Charitable casinos
In his May budget, Finance Minister Eves dealt extensively with charitable casinos and video lottery terminals (VLTs). Highlights included the following:

The government will replace the current three-day roving charity events with permanent charity event sites, expected to yield up to $80 million in extra revenue for Ontario's local and community charities each year.

Operators for the permanent charity casinos will be selected through an open competitive process.

The OLC will be responsible for the operation and management of a limited number of VLTs at charitable casinos, race tracks and other selected locations across the province. The OGCC will oversee and control VLT gaming activity.

Two percent of total terminal revenues will be set aside to establish a comprehensive problem gambling strategy that will include public awareness, prevention, treatment and research.

At the initial stage, VLTs will be located only at permanent charity event sites and at race tracks, where they can be closely monitored and will complement other existing gaming activities. Once an acceptable implementation plan is developed and tested, the VLT network can be expanded to the hospitality industry (including liquor-licensed establishments).

As to the division of revenues from VLTs, the picture remains somewhat unclear. The Minister of Finance announced that the host site will receive 10 percent of total terminal revenues and that a further 10 percent will be provided to charitable organizations. While the implication is that 80 percent of VLT revenues will go to the OLC for remission to the province's Consolidated Revenue Fund, there appear to be continuing discussions within the government on this issue.

On June 13, 1996, Bill 75 ("an Act to regulate alcohol and gaming in the public interest, to fund charities through the responsible management of video lotteries and to amend certain statutes relating to liquor and gaming") was given first reading in the Ontario Legislature, and on June 22, 1996, the Bill received second reading and was referred to Committee.

The Bill defines "video lottery" as "a lottery scheme conducted and managed by the Ontario Lottery Corporation and operated on or through a video lottery terminal", and "video lottery terminal" as "a machine or device that allows a person to play a lottery scheme upon payment of money where that play may result in the receipt of a credit that can be redeemed for further play or money".

The Bill provides that no person in control of premises where there are VLTs may permit persons under 19 years of age to play or have access to VLTs. It also amends the Gaming Control Act, 1992 to provide that persons supplying goods or services for video lotteries must be registered as suppliers by the OGCC.

From a practical point of view, the most significant provision of Bill 75 is section 8.3, which gives the Lieutenant-Governor-in-Council the right to direct the OLC to pay part or all of the proceeds from video lotteries in such manner as the Lieutenant-Governor-in-Council may direct. This is a critical amendment in relation to the effective use of VLTs in charitable casinos. Without it, section 9 of the existing Lottery Corporation Act limits the distribution of proceeds to those engaged in activities related to cultural activities, physical fitness, sports and recreational matters, activities related to the protection of the environment and activities sponsored by the Ontario Trillium Foundation.

Accordingly, while VLTs could be installed in charitable casinos by the OLC under existing law, unless the expanded dedication provision of Bill 75 is enacted, many operating charities could not benefit from their use. Accordingly, the failure to enact Bill 75 would effectively frustrate the installation of VLTs in many if not most charitable casinos.

The Legislative Committee considering the Bill in clause-by-clause debate was unable to complete its consideration of the Bill this summer, principally because of the prolonged opposition of one Committee member to the introduction of VLTs. At the time of writing, the fate of the Bill is uncertain. However, assuming its passage, the path will be cleared for the establishment of up to 50 permanent charitable casinos across the province.

We are advised that the government is currently considering a number of important issues relating to the setting up of charitable casinos including:

The number of facilities. The May budget documents refer to up to 50 facilities. It now seems likely that fewer than 50 will be approved, perhaps 35.

The process of selection. It appears virtually certain that there will be publicly advertised RFPs.

Timing. Since the May budget figures anticipate some financial return from charitable casinos in the current fiscal year, it is assumed that the RFPs will be published soon after the enactment of Bill 75 and that the period for a response will be relatively short, perhaps 30 days.

The number of facilities permitted for individual operators. It seems likely that proponent operators will be permitted to operate more than one facility but that there will be a limitation on the number of sites allocated to a single operator, possibly expressed as a percentage of the authorized facilities across the province.

The gaming facilities in the permanent sites. Although no public announcement has been made, sites will almost certainly have a combination of gambling tables and VLTs. Presumably the size of the establishment, and the number of tables and terminals, will vary according to population and customer density. Mention has been made of approximately 40 tables and 100 or more VLTs per site.

Regional distribution. This too will likely depend on population and potential customer concentration. It is thought that approximately one-half of the approved charitable casinos will be in the Greater Toronto Area, with the rest located across the province in accordance with anticipated market demand.

We are advised that all of the above matters are still under consideration by Cabinet. In the meantime, those interested in making application to the OGCC for licenses to operate charitable casinos should be prepared to respond promptly to RFPs on the assumption that outstanding issues, including the passage of Bill 75, will be dealt with by the government expeditiously. Obviously, the incentive to apply for a charitable casino operator's license will depend, to some considerable extent, on the government's final position on the division of revenues.

McCarthy Tétrault is monitoring the situation closely and, in the absence of any conflict of interest, is prepared to assist those wishing to give consideration to applying for a license to operate charitable casinos in Ontario.

This commentary was written by Tim Armstrong and Michael Crochan, both members of the Business Law Group in Toronto, and by Craig Shepherd, Student-at-Law.