‘Moral obligation’ no reason to back racetrack for casino location

Council can’t be in business of trying to save private business

First things first: When the provincial government sent its auditor around to study the books of Ontario’s race tracks, the Rideau Carleton Raceway complied.

And when the Ontario Lottery and Gaming Corp., the Alcohol and Gaming Commission of Ontario and a slew of other regulatory boards require financial statements be filed, the raceway complies with those, too.

It’s been implied that the racetrack didn’t necessarily want to share its financial info with the province. And the place it was implied was in this column. I apologize for that, and appreciate the raceway folks have accepted that my error was made without malice.

While no one ever wants to make a mistake, this one came with a silver lining — a chance to sit down with two of the raceway’s main players to discuss in detail why their business should be favoured by city council. That’s not exactly how raceway GM Jean Larose and spokesman Alex Lawryk put it. But it’s undeniable that if council votes Wednesday to tell OLG that any new casino must be located at Rideau Carleton, our elected officials will be virtually guaranteeing the raceway some sort of future income.

When councillors are told that the raceway is a local enterprise, they should think about what exactly that means, whether the ownership is particularly local or whether that even matters.

Is this politician-sponsored leg up justified? Some folks certainly think so.

After all, the provincial government pulled the rug out from under the raceways across Ontario when it announced a year ago it would cancel its decade-plus slots program, which involved a generous revenue-sharing arrangement between the OLG and racetracks.

It turns out the plan was too generous: instead of giving a helping hand to the flailing racing industry, the slots program was so successful it artificially boosted the sector, resulting in, among other things, the highest purses in North America. That’s one of the reasons the provincial government under former Liberal premier Dalton McGuinty put a sudden end to the scheme.

But in the meantime, the Rideau Carleton had made major capital investments in good faith. It put $35 million into renovating the raceway facilities, in large part to accommodate the 1,250 OLG slot machines.

The raceway didn’t recoup that investment until 2009, Lawryk says.

And since 2000, the Rideau Carleton had become hugely dependent on the OLG slots. The company reported revenue for fiscal 2012 of $29.7 million, but more than $13 million was attributable to the slotmachine revenue. Its profits topped $5.6 million.

Considering that 45 per cent of the raceway’s revenue came from the slots, it’s no wonder the company is so panicked about the prospect of the gambling machines moving out.

“How could we stay open?” Lawryk says. “There’s no money.”

That’s where councillors come in. They will be asked to name the raceway as the only new casino location, over the objections of others who’d like a shot to bid, namely Ottawa Senators owner Eugene Melnyk.

“There’s a moral obligation to consider Rideau,” Lawryk says. “Why would council like to close a 50-year business that’s been very successful, that’s run its operation successfully … what did we do that deserves a negative vote?”

Powerful stuff. But hardly as straightforward as the raceway’s supporters present it.

Warren Armstrong founded the Rideau Carleton Raceway in the early 1960s, and his family controls 54 per cent of the company that has 150 shareholders. That the 88-yearold Armstrong is committed to the raceway is beyond question — he’s known for personally helping landscape the property.

His daughter, Victoria, and her husband, Andrew Wright, appear poised to oversee the next phase of the company, which includes submitting its own casino proposal. The couple is based in Toronto, and it’s not clear how much time they spend in Ottawa.

So when councillors are told that the raceway is a local enterprise, they should think about what exactly that means, whether the ownership is particularly local or whether that even matters.

The pro-Rideau Carleton contingent points to the area jobs that would be at risk if the raceway failed. Lawryk put the figure at 1,000, including everyone from trainers and veterinarians to farmers who grow hay. To put a little perspective on how much of the rural and agricultural sector racing supports, consider that a provincial report states that only 16 per cent of adult horses were active in racing in 2010, including breeding stock.

There are some indisputable truths to this saga.

Rideau Carleton, by all accounts, has been a good corporate citizen. The province hooked the raceway on revenue from slot machines then blindsided the company when it abruptly cancelled the program with an insufficient transition period. There’s no place in North America where live horse racing exists without some sort of public subsidy because it is generally a money-losing proposition, including at Rideau Carleton.

Now, it may well be that the raceway is the ideal place for gambling in Ottawa if there must be gambling in Ottawa.

But does this add up to council having a “moral obligation” to favour the company?

No, it does not. Even if Rideau Carleton’s misfortune is not of its own doing, councillors cannot be in the business of “saving” private businesses.

The only thing councillors have a moral obligation to do is make responsible decisions that do not set irresponsible precedents.