Established in 1998, Ontario’s Slots at Racetracks Program brought a windfall to racing in the Canadian province with 20 percent of revenue from new slot machine parlors at racetracks directed to the industry. The government’s sudden decision to cancel the program in 2012 dealt a nearly fatal blow to racing and breeding in Ontario. Two years later, veteran Canadian racing journalist Dave Briggs explores the ill-fated slots era in a six-part series with an eye toward lessons for racing jurisdictions in America that derive revenue from other forms of gaming.
The first warning of the hurricane that was about to engulf Ontario’s horse racing industry came in a speech that Dwight Duncan gave to the Economic Club of Canada on Feb. 13, 2012. That’s when the man who was, at that time, Ontario’s finance minister, said he was going to “review the CA$345 million in annual subsidies given to horse racing in Ontario each year through the Ontario Lottery and Gaming corporation.”
The key word in that sentence is “subsidies,” but more on that in a minute.
Duncan’s speech was a preview, of sorts, of what the government was going to do in response to the Drummond Report, released just two days later. The 700-page report, commissioned by the ruling Liberal Party and produced by economist Don Drummond, made 362 recommendations for how the government should reduce a deficit pegged, at that time, to be around CA$16 billion.
Some 100 of those recommendations concerned the expensive public health care system, but for reasons still not fully explained or understood, one of the few recommendations the Liberals actually followed in a report already gathering dust two years later, was the one small one Drummond made about horse racing. Drummond suggested the Liberals “review and rationalize the current provincial financial support provided to the horse racing industry, so that the industry is more appropriately sustained by the wagering revenues it generates rather than through subsidies or their preferential treatments.”
How Duncan misinterpreted that passage to mean end the Slots at Racetracks Program (SARP) that provided, on average, more than 65 percent of the province’s purses and decimate an industry that supported 30,000 full-time equivalent jobs is still subject of great conjecture in the horse racing industry.
But timelines tend to indicate the Ontario Lottery and Gaming corporation (OLG) that ran SARP cancelled the program as step one of an aggressive gaming modernization plan that had the approval of the finance minister’s office.
Exactly two weeks after Duncan’s speech, the Liberal government further revealed its intentions by airing radio ads attempting to reframe the SARP partnership as a government subsidy rather than what it really was: racing’s cut of proceeds of consenting gamblers who played slots at private racetracks. Despite the government’s 75 percent cut of slot revenue that already delivered some CA$1.1 billion annually to fund health care and education, the radio ads suggested the industry’s annual revenue of CA$345 million from its 20 percent cut was taxpayer money that would be better spent on health care, not horses. The next day in the Ontario legislature, the education minister said the industry’s share of slot revenue would be better spent on education.
On March 12, 2012, less than a month after Duncan’s speech, the OLG officially announced its modernization plan, of which a key component was ending SARP, turning casino gaming over to the private sector and placing casinos in each of a series of zones that divided Ontario.
Just two days later, the OLG officially announced it was exercising a one-year out clause in its long-term SARP contracts with the horse racing industry — an out-clause very few people knew even existed. The day the OLG announced an end to the program, it also announced it was pulling the slot machines out of three racetracks located near the U.S. border — Fort Erie near Buffalo, N.Y., Windsor Raceway near Detroit and Hiawatha Horse Park in Sarnia, near Port Huron, MI.
Today, slot machines are still humming at the province’s 13 other racetracks, with no money flowing to purses and the government providing limited money to the racetracks to lease the slot hall space.
So why did the government pull the plug on such a lucrative program? Theories abound.
Clearly, the government was ignorant of the economic scope of the industry and its importance in providing jobs in rural Ontario. That’s proven by the fact the same Liberal government that tried to kill horse racing is now pouring CA$500 million in taxpayer money over five years into horse racing to try to save it to make amends to the rural areas it needs in the next election if it hopes to go from its current minority position to a majority.
Likely, the horse racing industry was impeding the OLG’s aggressive casino expansion plan and the major private (mostly U.S.) casino companies jockeying to grab Ontario – including the big prize, Toronto, the biggest city in North America without a casino — had no interest in sharing with the racing industry.
The government is fond of laying the blame on an industry that relied too heavily on slot revenue and did little to attract racing customers. It’s a fair criticism, but one that required tweaking the program, not killing it entirely.
Suggestions have also been made that the government was punishing some racetracks owners who reinvested little of their share of slot money back into facilities or other improvements. Even Woodbine — which made some CA$400 million in improvements — has come under fire for clashing with the OLG over how it chose to spend slot money that came with few mandated requirements.
In addition, greed is said to have played a role with fractious industry partners arguing over how best to spend the money, and the most vociferous disagreers going straight to provincial politicians alleging misconduct by other industry parties. The theory is, that, in turn, alerted many politicians to a program many knew little about.
The reasons don’t much matter now. The damage has been done and, two years later, all the chief architects of the OLG’s failed gaming modernization plan have exited the scene, including OLG CEO Rod Phillips and OLG chair Paul Godfrey, who was fired by current premier Kathleen Wynne, in part she said, for his intransigence on the horse racing file once it became clear cancelling SARP was a huge mistake.
Exactly a year and one day after dropping that bombshell at the Economic Club of Canada, Dwight Duncan announced he was following his boss, embattled premier Dalton McGuinty, into political retirement.
Leaving the politicians and bureaucrats that followed with the difficult task of cleaning up one massive pile of manure.
Tomorrow: What other jurisdictions must learn from Ontario
Dave Briggs is the co-editor of Canadian Thoroughbred magazine and a freelance horse racing columnist and features writer. For 18 years he was the editor of harness racing trade publication The Canadian Sportsman.