Good morning Penticton: You are $10 million poorer

Act Local Now Blog: Sept 16 Michael Brydon

The City of Penticton has been saying that the DAC funding for the SOEC is $40 million (see the latest press release on the subject). Of course this is nonsense since 28% of this $40 million in DAC was taken from unrestricted casino money to which Penticton was already entitled (see DAC for Dummies). [Ack! all this has changed—see the update below]

But take a close look at the SOEC numbers in today's story on the upcoming budget squeeze. To my utter amazement, the DAC amount reported by Mr. Kler has been reduced from $40 million to $30 million. And City Hall has finally hinted that the other $10 million is coming from "its own anticipated casino revenues".

For those who are keeping score, the cost of the SOEC is now roughly $80 million. Today's story confirms that the City of Penticton recevied approximately $10 million from the Provincial Government and only $30 million in unwanted DAC funding from Lake City Casinos (thank you Mr. Gadhia!). That means that the entire balance—$40 million—is one way or another coming from the pockets of Penticton taxpayers.

Update: 16 Sep 08

It appears that the City of Penticton has not, despite Freedom of Information Act requests, been completely forthcoming about the DAC deal. The net result is that I am indeed confused—but only because the City did not disclose the most important piece of this entire puzzle.

Here is the missing piece: the the Province of British Columbia wants to get out of the "destination casino" business. There are plenty of casinos in BC but only four (two of which are in New Westminster) have been designated "destination". The interesting thing about destination casinos is that the communities in which they are located get a significantly bigger share of the casino's revenue: 1/6 in Penticton versus 1/10 in Vernon and Kelowna. Naturally, this has been perceived as unfair and, apparently, the provincial government has decided to change all host local government agreements to the lower 1/10th rate of revenue sharing by 2009.

This intention is disclosed (sort of) in the 2007/08 annual report of the BC Lottery Corporation. The report (unlike all previous annual reports) simply drops any mention of the 1/6 rate (except for the Casino of the Rockies, for which negotiations are still apparently in progress). In other words, the provincial government has changed the rules of the casino game. Pentiction will naturally be a big loser in all this because the city will receive $1.25 million per year less than it would have under the destination casino agreement.

Fortunately, it looks like the provincial government was willing to make a deal to partially compensate Penticton and New Westminster for their loss of destination status and funding. In Penticton's case, the 6.7% of net casino revenue that the city is being forced to give up has been transferred (temporarily) to the South Okanagan Events Centre. This arrangement ends by 2020.

So the good news is that Penticton still gets 11 or so years of special treatment from the government with respect to casino revenues. The bad news—and this is really the central point of the whole deal—is that Penticton has had a major source of discretionary funds cut by 40%. And by not telling us about the loss of funding, the City of Penticton has allowed taxpayers to believe that we are in much better financial position than we actually are.

So some important questions naturally arise:

1. When was the City of Penticton going to tell us about the lost "host local government" casino revenue?
2. Why did the City of Penticton not fully explain both halves of the DAC deal (yes, we were getting increased money for the SOEC but only because the province had significantly reduced our share of unrestricted casino revenue)?
3. Why did the City of Penticton not disclose all of this to me prior to our September 10, 2008 press conference? After all, I made numerous specific requests to both City staff, the mayor and council members. I sent them my entire analysis in early August. What possible motivation could they have for letting me hold a press conference with incomplete information?

In the end, though, nothing has changed. Penticton: you are still $10 million poorer.**

** The cost is actually much higher since we have lost our "destination casino" status forever. But why quibble—it is a lot of money either way.

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Don Quixote note: Another part of the puzzle below.

Development Assistance Compensation Presentation

January 11 , 2008

New Westminster , BC – The City of New Westminster ’s Director of Development Services will present an overview of the new agreement between the City, Gateway Casinos, BC Lottery Corporation and the Province at the evening meeting of City Council on Monday, January 14, 2008 . The presentation will include a review of the $60.5 million in priority projects identified under the agreement to be financed by Development Assistance Compensation (DAC) funds.The Director of Development Services will be available for a media question and answer session outside council chambers immediately following her presentation.

When: 7:00pm , Monday January 14, 2008
Where: Council Chambers, City Hall
511 Royal Avenue , New Westminster , BC

See Also: http://vernonblog.blogspot.com/2006/09/bclc-speeds-up-casino-plan.html