City proposes using $1M of casino revenue to pay down arena debt

The City of North Bay revealed its proposal to North Bay City Council during budget deliberations Thursday evening on how to allocate the $1.26 million in casino revenue received through the municipality's agreement with OLG. Those funds are currently in reserves and are received on a quarterly basis from OLG.

CFO Margaret Karpenko suggested using $1 million as a one-time lump sum payment to pay down the debt on the approved community and recreation centre that will be going out for tender soon. This is contingent on the project coming back with a price tag that council can get behind.

See related: Council approves new arena project

See also: More on council's decision to tender new community centre

"My recommendation is to further fund the community centre project and this will further reduce the debt. As we reduce the debt, we build capacity because we don't have that principal and interest over the 10-year term," Karpenko said. "This is a strategic move."

See: What should North Bay do with its casino revenue? Take our poll

No final decisions were made on the subject. The majority of the council was at the very least open to the CFO's proposal but it is clear Councillor Gary Gardiner is not.

"Early in our four-year term in a day-long brainstorming/planning session this Council's collective top three priorities were community safety and well-being first, downtown revitalization second and an arena facility third," Gardiner said after the meeting. "Nowhere in this budget are there any extra funds set aside for our two top priorities.

"I was hoping OLG funds would be the appropriate source. We don't know what sort of programs and what the corresponding budgets for our two top issues would look like but it seems to me this is no longer a post-election concern. I believe we have a short window to address these issues and I am not sure how we do that with no budget."

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Coun. Justine Mallah asked the CFO if she felt there is an expectation from the community to spend the funds on societal issues.

"In our agreement with OLG, they have a commitment that they are reinvesting into social issues. They have a role to play, as well, with their revenues and what they are putting back into the community," Karpenko responded. "I think our role is to use the funds to expand our services that municipal dollars have to support."

Gardiner added, "When you talk about a transformational project that would help this city along, I think we should be reserving this money for our [election campaign] priorities. I think it's a shame if we don't earmark that money for those projects. We had a $2.5-million increase in the police budget and a lot of that has to do with these things. Why not dedicate this money to try and solve some of those issues?"

Karpenko indicated the final allocation policy will be established once the completed budget is reviewed. The plan is for the remaining balance of the funds to be distributed to user groups through an agreement with a community partner. Those specific groups and partners have not yet been determined but the program would start with approximately $260,000 in funds and the scope and look of it will depend on council's direction. An annual cut of the funds would replenish the community fund that is designed through the partner to be hands-off from the council. 

Coun. Mac Bain said the funds should be used for "Youth. Arenas, sports facilities, travel teams, the arts, drama. It's a separate group that decides where the money goes. We select the group and we leave them alone. Every year, we tell them how much money they get. They divvy it up accordingly. They set some money aside in case they have those bad years."

Karpenko and the finance team prepared the allocation policy in consultation with CFOs, finance directors, and CAOs from other municipalities that receive casino funds through agreements with OLG. She said it is common for OLG funds to be allocated to one-time expenses for economic development projects or transformational capital projects such as the community and recreation centre, Main Street redevelopment, the redevelopment of the police station or King's Landing repair/replacement. Another option is to allocate the funds to the assessment at risk from ARB appeal write-offs that affect the tax base.

The CFO did caution against putting the casino funds into operating projects, citing two examples in which municipalities dropped their program or now fund the program due to reduced casino revenue after initial positive returns.

"One used their OLG revenue to fund their police budget and that created a significant revenue gap when the OLG revenues fell and the police budget kept going up," Karpenko said. "They lost that revenue source and learned it was not sustainable and created a deficit."