders. This same study as well as others also point out the relationship with other addictions such as smoking, alcohol and substance abuse. The financial costs of problem gambling at a personal level and societal level are profound. There is a high correlation between problem gambling and personal/family financial difficulties. At its most severe level, financial problems can result in bankruptcy which affects not only the gambler, but their family and society around them. Persons with problem gambling may have accumulated debt by gambling with their paycheques and family savings as well as borrowed money from friends and relatives to try and forestall or turn around impending financial ruin. Once a household is without finances it cannot provide shelter, food becomes a problem and relationships within the family (husband and wife, children) and the social circle of relatives and friends start to break down and as these relationships deteriorate they in turn spawn other problems of their own (Levy, 2013). In some instances problem gambling is linked to crime but for the most part this is non-violent in nature. The most common crimes are fraud and embezzlement, including counterfeit money, credit card theft, fencing of stolen goods and insurance fraud (Levy, 2013). Ajax Down Socio-Economic Study_Final Report Docx 28

38 4.3 The Diagnosis of Problem Gambling There are number of tests and screening mechanisms available to diagnose whether a person has the propensity to be a problem gambler. In Ontario the two instruments most frequently used since 1999 are the South Oaks Gambling Screen (SOGS) and the Canadian Problem Gambling Index (CPGI). More recently since 2004 the instrument of choice has been the CPGI. The CPGI was originally launched in 2001 to measure the prevalence of gambling and problem gambling in the general population. By including indicators of social context and degrees of problem severity the CPGI provides a more complete view of gambling than other earlier instruments like SOGS. Since its launch it has been deemed to be the gold standard. It is currently used in all Canadian Provinces and several other jurisdictions including Australia, Great Britain, Iceland and Norway. The Index is constantly being revised and fine-tuned as researchers and practitioners involved in the diagnosis and treatment of problem gambling gain experience with it (Canadian Centre on Substance Abuse, 2013). At the present time the index poses a number of questions generally grouped to probe gambling involvement, problem gambling behaviour and adverse consequences. Nine questions are scored on the basis of: Never = 0 Sometimes = 1 Most of the time = 2 Almost always = 3 The nine questions are: Thinking about the last 12 months 1. Have you bet more than you could really afford to lose? 2. Still thinking about the last 12 months, have you needed to gamble with larger amounts of money to get the same feeling of excitement? 3. When you gambled, did you go back another day to try to win back the money you lost? 4. Have you borrowed money or sold anything to get money to gamble? 5. Have you felt that you might have a problem with gambling? 6. Has gambling caused you any health problems, including stress or anxiety? 7. Have people criticized your betting or told you that you had a gambling problem, regardless of whether or not you thought it was true? 8. Has your gambling caused any financial problems for you or your household? 9. Have you felt guilty about the way you gamble or what happens when you gamble? Based on scoring of the preceding, four levels of risk are identified with the higher the score the greater the risk of problem gambling. Score of 0 = non-problem gambling Score of 1 to 2 = low level of problems with few or no negative consequences Score of 3 to 7 = moderate level of problem leading to some negative consequences Score of 8 or more = problem gambling with negative consequences and possible loss of control. (Ferris and Wynne, 2001) Ajax Down Socio-Economic Study_Final Report Docx 29

39 4.4 The Propensity for Problem Gambling Within society at large there is a propensity for problem gambling. Studies have been done in many jurisdictions and in Ontario since the early 1990s. These studies rely on population surveys and in scale they have varied from a few hundred respondents to 10 s of thousands. Over time, as the survey methods have become more refined and directed, a sharper focus has been brought to bear on the propensity for problem gambling in the population at large. The graph that follows shows the propensity forecasts for Ontario from 1993 through to Based on the most recent survey completed in 2011 the prevalence rate for problem gambling in Ontario among the adult population (i.e., over 19) is about 1.2% (Williams et al. 2012). In a study done by Rush et al. (2007) the prevalence of problem gambling was mapped for southern Ontario taking into account its association with treatment accessibility and proximity to gambling venues. Findings from the study suggested that for the GTA specifically, problem gambling propensity was higher on the west side and within the City of Toronto then it was on the east side including Durham Region. As stated earlier in this document gambling is intertwined with today s society. It takes many forms and occurs on many different levels. Lotteries, horseracing, slots, the internet and even the stock market are all linked to gambling. It is difficult to say which causes the most problems. There are numerous studies that argue back and forth between which is best and which is worst. A number of studies suggest slots are particularly addictive to certain groups within society (i.e., older men and women). Table games are said to be more appealing to the younger generation of gamers. The internet is still in its infancy with respect to formal gaming but there is widespread worry that it will play a very large in role problem gambling in the near future. Figure 4-1: Prevalence Rates for Problem Gambling in Ontario s Adult Population based on Formal Surveys Source: Williams et al. (2012) Ajax Down Socio-Economic Study_Final Report Docx 30

40 4.5 The Social Agencies that Deal with Problem Gambling There are 55 Ontario problem gambling treatment agencies identified on the web page of the Problem Gambling Institute of Ontario. These agencies are in part funded by the Ministry of Health and Long Term Care to provide support in the area of problem gambling. The services offered provide a combination of treatment, education/awareness and/or prevention. The web site further notes that some of these services are available in several languages. Within Durham Region the Pinewood Centre is the lead agency. It specializes in addiction counselling for people affected with substance abuse and gambling. Funding for the Centre comes from the Ministry noted above as well as Central East Local Health Integration Network, the Ministry of Children and Youth Services and the Ministry of the Attorney General. Additionally the centre also receives donations from organizations and individuals to help with components of programming. Pinewood Centre operations are dispersed throughout the Region. There are 9 locations among 6 communities listed on their web page: Table 4.1: Pinewood Services and Locations in Durham Region Service Pinewood Addiction Support Services and Withdrawal Management Women s Residential and Day Treatment Pinewood Community Treatment Services Mental Health Early Psychosis Intervention and Interact Programs Mental Health Day Treatment and Adult Outpatient Services Mental Health Eating Disorders Program Inpatient Mental Health and Crisis Intervention Team Source: Pinewood, (2013) Locations Oshawa Whitby Ajax, Bowmanville, Oshawa, Port Perry Whitby Oshawa Oshawa Oshawa 4.6 OLG s Approach to Problem Gambling The OLG recognizes that Problem Gambling is an issue and as such it wants all players who partake of its games and use its facilities to understand: How their games work The difference between myth and fact To recognize their own gambling behaviours To know where and when to get help if they are concerned about a gambling problem In 2012 the OLG made contributions totalling almost $53 million to agencies involved with problem gambling diagnosis, treatment and research. The organization prides itself in being a world-wide industry leader in its recognition and approach to problem gambling It Pays to Know In 2010 the OLG introduced a series of brochures themed around the by-line it pays to know. These documents set out below address smart play, key gambling concepts and how gambling really works. It pays to know Knowing the odds It pays to know Concerned about someone s gambling Ajax Down Socio-Economic Study_Final Report Docx 31

41 It pays to know When you are over your limit, help is available Your guide to playing OLG slots Self-exclusion: A chance for change; What next? Getting the most out of self-exclusion Know the facts your guide to making lottery play fun All of these brochures are available on line at Responsible Gaming Above and beyond external financial contributions and literature on the risks associated with gambling the OLG has made Responsible Gaming (RG) a key part of its own operational strategy. The Responsible Gambling Program is delivered by the OLG in partnerships with independent agencies and other provincial gambling operators. The OLG has made this program an integral part of its Modernization Strategy and it underscores the fact that a sustainable profit line hinges on public trust and a player base who can gamble free of problems. OLG s RG website, KnowYourLimit.ca offers a variety of information and interactive tools to educate players about gambling, how games work and the odds of winning. Additionally the website offers a self-assessment tool to help players assess their own gambling behaviours. Every OLG Slot and Casino facility features a Responsible Gaming Resource Centre (RGRC) where players have access to a range of materials and resources that advise on safe gambling practices and provide profile and contact information on local gambling and support services (OLG, 2012a). The OLG does not want problem players at its games and through the Responsible Gambling Program they have expressed a commitment to take a proactive stance on preventing problems from occurring and providing support to those who need assistance. In fiscal 2011/2012 the Corporation put approximately $13 million into the program (OLG, 2013d). In its most recent annual report (2012) the OLG stated that as part of its modernization plan the Corporation would continue to provide North American leadership in responsible gambling. As such the plan calls for: Maintaining a strong funding base Ensuring all operations meet rigorous standards Advancing technological practices Integrating safe measure into the overall customer experience Continuing ongoing partnerships with independent provincially funded agencies The OLG plans to promote a new suite of individually directed help services that are being developed by the Centre of Addiction and Mental Health. Among these service is a world first internet counselling program for gamblers. Additionally among the technology practices new facial recognition programs are being put in place at all OLG facilities to enable better detection of those who have signed up for voluntary self-exclusion (OLG, 2012a). Transparency is an important part of the OLG s strategy to build public trust and to this end the Corporation puts out an annual scorecard on its Responsible Gambling Program that records progress against objectives. Figure 4.2 sets out results for the last 3 years. Ajax Down Socio-Economic Study_Final Report Docx 32

42 Figure 4-2: Responsible Gambling Scorecard Source: OLG, (2013d) The summary that follows provides a brief outline of current and future programs that OLG is putting in place itself and with others to address problem gambling Voluntary Self-exclusion The OLG currently offers voluntary self-exclusion as a self-help tool to people who wish to limit or stop gambling. Program participants make a written commitment to stay away from all OLG gaming facilities for the term of their self-exclusion. Participants stop receiving OLG promotional materials and they are provided with dedicated access to information at Responsible Gaming Resource Centres that link people to professional counselling and other services. OLG has taken steps to advance its self-exclusion program through the use of facial recognition technology (OLG, 2013f). Ajax Down Socio-Economic Study_Final Report Docx 33

43 4.6.4 Referrals to Independent Support Services Problem gambling treatment services in the Province of Ontario are managed and funded through the Ministry of Health and Long term Care. OLG works closely with the Ministry and its affiliates on matters of problem gambling. Local treatment providers are working with the gaming sites and provider representatives frequently present information to RG site teams to improve knowledge of available resources and processes for OLG employees and facility patrons. The OLG monitors its progress on promoting player awareness and providing support to those in need through the use of internal and third party data (OLG, 2013f). The table that follows sets out results for the years to Table 4.2: OLG Support Service Referrals Number of People Referred to Service By OLG employees Problem Gambling Helpline RGRC 661 1,033 1,652 By RGRC employees Problem gambling agency ,005 Credit counselling agency Other community agency Problem Gambling Treatment Admissions Counselling clients in Ontario 6,132 6,014 5,513 Source: OLG, (2013f) Employee Training and Culture of Care OLG employees across all lines of business receive Responsible Gambling training delivered by experts from the Centre for Addiction and Mental Health. Employees are trained to recognize, respond to and report problem gambling warning signs among patrons. All data associated with these interactions is entered into a database to increase OLG s knowledge and awareness of the types of interactions its employees encounter on the gaming floor (OLG, 2013f) Player Analytics Going forward the OLG plans to put in place the means to analyze play patterns for players involved with its loyalty programs. The data and technology associated with the loyalty programs will provide the means for OLG to build a comprehensive RG analytics program that will not only monitor player attitudes, game knowledge and gaming behaviours but will also communicate directly with players to advise on the realities and risks of their individual behaviours (OLG, 2013f). As a result of its various RG programs and initiatives OLG has received broad recognition for its efforts. In 2011 the organization received Level 4 - certification (the highest level possible) from the World Lottery Association. The award recognized OLG for excellence in integrating Responsible Gambling (RG) policy and programming into its daily operations. Worldwide, only 22 organizations have received this level of accreditation (OLG, 2013f). 4.7 Ajax Downs and Responsible Gaming Turning to Ajax Downs itself, in addition to the OLG initiatives outlined above the facility is one of eight in the Province that has earned an RG Check accreditation. This is reputed to be the most rigorous responsible gamming accreditation in the world. The Responsible Gambling Council is an independent non-profit organization dedicated to problem gambling prevention. The organization works to reduce gambling risks by creating and delivering innovative awareness and Ajax Down Socio-Economic Study_Final Report Docx 34

44 information programs. Additionally it promotes the adoption of improved play safe safeguards through best practices, research and development. The RG accreditation program was developed by the Responsible Gambling Council and administered by it. The program assesses facility operations against 8 core objectives: 1. Corporate policies 2. Self-exclusion 3. Advertising and promotion 4. Informed decision making 5. Assisting patrons who may have problems with gambling 6. Access to money 7. Venue and game features 8. Employee training For Ajax Downs and other OLG facilities going forward RG Check will be critical for modernization. All future service providers will be required to meet rigorous external standards like the RG check as well as regulations set by the Alcohol and Gaming Commission of Ontario (OLG, 2013e). 4.8 Observations and Conclusions 1. Gambling is a common activity across North America and while most individuals can engage in it without problems for a segment of the population who gamble it can cause personal harm and harm to others. 2. Problem gamblers are persons who have a continuous or periodic loss of control over gambling, a preoccupation with gambling and with obtaining money to gamble, irrational thinking and a continuation of these behaviours despite adverse consequences. 3. Problem gambling is a serious issue for the gaming industry and there is no denying its significant consequences. 4. Problem gambling can lead to severe personal and societal problems. It can lead to bankruptcy, personal health problems, family breakups financial crime and even suicide. 5. There are numerous tests and indices for identifying problem gamblers. The tool of choice in Ontario and across Canada is the Canadian Problem Gambling Index. It probes respondents on gambling involvement, problem gambling behaviour and adverse consequences. 6. Within the adult population there is a propensity for problem gambling. Numerous studies have been done in Ontario since the early 1990s. These studies have become more focused and refined over time and as result the problem gambling propensity statistics have fallen to the point of current estimation at 1.2%. 7. Gambling takes many forms in today s world and therefore one particular form of gambling cannot be identified as the source of all problems. However this being said it is well known that slot machines are particularly addictive to certain segments of the population (i.e., elderly men and women). Internet gaming is in its infancy but there are many worries that it may be a major catalyst for problem gambling in the years ahead. 8. There are many social agencies that deal with problem gambling issues in the Province. The chief agency in Durham Region is the Pinewood Centre. It has 9 locations with the Region including Ajax and it offers a number of programs. Funding is derived from the Ministry of Health and Long Term Care, the Central East Local Health Integration Network, the Ministry of Children and Youth Services, the Ministry of the Attorney General and private donations. Ajax Down Socio-Economic Study_Final Report Docx 35

45 9. The OLG is fully aware of problem gambling and last year contributed $53 million to agencies involved with problem gambling diagnosis, treatment and research. Within its operations OLG has put a Responsible Gaming Program at its core and it believes that it is a world leader on this front. It is working closely with the external agencies such as the Centre for Addiction and Mental Health and the responsible Gambling Council to develop programs and procedures. Some of these programs and procedures include: It Pays to Know Responsible Gambling as part of operational procedures Performance scorecarding against goals and objectives Voluntary self-exclusion with facial recognition Extensive RG employee training Player analytics 10. Ajax Down subscribes to all the programs discussed and listed above but also is one of 8 facilities in the OLG suite that is accredited under the RG Check program. Developed and Administered by the Responsible Gambling Council this is purportedly the most sophisticated and rigorous accreditation that can be obtained by a gaming facility globally. 11. Bottom line problem gambling is a serious issue and the dark side of gaming. It is well recognized however and the OLG prides itself in being a world leader in the industry in trying to deal with the matter. Ajax Downs itself is on the cutting edge of programming and procedures being developed by OLG and external partners to address problem gambling. Ajax Down Socio-Economic Study_Final Report Docx 36

46 5. The Socio-economic Implications of Expansion 5.1 The Proposal Ajax Downs is looking at expanding its existing facility in response to the OLG Request for Proposal issued in December The OLG RFP as discussed in Chapter 2 has suggested a threshold level of 2,500 slot machines plus 200 table games (1,200 live table gaming positions). Over the course of next 20 years as market conditions and facility performance warrant these numbers can be revisited to determine if expansion or contraction is warranted. It should be noted that the growth potential of Ajax Downs is influenced by the potential placement and scale of gaming facilities in other parts of the GTA. Again as discussed in Chapter 3, York Region, Mississauga and the downtown Area of Toronto have decided not to move forward with gaming facilities. This leaves zones C2 and C3 respectively located on the west and east sides of the GTA as the two locations currently being considered for major gaming facilities. 5.2 The Market Area Research was done by TMG Consulting (2014) to determine the market areas for an expanded Ajax Downs. Ajax Downs is caters to a domestic market. It does not rely on US, or international visitors. AECOM has done some further apportioning of the TMG data to provide a market breakdown for Ajax and Durham Region. Table 5.1 reflects this apportionment. Table 5.1: Market Areas 5.3 Projected Visitation Source: TMG Consulting, (2014); AECOM, (2014) Ajax Downs with 800 slot machines attracted 1.74 million visitors in FY As seen in Chapter 3 the addition of new machines and tables at gaming facilities does not necessarily yield a parallel bump in visitation. For example between FY 2008 and FY 2012 the number of gaming positions at OLG racetracks went up 15% but the number of visitations went down 12%. In the case of Ajax Downs the statistics are a 213% increase in machines and a 56% rise in visitation. The gaming position threshold set out in the OLG RFPQ for zone C3 is 3,700 positions, which is a 363% increase over the current complement of 800. Based on the statistical trend noted above it is projected that should the proposed gaming position complement be implemented then the visitation to the facility would climb to approximately 3.37 million visits which is an increase of approximately 94%. Through the use of more sophisticated models and analysis however, TMG Consulting has estimated that an expanded Ajax Downs would achieve a visitation level of 2.67 million in Relative to 2012, this is a visitation increase of approximately 53%. Using the TMG market estimate and assuming that current market apportionments hold, approximately 1.41 million visitations would be sourced from Durham Region with approximately 281,000 of these coming from the Town of Ajax. Table 5.1 provides a breakdown of projected 2017 visitations by market area to the expanded Ajax Downs facility. Ajax Down Socio-Economic Study_Final Report Docx 37

47 Table 5.2: Projection of Visitations to the Expanded Ajax Downs Facility by Area of Residence in 2017 Source: AECOM, (2014) Given the gaming populations in the eight core market areas that are likely to visit an expanded facility the average number of visits per patron per year is estimated to be as follows. Table 5.3: Comparative Projection of Average Annual Visitations per Patron to Ajax Downs Town of Ajax and Durham Region (2012 and 2017) Area 2012 Patron Visits 2017 Patron Visits Ajax Durham Region Source: AECOM, 2014 Note: 2017 numbers assume the expanded facility is in place Based on the foregoing table the average patron from the Durham Region would annually visit the expanded facility on 2 to 3 more occasions than they do the current facility 5.4 Problem Gambling As a Component of Facility Visitation Chapter 4 looked at problem gambling. In the expanded facility proposed for OLG Zone C3 problem gambling will continue to exist. There is no specific data on the exact number of problem gamblers at the existing facility however it is acknowledged that they make up a portion of the facility s patrons and will continue to do so in the future. Based on statistics presented earlier, the propensity for problem gamblers in the adult population of Ontario is about 1.2%. If 28% of the adult population has a propensity to frequent gaming facilities such as Ajax Downs then there can be expected to be a concentrating effect and the problem gambling component in this group would be on average about 4.3%. This being the case it is estimated that approximately 4.3% of the facility visitations, roughly 75,000 visits in FY 2012 were associated with problem gamblers and going forward if the same ratio still holds then the expanded facility could see visitation by problem gamblers in the order of 115,000 visits per year. Using the same logic employed above it is estimated that in FY 2012 there were roughly 40,000 visitations to Ajax Downs by problem gamblers from Durham Region. Going forward if the facility is expanded as proposed and the market distribution remains roughly the same then approximately 61,000 facility visitations could be associated with problem gamblers from Durham Region. Table 5.4 provides estimated problem gambling statistics for Ajax Downs in terms of visitations and patrons for the Town of Ajax and Durham Region for the years 2012 and For the purposes of this study the number of patrons with problem gambling afflictions has been estimated by assuming that these patrons would visit the facility two times more frequently than the average patron (refer to Table 5.2). Ajax Down Socio-Economic Study_Final Report Docx 38

48 Table 5.4: Problem Gambler, Visitations and Patron Counts at Ajax Downs FY 2012 and 2017 Source: AECOM, (2014) Problem Gambling in Relation to Facility Proximity There are thousands of studies that have looked at problem gambling in terms of causes, symptoms and consequences. It is not the intent here to try a write a treatise on problem gambling. As outlined in Chapter Four it is a problem that exists and it is recognized by OLG as a significant problem and one that they are actively trying to manage through a variety of means. In a study by the Australia s Productivity Commission (1999) that looked at the social and economic impact of gambling across Australia it was found that machine gambling increased problem gambling in a small portion of the population who accounted for the majority of expenditures. Similarly, Williams and Wood s (2007) study estimated that the 4.8% of problem gamblers in Ontario in 2003 accounted for approximately 36% of Ontario gambling revenue and that this number went up for slot machine gambling. A US national study done by Welte et al. (2004) found that neighbourhoods within 10 miles of a casino have a higher propensity for problem gambling among inhabitants and similarly in a Canadian study by Cox et al. (2005) the findings were that a higher prevalence of problem gambling is observed in regions with permanent casinos and high concentrations of machines. Pearce et al. (2008) in a New Zealand study also came to the conclusion that proximity to gambling opportunities is related to increases in gambling and problem gambling behaviour. Interviews with representatives from Pinewood Centre and Mental Health Services and the Problem Gambling Association both tended to corroborate the observation made above. Both interviewees indicated that if Ajax Downs were to expand with machines and table games then in all likelihood there would be an increase in the number of problem gamblers drawn to the facility including people from outside the region. The Pinewood representative noted that the introduction of table games would also attract a new kind of clientele. Certain populations are more susceptible to problem gambling than others. Rush et al. (2007) looked at the geographic prevalence of problem gambling in Ontario and found that problem gambling was significantly associated with males, unemployment, low education, being formerly married, having poor health, aboriginal decent and having substance abuse disorders. Problem gambling consequences are thoroughly discussed by Williams et al. (2011). In this study it is noted that there are both monetary and social costs associated with problem gambling. Monetary costs include money spent on treatment and prevention, policing, welfare payments and lost productivity. Social cost problems can include such things as mental problems, family problems and even suicide Problem Gambling and Adaptation While the findings in the preceding sub-section point to an escalation of problem gambling with facility introductions, there is now a substantial body of research that suggests that the relationship between exposure and problem gambling may not be as straight forward as first thought particularly in the case of existing facilities. Ajax Down Socio-Economic Study_Final Report Docx 39

49 Findings from LaPlante and Shaffer s 2007 study indicated that the relationship between problem gambling and prevalence was not linear and that after the novelty of initial exposure wears off people gradually adapt to the risks and hazards associated with potential addictions. Abbot (2006) found much the same thing noting that the impacts of exposure tend to be associated with the early stages of gambling introduction and that adaptation subsequently occurs at both individual and societal levels. Blue Thorn Research et al. (2007) examined the socio-economic impacts of new gaming venues in four British Columbia lower mainland communities and found no increase in problem gambling with the exception of one community that did not previously have convenient access to a casino. Sevigny et al. (2008) found that people who live in the proximity of a casino for an extended period of time may adapt their behaviours in reaction to exposure. A study by Storer (2009) found that a variety of factors at the individual and community levels are likely to influence incidence and problem duration including natural recovery or professional intervention (at the individual level) and adjusting to the novelty of gambling opportunities or increasing the awareness of potential harms (at the community level). In a study previously sited by Williams et al. (2011) further findings suggested that while residential proximity to casinos is statistically related to problem gambling prevalence the relationship is relatively weak. They found this pattern to be very consistent with general stabilization and/or decrease in problem gambling prevalence rates that have occurred in many western jurisdictions in the last decade. The conclusion that comes through based on the studies just discussed is that there appears to be substantive evidence that saturation/adaptation may occur with gaming where a population s familiarity with the product and potentially adverse experience may help inoculate them from further escalation in problem gambling. The representative from Pinewood who was interviewed made the observation that the caseload for problem gambling went up in Durham Region when slots were introduced at Ajax Downs but that current trends suggest that there has been a levelling off caseloads associated with slot machines. Similar observations were made by representatives from service providers in other areas suggested that expansion of existing facilities would not necessarily give rise to further incidences of problem gambling in the local community. They noted the problem was already there and that if the local gaming facilities were closed people would go elsewhere including to the internet Mitigation Measures for Problem Gambling Chapter four provides a discussion of the comprehensive measures and programs being put in place by the OLG, themselves and in partnership with others to address problem gambling at their facilities and beyond. Those discussions will not be repeated here rather the focus will be on measures that have been suggested by others. It should be noted however, that many of the suggestions that follow have been or are being acted on by the OLG and their partners. Williams et al. (2007) carried out a comprehensive review of ways and means to prevent or control problem gambling. Mechanisms suggested are listed below. Restrict the proliferation of gaming venues in a given area (i.e., have one facility versus many) Limit gaming opportunities to gaming venues by restricting gaming to dedicated venues and not allowing the proliferation of machines in secondary areas. Restrict the location of gaming venues by not putting venues in locations where people are most vulnerable. Control venue operations by: Limiting the hours of operation to prevent continuous play Restrict on site access to money by taking ATMs off the gaming floor Eliminate customer loyalty programs so as not to incent gambling among frequent players On site player monitoring to be able to detect those who are showing signs of problem gambling On site intervention to have the ability to intervene if problem gambling is detected Ajax Down Socio-Economic Study_Final Report Docx 40

50 On site information and counselling to offer information and counselling referrals to those who request them Control machine operations to: Slow down the machines and limit the lines of play Do not allow machines to accept bills Control how machines report near misses Limit the size of bets that machines can accept Have monitoring programs in place to ensure people who want to be excluded cannot gain access Educate the population at all levels about gambling and how to do it in a responsible manner Based on the foregoing and the discussions in chapter 4 it is apparent that there exists a large array of potential prevention initiatives to help control problem gambling. At the same time it is recognized that while all of the measures presented are helpful to some extent nothing by itself has the potential to be a cure-all. Effective prevention requires co-ordinated, extensive efforts between educational initiatives, policy initiatives and operating procedures. Prevention initiatives need to be sustained and long lasting Summary With an expanded facility there will be an increase in problem gamblers who visit the facility. There is empirical evidence to suggest however the given the fact that the facility has been in place for some time the problem gambling precipitated by it, particularly in the market area defined by the five core Durham municipalities, may have somewhat plateaued. This being the case, although an expanded facility will see more patronage from problem gamblers it will not necessarily drive up problem gambling among local area residents. It is also noted however that the advent of new forms of gaming at the venue (i.e., tables) may attract a new local clientele and that there could be some increase in problem gambling as a result of this. There is no hiding that problem gambling goes hand in hand with the gaming industry. The OLG is very much aware of it and prides itself in putting measures in place to control the problem. The Corporation regards itself as a world leader on this front. All of the service agencies interviewed for this study affirmed that OLG was very co-operative and proactive with them to address problem gambling. 5.5 Crime It is a wide-held view that crime rates will escalate with the introduction of gambling. However, based on studies elsewhere and discussions with police departments in other Ontario jurisdictions this does not seem to be the case. In 1995 KPMG did a study to look at the first year of operations of the Windsor Casino. They did not find any noticeable impact on crime. Subsequently Phipps (2004) completed a further study of the casino sites in Windsor and also found there to be little evidence of their having an impact on crime rates. Stitt et al. (2003) conducted a study in the United States that looked at crime in six casino communities. The results of this study showed a very weak correlation between the presence of casinos and elevated levels of crime. Blue Thorn Research et al. (2007) looked at four BC lower mainland communities with casinos and found no evidence of crime escalation in three of the communities and conversely, a reduction in crime in the fourth community. A study by Koo et al. also in 2007 looked at the social costs of gaming in urban areas and found there to be no impacts on crime rates. Ajax Down Socio-Economic Study_Final Report Docx 41

51 Discussions with one Ontario police department revealed that when the gaming facility in their area first opened a spike in the circulation of counterfeit money occurred within the community but this problem quickly went away. Since then there has been no noticeable crime associated with the facility. Activities that involve the police are largely confined to traffic incidents. The person interviewed noted that there is a lot of traffic to the facility from both the local area and further afield. The prevalence of traffic incidents was also noted by another municipal interviewee in discussions of the racetrack/slot venue in their community. An interview with spokespersons at Durham Regional Police Services (DRPS) revealed that Ajax Downs is not considered to be a problem location. DRPS have been called to the facility 1,300 times since it opened in 2006 and most of these calls were for traffic related offences. Enforcement responses were associated with complaints from residents and vehicle collisions. A small number of calls involved trespassing and fraud. The spokespersons noted that there was a spike in fraud crime in 2010 but since then this type of crime has significantly subsided. Going forward, should the proposed gaming expansion occur at Ajax Downs, DRPS expects that there will be an increase in calls for service. Fraudulent money circulation because of the introduction of table games is a concern as is the potential attraction of individuals and associates of organized crime groups. DPRS advised that should the proposed expansion of Ajax Downs be permitted they would like to be included in proactive engagement with Ajax Downs and the Town of Ajax as soon as possible. Given the findings of research documents and through discussions with police departments and municipal authorities it does not appear that community crime rates are significantly impacted by the presence of gambling facilities. In general, most studies find little evidence of increased activity. Moreover, it is also noted that many factors can mediate the relationship between crime and gambling including the availability of gambling relative to the size of the population and the existence of jurisdictional policies that protect against the negative impacts of gambling such as: responsible gambling programs, limits on the provision of alcohol and enhanced security and policing in venues. None of the police departments or municipal authorities interviewed during the course of this study pointed to any significant ongoing crime associated with the current operation of gaming facilities in their midst DRPS expect that the potential expansion of Ajax Downs will lead an increase in service calls particularly for traffic related incidents. They also have some concern about the potential appearance of criminal offences related to casino type crimes. In light of the preceding, should gaming activity be expanded at Ajax Downs it is essential that DRPS and community partners including Ajax Downs and the Town of Ajax proactively work together to ensure a safe enjoyable facility and broader community well being. 5.6 Property Value Effects Another frequently asserted effect of gambling venues is that they can potentially detract from the wealth of a community by lowering property values. Looking first at the literature there seems to be little evidence to support this claim. A study by Phipps (2004) on the Windsor Casino found there to be no impact on property values as a result of the casino opening and a similar finding held for research done by Gardner (2005) in an examination of property value impacts associated with the Seneca Niagara Casino in Seneca New York. Blue Thorn Research et al. (2007) found no property value effects from casino development and operation in host communities in BC and Williams et al. (2011b) concluded the same based on research conducted on host communities in Alberta. On a more positive note Ackerman (1997) found that the development of a casino in Deadwood South Dakota supported rapidly rising property values. Baxandall and Sacerdote (2005) also found that a modest increase in property values occurred as a result of the introduction of casino gambling in Massachusetts. Reece (2007) found no Ajax Down Socio-Economic Study_Final Report Docx 42

52 negative effects on property with the introduction of gambling facilities in rural Michigan communities. Wiley and Walker (2009) found very positive impacts on property values (particularly retail) when looking at the introduction of a casino venue in Detroit. Turning to look at the community of Ajax specifically, there is no indication that the Central East Neighbourhood, which accommodates Ajax Downs, has experienced any downside property value effects because of the presence of Ajax Downs. On the contrary looking at quarterly real estate price growth from 2011 Q4 to 2013 Q2 it shows the strongest growth of all community neighbourhoods at 4.7% (refer to Figure 5.1). In Figure 5.2 for the core municipalities of Ajax, Pickering, Oshawa and Whitby are shown over the period 2002 to The figure shows steady growth in housing prices in Ajax with no evidence of a dip precipitated by the advent of gaming facilities at Ajax Downs. All communities maintain their relative price positioning over the period and the only anomaly with significantly higher prices is North Pickering. Oshawa shows the lowest home price among the four communities. Based on evidence presented through reference to research documents and a more focused look at actual real estate prices in Ajax and surrounding areas it does not appear that the introduction and operation of gaming facilities had a negative influence on property values. Nevertheless careful landscaping and site design should be employed to ensure there are no off-site impacts from the facility that cause noise, dust and light intrusions or impair the aesthetics of adjacent properties. This is particularly true of residential properties located in close proximity to the site. Ajax Down Socio-Economic Study_Final Report Docx 43

53 Figure 5-1: Ajax Housing Price Growth 2011-Q4 to 2013-Q2 Source: Toronto Real Estate Board 2011, 2012a, 2012b, 2012c, 2012d, 2013a, 2013b Growth Rate Average Price All Homes 2011:Q4 to 2013:Q2 Northwest Ajax 4.4% Central West 1.9% South West 2.9% Central 1.8% Northeast Ajax 1.4% Central East 4.7% South East 3.1% Ajax Down Socio-Economic Study_Final Report Docx 44

54 Figure 5-2: Housing Market Trends (Pickering, Ajax, Whitby, Oshawa) Growth Rate Average Price All Homes Types 2002 to 2010 North Pickering 4.2% Central Pickering 4.8% South Pickering 5.2% Ajax 5.0% North Whitby/North Oshawa 5.1% Whitby 4.5% Oshawa 4.6% Source: Toronto Real Estate Board 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010 Ajax Down Socio-Economic Study_Final Report Docx 45