City Staff: We'd Need to Over-Size a Casino to See Major Economic Benefits
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City Staff: We’d Need to Over-Size a Casino to See Major Economic Benefits

A casino would need to be at least 30 per cent larger than planners recommend if it's to have the desired economic impact, according to staff's final report.

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This morning Toronto’s top civil servant released a long-awaited report on the prospect of allowing a new casino in Toronto. That report is an exercise in diplomacy—or hedging, depending on your point of view—and comes to no conclusions about whether we should permit a major gaming complex downtown. (The report does recommend expanded gaming at Woodbine.) But there are, lurking in the report’s details, many of the pieces of information councillors will need in order to make a decision.

The bottom line: the City’s planning department recommends that if council permits a new facility it should be “a scaled-back casino,” one that is less than half the size originally envisioned. City staff are further recommending that council only green-light a casino if we were to get a minimum of $100 million a year in hosting fees (that’s the share of the gaming revenue a municipality gets from the province in exchange for allowing a casino). Staff calculate that at that scaled-back size, and if the province were to consent to a 50-50 split of tax revenue with Toronto, we would get $111 million a year in hosting fees.

Two major snags: at that scaled-back size, a casino won’t be able to support an accompanying convention centre that staff says we need to make the whole thing make economic sense in the first place. Moreover, we also have no reason to believe the province will give Toronto a hosting fee that is anything like that large. As measured both by economic impact (in metrics like job creation) and direct money into the municipal government, the math on a casino is not adding up.

Here, step-by-step, are the key findings in the report—

“A standalone casino is not supported by staff.”

Both the municipal government and the developers who have been angling to build in Toronto have said from the outset that Toronto shouldn’t get just a straight-up casino, but rather a large facility that includes hotel and retail space, as well as other amenities.

“It is critical that a [downtown casino]…include the development of a top-rate convention and trade show infrastructure to improve Toronto’s competitiveness in attracting the largest class of events.”

City staff say, specifically, that Toronto would do best if a new downtown casino was part of a large convention centre complex. “A convention centre expansion is probably more important than a casino” Pennachetti told reporters at a briefing, emphasizing that the economic impact from a major new complex would come, in significant part, from convention facilities rather than the gaming floor. One indication of how important that convention centre is, in staff’s analysis: 46 per cent of the 10,000 new full-time jobs the entire venture would create are expected to be “spinoff from new convention delegates.”

In its report the City did not provide an economic impact analysis of just a convention complex without a casino; Pennachetti said he wasn’t aware of any developer who wanted to build one.

“City Planning has indicated that a new casino in the Toronto C1 zone should be appropriately sized to the unique urban context of the downtown area.

All those who want to build a casino in Toronto have also proposed huge complexes; the Ontario Lottery and Gaming Corporation’s own estimate once had the associated gaming floor at 250,000 square feet. This, say planning staff, is far too large. A scaled-back casino would have “an improved fit and compatibility within the overall diverse urban character of the downtown area.” It would also mitigate the impact on traffic and infrastructure, and on existing local businesses that would face new competition from the casino complex.

This is perhaps the biggest policy hurdle in the whole report. The City’s planning department has come to the conclusion that in order to fit into Toronto’s existing landscape, a gaming floor should be a maximum of 135,000 square feet. However, in order to support the kind of convention complex City staff think is crucial, a casino would need to be bigger—at least 175,000 square feet. Smaller than that, and the whole thing may just not get off the ground.

To summarize: in order to generate the economic impact staff thinks is desirable, we’d need to allow something much bigger than staff thinks is prudent. We cannot build a casino that is both an appropriate size for downtown and that will generate sufficient economic benefits.

“The City tabled terms with the OLG indicating Toronto receive a hosting fee from gaming revenues equivalent to the amount the Province receives through the OLG… [and] no less than an annual minimum of $100 million… City staff strongly advise that the revised municipal hosting fee formula must reflect the unique opportunity of a potential Toronto C1 casino.”

“Tabled terms” just means the City’s negotiating position. It does not reflect any agreement.

Effectively, the City is projecting a hosting fee—the amount of money Toronto would get each year in virtue of agreeing to a casino—based just on what it thinks we deserve, and not any deal it has reached with the province. City staff have estimated what they believe to be fair based on the premise that Toronto, because of its size and the lucrative nature of building here, represents a “unique opportunity” and therefore should be rewarded accordingly. This position has been explicitly rejected by the premier, who reiterated today that all municipalities needed to benefit from any casinos they might host equally.

Results of the Public Consultations on a Casino

Over the past few months the municipal government asked Torontonians to share their views about a casino. According to today’s report a total of 17,780 feedback forms were completed. The City also commissioned a poll with the following results:

To what extent do you support or oppose the possibility of a new casino in Toronto?

Strongly support: 16%

Somewhat support: 26%

Mixed feelings: 8%

Somewhat oppose: 14%

Strongly oppose: 36%

Don’t know: 1%

Poll taken: February 20–26, 2013
Sample size: 902
Margin of Error: +/-3.3%, at the confidence level of 95%
Methodology: Telephone survey
Conducted by: Environics

Also according to that poll, opposition to a casino is strongest among residents of the former municipality of Toronto (where a downtown casino would be located): 59 per cent are either somewhat or strongly opposed. In the former municipalities of North York, York, East York, Etobicoke, and Scarborough opposition ranges from 43-52 per cent.

Among those who filled out a feedback form opposition to a casino was higher: 71 per cent rejected the idea.

What’s Next

City council’s executive committee, comprised of Rob Ford’s closest allies, will hold a special meeting to discuss a casino on April 15-16; members of the public will be able to address the committee and share their views at that time. After that debate is concluded, the executive committee will issue a recommendation on whether to permit a casino in downtown Toronto; that recommendation will form the basis of a debate of full city council, expected to be called for early May.