Tuesday’s announcement of a winning bidder selected to build a casino complex at Woodbine in north west Toronto marks a major victory for Premier Kathleen Wynne. But,
Wynne has stacked the deck so a casino can't make enough money to build anything more than a box with four walls, slot machines & some tables.
In 2013, the biggest brand names in luxury resorts and gaming spent millions of dollars jockeying for an opportunity to build the next big global holiday destination on Toronto's waterfront. MGM, Wynn Resorts and Las Vegas Sands each proposed multi-billion dollar developments featuring breathtaking iconic architecture and luxury facilities estimated to produce 10,000 permanent jobs for Toronto. Caesars Entertainment proposed a somewhat more modest effort on Front St. in the downtown core. It was a controversial file and was a tough sell to Council. The outcome was uncertain until Kathleen Wynne was sworn in as Ontario's new Premier. One of her first acts was to kill the Toronto casino.
This “casinos-must-die” philosophy has been the operating paradigm at the Ontario Lottery & Gaming Corporation ever since. OLG regulates and operates casinos in the province (always an unwise combination, but that's another topic for another day) and has repeatedly (maybe intentionally?) fumbled the ball on casino expansion and modernization.
Now, this. After blundering through earlier attempts to issue a request for proposal that would attract bids from world-class global casino and resort operators, the OLG finally managed to short-list just three bidders. Among these three contenders, none of the big brands who’d pined for an opportunity to build a magnificent downtown casino four years ago. In the end, OLG awarded the contract to a third-rate consortium consisting of Brookfield Asset Management, a globally successful property developer with little or no experience in casinos and Great Canadian Gaming Corporation, a small-time casino player all but invisible on the world stage. Great Canadian, with a market capitalization 1/10th that of MGM and 1/25th that of Las Vegas Sands, currently runs such powerhouse resort destinations as Casino Nanaimo and Bingo Esquimalt. So, why did they win?
No doubt, they promised to work cheap and pay the highest fees to the OLG. That should be great news for the province... except, well, it isn’t. By making this competition all about the fees, with seemingly no minimum capital investment requirements, OLG drove away bigger brands interested in creating iconic properties. That’s a problem for Ontario and for the city.
Toronto Mayor John Tory wants to see a multi-billion dollar development at Woodbine that produces thousands of jobs and attracts tens of thousands of visitors to the city. He's not going to get that with this deal. Finance Minister Charles Sousa wants to see an increase in gaming revenues to help balance his budget. He’s not going to get that either. It's a simple matter of dollars and cents.
Because the winning bidder won't earn much from this venture, they can't afford to invest much up front. The deal reportedly guarantees the winner a minimum of $72 million per year for 22 years – with which to earn back its capital investment and make a profit for its shareholders. That means the upfront investment in capital is likely to be between $300-600 million rather than the $3-6 billion proposed in 2013 for a downtown Toronto casino project. This means the "Woodbine Casino & Resort" will probably be little more than a modest box with four walls and some bright lights – a far cry from the breathtaking billion-dollar designs pitched for downtown Toronto and coveted by Mayor Tory.
Of course, the winning bidders could invest more and shoot for the moon – aiming to vastly exceed the minimum guarantee of $72 million annual revenue. But, Brookfield is not in the high-risk business and Great Canadian doesn’t have deep pockets. So, who’s going to pay for it?
The anti-casino lobby will use the failure of Woodbine as proof casinos can't work in Toronto. But, they could work – if the government wanted them to.
Woodbine already has one of the most profitable slots operations in the world. Adding table games will not significantly increase employment and won't attract many new customers from out of province. It will, however, attract local residents who currently travel to Niagara Falls or Rama to play table games. That, of course, means there won't be much new money to balance Minister Sousa’s budget. Instead, he’ll get the same money he would have gotten in Niagara or Rama anyway. Those communities, though, will suffer from the loss.
Future anti-casino zealots will point at the failure of this Woodbine casino for years to come, holding it up as proof that a casino in Toronto doesn’t work. It’s a pity, really, because it could work. But, it would have to be done right. For starters, you’d have to want it to work. This government doesn’t.
Still, it's a win for Kathleen Wynne. She didn't want a casino in Toronto. And, she's artfully managed to poison the ground by forcing a decision that will all but guarantee Toronto never gets much of one.