BC Lottery Corp on spending spree while charities reel
Revelations of our casinos’ extraordinary vulnerability to organized crime-and the deals that Rich Coleman has struck with casino developers-should give British Columbians considerable pause.
The financial records of the BC Lottery Corporation give cold comfort to anyone looking for reassurance there.
Pete McMartin’s piece in the Vancouver Sun details the transfer of some $400 million to private casino companies since 1997. But this is only part of the story. Since fiscal 2005, $48.5 million has also gone into capital spending in community gaming facilities. The word “community” is a euphemism here--almost all these operations function as privately held junior casinos.
A review of the BCLC 2010 annual report suggests that the velocity. the velocity of those transfers is accelerating. The BCLC projects $350 million in capital spending over the next 3 years. Altogether, the period of fiscal 2005/06 through fiscal 2012/13, the BC Lottery Corporation projects total capital expenditures of $724 million.
You read that right. 724. Million. Dollars.
For a crown corporation that does not own or operate any bricks and mortar gambling, this is a breathtaking figure.
But the BC public should be very concerned that huge sums are being transferred to very profitable private companies, including foreign owned operators, to develop their own private real estate. And then we hand them the keys.
It has been claimed that these capital investments are necessary to build the gaming revenue stream that delivers over a billion dollars to government annually. Leaving aside the myriad policy questions embedded in that position, this is simply not true.
Let’s look at our closest neighbour, Alberta. Their AGLC (Alberta Gaming and Liquor Commission) operates on a model roughly equivalent to our own. But the contrasts are startling, and not in a good way.
Serving a population of 3.7 million, 800,000 less than BC’s, the AGLC generates $1.4 billion in net revenue, compared with our $1.08 billion net. This is a return, by the way, of $378 per capita, compared with BCLC’s performance of $239 per capita.
Alberta records capital assets of $200 million, and BC’s are $147 million. Given the relative operational sizes, BC’s capital expenditure would be expected to come in at about 75% of Alberta’s, or roughly $30 to $40 million annually. Instead we are clocking at around three times that spending. Last year we spent $92 million in capital expenditures, a figure slated to rise to $120 million by the next fiscal year.
To put it another way, Alberta generates $35.89 in profits for every dollar of capital expenditure, and BC comes in at $11.72 to one. This disparity only becomes more glaring when the population differential is considered. In terms of return on capital spending per citizen, Alberta buries us--4 to 1.
And they do this without coddling private developers and interfering with free market competition between hotels, bars and restaurants.
While Alberta’s business performance leaves us in the dust, perhaps the most troubling aspect of this whole story is in the treatment of charities and non-profits.
Gambling was legalized in Canada in 1969 for the express purpose of supporting charities and non-profits with non-tax dollars. For better or worse, an entire economic architecture has built up over 40 years on the foundation of this legislation, generating significant GDP and employment.
Most charities do not have large staffs and development offices in affluent communities. They rely on a broad and effective network of volunteers and fairly low-paid but exceptionally high value employees. They run seniors’ centres, aboriginal suicide prevention crisis lines, brain injury support groups, sports and arts organizations, and meet thousands of other needs we can’t even imagine. They are the silent invisible army that we cannot live without. Sometimes we never think of them until the day we need them ourselves. And when that day comes, they do not fail us.
Civil society cannot exist without our charities and non-profits, yet it is a common human error to mistake a thing’s value for its price.
On a day that stunned the entire BC non-profit world, Rich Coleman moved in August 2009 to claw back tens of millions of dollars already committed to charities in communities across the province. The effects were catastrophic, as most organizations, relying on government commitments, had set budgets months in advance with no alternative source of funds for money already spent or committed.
The assault on charities and non-profits continued in 2010, when the sector lost 28 per cent of its gaming funds overnight. Ignoring a legal agreement to fund the charitable sector with 33% of gaming revenues, Rich Coleman slashed the 08/09 allotment of $156 million to $112.5 million (or 10.42% of net earnings) for 09/10.
A poor performance when compared with Alberta, which funneled a full $323 million (or 24% of net) to its charitable and non-profit sector in 09/10.
In fact, Alberta’s gaming industry generates $87.30 per capita for charities and non-profits, while BC’s contribution is only $25.
The Alberta government is about 3.5 times more generous than the BC government and about 4 times more profitable on a return on capital investment measurement.
Capital spending by the AGLC equals 12% of remittances to charities, while in BC the proportion is 88%. By 2012, transfers to private developers and casino operators will equal the allotment to charities.
Charities and non-profits have been thrown to the curb, while hundreds of millions of dollars in public funds pour continuously into the pockets of private casino developers and operators. When challenged on BC’s poor record of remittances of gambling proceeds to charities, Rich Coleman, architect of BC gambling industry, demurred, saying that the provincial government has other priorities now.
Those priorities could not be clearer.
Watch 60 Minutes' recent report on gambling in the U.S.