OLG’s Host Community Payments Fall For Second Consecutive Quarter

Written By Jose Colorado on January 25, 2023
olg host community payments decrease for the second consecutive

Ontario casinos slowed their record-setting pace in a subdued third fiscal quarter.

The Ontario Lottery and Gaming Corporation announced a third-quarter payment (Oct.1 – Dec.31) of more than $32 million to its 29 host gaming communities. The contribution comes via the Municipality Contribution Agreement – an arrangement meant to benefit regions that host land-based casinos in Ontario.

On the one hand, the $32 million certainly isn’t anything to balk at; all proceeds get reinvested in local communities. Yet, on the other, the figure is the second drop in as many fiscal quarters.

Here’s how it breaks down thus far for 2022 – 2023:

  • First quarter payment: $43,420,036
  • Second quarter payment: $38,113,757
  • Third quarter payment: $32,385,278

OLG: Better to look at returns year over year

OLG spokesperson, Tony Bitonti, told PlayCanada he wasn’t overly concerned.

“It’s better to look at the same quarter year over year or just to look at the annual payment for each site – you will see that those figures are usually similar year over year.”

He added:

“When we release the Q4 payment in mid-April – then you will be able to see the total annual payment.”

Nearly $114M shared with host communities this fiscal year

Host communities have received $113,919,071 for OLG’s current fiscal year (April 1, 2022 – March 31, 2023). If projections hold, then $151,892,094 will be distributed in total.

For context’s sake, that would be lower than pre-COVID numbers as the crown corporation enjoyed a trio of years at $160M+ between 2017 – 2020. The highest-grossing period was 2019 – 2020 ($161 million).

Regardless, here are the annual payouts for the past six fiscal years:

  • 2016 – 2017: $146.3 million
  • 2017–18 – $160.8 million
  • 2018-19 – $160.8 million
  • 2019-20: $161 million
  • 2020-21: $38 million (COVID influenced)
  • 2021-22: $82.9 million (COVID influenced)
  • 2022-23 (projected): $151.8 million

Cities with the biggest payouts

Traditionally, the City of Niagara has seen the biggest benefit of the Municipality Contribution Agreement. That’s mainly because they host two of Ontario’s biggest casinos, Casino Niagara and Fallsview Casino Resort.

Again, they led the pack this past quarter, receiving $4.4 million. In the second quarter, the destination city pulled in $5.2 million.

Beyond Niagara, here are some of OLG’s third-quarter payments:

  • Niagara Falls (Casino Niagara and Niagara Fallsview Casino Resort): $4,433,189
  • Pickering (Pickering Casino Resort): $3,857,611
  • Windsor (Caesars Windsor): $2,085,083
  • Brantford (Elements Brantford Casino): $1,372,633
  • Town of Milton (Elements Casino Mohawk): $1,435,055
  • Ajax (Casino Ajax): $912,355
  • Mississaugas of Scugog Island First Nation (Great Blue Heron): $841,199
  • Centre Wellington (Elements Casino Grand River): $717,647
  • City of Sudbury (Gateway Casinos Sudbury): $463,325

OLG:  Payments help municipalities build better communities

Minister of Finance Peter Bethlenfalvy – via a press release – said the payments are critical to local economies.

“Payments through OLG’s Municipality Contribution Agreement provide host gaming communities with the support they need to fund programs and critical infrastructure to improve the lives of residents and families.

With these revenues, municipalities are able to build better communities with more opportunities to live and work.”

Historic year fizzles following third-quarter return

Initially, $163 million was this year’s projection following the first two fiscal quarters.

However, that now appears unlikely with the subdued third quarter in hand. OLG would need $47 million in the year’s final fiscal period to surpass the previous annual high.

So why the big dip?

Bitonti told PlayCanada it essentially comes down to semantics.

For instance, a graduated scale including a combination of slot machine, table game and sportsbook revenues at each site decides the payments.

Under the Municipality Contribution Agreement, a payment to a municipality (or community) only triggers when the account reaches a particular milestone.

It goes as follows:

  • 5.25% on the first $65 million of slot revenue
  • 3.0% on the next $135 million of slot revenue
  • 2.5% on the next $300 million of slot revenue
  • 0.5% on the slot revenue above $500 million
  • 4.0% of table game revenue (if applicable)
  • 4.0% of sportsbook revenue (if applicable)

Payment variance due to benchmarks agreements

Bitonti explained:

“Here is an important piece of information – as payments are provided quarterly, and the dollar value of these quarterly payments may vary within a given year depending on if/when a site reaches these graduated revenue benchmarks. This is the primary reason for the variances in the payments each quarter.”

But there could be more at play, he said.

“Also, another reason for a possible variance is impact of weather on a site – a particularly harsh winter could also impact attendance and impact the revenue of a gaming site.”

From an outsider’s perspective, the current economic recession would seemingly be another consideration. It could simply be that fewer people are gambling with budgets tightening.

Online gaming – specifically Ontario’s iGaming market – could be another explanation. More people could be gambling online instead of hitting the physical casino.

Land-based casinos added retail sportsbooks late in third-quarter

Of course, it’s not all doom and gloom.

After all, the gaming revenue payment is just one piece of the puzzle. Punters should recall the agreement only applies to land-based casinos.

Thus, the province’s highly lucrative iGaming market, including its Ontario online sportsbooks and online casinos, is not factored into the calculations.

Nonetheless, certainly casinos – and OLG – would like to see better returns.

To that end, retail sportsbooks could help.

Consider brick-and-mortar sportsbooks only got the go-ahead in late October. That gave them little time to impact the last financial quarter (Oct.1 – Dec.31).

Granted, thus far, OLG has only permitted a “select” few locations the ability to offer in-person betting at their land-based casinos. Some are limited to sports betting kiosks, while others have sports lounges. Caesars Windsor has Ontario’s first full-service sportsbook.

Nonetheless, with the added experience, land-based casinos could have an additional – and reliable – income stream moving forward.

OLG’s contributions to local municipalities continue to add up

OLG’s gaming revenue payments remain a crucial contributor to regional development.

For instance, the government agency states proceeds from the Municipal Agreement have helped local communities with vital societal issues. Some examples include economic recovery, infrastructure development and job creation.

Moreover, over the past seven years, the crown corporation has invested nearly $1.8 billion in private-sector capital investments across the province.

Since 2017, that meant developing and opening seven new casinos, one planned development, additional gaming expansions, and non-gaming amenities.

Since 1994, host communities have received more than $1.93 billion in non-tax gaming revenue.

Photo by Shutterstock
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Jose Colorado

Jose Colorado is a British Columbia-based writer. He lives in Burnaby and loves sports, anime, writing, business and the occasional walk on the beach.

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