Ontario is preparing to hand over control of its gambling operations in the Greater Toronto Area to a private operator as the government seeks to drive a gambling boom in the province.
Within a few weeks, the Ontario Lottery and Gaming Corp. (OLG) will select a business to run its casino and thousands of slot machines in the GTA for the next two decades. The process has attracted foreign casino operators who have been drawn by the promise of more gambling and fast profit in a thriving Toronto region.
At least three companies are in the final round to take over the gambling at Toronto's Woodbine racetrack, Ajax Downs and the Great Blue Heron Casino in Port Perry, The Globe and Mail has learned. According to people familiar with the request-for-proposal process who were not authorized to speak publicly, the companies bidding include Canada's Brookfield Asset Management, American-based Caesars Entertainment and Malaysian conglomerate Genting Group.
The OLG says Toronto's market is still largely underserved, with slots at two horse-racing tracks and a rural casino an hour away from downtown. The sale would allow a private operator to rebuild the three sites as full-fledged casinos and add a fourth gambling establishment, though those changes require municipal approvals.
By outsourcing gambling, the agency says it is aiming to put more money in provincial coffers while offloading the costs of upgrading and replacing aging casino buildings and equipment.
Whichever company wins the contract will earn a minimum of $72-million annually for the 22 years of the deal, as well as up to 70 per cent of gambling revenue, according to the OLG. In exchange, the OLG has asked companies to present aggressive targets for increasing revenue, an official close to the process says. The agency's casinos in the GTA earned nearly $1-billion in revenue last year.
The greatest prize will be the facility at Woodbine. Located at the north end of the city near the churn of passengers at Toronto Pearson International Airport, Canada's busiest, and a congested stretch of Highway 401, a new operator could transform the site with a casino, adding thousands of slot machines and gambling tables. The operator could also build a fourth casino in the GTA if it can find a willing host municipality.
"I'm looking forward to the long-awaited day when we can inaugurate a 'Vegas North' right here in the riding, bringing tourism, concerts, conferences, activity and buzz," said Liberal MPP Shafiq Qaadri, whose riding includes Woodbine. He said that whether the new operator will be allowed to provide table games such as blackjack or roulette at Woodbine will be left to Toronto city council.
The future of the horse-racing site as a casino has been contentious and met some opposition at city council. However, Woodbine Entertainment, which helps run the site, has been a long-time advocate for development.
"The OLG's modernization plan is the catalyst for Woodbine Entertainment to unlock the value of the Woodbine lands to sustain horse racing on our 680-acre site and bring real economic development to Rexdale," Woodbine spokesman John Siscos said.
More than 400 workers have picketed Woodbine since they were locked out in mid-July after failing to reach a collective agreement. Among the workers' concerns is the future of their government pensions after their employment is transferred to a private operator.
A subsidiary of Caesars is currently exiting bankruptcy protection and Genting has been investigated for its part in an alleged kickback scheme where billions of dollars were misappropriated from Malaysian state firms and funnelled to the party controlled by the country's Prime Minister.
Brookfield, Caesars and Genting declined to comment.
As part of the bidding process, each company is undergoing a review of its conduct, according to OLG spokeswoman Allison MacNeil. "Part of that process involves undergoing an extensive due-diligence process into current and past business conduct […] examines a gaming operator's ability to act in accordance with the law, with integrity, honesty and in the public interest."
Facing increasing competition from internet gambling and casinos in the United States, and with limited gambling options in Ontario, the OLG's revenues have been largely flat in recent years and the agency is operating with increasingly dated buildings and equipment. In a bid to reverse its revenue slide and increase its profit, the OLG has sold nearly half its casinos and slot machines to the private sector over the past two years as part of a process the agency has dubbed "modernization."
The Casino Thousand Islands and slots at Kawartha Downs were the first to be sold, for $46.9-million in September, 2015. The sales price for slots and casinos sold to private entities in southwest Ontario, the province's north and Ottawa have not yet been released.
"In 2010, Ontario asked for a strategic review of gaming, they determined areas were underserved," OLG spokesman Rui Brum said. "Our revenues were flat, especially along the border."
The OLG is the Ontario government's largest source of non-tax revenue, turning over $2.3-billion in profits to the province in the 2015-16 fiscal year. The agency wants to provide an extra $900-million annually by 2021 once its outsourcing process is over.
While the OLG will continue to have an oversight role at the private casinos, all day-to-day operations and property will be transferred to the private operator. Local municipalities will also continue to receive a share of revenue.