OLG's modernization plan too ambitious: auditor general
Keith Leslie, The Canadian Press
Published Monday, April 28, 2014 1:57PM EDT
Last Updated Monday, April 28, 2014 6:52PM EDT
TORONTO -- Ontario's Lottery and Gaming Corp. failed to adequately consult municipalities before promising to increase revenues by building new casinos that it turned out cities don't want, auditor general Bonnie Lysyk reported Monday.
"OLG included projected profits from those casinos without first confirming that new casinos would be accepted, would be considered, in certain municipalities," said Lysyk. "In fact, large Ontario cities such as Toronto and Ottawa rejected OLG's proposals for constructing new casinos."
Lysyk issued a special report on OLG's modernization plan that also criticized the agency and the Liberal government for the "abrupt cancellation" of a program that gave $347 million a year from slot machine revenues to horse racetracks.
"The profit estimates should have been more realistic, and the abrupt impact on the horse racing industry could have been mitigated had more people been consulted beforehand," she said in the report.
OLG originally projected it could bring in an additional $4.6 billion in gaming profits between 2013 and 2018 through new casinos and other modernization efforts, a figure it has since revised downward by nearly half to $2.2 billion. However, that's still too optimistic for the financial watchdog, who puts the figure at $1.8 billion, or about 60 per cent less than the forecast.
The Progressive Conservatives said that means the Liberal government faces an even larger problem trying to eliminate an $11.3-billion deficit and balance the books on schedule by 2017-18.
"There's a huge hole in the Liberals' accounting due to OLG revenues," said PC finance critic Vic Fedeli.
But Finance Minister Charles Sousa said he'd already taken the lower-than-expected revenue hike from OLG into consideration in last year's budget, and then lowered the figure even more in last fall's economic statement.
The agency is expected to turn over $2 billion to the province this year, and had hoped to increase that by $1.3 billion more each year by 2018, but Sousa put a much lower revenue figure in his budget.
"In the provisions of the budget at the time, we lowered them -- we didn't make it as high in what we put forward in our budget projections, and since then we've revised them again, and I've since revised them even lower to $600 million," he said.
OLG also overstated the number of jobs that would come from its modernization plan by projecting 2,300 new positions would be created, said Lysyk, who warned there would likely be job losses in the end.
"OLG projected that all of this expansion was to have created 2,300 net new gaming jobs in the province," she said. "With the cancellation of a GTA casino factored out of this projection, there may be a loss of 1,000 net new gaming jobs."
In addition, OLG's hopes of attracting $3.2 billion in private sector capital investment has been reduced to only $940 million, "most of which would be realized from the sale of OLG's existing gaming assets," said Lysyk.
The auditor also said part of the problem may be changing leadership at OLG, noting it has had five different board chairs and seven different CEOs since 2005, and is now reporting to the fifth cabinet minister to be responsible for the lottery agency.
"One wonders if stable leadership and governance could have benefited OLG and the gaming industry in Ontario," wrote Lysyk. "In our opinion, the government and OLG did not do enough preparation and planning before launching an ambitious 'best-case scenario' modernization plan."
Ontario Auditor General Bonnie Lysyk listens to questions on her special report on the Ontario Lottery and Gaming Corp.'s Modernization Plan during a news conference on it at the Ontario Legislature in Toronto on Monday, April 28, 2014. (Frank Gunn / THE CANADIAN PRESS)