Ontario's horseracing industry will need "greater investment" than the province has so far put up to transition the industry out of its cut of slot machine revenue, according to the province's own "transition panel."
That panel, including three former provincial cabinet ministers, filed an interim report last week in which they said it would be a "mistake" to restore the Slots at Racetracks program (SARP), which the province tapped in March for cancellation at the end of March 2013.
SARP was a revenue-sharing agreement set up in 1998 between Ontario Lottery and Gaming Corp. (OLG), the province's racetracks and host municipalities, allowing government-operated slot machines to be placed at racetrack facilities.
The province, however, now believes SARP has prevented OLG from locating gaming sites based on "customer interest" and thus kept OLG from maximizing slots revenue, the panel said. Ending the program is expected to allow OLG to "locate slot facilities more strategically."
SARP, the ex-ministers said last week, "has provided far more money than was needed to stabilize the (horseracing) industry -- its original purpose -- and has done so without compelling the industry to invest in a better consumer experience."
The province said in its 2012 budget, which telegraphed the decision to scrap SARP, that it had provided $3.7 billion to the industry since 1998, including $345 million in 2011-12.
The budget move followed the February report from the Commission on the Reform of Ontario's Public Services -- also known as the Drummond report -- which noted Ontario has more racetracks than any other jurisdiction in North America and "subsidies to racetracks and horse people require a review and adjustment to realign with present-day economic and fiscal realities."
Slots revenue, the panel said last week, "has enabled the industry to avoid facing up to the challenges of today's intensely competitive gaming and entertainment marketplace."
The province in June said it would put up $50 million over three years to help the racetrack business make a transition to a business model without SARP.
The panel, however, said last week the province's pledge is "insufficient to build a bridge to sustainability" and "few if any industries could survive such a sharp financial loss." Ontario's horseracing business today gets 63.6 per cent of its purse revenue from SARP, the panel said.
The panel's interim report finds a "viable, world-class" racing industry will need public support to sustain its "core elements" such as an "adequate number of races, competitive purses, state-of-the-art tracks, quality breeding programs, skilled personnel and a growing parimutuel wagering pool."
The panel added, however, that any future public funding should be based on "accountability, transparency, a renewed focus on the consumer and a business case showing that each public dollar invested is returned to government through tax revenues."
Also, the panel said, more research and analysis will be needed to "plan and implement a new partnership between the horse racing industry and the government," such as measuring the gap between potential costs to preserve a core industry and revenues that would need to be filled by some form of public support -- such as new gaming products, for example.
Provincial Agriculture Minister Ted McMeekin, in a statement following the panel's interim report, said further funding would require the horseracing industry to "display financial transparency."
The panel, McMeekin said, has been asked to "consult further with the industry to determine its willingness to work together in such a way that recognizes the public interest and the current fiscal climate."
A final report from the panel is expected "no later than the end of September," he said.
OLG has already announced the closing of the slot facilities at racetracks at Fort Erie, Windsor and Sarnia effective April 30. The province has said the three tracks are expected to continue to get about the same level of SARP funding through next March as they would have if the slots remained open.
Ontario's 14 other SARP-backed racetracks have already been informed that their slots agreements are finished as of March 31, 2013.
OLG has said it plans to still have slots facilities at racetracks where "consumer interest" warrants them and is already in talks with some racetrack owners to rent space for slot facilities.
Lisa McLeod, the Tory MPP for the Nepean-Carleton riding, was able to pass a private member's motion Thursday in the provincial legislature calling on Jim McCarter, the province's auditor general, to review the Liberal government's decision to scrap SARP.
Her proposed review would include the revenue and expenditure projections for OLG's new gaming plans, plus their "mental health and addictions impact and (their) effect on Ontario's horseracing industry."
The motion -- which passed on the same day as horseracing industry supporters rallied outside the legislature -- also urges that a referendum take place in any affected municipality where OLG proposes a new casino.
Ont. to halt horse racing industry's slots program, March 12, 2012
Ont. pledges funds for horse racing transition, June 8, 2012