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HomeMy WebLinkAboutCRPS-06-070 - Request for Interim Revenue Model - Bingo Country - 1356 Weber Street Eastl Krrc~~R - • Corporate Services Report To: Councillor B. Vrbanovic, Chair and Members of the Finance and Corporate Services Committee Date of Meeting: May 1, 2006 Submitted By: R. Gosse, Director of Legislated Services/City Clerk Prepared By: Patricia Harris, Manager of Licensing Ward(s) Involved: N/A Date of Report: April 20, 2006 Report No.: CRPS-06-070 Subject: REQUEST FOR AN INTERIM REVENUE MODEL FOR BINGO COUNTRY-1356WEBER STREET EAST RECOMMENDATION: That the request by Bingo Country and Concourse Charities Bingo Association to implement the Alcohol and Gaming Commission of Ontario's Interim Revenue Model be declined. BACKGROUND: There are currently two licensed commercial bingo halls in the City of Kitchener. Bingo Country is located at 1356 Weber Street East and K-W Bingo Centre is located at 29 King Street East. There are currently 39 charitable and non-profit organizations holding bingo events at Bingo Country and raising funds to provide for the needs of the surrounding community. As required by Provincial Regulations they are members of a Bingo Sponsors Association. This Association represents their needs to the hall operator and the municipality. Currently the hall operator at Bingo Country pays for the bingo callers and for 100% of the bingo paper used at the bingo events as well as other expenses that are part of running a commercial business. Bingo paper is the numbered cards that participants use at each event. Each card must have a separate serial number. The charities, through the Bingo Association pays for the prizes, rent to the operator, licence fees, advertising and any other miscellaneous expenses such as audits and administration expenses for the Association. The charities at Bingo Country provide volunteers to act as runners and sell bingo cards. Runners are volunteers that sell bingo paper and verify prize winners. On February 17, 2006 the Alcohol and Gaming Commission of Ontario introduced an Interim Revenue Model for Pooling Bingo Halls in the Province of Ontario. It was implemented because in the past several months a number of bingo halls have closed in the Province because they -2- were no longer profitable. The Province has indicated that this revenue model may be in place for a period ending no later than September 30, 2006, or the implementation of a municipally- developed revenue model or the Registrar's permanent revenue model, whichever occurs first. REPORT: The Registrar of the AGCO has stated that: • The licensee (charity) may pay out of the gross receipts up to $250/event to pay the costs of a caller and runners employed by the hall operator and used in the operation of the event; • The licensee may pay out of the gross receipts the costs of the bingo paper used in the bingo event. • A licensee may pay a bingo hall operator a maximum of 40% of the net proceeds. This interim adjustment should only be implemented in situations where it is determined to be necessary and in the best interest of all parties involved. A process has been put into place by the AGCO whereby: • The hall operator for a pooling bingo hall shall propose to the bingo sponsors' association and the municipal licensing authority one or more of the changes set out above. • The bingo sponsors' association shall indicate support or non-support of the proposal in full or in part; • The municipal licensing authority shall review the request and determine whether one or more of the elements shall be implemented for that bingo hall on an interim basis. The licensing authority may decide: • To approve the proposal, with or without change. • To decline the proposal and maintain the status quo; • To implement amunicipally-developed revenue model in accordance with the Registrar's Guide to Establishing aMunicipally-Developed Revenue Model. Where a municipality approves the proposal with our without change the municipal licensing authority shall; • Set out the terms of the approved proposal in a memorandum of understanding to be signed by the bingo hall operator and the bingo sponsors' association; -3- • Advise the Registrar of the timing for the implementation; and • Monitor the financial position and ongoing justification for the interim revenue model in accordance with the direction from the Registrar. The AGCO has proposed an interim revenue model where one of the options provided is that the hall operators may pass on the costs of paper for bingo events to the Bingo Association provided they obtain agreement from their Bingo Association and the municipality determines that it is in the best interest of all parties involved. Attached is a letter from Concourse Charities Bingo Association agreeing to accept the inclusion of all bingo paper as an "above the line" expense until such time as the new Provincial Bingo Financial Model is adopted and approved by the City of Kitchener. They have agreed to share the paper costs at a rate of 60% cost to the Bingo Association and 40% costs to the hall. An analysis has been completed to show the impact that sharing paper costs will have on the charities that operate bingo in this hall. Year # of Events Total Gross Total Total Net Average Receipts Expenses Proceeds Payout per Event 2004 1416 $4,175,738.50 $3,774,536.69 $401,201.81 $283.34 2005 1375 $4,014,847.00 3,663.327.57 $351,519.43 $255.65 Proposed Based on Interim 2005 Revenue Information Model 1375 $4, 014, 847.00 3, 714, 668.49 $300,178.51 $218.32 In 2005 the paper costs at Bingo Country, 1356 Weber Street East were $85,568.20 as provided by the hall operator. The hall operator and Bingo Association are proposing to split the costs of the paper 60/40. The charities would pay 60% of the paper costs through their Bingo Association and the hall operator would absorb the remaining 40%. This split has been agreed upon because it is the formula the AGCO usually uses when costing out expenses. Based on this assumption, and using 2005 statistics, the additional costs to the charities through the Bingo Association for a year would be approximately $51,340.00 or $37.33 per session. This would mean an additional loss of revenue for the charities of $37.33 for each session which coupled with the decrease in revenue from 2004 amounts to a 23% decrease in revenue going to the charities for community projects. The hall operator has provided confidential financial information to Licensing staff but it included corporate expenses for the entire corporation and not just financial information for the hall at 1356 Weber Street East. When the Corporate wages were removed from the financial statement it showed a reasonable profit. -4- Council has been provided with three options by the AGCO. They may: • Approve the proposal, with or without change • Decline the proposal and maintain the status quo • Implement a municipally developed revenue model in accordance with the Registrar's Guide to Establishing aMunicipally-Developed Revenue Model. It has always been the role of the municipality to maintain an even playing field in the bingo market. Bingo has provided many charities and non-profit organizations the opportunity of raising much needed funds for a variety of community projects. Although the Interim Revenue Model will assist the hall operator to increase their profit there does not seem to be any positive outcome for the charities. In fact the charities will lose further revenue. CONCLUSION: It should be reiterated that implementation of the AGCO's Interim Revenue Model is only to occur in situations where it is determined to be necessary and in the best interest of all parties involved and is only to be in force until September 30, 2006 or until the Registrar of the Alcohol and Gaming Control Commission has implemented a new revenue model. It is staff's opinion that the proposed Interim Revenue Model is not required at this time. This hall is reasonably profitable and an increase in profitability for the hall will be done at the expense of the charities. FINANCIAL IMPLICATIONS: None. (MRS) PATRICIA HARRIS MANAGER OF LICENSING