MUNICIPALITY OF CHATHAM-KENT CHIEF ADMINISTRATIVE OFFICE LEGAL SERVICES MUNICIPAL GOVERNANCE AND LICENSING SERVICES

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1 MUNICIPALITY OF CHATHAM-KENT CHIEF ADMINISTRATIVE OFFICE LEGAL SERVICES MUNICIPAL GOVERNANCE AND LICENSING SERVICES TO: FROM: Mayor and Members of Council Nancy Havens, Manager of Licensing Services DATE: November 29, 2013 SUBJECT: Electronic Bingo (ebingo) RECOMMENDATIONS It is recommended that: 1. The Ontario Lottery and Gaming Corporation s initiative on Charitable Bingo and Gaming Revitalization (ebingo) be endorsed by Council s support of Riverview Bingo Hall Charities Association, Riverview Bingo Palace owner and its supported charities. 2. The Municipality enter into a contract with the Ontario Lottery and Gaming Corporation to participate in the Charitable Bingo and Gaming Revitalization Initiative at Riverview Bingo Palace. 3. The Mayor and Clerk be authorized to execute the said agreement. 4. The Base Budget for Bingo License revenue be decreased by $129,000 as a result of the new revenue formula under the OLG s ebingo model. 5. Due to 30 slots being added at Dresden Raceway the additional slots revenue of $67,500 be used to offset the reduction in base budget. BACKGROUND Ontario Charitable Gaming Association, Ontario Lottery and Gaming Corporation (OLG) and Ontario Charitable Gaming Association have been working together collaboratively on a charitable bingo and gaming revitalization initiative. It is a multi-year program that should have significant impact in sustaining and growing charitable revenue. In 2005, the first ebingo gaming test pilots were open in Barrie, Kingston, Peterborough and Sudbury, then in 2009 Windsor Breakaway, and in 2010 Windsor Paradise. The initiative has been designed to preserve and enhance charitable bingo revenue for local

2 Electronic Bingo (ebingo) 2 charities by providing a lineup of new electronic (touch-screen bingo, electronic personal pay games, and electronic break-open ticket dispensers) in addition to the traditional paper games in bingo halls across Ontario. Attachment A is a list of 23 municipalities that are/will be participating in ebingo. The list does not include St. Thomas or Fort Erie who have since approved the implementation of this initiative. The bingo industry has been in a decline for the past decade with an average provincial contraction of 8% to 10% year over year. A decade ago there were more than 6,000 charities raising funds at 200+ bingo halls; today there are just under 3,000 charities fundraising in approximately 65 halls. There are two bingo halls carrying on business in the Municipality of Chatham-Kent, namely Wallaceburg Hometown Bingo Association and Riverview Bingo Palace. Wallaceburg Hometown Bingo supports 25 local charities or nonprofit organizations, and Riverview Bingo Palace supports 104. Licensing Services receives revenue from the licensing fees of these two pooling bingo halls. Riverview Hall Charities Association, the owner of Riverview Bingo Palace and the associated charitable organizations are in favour of introducing ebingo in 2014 at its current location at 497 Riverview Drive in Chatham. At the present time, Wallaceburg Hometown Bingo Association and the Kinsmen Club of Wallaceburg, owner of the Wallaceburg Bingo Hall, are not considering ebingo. COMMENTS Riverview Hall Charities Association executive and the owner of Riverview Bingo Palace held an information meeting on June 25, 2011 with the charitable organizations it supports. Following the meeting a vote was taken and a decision was made in favour of the movement to ebingo. Since then administration has had meetings and phone call discussions with OLG representatives, and the new general manager of Riverview Bingo Palace. On September 16, 2013 administration received a package containing the following: Attachment B - Letter from the General Manager of Riverview Bingo Palace with supporting documentation Attachment C - Letter from the President of Riverview Bingo Hall Charities Association Attachment D - 44 letters of support from various charities Participation in the new model is one of choice for commercial operators, charities, and municipalities. The first step in the process is to establish that all parties (municipality, charity association and commercial operator) agree to the new initiative.

3 Electronic Bingo (ebingo) 3 For bingo players, ebingo will provide a new and exciting entertainment experience through continuous refresh and delivery of new products. The intent of the new model is to satisfy current players, but more importantly, attract new players. Under Charitable Gaming and Bingo Revitalization, bingo hall owner/operators not only provide the facility and renovations, but are responsible for day-to-day operations, including costs such as capital improvement, facility maintenance, local advertising and promotion, and all staffing. For municipalities the administrative workload is focused on eligibility review and ensuring appropriate use of proceeds. Revenue is paid by OLG for these services and municipal revenue has the opportunity to grow as industry revenues improve. The municipality will receive bingo licensing revenue to cover the costs related to administering and enforcing the regulations set out in the Alcohol and Gaming commission of Ontario s Lottery Licensing Policy Manual. Upon approval by Council and the signed contract, representatives from OLG will meet with the Operator to discuss the work that must be completed prior to OLG arriving on site. OLG s best guess for implementation would be summer or fall of Financial Model Attachment E is a copy of the financial model depicting OLG s estimate versus administration s estimate. In the financial model under administration s estimate you will see that the Net Win for BOT (Break Open Tickets/Nevadas) dispenser was reduced to $765,000 in comparison to OLG s projection of $2,178,000. The reason for this reduction was based on doubling the net wins of 2013 projected BOT sales at Riverview Bingo Palace. This is a rough estimate. It really is hard to predict as currently BOTs are sold by sellers, and under the new model there will be 30 dispenser units accessible throughout the hall. BOT machines electronically dispense a paper BOT that gets scanned and appears on the screen when it is being dispensed. Also you will note that the OLG s estimate in the new OLG Charitable Gaming Model depicts the Municipality s commission to be approximately $150,000 year 1. Administration estimates the Municipality s commission to be $111,000 year 1, and will use this figure for budget purposes. The 2013 base budget for bingo revenues is $285,000. The projected base budget for bingo revenues for 2014 will be reduced by $129,000 to $156,000 ($111,000 from Riverview Bingo Palace and $45,000 from Wallaceburg Hometown Bingo). The actual revenue received from Riverview Bingo Palace has been approximately $318,000 for the last five years. If the annual revenue received under the new model is $111,000 from Riverview Bingo Palace it will be an actual loss of revenue to the Municipality of $207,000.

4 Electronic Bingo (ebingo) 4 Differences in models Current Model Municipal Responsibilities Municipality s share Charities involvement Charities share Hall Charities Association Commercial Operator OLG eligibility reviews issue licences (quarterly) review monthly reports including monitoring use of proceeds $118 per session licence fee was received from charities dealing with game sales and cash conduct and manage minimum of 3 bona fide members for approximately 3 hours 45% of net win** less municipal and provincial licence fees, admin fees and HST Schedule charities Responsible for games and cash Monthly distribution reports Charity Administrator Employ restaurant staff and managers for bingos Operator share 55% plus HST 0.78% of gross revenues New Model eligibility reviews issue permits (semi-annually) instead of licence review simplified monthly reports including monitoring use of proceeds 3% of adjusted net win* received from OLG through contract Support role only -no responsibility for cash or games promoting cause and customer care 2 bona fide members for 2 hours = 1 share 25% of adjusted net win* Still schedule charities but more flexible No longer responsible for games and cash Monthly distribution reports but simplified Charity Coordinator Facility upgrades Staff training and development Retain direct relationship with charity association Manage day to day operations facilities, games, finances, advertising and promotion Blended average 47% from monthly adjusted net win 25% - OLG cost recovery (for hardware to site set up including gaming devices, product software, IT help desk) Holds conduct and manage responsibility through contracts with commercial operators, charities and municipalities *Adjusted net win is Revenue(cash sales) less prize payout less 7% marketing fund ** Net win is Revenue(cash sales) less prize payout

5 Electronic Bingo (ebingo) 5 Revenue Bingo revenue for 2012 received from the charities of Riverview Bingo Palace amounted to $318,954, and from Wallaceburg Hometown Bingo $42,952. The Municipality s revenue has been consistent for the last several years as under the existing bingo model the Municipality is paid $ per session. Riverview Bingo Palace conducts on average 2,695 sessions per year. Although the Municipality s annual bingo licensing revenues will decrease, OLG predicts that service clubs and charities can expect increased long-term revenues as bingo halls evolve into charitable gaming centres and attract new players. COMMUNITY STRATEGIC PLAN The recommendations in this report support the following Council Directions: Healthy, Active Citizens Growth Through Variety of Post-Secondary Institutions High Quality Environment Through Innovation Destination Chatham-Kent! Magnet for Sustainable Growth Prosperous and Thriving Community Has the potential to support all Council Directions Neutral issues (does not support negatively or positively) CONSULTATION The following were consulted and agree with the recommendations in the report. Carla Fox, General Manager, Riverview Bingo Palace Mary Sue Glasier, Hall Administrator, Riverview Bingo Palace Kelly Kirkman, President, Riverview Hall Charities Association Michael McLaughlin, Bingo Stakeholder Liaison Manager, OLG Bob Katsavelos, Director, Business Development, OLG Budget & Performance Analyst Solicitor, Legal Services Executive Management Team FINANCIAL IMPLICATIONS The base budget for 2013 for bingo revenues (licence fees) is $285,000. It is estimated that the revenue the Municipality will receive under the new OLG Charitable Gaming Model will be approximately $111,000 as a result of ebingo at Riverview Bingo Palace, and $45,000 from Wallaceburg Bingo Hall under the current model.

6 Electronic Bingo (ebingo) 6 Therefore, the 2014 base budget will be reduced to $156,000 (a reduction of $129,000) should this recommendation to implement ebingo in Chatham-Kent at Riverview Bingo Palace be approved. OLG is installing 30 new slot machines in Dresden in OLG estimates that the addition of these slot machines will accumulate annual revenue of approximately $90,000 per year; for budget purposes administration used 75% of that total - $67, Bingo Licenses (Revenue) 2013 Base Budget $285, Base Adj due to ebingo ($129,000) 2014 Base Budget $156, Slot Machine Revenue 2013 Base Budget $596, Base Adj due to new Dresden Slots $67, Base Budget $663,951 Net Budget Impact Loss of Bingo Revenue 2014 ($129,000 /12)*3 $32,250 $129,000 Additional slot Revenue $67,500 $67,500 $35,250 ($61,500) If ebingo is implemented in October 2014 the total bingo revenue for 2014 will surpass the new base budgeted amount by $35,250. However, in 2015 it is projected to be a loss in base budget net revenue of $61,500. Prepared by: Reviewed by: Nancy Havens, CMM III Manager, Licensing Services Judy Smith, CMO, CMM III Manager Municipal Governance/Clerk Reviewed by: John Norton Chief Legal Officer, Legal Services

7 Electronic Bingo (ebingo) 7 Attachment A: Charitable Gaming Initiative ~ Participating Municipalities Attachment B: Letter from General Manager, Riverview Bingo Palace with supporting documentation Attachment C: Letter from the President of Riverview Hall Charities Association Attachment D: 44 letters of support from various charities Attachment E: Financial Model comparison c. Kelly Kirkman, Riverview Hall Charities Association Carla Fox, General Manager of Riverview Bingo Palace Wallaceburg Hometown Bingo Association Kinsmen Club, Hall Owner of Wallaceburg Hometown Bingo Matt Torrance, Budget & Performance Analyst Gail Whitney, Budget & Performance Analyst Dave Taylor, Solicitor Michael McLaughlin, Charitable Gaming Stakeholder Liaison Manager OLG Bob Katsavelos, Director, Business Development, OLG P:\RTC\Clerk_Municipal Governance\Licensing\2013\Electronic Bingo (ebingo).doc

8 Charitable Gaming Initiative ~ Participating Municipalities Municipality Participating Hall (* - existing e-site) Signed Agreement Sudbury Boardwalk Gaming * Nov 2012 Sudbury Valley Bingo Aug 2012 Peterborough Kawartha Club Bingo * Dec 2012 Kingston Treasure Chest * Dec 2012 Kingston Community Spirit Sept 2012 Barrie Boardwalk Gaming * Jan 2013 Mississauga Meadowvale Bingo Aug 2013 Penetanguishene Angel Gate Bingo Oct 2012 Pickering Delta Bingo Pickering Nov 2012 Richmond Hill Bingo World Richmond Hill June 2014 Hawkesbury Long Sault Bingo Newmarket Bingo World Newmarket Oct 2013 Oakville Delta Bingo Oakville June 2013 Windsor Breakaway Gaming Centre * Windsor Paradise Gaming Centre * Owen Sound Sound Bingo Pembroke Bingo Country Feb 2013 Cambridge Cambridge Bingo Centre Sept 2013 Niagara Falls Delta Bingo May 2013 Brampton Rutherford Bingo July 2013 St. Catharines Delta Bingo Nov 2013 Leamington Chances Thunder Bay Thunder Bay Charitable Bingo March 2014

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61 ATTACHMENT E