Global Gaming Exposition - Las Vegas
September 17, 2003

"Racinos" - Slots-At-The-Racetrack in Canada
by Michael D. Lipton, Q.C.* Elkind & Lipton

Introduction

• “Racino” – A Canadian term to describe a gaming floor at a horseracing rack. Slots introduced to Canadian racetracks in 1998.
  
• Ontario currently has 15 racinos, with 3 additional racinos to be trotted out in the very near future. As of 2002, over 17 million visitors to Ontario’s 15 racinos.
  
• As well, there are 3 in Alberta, 3 in Quebec and 1 in Manitoba.

Jurisdiction

• Under the Criminal Code of Canada (the “Code”), ss. 207 (1)(a), all slots in Canada are owned or conducted and managed by the provincial government, or an agency of that government.
  
• In Ontario, “to conduct and manage” is interpreted to mean that the Ontario Lottery and Gaming Corporation (“OLGC”), an agency of the government, must operate the “lottery schemes,” to use wording of Code. Slots are one such “scheme.”
  
• So slots-at-racetracks in Ontario are managed, staffed & operated by OLGC. Racetracks act as landlords, providing the facilities based on standards established by the OLGC.
  
• OLGC:
  o   Manages the gaming floor area of racetrack in the same manner as a casino is managed, with strict licensing requirements imposed by the Alcohol and Gaming Commission (“AGCO”)
  
  o   Markets gaming floor area of the racetrack; the rest marketed by racetrack owners
  
  
• AGCO:
  o   Inspects and approves slots, through its Electronic Gaming Branch
  
  o   Slots previously approved by gaming commissions of New Jersey or Nevada get fast-tracked; otherwise approval process can take 3 – 4 months
  
  o   Licenses slot manufacturers and racetrack owners which meet the high integrity standards set by the AGCO
  

Economic Benefits

• Slots at Ontario horseracing tracks have generated millions of dollars in revenue and created thousands of direct and indirect jobs.
  
  o   Revenue: Over $200 million in 1999; over $900 million in 2000; over $1.1 billion in 2001
  
  
• From 1996 – 1998, the Ontario government negotiated revenue split with the Ontario Horse Racing Industry Association (“OHRIA”).
  
• 20% of the gross slot machine revenues go directly to the horse racing industry. {further details of this beneficial revenue split provided below}
  
• Benefits of Racinos: Horse-racing industry produces greater incomes, employment security, job creation, increased tourism, government revenue for priority provincial programs such as healthcare. · Benefits of Racinos: Horse-racing industry produces greater incomes, employment security, job creation, increased tourism, government revenue for priority provincial programs such as healthcare.
  
• OHRIA made a commitment to government that its core business would remain horse racing; they would not just be a front for slot gaming.
  
• OHRIA appears to have kept this commitment, as the number of race dates in Ontario has steadily increased since the first racino opened in 1998:
  
  1998          1457 race days
  1999          1528 race days
  2000          1592 race days
  2001          1696 race days

Distribution of Profits From Slots at Ontario's Racetracks

• Gross Revenue from Slot Machines distributed as follows:
  
  o    10% to the racetrack owners, who use it to cover infrastructure expenses
  o    10% to the horse racing people; their share goes to race purses
  o    5% to host municipalities of slot machine facilities at racetracks for first 450 slots, and 2% of gross revenue for any machines over the initial 450.
  o    2% to problem gambling programs in Ontario
  o    Remainder of the revenue goes to the provincial government, including funds to cover OLGC operating costs.
  
• To date, slot machine facilities at racetracks have created more than 3,500 jobs within the agricultural industry alone, with an estimated annual payroll of $143.5 million.
  
• OHRIA estimates that the slots will help maintain existing 27,000 full-time equivalent jobs, and will also generate as many as 7,000 new, full-time equivalent jobs in rural Ontario.
  
• Pari-mutuel wagering at Ontario racetracks has increased by 4% – 5% since the introduction of slots, allowing host tracks to offer increased purses, which in turn results in better quality horses and more customers through the turnstiles.
  
• Purses paid out have increased by over 40% a year at racetracks with slots, due to the infusion of 10% of the slot revenue into the purses.
  
• Slots-at-racetracks in Ontario have proved a tremendous success to date. Racinos ensure continued viability of the horse racing industry through improved facilities and skyrocketing purses, which lead to horses of better quality and overall improved racing.

MICHAEL D. LIPTON, Q.C.
Elkind & Lipton LLP
Barristers & Solicitors
One Queen St. East, 19th Floor
Toronto, Ontario
Canada
M5C 2W6
Canada

Telephone: (416) 367-0871
Facsimile: (416) 367-9388
E-mail: MDLIPTONQC@AOL.COM

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