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22 octobre 1997
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Public Accounts -- Wed., Oct. 22, 1997

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9:30 A.M.


Mr. John Leefe


Mrs. Eleanor Norrie

MR. CHAIRMAN: Ladies and gentlemen, we will commence the proceedings of the Standing Committee on Public Accounts for today, Wednesday, October 22nd. Our witnesses today are from the Nova Scotia Gaming Corporation. They are Ms. Dara Gordon, the Vice-Chairman and Acting Chairman; Ms. Sheila Butler, Vice-President of Finance and Administration; and Mr. Andrew MacIsaac, Senior Financial Analyst. We also have here, from the Auditor General's Office, the Auditor General, Roy Salmon, and Mr. Claude Carter, the Senior Audit Director.

Today, the Vice-Chairman, Mrs. Norrie, is not able to be with us and she is being ably replaced for today by Bill MacDonald, and Bob Carruthers is the Acting Vice-Chairman for the committee for today.

Welcome to the witnesses. It is the practice of the committee to allow the witnesses an opportunity to make a presentation to the committee in advance of committee members placing questions. So for the next few minutes, Ms. Gordon, we will turn the floor over to you and to those who are with you to be part of your presentation.


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MS. DARA GORDON: Thank you very much, Mr. Chairman, and good morning. Thank you for the opportunity to speak with you today about the Nova Scotia Gaming Corporation. Although I have taken on the responsibilities of Chairman just a few days ago, I have been Vice-Chairman of the corporation since February 1995. In those two years, the mandate of the Nova Scotia Gaming Corporation has been a very busy one. These have been years of transition and change. The corporation was established in early 1995 to promote and manage gaming activities on behalf of Nova Scotians. The regulatory side of gaming is managed by the Nova Scotia Alcohol and Gaming Authority, formerly the Nova Scotia Gaming Control Commission.

On the business side, our corporation's objective is to maximize gaming profits in a fair and responsible manner and to look out for the economic interests of Nova Scotia. Our main areas of business are the Atlantic Lottery Corporation and casinos. Last year the Gaming Corporation netted $119 million for our shareholder, the Province of Nova Scotia. In addition, the province collects another $14 million in direct casino win tax.

Our major source of revenue comes from the Atlantic Lottery Corporation. ALC administers the lottery tickets and the video lottery programs on behalf of the four Atlantic Provinces. The Nova Scotia Gaming Corporation is one of four equal shareholders of the Atlantic Lottery Corporation and it appoints two of eight members of the board of directors. For the fiscal year ending March 1997, ALC contributed a total revenue of almost $110 million to the coffers of the corporation.

In 1995, the Nova Scotia Gaming Corporation requested a shareholder's audit of the ALC financial framework. This was conducted by the Auditor General of Nova Scotia who also happens to be the auditor for the Nova Scotia Gaming Corporation. ALC received a good report card from the Auditor General. However, he did identify a number of areas for improvement and ALC is presently working on those.

The Nova Scotia Gaming Corporation also asked the Auditor General to review how profits get shared among the four Atlantic partners of ALC. His conclusions indicated the profit distribution needed review and updating. So right now we are working on that to make sure Nova Scotia gets its fair share of the profit from ALC. This is a priority.

Casinos are another key business area for the corporation. Our casino operator is the Metropolitan Entertainment Group which is a partnership of ITT Sheraton and Purdy's Wharf. 1996-97 was the first full year of operation for the Halifax interim casino and the Sydney casino. Casino revenue surpassed $70 million before casino win taxes were paid. This year, profits from the Sydney casino total, as of June 30th, $620,000. The Nova Scotia Gaming Corporation will pay this money to the province to split evenly between qualified Nova Scotian charities and the First Nations people who have signed gaming agreements with the province. Discussions are now taking place on the fairest way to distribute these dollars.

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Casino revenues have, however, fallen short of original expectations. For that reason, it is important to note that for the first four years of casino operations in Nova Scotia, the corporation receives an annual guaranteed amount of $25 million from ITT Sheraton, regardless of actual revenues. That is a total amount of $100 million for Nova Scotia. This amount is solid and it remains unchanged.

When the original casino agreements were signed in 1995, it was anticipated that the plan for casinos in Nova Scotia would evolve and take shape and it has. One of the advantages to having had an interim casino in Halifax was to test the Nova Scotian market and make appropriate adjustments to the plan for the permanent casino. This has been taking place and we are now in a position to move forward with a clearer, better plan for a long-term casino that is right for Nova Scotia. This process has taken longer than either partner had envisaged. There have been points of negotiation, times when we needed to step back and gather more information and we haven't agreed at every turn. But now things are moving ahead and beginning to take shape.

We have agreed with Sheraton on a new process and time line. These recommendations will be going forward to Cabinet in the coming weeks and a detailed announcement will be made shortly. There will be changes to the agreements because the corporation and its board want certain changes. However, the heart of the original agreement remains the same. Number one, there is no government money, no taxpayer dollars in the casinos. The Sydney casino, the Halifax interim and the Halifax permanent have been or will be built with Sheraton's money, close to $150 million in all. We still get the $100 million guarantee from the Sheraton, that is $25 million each year. The province still gets 20 cents off the top of every dollar of revenue generated by the casinos in the form of win tax. We have Sydney profits available and they will be going to charities and the First Nations people. In Halifax, 65 cents of every $1.00 of profit on the bottom line goes to the Nova Scotia Gaming Corporation. We, at the Nova Scotia Gaming Corporation, believe this is a good business deal for Nova Scotia.

The next few months, and, in fact, the next few years, will be busy ones for the Nova Scotia Gaming Corporation. It is our goal to ensure that gaming is profitable for Nova Scotia, that it is conducted fairly and openly and in the best interests of Nova Scotians.

Thank you and I would welcome any questions the committee may have.

MR. CHAIRMAN: Mr. Russell.

MR. RONALD RUSSELL: Ms. Gordon, one of the prime concerns, I think, that most Nova Scotians have and certainly the members of the Legislature have, is with regard to the slippage in the time-frame for the completion of the new casino. It is my understanding that at the present time the agreement has been amended to reflect a September 1998 date, I

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believe, and according to your annual report, there is a document somewhere in the works to extend that until May 1999. I was wondering if you can confirm that that is correct?

MS. GORDON: Well, as I mentioned in my opening remarks, the corporation has been working with the Sheraton to make sure that the permanent casino is the best casino, the right casino, for the Halifax waterfront. That process is taking time because, at the corporation, we have consulted widely, we have retained consultants to assist us in that process, and we believe that it is more important to ensure that Nova Scotia has the right casino on the Halifax waterfront for the next 17 years than to hurry the process.

At the moment, as I mentioned, the arrangements, we believe that we have reached principles of agreement with the Sheraton on the development, the process, the design and the time line for the permanent casino. That will be considered in going before Cabinet shortly. If it results in a delay of a few weeks, or even a few months, at the corporation the board believes that this delay is warranted to ensure that we do have the right casino on the waterfront.

MR. RUSSELL: These are recommendations that are going to Cabinet, you have stated, with the results of a consultant's report. Is that consultant's report available to, for instance, this committee?

MS. GORDON: Well, I am not perfectly certain myself on what information the committee is entitled to receive. Certainly whatever the committee is entitled to, we would be prepared to provide. We do have such a report and it was the board's intention, once the negotiations and this period that we are currently in with the Sheraton is behind us, to make that report available to the public.

MR. RUSSELL: Of recent date, the ITT Sheraton or the Metropolitan Entertainment Group, have taken out public advertisements, as they say, to set the record straight. As part of that advertisement, they state that penalties for construction delays are tied to resolution of the construction agreement. Those penalties have not been waived or adjusted. Do you agree with that statement?

MS. GORDON: Yes, I would agree with that statement, that there has been no waiver of penalties, nor is any under consideration at the moment.

MR. RUSSELL: I am not sure when those penalties are supposed to kick in, whether or not they were changed from the previous May 1998 date to September but, nevertheless, whichever date it is, those penalties kick in as of either May or September 1998?

MS. GORDON: The penalties arise if Sheraton fails to complete by the required completion date. I have already indicated that the required completion date may move by a matter of weeks or months because of the process that has been underway over the past year.

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The penalties themselves, the penalty clause stands as it always has. It will kick in if there is a delay beyond the required completion date. That completion date may change.

MR. RUSSELL: Yes, but if you keep moving that line forward, they are never going to have to pay any penalties.

MS. GORDON: Well, it is important to understand that the process that has resulted in the movement of the completion date to the current date, as disclosed in our annual report, of May 1999 and any further extension is a result of a process of discussion that we have participated in - that is the Gaming Corporation has participated in that process - and we have needed time to assemble information to ensure we make the right decision with respect to the permanent casino. To proceed in haste and to build a casino that is not well thought out and is not well suited to the Nova Scotia market does not make good business sense.

MR. RUSSELL: Well, Ms. Gordon, I would suggest to you that you have had two years to review the documents. I would suggest to you that the penalties that will not kick in, if we had stuck to the original construction date of May 1998, as of May 1998 this province would be entitled to $10,000 per day for every day following that that the construction was not completed and, indeed, one year later from that it would kick in at the rate of $15,000 a day. Surely, that is a tremendous loss to the Treasury of this province.

MS. GORDON: Well, the original schedule completion date, bear in mind, was based upon the original proposal, which was submitted back in 1994, being the appropriate proposal for Halifax. Now, we know based upon the results from the interim casino, which has not achieved the expectations, that some modification needs to be made.

MR. RUSSELL: Well, if I may just interrupt, whose fault is it that it did not achieve the expectations? That is not my fault or any other taxpayer in the Province of Nova Scotia. It is the fault of ITT Sheraton. They were the ones who came out with the proposal, they were the ones who drew up, in concert with the Government of Nova Scotia, the agreement. Well, surely to goodness, at that time those persons who made that agreement intended that the completion dates could be met and would be met.

MS. GORDON: Well, I think that Sheraton accepts the proposition that the market that they anticipated and that they projected was not what they found.

MR. RUSSELL: That is tough luck.

MS. GORDON: The Nova Scotia market is different from what they had expected, indeed, what many of the other proponents had expected. We have given them the time necessary to reassess their plan and to develop the right plan for the Halifax waterfront. We believe that that is the appropriate business decision to make, that we need to work with our partners to ensure that the correct casino is built on the Halifax waterfront.

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MR. RUSSELL: What guarantee does the Gaming Corporation have that there will indeed be a casino built down on the waterfront?

MS. GORDON: Well, of course, our contracts are in place. They are valid . . .

MR. RUSSELL: You have a contract but you have already broken the contract.

MS. GORDON: I am sorry. I would not agree that the corporation has broken the contract and nor would I agree that the Sheraton has at this stage. In what way do you feel that the contract has been broken?

MR. RUSSELL: Because you have changed the dates within the contract to accommodate the ITT Sheraton who are not making sufficient money.

MS. GORDON: Yes, but that was by agreement. So, if both parties to a contract agree to amend it, the contract has been amended. It is not broken or breached.

MR. RUSSELL: So, you are suggesting to me that this could go on ad infinitum until the year 2050 and we would still be negotiating a completion date for the casino?

MS. GORDON: Not at all. I am suggesting that we needed a reasonable and prudent period to study the situation that we found here in Halifax with the interim, and it was not up to expectation and Sheraton freely recognizes that. We needed the period to study the plans that Sheraton was putting forward, we needed time to retain consultants and expert advice to look at that, to make certain that the end result that will be built on the waterfront is the right one for Nova Scotia. That is a prudent business approach and that is the one we have followed.

MR. RUSSELL: Can you make available to this committee other proposals that are contained within that proposal that is now before Cabinet, that are going to materially affect that agreement?

MS. GORDON: I am sorry, other?

MR. RUSSELL: Well, one of the things that we know from your annual report is that the scheduled completion date of the permanent Halifax casino will be extended from September 30, 1998 to May 15, 1999, et cetera. What other changes are within that package going to Cabinet with respect to the agreement, or other rules and procedures, that are in place for the operation of the casino?

MS. GORDON: What you are asking me is what is contained in the recommendation that we are making to Cabinet?

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MS. GORDON: Well, I am not sure. The committee knows best about my obligation to disclose, which I am happy to do. We are worried, however, as a board, given that the negotiations are not completed about the effect upon the business deal and, indeed, our negotiating position if those terms should become public at this stage. We do believe that the process will be complete quite shortly and the terms will be released to the province.

MR. RUSSELL: Will the changes to the agreement reflect an advantage as well for the Province of Nova Scotia? What I am referring to here is the change of the completion date is to the advantage of ITT Sheraton. Is there something in the proposal that is going to Cabinet that will put the province in a better position? In other words, will the rental per square foot be reduced for the interim casino?

MS. GORDON: The proposal that is going before Cabinet is a negotiated result. We, the corporation, believe that on balance we have obtained more advantage than the Sheraton. I have said at the outset that we don't agree with the Sheraton on every point, we haven't, this has been a give and take process. We believe that the improvements contained in what is before Cabinet are beneficial to the corporation. So, to answer your question . . .

MR. CHAIRMAN: . . . be succinct please, we have to move on to the next questioner.

MR. JOHN HOLM: I just want to pick up on the same thing, first of all. I am interested in the proposed settlement that the corporation has approved for the ITT Sheraton. My question is, first of all, is it not correct that the corporation was instructed by Cabinet to approve that proposal?

MS. GORDON: Well, if I could back up for a moment, the corporation is autonomous from the government, it is administered and its policy direction is administered by a board of five people. It does, however, report to its shareholder, the Minister of Finance. In the process of negotiating with Sheraton, the corporation consulted widely, it consulted with external experts and others and all of its stakeholders, including the Province of Nova Scotia. The board's decision to recommend the terms of the amendment to Cabinet was achieved through a consensus process with input from many parties including the Government of Nova Scotia.

MR. HOLM: So my question still is, did the Cabinet direct the corporation, the board of the corporation, to approve this proposed settlement and did the casino, their lawyers or whoever, do any of the negotiations with Cabinet or Department of Finance, government officials, rather than the corporation? I want to know where the agreement originated. Did it originate at the Cabinet table or at the corporation?

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MS. GORDON: Well, the agreement has been a creature of the corporation. It has been negotiated and developed by the board of directors and its advisers. Your question as to whether anyone from government has been involved in the process, yes, they have been. They have been consulted and, indeed, their lawyers have been consulted.

MR. HOLM: Again, though, did Cabinet or a Cabinet Minister direct the corporation to approve the proposed settlement with the Sheraton?

MS. GORDON: Did Cabinet or a Cabinet minister?

MR. HOLM: Yes.


MR. HOLM: Did you have an indication from them that they wanted this approved?

MS. GORDON: Yes, we certainly did. As I mentioned earlier, Cabinet and its representatives were involved in the negotiation process. They worked with our lawyers, they worked, at times, with the lawyers from MEG and they were involved in the process, they are an important stakeholder for the corporation.

MR. HOLM: Indeed they are. My next question is, does the casino itself negotiate or have discussions directly with government ministers or Cabinet other than with the corporation? The corporation, as you said, is supposedly an independent arm's-length body that is supposed to be managing the affairs. There are numbers of questions whether the corporation is truly acting as an independent body or if the casino is not doing an end run around the corporation and dealing directly with government and Cabinet. Does it have such direct dealings with the government and Cabinet?

MS. GORDON: Just to correct. I had indicated that the corporation is autonomous; its board is appointed by the government and, as a consequence, it cannot be said to be totally independent of government. I have already indicated that government was involved in the process.

MR. HOLM: Directly with the casino?

MS. GORDON: Well, unfortunately, my tenure is fairly new, this has been going on, as Mr. Russell pointed out, for 6 or 12 months, and I can't speak to all conversations and meetings that have taken place. Certainly, to the best of my knowledge, members of Cabinet have never been involved in any direct discussions.

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MR. HOLM: The casino was supposed to be providing a detailed plan. Did they ever provide that detailed plan for the construction of the new casino? I am not talking about sketches, I am not talking about artistic drawings, I am talking about did they ever, as they were required, provide the detailed plan?

MS. GORDON: That has been the subject of some considerable discussion and debate with the Sheraton. Their view is that the contracts did not require more than conceptual drawings. Our view was to the contrary. The advice from our lawyers was that the water was muddied. Some of these changes that will be announced shortly will, I think, greatly improve that process and the involvement of the corporation in the approval process.

MR. HOLM: So your advice is that they are in breach of the contract that they signed and if they are in breach of the contract they signed, therefore, they say it should be subject to the $10,000 a day penalty for breach of that contract?

MS. GORDON: The advice that I am getting is that the question is not crystal clear and we have sought legal advice on that subject.

MR. HOLM: Or that the government doesn't want to proceed with it, at least at this stage in trying to collect anything?

MS. GORDON: No, what I am saying is, we have legal advice that it is not clear and that it is better and quicker to resolve things in a business setting than it is to pursue it under the contract.

MR. HOLM: The casino was also supposed to be developing and we had visions, Nova Scotians were told, that there were going to be all kinds of high rollers flipping into Nova Scotia, dropping huge wads of money down at the casino. The casino was supposedly developing an international marketing program that was going to be attracting those individuals to this province. Did they ever develop such a marketing strategy and, if so - you would presumably have a copy of it - could you provide us with a copy of their marketing strategy? One of the excuses given for why the casino hasn't been as profitable as we were sold that it was going to be was, in fact, that those high rollers haven't appeared.

MS. GORDON: Yes, that is one of the reasons that the Sheraton gives for the performance falling short of the original projections. They also found that the Nova Scotian market is considerably different from what they anticipated. It has taken some time for them to adjust and deal with the . . .

MR. HOLM: But they didn't develop that international marketing strategy?

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MS. GORDON: Oh, yes. I was going to come to that. We have had several marketing plans delivered by Sheraton. In the beginning days, of course, there hadn't been sufficient time to commission some independent work and survey, as a result that work has been done and the Sheraton has shared that information with us. You will find that the permanent casino will be developed mainly to try to attract the tourist or international traffic to the waterfront.

MR. HOLM: I would like to see a copy of that and I would also like to see an assessment as to what they have actually done. Rather than just developing some kind of a conceptual marketing plan, I would like to see what they have actually done, because if they haven't, I would contend that that is one more area where they are in breach of the contract and another reason that Nova Scotia could, if they would, have a good legal argument for calling, as the saying goes, the whole deal off.

I want to touch on another thing that has been in dispute between at least the former chair and it would appear to be a dispute between the annual report and the Sheraton, and that has to do with the money that would be used or could possibly - this $100 million and the aspect that the Sheraton would be able to deduct, as the annual report says, that they would be able to deduct the interest from the new casino from the $25 million totals.

[10:00 a.m.]

My question is, we can get around by all kinds of fuzzy words, we can say that that $25 million is still going to be coming in for the first four years, I want to ask, however, in that proposal that the corporation has agreed to and is sending back to Cabinet for approval, is there any condition in that, that provides the Sheraton with any kinds of concessions, any kinds of write-offs of their interest costs against revenues that are supposed to be coming to the province from the original agreement?


MR. HOLM: No concessions whatsoever?


MR. HOLM: So the annual report, you are saying, is wrong?

MS. GORDON: No, the annual report, as you have referred to it, referred to the situation as it was in May 1997. That is accurate disclosure at that time.

MR. HOLM: So that provision was in there in May 1997 and has been dropped?

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MS. GORDON: No. The income guarantee is a complicated subject that I should defer to the accountants on but on a conceptual level, the income guarantee is unaffected by the arrangements that are currently in the process of going to Cabinet.

MR. HOLM: What else has been affected?

MS. GORDON: In what sense? Do you want to know the terms of the settlement . . .

MR. HOLM: Well, I would certainly love to know those and I certainly have a freedom of information request ready to go if we cannot get them through this committee. I think that this committee does have the abilities to ask for those. We cannot ask for Cabinet documents but we are not asking for those. We are asking for the documents of the corporation.

I believe, as members of the Public Accounts Committee, we have a right. I would ask for Mr. Chairman's ruling on that but I would like to have a copy of the proposal, the proposed settlement that the corporation has approved with the ITT Sheraton. I would like to ask that that be provided to this committee. I make that as a formal request.

MR. CHAIRMAN: Mr. Holm is absolutely correct. We do not, of course, have the right to require that Cabinet documents be tabled here in the committee but we, as a committee, have every right to expect documentation requested by committee members be forthcoming from departments and agencies of government.

MR. ROBERT CARRUTHERS: Mr. Chairman, I am just wondering if what the witness has said is that this document is prepared and its purpose is to advise and recommend to Cabinet. If that is the purpose of the drafting of the document, I have some concern in that, simply, this person before us is not a Cabinet Minister, whether that protection - I just say I have some concern.

I would ask the Chairman to consider whether our committee has some legal advisers in that regard just to be sure that we are not putting this witness in such a position that, on the one hand, they may feel an obligation that they are reporting to Cabinet and there is some kind of obligation not to disclose, as opposed to the right of this committee to have full disclosure of its witnesses.

I just simply say, if the Chairman is sure that he has checked that out, that is fine with me. I just do not want this witness put in a position where they are hung if they go one way and hung if they go the other. I would just ask the Chairman to consider that.

MR. CHAIRMAN: I thank my honourable friend for his intervention. Mr. Russell?

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MR. RUSSELL: Mr. Chairman, I would just like to comment on the point of intervention that while the honourable member may have concerns, we have already been told that this Gaming Corporation is at arm's length from government and, as such, then indeed, papers can be made available to this committee without any reference to Cabinet at all.

MR. CHAIRMAN: Well, it is the view of the Chair that that documentation should be made available by the corporation and we look forward to receiving it from you in a timely fashion.

MR. HOLM: Just before I get onto another topic, for a moment - and I am not sure how much time I have left in the first round. (Interruption) My next question then that I would like to just pose on this whole issue is, when did the corporation actually have its vote to support or approve that proposed settlement? When was that done?

MS. GORDON: Gosh, I couldn't say the exact date.

MR. HOLM: The approximate date. Was it in the month of October, September, last January? When approximately would that have been done?

MS. GORDON: I believe towards the latter part of September but I truly could not say. I could check that and get that information for you.

MR. HOLM: But, certainly, long after the new Premier took office?

MS. GORDON: And he took office in?

MR. HOLM: June, I believe it was?

MS. GORDON: Yes, long after that.

MR. HOLM: All right.

MR. CHAIRMAN: Mr. Holm, I am checking my times here. Your time, actually, is close to expiry so if you could finish up in the next couple of minutes and then we can go on to the next questioner.

MR. HOLM: Okay, I thought you were being rather generous there. (Laughter) I don't like to challenge the Chair.

MR. CHAIRMAN: I misread my calendar. I thought it was December 25th. (Laughter)

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MR. HOLM: My next question, I am going to just throw it totally away from that whole topic just for a second and, hopefully, come back to it. I just have another question about the Atlantic Lottery Corporation, that is, that the Gaming Corporation, did I understand, do a review of the feasibility, financially and otherwise, of taking over, taking back within the corporation, those things that the Atlantic Lottery Corporation is currently doing, in other words, bringing it all home and getting out of that partnership?

That review has been completed and my question is, will you provide to this committee a copy of the review that was done so that we can find out, because there have been questions about the financial viability, whether we are or are not getting our fair share. There are also very real concerns about whether or not, because of the structure, you can ever get any kind of effective changes.

I would ask, would you provide us with a copy of that review that was done by the corporation?

MS. GORDON: Yes, if that is required, I certainly would but I would like to say, for the record, that I believe that that would truly impede the negotiation process that is underway with the other three shareholders, should that report be made available or released in any way into the public domain.

There is information in that report that, clearly, we require in order to negotiate the best position for Nova Scotia. It would, indeed, hamper negotiations if that was generally available.

MR. CHAIRMAN: I think we can move on to point two. Mrs. O'Connor.

MRS. LILA O'CONNOR: Ms. Gordon, I would like to ask, how long have you been with the corporation?

MS. GORDON: I was appointed in February 1995 which was when the corporation was established.

MRS. O'CONNOR: Can you explain your role at that time when you first were appointed?

MS. GORDON: Yes, I was appointed as a member of the board of directors. There were five directors appointed. I also function as vice-chairman of the corporation, meaning that in the chairman's absence, I fulfil his role.

MRS. O'CONNOR: What experience do you bring to the table?

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MS. GORDON: In terms of gaming, specifically, I had no previous gaming experience. In terms of business, I am a practising lawyer. I have practised law in the business area, financing and so on, for 18 years.

MRS. O'CONNOR: Now that you are the acting chairman, what are your priorities?

MS. GORDON: Well, the corporate agenda is set by the board of directors. The chairman and, now, in my role as vice-chairman, carries out the mandate set by the board.

The board's priorities at the moment are to push forward with the permanent casino and see that structure begin to emerge from the waterfront. We also are pushing hard to resolve what we feel to be inequities on the profit allocation formula with the Atlantic Lottery Corporation. Those are the two primary objectives of the board at this point.

MRS. O'CONNOR: How would you categorize the corporation's relationship with the ITT Sheraton? We have heard today that you don't always agree but do you agree most of the time? Do you find that you are really going forward or do you just think that you are taking one step forward and two steps back or are you finding you are taking the steps forward and this is going to progress quite quickly?

MS. GORDON: The corporation has sort of grown through an infancy over the past two years. Until 1995, there was no corporation and no entity mandated with the business side of gaming and that has been a difficult process. It has been a learning curve. It has also been that for ITT Sheraton. We are in a quite different regulatory regime than any other jurisdiction that they do business in, so naturally we have had our frictions. We haven't always seen eye to eye, particularly on the development of the permanent casino but we have a good working relationship. We are pushing forward with that relationship, we believe, with the resolution of these issues that are currently on the Cabinet agenda. With the resolution of those issues, that will go a long way towards enabling the relationship to move forward in a positive fashion.

MRS. O'CONNOR: Well, I may be one of the few on the committee, but I would rather see you take your time and do it right than go quickly and have it wrong. So thank you very much.

MR. CHAIRMAN: Mr. MacDonald.

MR. WILLIAM MACDONALD: Welcome, Ms. Gordon, to the committee. Do you believe that the negotiations with the Sheraton are the best now going on after you look at the last three or four years what has happened, and look at the casino and the future of gambling in Nova Scotia? Do you believe that the renegotiation part of it now is in the interest of Nova Scotians?

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MS. GORDON: I apologize, I wasn't able to hear your question.

MR. WILLIAM MACDONALD: The renegotiations that are going on now with the Sheraton due to things you found out over the last three years, do you believe they are in the best interests of Nova Scotia?

MS. GORDON: Absolutely. I mean we regard that as our mandate to work out the best business deal with the Sheraton, to push that forward on proper, prudent business terms and the board believes that that is the direction we are taking.

MR. WILLIAM MACDONALD: I think earlier the Opposition, when we first started, were worrying about seeing dancing girls and all that. I think the Nova Scotia Gaming Corporation has recognized that. They don't want that either and with renegotiation we are looking at a different direction. I think that is very positive for Nova Scotia and for the commission.

I think another concern was that when you first looked at it they were talking about, as they said before, out of town people, millionaires coming in and so on and so forth. Do you believe that now that they have been looked at, the smaller, more conservative casino is something that we seriously have to look at?

MS. GORDON: Your question was about a smaller casino? I am not sure.

MR. WILLIAM MACDONALD: There are some changes, I think, from the original, we're not getting the funds from out of town and so on and so forth. It is a question of how large the casino should be.

MS. GORDON: There will be no change in the scale of the casino, if there is any concern relative to that. The casino, the size, the amount of the investment, remains by and large the same but there have been adjustments both in the style of the casino and in the interior of the casino from lessons learned relative to the interim casino over the past two or three years. We believe that these adjustments will result in a better end product and the right casino for Nova Scotia.

MR. WILLIAM MACDONALD: Thank you. What did you do in the past before you came to the Nova Scotia Gaming Corporation?

MS. GORDON: It is not so much the past, I practise law and still do.

MR. WILLIAM MACDONALD: Do you have a private practice?

MS. GORDON: Yes, that is right.

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MR. CHAIRMAN: Mr. Carruthers.

MR. CARRUTHERS: There are some people, I am not one of them, but there are some people who believe that there is no need for a permanent casino. What is the fuss? Why do we need a permanent casino? I am not one of those people but there are some who say that. You can hear that on the street on occasion and I just wonder what is your view? Do you think that the construction of a permanent casino is something that is good, necessarily, to make this program complete?

MS. GORDON: Well, when we embarked upon this process in 1995, part of what the Sheraton undertook to do was to build us a permanent casino on the waterfront. It would be a completion of their mandate, of their undertakings that needs to take place. Those decisions with respect to the permanent casino were made in those time-frames back in 1995.

MR. CARRUTHERS: In my own head, I had some trouble with this. Profits that are shown seem to be continually stated from the private partner, being the ITT Sheraton, that they are not up to spec and it is because of the different markets. There are all sorts of reasons.


MR. CARRUTHERS: Of course, we say, as the people of Nova Scotia, well, we are getting our $25 million so them's the breaks, guys. I have never been fully convinced that there are not profits being made in other aspects.

The ITT Sheraton is a big outfit. It has a hotel there, it has restaurants, bars and other facilities. I think its room rates are fairly - well, they are not low. I don't think its absenteeism rate is all that low either.

You know, in many businesses - you are a lawyer; sometimes, maybe, you don't charge so much for a will. It brings clients into your office. Maybe you will get an estate some day.

I just wonder, how clear are we that this partner is not doing fairly - I wonder, do you think they might be doing just a little better than, sometimes, these numbers show, taking particular reference to the profits of the casino portion of this, well, it is an industry that is much wider than a casino. That is, of course, one of the reasons why - well, you answer that question. I will come back to the other.

MS. GORDON: I'm sorry, the question is, do I think they are doing better than the casino profits show?

[Page 17]


MS. GORDON: Well, ITT Sheraton has many bodies, arms and corporations. The hotel in which the interim casino is located is owned by one of those incarnations of Sheraton. We are conscious of that.

We monitor those, what we call, non-arm's-length transactions, quite closely. We have inquiries and we ask periodically that Sheraton explain and justify those sorts of related-party, as we call them, transactions. We are watching for those and we are satisfied that we have a good handle on the nature of those related-party transactions.

MR. CARRUTHERS: Just continuing on that, that is one of the reasons why I feel a permanent structure, not located in the hotel, is of some significance.

It just seems to me, if I was running the show for ITT Sheraton, I had a casino in my hotel, that I already had the hotel, it would be in my best interests to continue on in that aspect, whereas, the other partner, perhaps it would not be. Does that make sense to you?

MS. GORDON: Yes. I want to be careful here. There is no problem. We are watching those transactions; we understand Sheraton's approach and we have had no difficulty with Sheraton in that regard.

I do believe you are right, that a freestanding casino out of that hotel will relieve that part of the process to a great extent. That will be good for our go-forward relationship as well.

MR. CARRUTHERS: I compliment you that that has to be done right, because you don't get a second kick at the can in that one. You can play with an interim casino that is in the structure but once you get the permanent one, it is pretty hard to change horses in midstream then. I think that that is sensible.

The chairman has made a ruling about the recommendations that will be coming forward. Given that scenario, I realize that you cannot go into details but my concern is that when we look at these negotiations - and adjustments are always made, it's a changing world out there - I think people learned from the interim casino and I think that is why. You should learn and you change direction when it is necessary.

The adjustments that might be made, my concern is to ensure that those adjustments are not made strictly on an economic return level. That might be for the private partner, but for the public partner there must be other considerations. When one makes adjustments to the contract or to the direction that you are going, for such things as the social effects and the overall well-being of the economics of Nova Scotia as opposed to the private partner's well-

[Page 18]

being, is that something you are conscious of? Is that something that is reflected in these recommendations?

MS. GORDON: Yes, we do believe it is. Our primary mandate we see as the business mandate, but we see that in the overall context of a fair and reasonable approach to gaming in Nova Scotia. So with respect to the permanent casino, we believe we have been sensitive to some of those issues. Primarily, however, that is the mandate of the Nova Scotia Alcohol and Gaming Authority and we read their annual report and are sensitive to the directions that they are suggesting in that regard.

MR. CARRUTHERS: It is interesting you mentioned that because at some points in time, there was talk that a great deal of crime would come out of the development of a casino, and various types of crimes, and I know that the commission and others are always conscious of these organized crime scenarios. How do you think that is coming? How is the universe unfolding in that regard?

MS. GORDON: Well, the best information that I am receiving is those fears were totally unwarranted. As you know, we are under an obligation to report anything of that nature directly to the minister who, I believe, tables that in his annual report. The incidents that we have seen are very insignificant relative to what was predicted back during those discussions.

MR. CARRUTHERS: Sort of off that subject, I suppose you have some limited knowledge in this regard, but there has been discussion in the public and some discussion in the media about a change in the chairmanship in this organization. Can you tell us anything?

MS. GORDON: Well, I know that the chairman has resigned and that I have been asked to step in and assume the roles and responsibilities of the chairman until such time as a permanent chairman can be found. Mr. Fiske was also the Chief Executive Officer of the corporation and, in the intervening time until a Chief Executive Officer is appointed, Sheila Butler, our Vice-President of Finance, has agreed to assume those responsibilities. I am given to understand that a permanent chair will be selected in the short term; I understand from the minister's statement. On the Chief Executive Officer, the board of directors of the corporation will be, in due course, seeking an appropriate CEO.

MR. CARRUTHERS: I suppose it is sort of like asking those who the decisions affect the most to give a comment, but I think that is fair. This idea of splitting the two roles, that being the directorship role as opposed to the administration role, perhaps I could look to your compatriot to maybe give us a comment on that too, how do you see that? Is that an effective use of resources? Do you feel that that may be more effective than merging the roles, even though you might save a few dollars by merging the roles? What are your thoughts on that?

[Page 19]

MS. GORDON: Well, that is a difficult issue. Corporate governance, generally, is a topic of great debate these days, and the board of the corporation is sensitive to that. In many ways, given that Mr. Fiske served in both capacities, this issue was not a front burner issue in the context of the other things that were going on. However, now that Mr. Fiske has resigned, the board has reactivated its review of the corporate governance structure of the corporation because it is mandated to deal with that, and we are in the process of taking advice on the issues. There are pros and cons on both sides and I think the swirling debate reflects that.

MR. CARRUTHERS: Would your friend also like to have a comment on that? I don't require it. I just wonder if you would like to have a comment?

MR. SHEILA BUTLER: I think Ms. Gordon has said it all. (Laughter) Thank you.

MR. CARRUTHERS: Very wise. Thank you.

MR. CHAIRMAN: I would like to take this opportunity to intervene from the chair. I noticed on the last page of your presentation, Ms. Gordon, you say, "We have agreed with Sheraton on a new process and timeline.". This, you have indicated, is the process and time line that will define the recommendations that will be going forward to Cabinet in the coming weeks. Is this the same process and time line that had been created under the chairmanship of Mr. Fiske?

MS. GORDON: Yes, I believe so. The process certainly and the time line. Yes, that is a fair comment.

MR. CHAIRMAN: So, if Mr. Fiske were to look at the documentation that will be forthcoming to Cabinet, he would not find anything there that would be different from any recommendation with respect to process and time line that he would have made as chairman?

MS. GORDON: Oh, no. That, I think, is a different question and not . . .

MR. CHAIRMAN: Oh, I see. Perhaps you could explain to me why it is different.

MS. GORDON: The recommendation that is going to Cabinet, in large measure, I will not speak to every detail, Mr. Fiske would be familiar with.

MR. CHAIRMAN: Would he agree with it?

MS. GORDON: Well, at the board of directors' level, there was considerable debate and a give and take process. The board has recommended the minutes of settlement that have gone forward to Cabinet; whether Mr. Fiske agrees with it or not, I think would be up to him to respond to that.

[Page 20]

MR. CHAIRMAN: Did that board decision occur before or after Mr. Fiske's resignation?

MS. GORDON: Well, it has been active on the board's agenda, I believe, before.

MR. CHAIRMAN: Then one may conclude that Mr. Fiske was at variance with a majority of members on the board with respect to what process and timelines should be put in place, and what recommendation should be made to Cabinet?

MS. GORDON: Pardon me? You may conclude? Yes.

MR. CHAIRMAN: That is what I would conclude and as a consequence of that disagreement, Mr. Fiske chose to resign the chairmanship?

MS. GORDON: Well, I am not sure that the issues are that simple, and I really would defer to Mr. Fiske to comment upon those.

MR. CHAIRMAN: Well, indeed, we had hoped to have Mr. Fiske before the committee today, but a majority of the committee voted not to have him appear today. So, we are denied that opportunity, but it is one that perhaps at your recommendation, we will pursue at a further date. I think I will go on to Mr. Russell.

MR. RUSSELL: Mr. Chairman, I would like to return to the change that is presently before Cabinet. As I understand it, one of those changes has to do with the amortization of the cost of the development of a new casino, and that is new and it is going to reflect on that $100 million that we would receive over the four year period from the ITT Sheraton?

MS. GORDON: No, there is no change to the amortization schedule in the new proposal that is going before Cabinet.

MR. RUSSELL: Well, perhaps you could set me straight. What was the original proposal with regard to amortization?

MS. GORDON: The original deal, like going back to 1995?

MR. RUSSELL: Yes. Just in a capsule.

MS. GORDON: I wish I could. It is a complicated financial formula. The effect of it is that the income guarantee is adjusted or reduced by an amortization, for example, of the cost of the interim casino. That has been ongoing. That is the essence of it.

[Page 21]

MR. RUSSELL: Well, there is a problem in that the costs that the casino generates, you have no control really over what those costs are but they are charged against the profits of the casino which in turn become the profits for the Gaming Corporation. As a for instance, let me just start right off with one in particular, and that is the fact that as I understand it the Hilton Hotel is charging ITT Sheraton Gaming Corporation $63 or $64 or something a square foot, whereas the going rate for class A accommodation in downtown Halifax at the max is around $18 and generally at the present time is somewhere between $12 and $15, I would suggest. How was that determined?

[10:30 a.m.]

Perhaps, because I know time is short, how do you determine the cost of food and beverage going into the casino that is supplied by the hotel? These are all charged against the profits of the gaming arm of ITT Sheraton which, in turn, reflects upon the profits that accrue to the province.

MS. GORDON: I want to dispel any impression, however, that they are charged willy-nilly and without regard to proper business practice and generally accepted accounting practices. That is part of our role to ensure that the costs that are charged against the Sheraton revenues are fair and reasonable ones. That's what we are engaged in. That is why we monitor the related-party transactions and other transactions.

Now, to come back to your suggestion, because I have seen and read this in the press myself, that we are paying $65 a square foot is ludicrous. The rate that has been negotiated is a reasonable rate for the prime waterfront location that we are talking about there and the special purpose use of that facility. I don't want to say a specific dollar figure, but we are talking in the $20's per square foot; $65, I don't understand where that figure was derived from.

MR. RUSSELL: Well, if that figure is so wrong, can you produce for us the actual figure per square foot that is being paid to the hotel for that space?

MS. GORDON: Absolutely; yes.

MR. RUSSELL: You can?

MS. GORDON: Oh yes.

MR. RUSSELL: You say it is a lot less than $67 million.

MS. GORDON: Indeed, yes, indeed.

[Page 22]

MR. RUSSELL: Profits from the catering division of the hotel that provides the food and beverage services for the casino, how are those costs derived and do you have any indication as to what the true cost of that food service is to the casino?

MS. GORDON: First of all, let me say that it is not a significant cost relative to the overall expenses of an operation such as that on the waterfront. But as part of our process of monitoring these non-arm's-length transactions, that is an area that we are presently looking into. We believe that costs that are being charged are, in fact, fair market rates, if you like, but we want a little more assurance on that particular issue.

MR. RUSSELL: Why should the amortization of the costs of the development of a new casino be charged back against the province?

MS. GORDON: Well, if you can believe it, it is because it is good for the province.

MR. RUSSELL: Okay, you have convinced me. (Laughter)

MS. GORDON: It has to do with the income guarantee. Every dollar we charge back to them comes out of their pocket.

MR. RUSSELL: When the cost of amortization of, I presume, the borrowing that ITT is probably going to make for themselves to build that new casino is going to be charged back against the bottom line, you say that that is good business for the province? I think it is great business for ITT Sheraton.

MS. GORDON: Yes, but now think about it, say the interim casino cost $24 million, we are going to amortize that over three years - am I correct there? - that means that is roughly $8 million a year.

MR. RUSSELL: How much is the interest on that?

MS. BUTLER: Twelve per cent.

MS. GORDON: Twelve per cent. Bear in mind that was back in 1994 when those rates were negotiated. But in any event what I want to point out, the $8 million, Sheraton assures us of $25 million every year. So if they deduct $8 million then they just have to put it back in on the guarantee, so it is to our advantage to have and in effect paying for that facility out of the income guarantee years and that is what we are doing.

MR. RUSSELL: In effect, though Ms. Gordon, truthfully, this $100 million was simply a carrot that was put out there to ensure that the metropolitan group actually got the contract to establish a casino in downtown Halifax. I think there were three or four applicants to put a casino in downtown Halifax, this group came along and offered $100 million, which

[Page 23]

was a bonus if you will, so I mean regardless of what we say about that, it is coming out of our share of the profits anyway. If the casino, and it would be wonderful, made $100 million this year, we would get our share of the $100 million and if it was in excess of $25 million that is what we would get. The $25 million is simply a bottom step of the profits that are going to accrue to the province and we are guaranteed that for four years, after that heaven knows what is going to happen.

MS. GORDON: Well, I wasn't around when the deal was negotiated but given the history of the interim casino over the past two years, it is a darn good thing that we had the $25 million guarantee. Because without it, we would have received 65 cents of every bottom line dollar, which would have been far short of the $25 million guarantee that we do receive.

MR. RUSSELL: My problem is that I am not sure that that bottom line established by the Gaming Corporation and ITT Sheraton is actually the bottom line.

MS. GORDON: As I said to you, our job is to monitor the Sheraton, we don't take that job lightly. We want to make sure that they adhere to the contracts, that the costs are appropriate and we are in their face to do that. We are satisfied that the bottom line is a reasonable one.

MR.. RUSSELL: Mr. Chairman, how much time do I have?

MR. CHAIRMAN: About another four or five minutes.

MR. RUSSELL: All right, I would like to go off on a different tack for a moment. When the casino is finally built, let's say on the waterfront, and they start tearing out the slot machines and the tables, et cetera, from the present Hotel Hilton, is the casino responsible for the cost of reverting that space back to the hotel?

MR. CHAIRMAN: Just for the record, you spoke of the Hilton, I think you meant the Sheraton.

MR. RUSSELL: I am sorry, the Sheraton Hotel. When they rip those tables, et cetera, out of the Sheraton who is responsible for the cost of restoring that space to hotel usage?

MS. GORDON: The restoration of the leasehold premises will be a cost of the new casino.

MR. RUSSELL: Who is going to identify what those costs are? Let's face it, the operators of the casino are actually the operators of the hotel, it is really the same corporation, just split into two very little neat divisions and charging one against the other, of course, a very convenient way of doing business. Those costs that are established to revert the hotel's space, have they been established in advance of anything being done?

[Page 24]

MS. GORDON: No, I don't think they have been established in advance, we would have some estimates. I want to be clear that we haven't approved any amount in advance, we have approved the principle of restoring, taking the leasehold improvements out and restoring the premises to the state they were in when they were leased. That's typical under a lease. We have yet to engage in the debate of how much and what portion can be charged to the new casino. That is something that is ahead of us and part of our role and Sheila's staff is to ensure that those charges are reasonable.

MR. RUSSELL: Normally though, surely, leasehold improvements that are made to space that you are going to occupy, in other words, if the government moves into the Bank of Montreal over here and wants to lease the fifth floor, either the owner of the building does the leasehold improvements or the government would do the leasehold improvements and that would be adjusted in the lease rate, but I haven't heard about this business that when you leave you are going to have to tear out all your leasehold improvements.

MS. GORDON: I think normally in a commercial lease when you leave, the tenant has the obligation to restore the premises to the condition they were in when they let the premises.

MR. RUSSELL: Yes, but we are just talking about straight space; whereas, down at the Sheraton, as I understand it, we have to return that space back to hotel-type space which is a much more expensive proposition.

MS. GORDON: We don't have to return it to hotel-type space. We have to restore it to the condition it was in before the interim casino was put in there.

MR. RUSSELL: This cost is reflected against the bottom line on which our profits are based?

MS. GORDON: It is not directly, of course, against the bottom line, it is added to the total capital cost of the new facility and, eventually, amortized over the term of the contract.

MR. RUSSELL: So the cost is added to the cost of the new facility?

MS. GORDON: Yes. They and we, you know, eat 35 cents or 65 cents of each dollar on the ultimate sharing formula.

MR. RUSSELL: Okay. That same type of agreement applies to the amortization of the new structure or . . .

MS. GORDON: Right, the new permanent casino when it is built, the total capital cost of that casino - which, you know, we believe will be around $100 million - will include a provision for restoration of the old premises that the interim casino occupies.

[Page 25]

MR. RUSSELL: Does that cost of the new premise also - well, obviously, it would include new gaming machines and what have you, I take it. It is equipped . . .

MS. GORDON: Well, some of the equipment that is currently in the interim casino will, of course, move over to the new casino, yes.

MR. RUSSELL: Yes. Does that include the cost of equipping all the facilities? For instance, as I understand it, the new facility may possibly have two or three restaurants. That would all be included in the costs of . . .

MS. GORDON: The aggregate cost of the freestanding casino, with all its various amenities, is what we are talking about.

MR. CHAIRMAN: Can we go on to Mr. Huskilson, who has not yet had an opportunity to place questions.

MR. CLIFFORD HUSKILSON: Thank you, Mr. Chairman.

Ms. Gordon, I was wondering, what are the specific benefits to the province that are created by the casino project? If you could give us some details about that, please.

MS. GORDON: Well, one of the most significant benefits will be immediately seen during the construction phase and that will be the additional construction activity and jobs created as a result. It will be a larger facility generating considerably more by way of revenue and, hence, increasing the tax base for the province. The province gets 20 cents off of every dollar by way of a win tax. It will employ more people; it will be a significantly larger facility than what we currently have.

The facility will also return more bottom line to the corporation which, as you know, we pay on to the province, so 65 cents of every dollar profit on the bottom line will be paid to the province.

There are also some non-economic benefits that are very attractive. We believe that the construction of the freestanding facility on Parcel P, which is slightly north of Purdy's Wharf development, will pull the Halifax waterfront northward. It is designed to attract and enhance the tourism industry here and, particularly, on the waterfront, and to make it more of an international destination. That is in keeping and compatible with the objectives that we are trying to achieve through the casino, as well, to attract more international players. We feel that that is a significant enhancement as well.

As will be released in due course, we will see other amenities in the casino that will be of benefit to the Halifax waterfront, as well.

[Page 26]

MR. HUSKILSON: Okay. How many employees are there now at the Halifax casino?

MS. GORDON: I am told that I don't have that number here right now, unfortunately - at the Halifax interim?

MR. HUSKILSON: Yes. See, what I am trying to do is find out how many more there will be when the new place is built, to get a contrast.

MS. GORDON: Yes, well, those are not simple multipliers because of the fact that the table gaming activity, which employs more people, will remain at roughly the same level. The other amenities, for example, the slot machines, will increase, and we believe that that will give rise to the increased employment level. Plus, the additional revenues that are projected will keep those table games active for a greater period of time each day.

MR. HUSKILSON: So the square footage in the new casino would be much larger, is this what you have said?

MS. GORDON: Yes. I can give you some specifics on that. The new permanent will be 33,000 square feet. That is the gaming floor alone, which is primarily what we have at the moment at the interim casino which would be about 11,000 square feet existing.

MR. HUSKILSON: Just a few questions about the Sydney casino. How are they making out, do they seem to be doing well? Would you like to expand on that for me, please?

MS. GORDON: The Sydney casino is doing quite well. The market was not as expected in Sydney either, but the market plan has responded more quickly in Sydney. Sydney is doing quite well. We believe there will be profit in excess of $1 million from the Sydney casino this year for distribution. As you know, 50 per cent goes to community charity groups and 50 per cent to the First Nations. The Sydney market place seems to be working quite well.

MR. HUSKILSON: So, you said there would be about $1 million?

MS. GORDON: It will exceed $1 million. The extent of the excess is still a little bit of a speculation.

MR. HUSKILSON: How many employees would be at the Sydney casino?

MS. GORDON: Once again, I think I am without those numbers. I apologize. I can certainly provide those in due course.

MR. HUSKILSON: You will provide those later?

[Page 27]

MS. GORDON: Yes, I will.

MR. HUSKILSON: What is the time-frame, when do you think a new chairman will be selected, or whatever? Do you know what that time-frame is?

MS. GORDON: No, I know no more than what I read in the minister's press release.

MR. HUSKILSON: One last question. When do you think that the new casino might begin, when they might have a ground-breaking ceremony?

MS. GORDON: I hope that we will see that early on in the new year.

MR. HUSKILSON: Thank you.

MR. CHAIRMAN: Mr. Hubbard.

MR. RICHARD HUBBARD: Ms. Gordon, I want to shift gears a little bit and talk about another subject. We have been hearing and reading about plebiscites lately with the video lottery terminals and I wonder if you can tell me how our video lottery terminal program compares to other provinces?

MS. GORDON: Well, all four Atlantic Provinces have video lottery programs. Ours is similar to Newfoundland's. We place video lottery machines in locations and share a percentage with the operators in the location. We do this through the Atlantic Lottery Corporation, so they are in charge and, through their agreements, deal with the video lottery program. New Brunswick and Prince Edward Island are quite different; in fact, New Brunswick is going through some policy revision. They haven't found that their program has worked as well. It has been more privatized, less under the control of the Atlantic Lottery Corporation.

That is sort of on a structural level. On a more general level, Nova Scotia has the fewest number of video lottery terminals per capita as compared to the other Atlantic Provinces. We have a fairly rigorous regulatory regime here under Part II of the Gaming Control Act, so the Nova Scotia Alcohol and Gaming Authority - they have just changed their name - are responsible for the regulatory and monitoring side of that program. That is quite different from New Brunswick, P.E.I. and Newfoundland who don't have that sort of regulatory regime. So, we do have a regulatory watch-dog, if you like, on all of our gaming activity and, since you have asked, particularly in the VLT program.

MR. HUBBARD: You say theirs is much different than ours, have they looked at our situation; have they given any thought to changing?

[Page 28]

MS. GORDON: My understanding is that they have started to move in our direction and I believe the Minister of Finance in New Brunswick recently had a press conference announcing that there would be movement in that direction. I understand that they are currently in negotiations with what they call their coin operators, who are sort of their private sector group that run that program. Nothing has been finalized, I don't believe.

MR. HUBBARD: Just one other question. How does the situation prior to VLT control and the regulations contrast to the situation today?

MS. GORDON: Do you mean before we had . . .

MR. HUBBARD: Numbers and illegal machines and all of those things that were out there?

MS. GORDON: We understand that we have virtually eliminated the grey machines here in Nova Scotia and that is information that is derived from outside sources, including the RCMP. We think that our approach to the VLT program has worked, in that it has eliminated that grey machine activity which still remains a problem in some other provinces.

MR. HUBBARD: The numbers that we have out there today, how would they contrast, say, to the illegal machines years back?

MS. GORDON: I was going to say I don't know how you would count illegal machines, but I am told that someone did and there must have been about 4,000, is what the information was.

MR. CHAIRMAN: And when would that have been?

MS. GORDON: That would have been pre-1991, when the VLT program was introduced. Our range, now, is around 3,000 legal machines in the province. Some of those have been contracted to the First Nations.

MR. HUBBARD: So, you are suggesting that there is much better control now than there was in 1991 or 1992.

MS. GORDON: We believe that. The Atlantic Lottery Corporation who administers . . .

MR. CHAIRMAN: I think you said before 1991.

MS. GORDON: Yes. Was it 1991? Yes, before 1991.

MR. HUBBARD: Thank you.

[Page 29]

MR. CHAIRMAN: Mr. MacArthur. I think you are filling in for Mr. Colwell?

MR. CHARLES MACARTHUR: Yes. Mr. Huskilson asked a couple of questions about the Sydney casino and I was wondering if the ITT Sheraton has intentions of moving out of Centre 200 in the next number of years to build a permanent casino in the Sydney area, or is that down the road quite a few years? Do you have any idea?

MS. GORDON: I haven't heard any suggestion to that effect. I think the Sydney casino, when it was built, was intended to be the permanent casino. Of course, market will dictate that in Sydney and if good business planning would require a move, I am sure that the Sheraton would monitor and consider that, but I haven't heard anything along those lines.

MR. MACARTHUR: The other question I have is about the $1 million and 50 per cent goes to the Native community, is the other 50 per cent decided by the corporation or does the government decide what money would be given to what charity?

MS. GORDON: The corporation will pay that $1 million on to the province and the province deals with that under the gaming agreements with the First Nations people. I believe they are currently developing a policy relative to the portion that goes to charities and community groups.

MR. MACARTHUR: I am glad to hear that the Sydney casino is doing well. The rumour, quite some time ago, was that it wasn't a viable situation and that maybe it would close at some particular time, but I guess your information today is that it is doing quite well, or reasonably well, and we would hope that it would continue.

Mr. Huskilson asked the other questions that I wanted to ask, so I thank you, Mr. Chairman.


MR. HOLM: You have, of course, worked with Mr. Fiske for a number of years. I guess my first question - which is really a personal assessment, I guess - did you find that he was, indeed, a very capable individual?

MS. GORDON: I certainly enjoyed working with Mr. Fiske. We had a close relationship, we shared a lot of thoughts and engaged in a lot of debates. I thoroughly enjoyed the time that I had to work with Ralph.

MR. HOLM: I guess that is a roundabout way of saying that obviously if you enjoyed working with him that you thought he was quite capable. Would you describe him as a person of principles, of integrity?

[Page 30]

MS. GORDON: Yes, I certainly would.

MR. HOLM: Certainly the Sheraton casino spent a few dollars in putting out quite expensive advertisements and these ads came out just very briefly, of course, after Mr. Fiske resigned. Some might suggest, reasonable people, that this is the Sheraton's response to the kinds of concerns that Mr. Fiske has raised. Is there anything in that advertisement that the corporation would disagree with?

MS. GORDON: I would have to beg for a copy to read it quickly. Thank you. Most of those statements, I would be disposed to agree. I would have phrased them slightly differently. The one you have marked, that is the question of formal and final approval has yet to be received. That certainly is a true statement. That is also where Sheraton indicated that it has not delayed the process and, of course, my remarks would not be consistent with that. I would say to you that both Sheraton and the corporation have through a result of their discussions and negotiations to hit upon the right casino for the waterfront, that contributed to the delay.

MR. HOLM: I read the ad and I thought it was a very craftily worded one to say very little so that you could interpret almost anything into it and in a roundabout way. I will leave that for a moment.

I had asked a question before and the committee had agreed that you are going to be providing some documents on the proposal that the corporation has approved. My simple question is, when can we expect that? I would not want that left hanging that we might have that information provided in six months or one year's time. That is something that is obviously readily available. Can we expect that that would be forwarded on to the committee within, let us say, a week's time?

MS. GORDON: Oh, I think so, yes.

MR. HOLM: Another point, you were talking earlier about how the corporation monitors - and that was the word that you used - the related-party transactions. My question is, does the corporation have the authority to audit those numbers to, in fact, verify that there are the legitimate kinds of expenses? Does it have that right to audit and does that audit occur, of their partner, the casino?

MS. GORDON: Yes, we do have the right to audit. Sheraton has their own independent auditors, a private accounting firm. We have worked with them to get the information we require and we have, through our own staff and through the Auditor General, tested and reviewed the information.

[Page 31]

MR. HOLM: But you are relying on the auditor that works for the Sheraton. Certainly we have had some dispute, even in the Province of Nova Scotia, about whether or not the audits of the province should be done by the Department of Finance's private auditor or whether it should be done by the Auditor General who is, of course, a servant of the House and completely independent. My question is, has the corporation employed the services of an independent auditor to look at those books and to, in fact, find out not only if the beans add up but also to check and find out if the business practices are appropriate in terms of Nova Scotia?

MS. GORDON: What I wanted to clarify is that we have been monitoring, and I want to make it perfectly clear that that has been through our auditor, the Auditor General. We also employ our own accounting staff for that purpose. If the question is, have we actually exercised our right to go in and carry out an audit, no, we have not at this stage.

[11:00 a.m.]

MR. HOLM: Do you intend to do that?

MS. GORDON: It depends upon the results and the advice we receive from our auditor, from our staff and the further information and its availability.

MR. HOLM: You were talking earlier too and you indicated that the price per square foot was way off the one that was in the press. I can't remember. I thought it was $50, it might have been $63. You indicated that it was somewhere in the $20's. Now, that is the per square foot cost of the space, presumably. Does that include the cost for shared services or shared costs in the facility that might be assessed against the casino, it could include the doorman, doorperson I should say, or all the others? In a lot of commercial leases, there are shared costs that are tacked on to the per square foot. Does it include the cost of the leasehold improvements that were done in the casino space? What I am trying to get is, the total actual per square foot cost, including all of the add-ins that the casino is paying the Sheraton for that space?

MS. GORDON: Well, it is the square foot cost, first of all, to answer that question. The operating or business costs associated with the business of the casino are dealt with separately as part of the expenses of the casino.

MR. HOLM: No, this is a commercial lease, presumably that one pocket of the Sheraton corporation, the casino, has with another pocket of the same corporation, and they are leasing space, renting space from themselves, they have commercial contracts presumably to rent that space. Most commercial space, and my experience is rather limited except insofar as my own leases, but I do know that most commercial leases not only have a per square foot cost, they also have other costs associated that would relate to shared costs, and also would relate to any leasehold improvements. What I am trying to figure out and that is all calculated

[Page 32]

in on a per square foot basis, what is the total cost of that space as it works out on a per square foot base?

MS. GORDON: That would be a difficult number to provide you with because the per square foot cost that I am talking about is the basic rent for the space. The operating costs are included as part of the business operation and are deducted from the revenues of the casino.

MR. HOLM: Leasehold improvement costs that were done to switch it over basically from restaurant area to the casino, those are separate costs and are being borne and being assessed against the profits?

MS. GORDON: Yes, the way those would be treated, and here I would ask Sheila to jump in if this is inaccurate, but they have been included as part of the total capital costs of the interim casino and amortized under the arrangement that we have with Sheraton. So, they would turn up, to answer your question, as an operating cost or a deduction from revenue.

MR. HOLM: In the Sydney Casino, what is the per square footage rent charge there?

MS. BUTLER: There is no charge for the facility itself. There is a charge for land that they are leasing from the municipality, but the building is owned.

MR. HOLM: So, what would be the land lease? Any idea what that works out to?

MS. BUTLER: I can get that for you.

MR. HOLM: (Interruption) That is true, the amortization cost of the business in Sydney, of course, would still be charged, right?

MS. GORDON: Yes, that is right because the cost of Sydney would have been financed by the Sheraton and they are being amortized over the agreed upon term which I believe is 10 years in the case of Sydney.

MR. HOLM: I want to pick up, and I am being maybe a little bit nit-picky on this one and it just deals with the amortization, but I just want to clarify something in my mind.

MR. CHAIRMAN: If you could clean up in the next couple of minutes.

MR. HOLM: Well, I will have to. In the earlier series of questions, I asked about the annual report and the comments that were made about the amortization costs against, okay?


[Page 33]

MR. HOLM: You indicated that that was correct for May 1997. You also indicated that there is nothing in the new proposal that affects that issue, that is going to change that. My question is, between May, when the annual report was correct, and the time that the proposal was approved in September, was there anything else done and submitted to Cabinet for approval that has any effect on the amortization and the deductions of those monies from either the $25 million or any other profits? Was there something else - you were vice-chairman, of course, during that period of time - other changes, that affect the financial arrangements during that intervening time?

MS. GORDON: Between May and September? I don't think there was anything.

MR. HOLM: Yes, because it was accurate in May but apparently now it is not.


MR. HOLM: When did that change and how did that change? How did what was accurate in May change to not be accurate anymore?

MS. GORDON: What you needed in order to make it accurate in May was an amendment that we didn't give. So that means that that statement would no longer be correct.

MR. HOLM: So in other words, the annual report was wrong.

MS. GORDON: No, it was absolutely correct at that time. That was issued at the end of June or June 20th, a time to that effect, at a point in time where we felt we should disclose what the agreement in principle then was. (Interruption) May 30th, okay. Of course, it has since changed.

MR. CHAIRMAN: We will finish up at 10:08 a.m. with you, Mr. Holm. I will give you a minute to finish up.

MR. HOLM: I guess the last question I will ask, I will just throw this one out, certainly when the deal was originally negotiated with the Sheraton, the price tag, if Nova Scotia was supposedly going to get out of it, was in the hundreds of millions of dollars in penalties that we would have to pay. If one looks at a lot of the things that have happened in terms of the kind of marketing strategy that they have or have not done, the fact that they haven't provided the detailed plans, that they didn't begin the construction on time, some reasonable people might conclude that the province could make a good argument that the Sheraton has, in fact, broken the deal that they signed.

My question is, has the corporation calculated, figured out, if Nova Scotia decided, we are unhappy with what is going on, we believe you are in violation of our original agreement and we are going to cancel that deal, has the corporation or the government

[Page 34]

looked at that and do we have a legal opinion that would indicate whether we could or could not win or if we were to try to get out of it, what would the cost be to the Nova Scotia taxpayers today in terms of the bottom line, to cancel the deal and penalties?

MS. GORDON: We have considered all alternatives. We have tried to anticipate all directions that this could move in and we have received legal opinions on some issues, not each and every one that you have described, as we have worked our way through the piece with Sheraton. I have said, and I say again, that the penalty is not being waived in any way. We, the corporation, have agreed with the Sheraton that time is necessary to make sure we get the right casino. It is clear that the original projections, and thus the original proposal, was not appropriate. Some time had to be allowed for those discussions and we have agreed to that. As a result, we will get the right casino for Nova Scotia and to us that is an important business consideration.

MR. CHAIRMAN: And speaking of time, it is time to move to Mrs. O'Connor.

MRS. O'CONNOR: I guess I would like to make a comment and if you want to respond, that is completely up to you. We all know that when boards meet that not everybody on the board will always agree with everything that is happening and being said at the time. It is up to the board member, if they don't agree, whether they want to stay, whether they want to continue on the board. I believe that has happened to one of the board members and a lot more is being made out of it than what maybe needs to be made. The board member didn't agree and so decided to move on. If you want to respond, that is fine.

MS. GORDON: I can only agree with your general observation, that a board isn't a very good functioning board if there isn't a lot of debate and consideration of different angles of every issue.

MRS. O'CONNOR: Would you explain to me, please, what do you see as the future of gaming in Nova Scotia?

MS. GORDON: Gaming in Nova Scotia, to my mind - and I believe the board would echo these sentiments - has changed significantly since 1995 in the introduction of the new Gaming Control Act which squarely places the business of gaming in the hands of the Nova Scotia Gaming Corporation and takes them out of the regulatory business and puts that separate and apart with the Nova Scotia Alcohol and Gaming Authority. So that has certainly changed the landscape. The corporation and the commission, as it formerly was, and now with its new name, are working through the relationship and the implications of that.

The Nova Scotia Gaming Corporation is now operating directly through its partner, Sheraton, and through the Atlantic Lottery Corporation in a highly regulated environment and we are still adjusting to those changes. Nevertheless, we have a business mandate to push

[Page 35]

forward and at the moment we are giving the casino the priority it deserves to ensure that early in the new year we will begin to see the structure emerging from the waterfront.

Our next and most significant priority is the Atlantic Lottery Corporation in all its forms. It does carry on the lottery ticket business. It deals with the VL program that is currently under scrutiny. It has been asked to look at Maritime harness racing, so there is an enormous number of business segments that the Atlantic Lottery Corporation is currently considering and that whole relationship, our auditor has advised us, has to go under review and consideration. That will be the agenda in the forthcoming year.

MRS. O'CONNOR: I will end by asking, since you went on the board in 1999 and now that you are there as Acting Chairman, you are convinced that the Sheraton isn't and won't be ripping off the Province of Nova Scotia?

MR. CHAIRMAN: I think that is 1995.

MS. GORDON: Yes, 1995.

MRS. O'CONNOR: Yes, 1995, I am sorry.

MS. GORDON: Yes, obviously we feel that the amendments that we have recommended to the agreement will continue, an agreement and a relationship with the Sheraton. We believe that we received the concessions and the things that we required, and to my mind this is a good business deal and one that will work for the corporation and for the people of Nova Scotia.

MRS. O'CONNOR: Thank you very much and I wish you all the luck.

MR. CHAIRMAN: Mr. MacDonald.

MR. WILLIAM MACDONALD: Ms. Gordon, I have been asked different times, is this the end of gaming casinos in Nova Scotia? Is there interest from any other groups around the world or in Nova Scotia, or anywhere else, that are interested in opening further casinos, or is the revenue or the possibilities there at all? Not that I want them, I am just wondering if there is any interest from other groups?

MS. GORDON: I couldn't say for sure the extent to which we may have had inquiries and active interest. We do seem to receive a fair amount of press in the media and journalistic circles for the casinos, nationally and internationally. Beyond that, I don't think I could comment specifically.

[Page 36]

MR. WILLIAM MACDONALD: I saw in the paper yesterday, I think the ITT group has been bought out by somebody else again there now and they don't know who you will be dealing with next week, but it is quite an interesting process.

MS. GORDON: We are monitoring that situation closely and it appears that ITT Sheraton will continue to exist in its current form, so far as our contracts are concerned.

MR. WILLIAM MACDONALD: Just another short question. There is a lot of concern, I guess, in Nova Scotia with the position of Nova Scotia members of the Atlantic Lottery Corporation getting a fair percentage of the funds produced. How are negotiations going with that?

MS. GORDON: The board of the Atlantic Lottery Corporation consists of eight persons, two from each of the Atlantic Provinces. Ralph Fiske, as Chairman, and I, as Vice-Chairman, at the time, put forward a notice of motion - this was June of this year - indicating that we wanted the profit allocation changed. We, at that time, put forward a specific proposal. It does require unanimous shareholder agreement in order to amend the profit allocation formula and the process is still underway of negotiating that.


MR. CHAIRMAN: Mr. Carruthers.

MR. CARRUTHERS: Mr. Chairman, I also want to just touch base on a couple of questions about the Atlantic Lottery Corporation. Our Auditor General basically had a chance to look into the matter and give his report. It was an excellent report and it generally was complimentary to the controls. I am always concerned when these outfits, they set goals and then sometimes it gets a little hazy as to whether they are meeting those goals, whether they know themselves whether they are meeting those goals. The other aspect of it, how do we, ultimately, in the House of representatives, how are we going to be assured that we are going to get a timely report, that we know, not two years down the road, whether two years ago they were off base or not? What interest do you have and if you do have an interest, what steps can you take in that regard?

MS. GORDON: The corporation and its board has a great interest in the Atlantic Lottery Corporation. It represents 90 per cent or more of our revenues. Our approach, since 1995, since we were created, is to introduce that monitoring and control function of Atlantic Lottery Corporation, who is really no more than our agent in that business just as ITT Sheraton is our operator in the casino business. So all of the discussions that we have had today about ITT Sheraton and our role in monitoring and potentially auditing and those sorts of things, those things are ongoing with the Atlantic Lottery Corporation. That is the role of the corporation and its staff and through the course of our own internal focus on that, our

[Page 37]

request for the Auditor General's comments on the roles and functionings of ALC, we have identified areas that we want to work on.

MR. CARRUTHERS: I have always found that important, that the members of the House and the public, ultimately, get a timely report on how well we are doing. My friend, the honourable member for Sackville-Beaverbank, mentioned about the percentage of profits and how they flow back to the province and how you have actually instigated the question in looking into that issue. Right now the numbers that were reported to us last week indicated that the percentage of profit relatively reflects the percentage of population. I just got this feeling, nobody said it but I got this feeling that that could have been just more the luck of the draw as opposed to good management. I say that from my own. I never saw that in writing, it was just the feel that I got questioning that there were no safeguards to ensure that that is the way it would be but simply that is the way it turned out and isn't this nice. What can you tell us to make me feel, my constituents, comforted that we have the percentage of the population of this outfit and we want the same relative percentage of the profits? What can you tell us about that?

MS. GORDON: We have been taking a position with ALC that that percentage of population number is really irrelevant. What we feel is important is the percentage of sales that come out of Nova Scotia, that is the bottom line that we want to see. Unfortunately, there are anomalies in the existing formula that result in us not getting to that point. The problem, of course, is for every extra dollar we want, in order to get our fair share, it has to come out of someone else's pocket and we are in a situation where we need unanimous shareholder agreement. So this is an uphill battle in many respects.

MR. CARRUTHERS: Well, I wish you luck with it because if it has to come out of somebody else's pocket, them's the breaks, as far as I can see. (Laughter) The issue for me, there, I agree it is really a percentage of sales as a percentage of the population base but I don't think the human in Moncton is significantly different than the human in Truro, so I feel that is relatively reflected. I am glad to see we are working on it because that ultimately is the goal that we want to obtain.

I was interested in your comments regarding my friend who questioned earlier about how our enforcement techniques compare with other provinces and I also had felt that our enforcement seemed to be more rigorous than those. Did I understand you to say that pre-1991 that there would be about 4,000 grey machines out there - grey machines means machines that aren't supposed to be there - that wouldn't be counting the machines that were supposed to be out there, that is 4,000 illegal machines. Am I right there?

MS. GORDON: Yes, that is correct although would this not be at a time when there were no legal machines?

MR. ANDREW MACISAAC: That is right.

[Page 38]

MS. GORDON: These numbers are derived from a period when there were no legal machines in Nova Scotia.

MR. CARRUTHERS: I see. So the total amount of machines out there, that is when the ban was on completely.

MS. GORDON: Right.

MR. CARRUTHERS: So there were 4,000 out there when there weren't supposed to be any and there are 3,000 out there now when there are supposed to be some.


MR. CARRUTHERS: It sounds good to me, that part anyway.

I want to switch back to the casinos just for a quick moment. We talked about the Sydney casino and that the profits that come out of the Sydney casino, basically the theory is that 50 per cent would go to our Native communities and 50 per cent would go to charities in some method that would be derived. Now when we talk about the Native community at this point in time, am I correct in assuming it is those bands that have become signatories to the agreement? Am I right there?

MS. GORDON: Yes, that is correct.

MR. CARRUTHERS: There are still some bands that are not signed on yet.

MS. GORDON: Yes, that is right, 10 of 13 have signed the agreements.

MR. CARRUTHERS: I also agreed with my friend, the member for Sackville-Cobequid, and I know that I am beginning to do that more and more often, that it seems that the wording in these ads kind of stuck in my craw a bit too because you could really read them and your first glance you would think it said this but if you analyze it, well, perhaps it didn't quite say that, it could have said something else.

MR. CHAIRMAN: Kind of a crapshoot.

MR. CARRUTHERS: And of course I recognize that the senior member for the New Democratic Party would be able to note that (Laughter) but I appreciate your comments in clarifying that ad, that there is a disagreement when it comes to, we have done our part, the other guys haven't. Isn't that really what the disagreement is?

MS. GORDON: That is right.

[Page 39]

MR. CARRUTHERS: I appreciate your comments, Mr. Chairman.

MR. CHAIRMAN: Thank you very much, Mr. Carruthers. I would like to get back in, myself, to the questions at this point and then Mr. MacArthur, I know, hopes to have time to have a second question as well.

You made reference, Ms. Gordon, to testing of auditing data being undertaken at your request by the Auditor General. How extensive was that testing that was done by the Auditor General?

MS. GORDON: Are you referring here to his review of the Atlantic Lottery Corporation or of the Sheraton operation?

MR. CHAIRMAN: The Sheraton.

MS. GORDON: I will ask Ms. Butler to respond to that more fully but the Auditor General has been assisting us and dealing through Ms. Butler with the books and records of the Sheraton and we have been consulting with him and his people on a periodic basis. Specifically on the question of the Auditor General's review of the books, there has been no audit undertaken and I will let Ms. Butler clarify the extent of their involvement on the review.

MS. BUTLER: They have been involved with ourselves as well as the independent auditors of ITT Sheraton in assisting with reviewing the special review of related-party transactions.

MR. CHAIRMAN: And the related-party transactions would include?

MS. BUTLER: Are the non-arm's-length transactions.

MR. CHAIRMAN: We have the Auditor General with us this morning. Perhaps it would be appropriate to ask him to comment with respect to the role that his office has played in this matter.

MR. ROY SALMON: The role we have played has been, as portrayed, consultative. We have assisted the corporation in specifying to the independent auditor the areas that we felt should be examined, and worked with the independent auditor on the approach that was being taken to the review of the related-party transactions. Nothing that we have seen has led us to believe that we need to go beyond that at this stage.

[Page 40]

MR. CHAIRMAN: One final question and then I will turn the floor over. Reference was made, Ms. Gordon, in your opening remarks to gathering more information. That suggests to me that consultants may have been retained to do studies, make reports. Is that true?

MS. GORDON: Again, with respect to the casino?


MS. GORDON: Yes, consultants were retained.

MR. CHAIRMAN: Were those consultants retained by your organization or by ITT Sheraton?

MS. GORDON: By the corporation, our organization.

MR. CHAIRMAN: Were these consultants hired through a tendering process?

MS. GORDON: Yes, in conformance with the policies that apply.

MR. CHAIRMAN: Were the tenders invitational or open?

MS. GORDON: They were by invitation.

MR. CHAIRMAN: Can you provide us the names of the companies that were successful in being awarded those contracts?

MS. GORDON: Certainly. Yes, we can.

MR. CHAIRMAN: How many would there be?

MS. BUTLER: Just one.

MR. CHAIRMAN: You obviously don't remember . . .

MS. BUTLER: McGhie Consulting.

MR. CHAIRMAN: McGhie Consulting, and who are they?

MS. BUTLER: Don McGhie and his organization out of Reno, Nevada.

MR. CHAIRMAN: Do they also do work for ITT Sheraton?

[Page 41]


MR. CHAIRMAN: So, ITT Sheraton is not a client of McGhie's?

MS. BUTLER: That is correct.

MR. MACARTHUR: I just have one question about the racetracks and the Gaming Corporation taking over the racetrack situation under the supervision possibly of the racing commission. We have a small racetrack in Inverness that has done reasonably well in the last few years and they are very much afraid that the regulations coming in under the new regime will take some of the control away from them. I just wonder if the Gaming Corporation would be willing to come in and sit down? We have a meeting with some of the officials now, with the minister and some of the officials of the Gaming Corporation, but I am afraid you will put the racetrack in Inverness in jeopardy if we have to follow the regulations. I just wonder if the Gaming Corporation would be willing to sit down and give us some indication of what the regulations might be and how it will affect a small track like Inverness?

MS. GORDON: Well, the regulation side is the Nova Scotia Alcohol and Gaming Authority which is totally separate from us. We are the Gaming Corporation, but our involvement in the Maritime harness racing community has been through the Atlantic Lottery Corporation. So, we are not equipped to operate gaming businesses per se. In our role, we operate through other entities. In the case of the casino, through the Sheraton, and in the case of the lottery tickets and VLTs and possibly harness racing, through the Atlantic Lottery Corporation. They are actively looking at that project now and I am sure they would be pleased to sit down and meet with the group from Inverness.

MR. CARRUTHERS: Mr. Chairman, you indicated to ask the witnesses if they would provide us with a list of the successful applicants in that tender. Any possibility of getting that list expanded into all those who applied even if they were not successful? Is that a difficulty?

MS. BUTLER: In terms of the casino consultants?

MR. CHAIRMAN: Those who were invited to do that.


MR. CHAIRMAN: We have three minutes left. We will give a minute to Mr. Holm, a minute to Mr. Russell, and a minute to somebody to my left here.

MR. HOLM: First question, the consultant's report that was just referenced, is that available? Can that also be provided to the committee? I would appreciate receiving that. Secondly, just an issue that I have raised on a number of occasions in the House and committees previously, and that is the sale of offshore tickets or sale of tickets offshore. The

[Page 42]

Atlantic Lottery Corporation basically says, well, unless it is breaking the law technically, they are not prepared to do anything. That is what they told us last week. My question is, and I know the commission has responsibility for regulating it, but does the corporation endorse the sale of lottery tickets where the numbers are going to be resold offshore at a much higher price, and has the corporation tried to get the Atlantic Lottery Corporation to crack down on that and prohibit it from happening?

MS. GORDON: Well, you are right, the offshore sales is not a clear-cut area. There is some considerable debate as to whether there is illegal activity or not. We are two of eight on the board of directors of the ALC. We, the Gaming Corporation, do not endorse the activity that you described, but we have a corporate governance issue that we have to deal with here in terms of what the approach can be in Nova Scotia as opposed to the other provinces.

[11:30 a.m.]

MR. RUSSELL: Have there been any reports and recommendations either to the minister or to Cabinet that have been rejected either by the minister or by Cabinet within the last 60 days? In other words, there is a recommendation before Cabinet at the present time, but was there one just prior to that that was rejected by either the minister or by Cabinet?

MS. GORDON: I just want to be clear, there has never been any recommendation to Cabinet on this. You're talking the casino issue?


MS. GORDON: We have consulted with government, you know, officials of the Department of Finance. We have responded to their comments and suggestions and modifications have been made to the agreements and the terms of reference that we have with the Sheraton as a result. But if you are asking me whether we have made a recommendation to Cabinet that has been rejected, no, it simply has never advanced to that stage.

MR. RUSSELL: A recommendation that has proceeded from the board to either the minister responsible or to Cabinet, there has never been a rejection or request for change?

MS. GORDON: No, the board, as I mentioned earlier, has a consensus on this issue. Its recommendation has gone forward on a basis that a majority of the board is comfortable with. I am not sure what you have in mind there.

MR. RUSSELL: Very quickly, was this final what I call a report and recommendation, which is a recommendation (Interruption) a proposal that went to government, was it prior to the resignation of Mr. Fiske?

[Page 43]

MS. GORDON: No, I don't think so. I am a little uncertain of the timing. The recommendation that is currently on the table was finalized and approved by the board prior to Mr. Fiske's resignation. Does that help?

MR. RUSSELL: And that is unchanged before Cabinet at the present time?

MS. GORDON: Right. Well, I mean, there are t's that have been crossed and i's dotted but there has been no change in substance.

MR. WILLIAM MACDONALD: Ms. Gordon and your staff, I would like to personally thank you for coming here this morning. You overcame a little trepidation in that people would rather have seen the past chairman here but I think you have the information that our group wanted this morning and I think you have all done an incredible job. Thank you very much and I think if you are appointed chairman you will do a good job. Thanks, I appreciate it very much.

MS. GORDON: Thank you very much. We welcome the opportunity.

MR. CHAIRMAN: Letters of reference are available upon request. (Laughter) Well, Ms. Gordon, Ms. Butler and Mr. MacIsaac, I would like to thank you for joining with us this morning as our witnesses. There have been a number of requests made of you for information, our secretary will be in touch with you respecting those and I know we can look forward to them being provided to the committee expeditiously.

Mr. Holm?

MR. HOLM: Just before we adjourn, I am very appreciative of Hansard and their speed in providing us the minutes for example of our meeting a couple of weeks ago and I just would like to make a request that we again ask Hansard if it is possible to get an early transcript of this morning's proceeding?

MR. CHAIRMAN: I will undertake that.

Also, I would remind all committee members that we will meet again next Wednesday morning for a briefing session, an in camera briefing session, on public-private partnering to be followed by a public session.

Anything else anyone wishes to bring before the committee?

We stand adjourned.

[The committee adjourned at 11:35 a.m.]