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Is an economic development strategy based on casino revenue sound economic policy?

No. This hasn’t proven the case in several US cities and there is no reason to believe that Toronto will be different.

The OLG holds out the promise of financial benefits for the City of Toronto.  Ontario Finance Minister Dwight Duncan asks Torontonians to, “Imagine an anchor that could create a golden mile on Toronto’s waterfront,” of high-end restaurants, shops and theatres. This has not proven to be the case in Detroit, Atlantic City and St. Louis, where neighbourhoods surrounding the casino, declined.

Ken Greenberg, an eminent Toronto architect and urban designer, has been hired to do a rescue plan for Atlantic City and St. Louis, cities who based their economic strategy on a similar casino development.

The OLG is asking Toronto to roll the dice on an industry that is currently facing financial challenges : (1)

  • The casino industry was hit hard by the 2008 recession producing a precipitous drop in revenues and a series of foreclosures.
  • MGM, one of the main contenders for the Toronto casino, has not recorded a profit in the last three years.
  • In January 2012 the company announced it had completed a deal to borrow an additional $850 million, adding to a long-term debt load that already totaled approximately $13 billion.(2)
  • In the first quarter of 2012 MGM recorded a $203.3 million net loss.(3)
  • Caesars Entertainment Corp. (Harrah’s Entertainment), another contender for a Toronto mega casino, has a heavy debt load (10 times its cash flow), which has been a deterrent to potential investors.(4)
  • Its also has a $6 billion debt payment due in 2013.(5)
  • The latest gambling mogul to throw his hat in the ring is American billionaire Sheldon Adelson, the chief executive officer of Las Vegas Sands Corp.  His company, which is nearly $10 billion in debt (6), last year revealed that it was being investigated by U.S. government officials over allegations of bribery and money laundering.(7)

Studies show that casinos (companies) do not reinvest in the local community with the money they collect.  Statistics show that 35% to 87% of the profits are sent out of the jurisdiction in the form of vendor contracts, capital investment dividends and parent company profit sharing.(8)

Sources: Endnotes