Editor’s Note: Sydney’s casino turns 25 this month and to mark its quarter-century, Rob Csernyik takes an in-depth look at the promises — and realities — of casino gambling in Cape Breton. In Part II, he focuses on the casino’s record for charitable contributions and job creation and explores the effect it’s had on local businesses. (Read Part I here.)
Along the wall of the Sydney casino’s Celtic Junction Bar and Grille are photos of smiling Cape Bretoners holding novelty-sized checks – evidence of the money the gambling palace has raised for charity over its 25-year history. It’s an odd decor choice – you wouldn’t likely find such shameless self-promotion taking up prime wall space at the Bellagio or the Mirage. Adding up the numbers on each check pictured, I get just over $70,000 – though this isn’t an exhaustive list of donations.
Documents from the early days of Nova Scotia’s casino project stressed the need for positive public relations, and these pictures help create an image of the casino as a partner giving back to its community in a manner conspicuous enough to distract from the reality of its charitable donations.
The original ITT Sheraton proposal promised charities and community groups $4.4 million annually, although this dwindled to $2 million in a report prepared by the consultant retained in 1995 to design a fund distribution framework for the Nova Scotia Gaming Corporation (NSGC).
Had the casino fulfilled even the more conservative version of its original mission, the funds distributed to charitable and community groups across the province would by now have totaled $50 million. But this never came to pass.
First, because Sydney’s casino didn’t have any profit to share from its 1995 opening until the 1997/1998 fiscal year, but second, because in October 1999, faced with Canada’s biggest provincial debt, John Hamm’s Tory government axed the charitable portion of the casino’s revenues:
“Instead, all the money collected in the canceled program’s fund has been transferred to the government’s general revenues – $1.6 million as of March 31, 1999,” The Daily News reported. (Participating First Nations continue to receive their share of casino profits to this day.)
D. Owen Carrigan, the Saint Mary’s professor emeritus behind the original 1975 casino pitch to the province stressed to me, when I spoke to him recently by telephone, that comparing the casinos we have to his original proposal was comparing apples to oranges.
Carrigan had envisioned provincially-run casinos returning all revenues to the province, not sharing them with a far-off operator. Moreover, Carrigan had advocated locating casinos in resorts – like the Keltic Lodge – which would have helped make the resorts four-season operations.
All these years later, Carrigan, who consulted on one of the original bids (that of Casino Austria) in 1994, holds steadfast to the idea of resorts, an added benefit of which would have been an influx of money from tourists. (This hasn’t been the case with Nova Scotia’s existing casinos; as I discovered in a recent investigation for the Halifax Examiner, no proof exists Nova Scotia’s casinos have had any discernible impact on tourism since 1995. Despite increases in overnight visitors and tourist spending over the last 25 years, casino revenues and patronage have declined.)
But Carrigan sees this as a result of people with little understanding of the industry selecting the project’s final form:
We simply got second rate casinos. And consequently, we don’t attract the tourist trade, as such, our main trade are local people, so you’re robbing Peter to pay Paul. And that was not what was envisaged by the group of advisors that was put together originally to look into this.
From the start, expectations for Sydney’s casino were lower than those for Halifax. The original marketing plan anticipated higher-value gamblers would be worth only half as much in Sydney, where “premium” players would spend $1,000-plus versus $2,000-plus in Halifax.
“The Sydney casino will approach special events on a much smaller scale and will not present Theme Parties or Special Events of major proportions,” Sheraton said in their plan. “This is due to a different client base as Sydney does not appeal to the same player profile as Halifax.”
It was a nice way of starting the obvious: Sydney’s local customer base was less affluent.
Although in its first year it brought in almost $13.5 million before taxes, the Sydney casino generated no profit for distribution. During the early years, when casinos were enough of a curiosity to draw national attention, this helped Sydney’s attract wide notice as a failed experiment.
Stephen Kimber wrote about it for Chatelaine in June 1997, under a page-41 sub-headline that blared:
They said there’d be lots of money and hundreds of jobs. They promised tourists would flock to Sydney, N.S. But these days many Cape Bretoners are wondering if their palace of dreams is turning out to be just a house of cards.
The piece didn’t sugarcoat the casino’s lack of success, but it did offer a ray of hope, suggesting the positive impacts, not unlike that big jackpot win, might be just around the corner.
There was also a widely-circulated urban legend about desperate gamblers using adult diapers to prolong their play. In March 1998, the Chronicle-Herald published a front-page article “quoting an unnamed employee at the Sydney casino as saying gamblers there have sat in their own feces and urinated into cups rather than step away from slot machines” (as reported by the rival Daily News).
Halifax casino manager Mel Thomas laughed it off. Two days later he “stacked packages of Depends adult diapers outside the casino’s entrance from the attached hotel.” Next to the undergarments he placed a sign: “Courtesy of the Chronicle-Herald.”
Then in 1999, the Sydney casino was immortalized in Brian Hutchinson’s polemic, Betting the House: Winners, Losers and the Politics of Canada’s Gambling Obsession:
Sydney is the last place on earth one would expect to find a glittery gambling emporium. And yet there it is, a stone’s throw from the tar ponds…
Reviewing Hutchinson’s book, the Globe and Mail referenced the:
…ill-conceived, Sheraton-run casinos in Nova Scotia which, far from fulfilling the brave promises of their backers, have either failed to generate expected economic activity (Halifax) or become neon-illuminated sponges, leeching money and morale from the community (Sydney).
While such harsh assessments have almost entirely disappeared from the press since the turn of the century, it’s not because the casino has become more successful.
Between 2000-01 and 2010-11, visitors at Sydney’s casino dropped from 839,138 to 366,131, and annual provincial revenue fell from $11.9 million to $8.3 million.
The most recent figures, from 2018-19, show 382,199 visitors generating $7.3 million for provincial coffers, suggesting that rather than being a business on the upswing, the casino is a business that has largely matured and slowed.
Given overall provincial revenues of $11.6 billion in the 2020-21 budget, and surpluses the five most recent fiscal years, the amount the government receives from Sydney’s casino is relatively insignificant. This could, perhaps, be discounted were the municipal government making a significant amount from it, but dig deeper and you realize the casino is channeling money away from the island.
Dr. Robert Williams, a health sciences professor and gambling expert at the University of Lethbridge, says when judging its impact, it’s necessary to realize how little of the money flowing through Sydney’s casino stays in the CBRM or makes its way back here.
The casino draws its money from its target market – locals. The province gets paid two ways, first, it receives a daily win tax payment of 20% of the total amount wagered in the casino, after which its BC-based operator, Great Canadian Gaming, takes its cut from net revenues.
“The Company is entitled to receive an operator’s fee equal to 52.24% of total gaming revenue, plus an additional 47.76% of non-gaming revenues, after deduction of the capital reserve (“CR”) contribution and the marketing fund contribution (“MFC”),” Great Canadian says in their annual report.
The province then gets another portion, 50% of which goes to First Nations, the rest into general revenues. By this time, though, the number has become a fraction of what locals originally put into the slot machines.
Belleville’s Shorelines Casino
As for the municipality, Williams says communities that host casinos often look for a cut, which can take the form of a hosting fee – a portion of the casino’s income given directly to the city or municipality where the casino is located. For example, all Ontario communities with casinos receive a hosting fee on a sliding scale, starting with 5.25% on the first $65 million of slot revenue. Additionally, the communities receive 4.0% of table game revenue generated, if applicable. In 2018-19, Belleville, Ontario, two hours east of Toronto and with a similar regional population to the CBRM, received $3,245,401 for hosting its casino.
The CBRM would receive at least $3.4 million on the first $65 million of slot revenue under Ontario’s hosting fee plan. (The exact amount can’t be calculated without knowing how much revenue table games provide.)
Last year, according to CBRM communications advisor Christina Lamey, the municipality received $620,723 in rent and property taxes from the casino – but no hosting fee. This means the CBRM receives no direct payment related to casino operations – even were the casino’s revenues to jump, there’s no guarantee the municipality would benefit financially.
Williams says some municipalities might not ask for such a fee, figuring benefits like property tax, business taxes and “the presumed – although often not realized – employment opportunities would be sufficient.” But the CBRM hasn’t done much better on the jobs front.
Jobs are always touted as one of the big gains,” says Joseph Marchand, an associate professor of economics at the University of Alberta who describes himself as the guy who “comes in and kind of ruins the party.”
His 2013 paper “New Casinos and Local Labor Markets: Evidence from Canada,” co-written with Brad Humphreys, found casinos entering new markets made a sizable economic impact in the first five years only, and that one or two jobs were created per casino job, but only in hospitality industries. Using less advanced techniques, he says, you can see increases in construction and retail jobs, but when better identification approaches are employed, these disappear.
Based on Marchand’s estimates and early employment figures, the casino may have created between 350 and 700 indirect jobs in the CBRM. (By 2018-19 there were only 128 direct casino employees.) But early news reports suggest any job increases may have been mitigated by job cuts at local restaurants.
Charlotte Street, Sydney NS
Kirk MacRae, a local Subway sandwich shop franchise owner from 1990 to 2018, spoke out against the casino in at least two newspaper interviews. In 1996, MacRae told The Daily News he’d experienced a 6-7% drop in sales, resulting in the loss of at least 10 student jobs.
I called him late last year to see how that impact looked over a longer period of time and he told me:
Every bar, except for the Steel City, closed or changed ownership during that time. Every one, and I can go up and down the downtown and tell you what happened. I can tell you that when the casino came, we started to lose.
Before the casino, he remembers being open until 4 a.m. because he was right across the street from Smooth Hermans Cabaret, (now the home of the Cape Breton Farmers’ Market) whose license allowed it to stay open later than other bars.
“When I opened my door in 1990, there were 300 kids a night walking up and down the street,” he says. But today, he says, at 8 p.m. on a Friday, you could fire a cannon down Charlotte Street and hit nothing. While he acknowledges this is partly due to a demographic shift, he still calls the casino “the worst thing ever to happen” to downtown.
MacRae was on a committee of businesspeople charged with assessing the idea of opening a casino in Sydney, and he remembers them recommending against it.
I also spoke briefly by phone with Martin Chernin, a real estate developer who has proposed moving the casino to a waterfront development his company is trying to get off the ground. He was a long-time investor in the Joe’s Warehouse/Smooth Hermans complex. (Joe’s was the restaurant located above the cabaret in the space now occupied by The Old Triangle.) Chernin told me, briefly, that he remembers restaurant business declining by about 5-10% immediately after the casino opened before returning to normal. (MacRae remembers business improving somewhat over time as well.)
Harbour Royale Development Ltd’s Sydney waterfront plan. Note casino located in expanded Holiday Inn.
I tried reaching out to another former owner of Joe’s Warehouse and the owners of the downtown staple, the Peking restaurant, but neither responded to an interview request.
Michelle Wilson, executive director of the Sydney Downtown Development Association since 2014, said in a LinkedIn message she “never really put much thought into” the casino’s impact on downtown, and didn’t respond to submitted questions before publication.
Because of the variety of factors influencing downtown businesses: from positive ones like the new NSCC development and (pre-COVID-19) the cruise industry, to negative ones like years of population decline and the impact of online shopping on local businesses, it’s hard to know exactly what share of the downtown’s success or lack thereof to ascribe to the casino – either historically or today.
Trouble for nearby bars and restaurants, though, is a bit more apparent.
Recently, I spoke to Gordon Stewart, executive director of the Restaurant Association of Nova Scotia, who said the big challenge restaurateurs face from the casino today is predatory pricing.
In its first annual report, released in 1996, the Nova Scotia Gaming Control Commission found “a majority” of downtown Sydney taverns experienced a decrease in business. “The situation with restaurants in Sydney as described by some of those interviewed must be viewed seriously,” the commission said.
But the commission had no hard data, saying it was “impossible to say at this time what effect the casino is having on discretionary income in Sydney.”
In Kimber’s 1997 Chatelaine article, Alastair Wilson, founder of the now-defunct Jasper’s family restaurant chain, accused the casino of using its $4.95 breakfast buffet as a loss leader to draw customers from other eateries.
In 1998 (as reported in a 2004 Genuine Progress Index Atlantic report), Nova Scotia Alcohol and Gaming interviewed business leaders in downtown Halifax and Sydney to see how they were faring with the casino and found restaurants and bars offered differing opinions. In Sydney, they said, some felt that the casino restaurant presented “unfair competition,” while others appreciated the healthy competition. It was believed that the casino contributed to a drop in patronage in bars and restaurants, but that changes to their service standards could help level the market.
There’s no comparable contemporary data, but advertisements for cheap buffets, lobster and prime rib appear on local television and billboards, enticing visitors with the sin of gluttony as well as greed. Probably not coincidentally, many of the Sydney casino’s reviews on TripAdvisor focus on its affordable buffets rather than its other attributes (though one Australian notes, “Have been to much better casinos in other cities around the world”).
Stewart says that in the last several years, the casino’s prices are low enough that they’re violating the Gaming Control Act which says, in part:
A casino operator shall provide goods in a casino at reasonable prices which are not predatory or exploitive of local suppliers of similar goods.
He says the competition is felt at the average price point with pub-style fare and that “higher end, upscale” restaurants aren’t impacted. This offers some indication why restaurants specializing in international or upscale fare don’t appear to have been as badly hit and why restaurants like The Olive Tree, A Bite of Asia and The Lebanese Flower (among others) have opened during this period. Stewart contends that competition from the casino is not enough to force restaurants to close, but that:
In the market where they do compete, they actually steal from other restaurants. They’re running billboard ads, full magazine four-color ads, everything so well below the cost. There’s no way they could ever support that and pay the cost.
In 2017, Trevor McPhee, owner of Embers Southern Barbecue on Charlotte Street which has since closed, filed a complaint against the casino with industry association Restaurants Canada, saying their low prices created an unfair playing field.
“It’s a battle we can’t win, their only concern is they hope that they give the food away and people put money in the machines,” McPhee told the Cape Breton Post. The article featured a picture of an advertisement for a dozen wings for only $3.
Stewart suggested two restaurant owners who could offer insights into the impact of predatory pricing.
Brian Doherty, owner of The Old Triangle Irish Alehouse, said between the locations in Halifax and Sydney, the casino’s pricing causes more concern in Sydney:
People are very conscious of the dollar value of food and people, I suppose, look a lot closer there than they maybe would in Halifax but you’re dealing more with a transient crowd, maybe back in the day more tourists.
(Stewart’s other suggestion, Governor’s Pub & Eatery declined an interview, owner Ardon Mofford being “crazy busy.”)
With its revenues and visitors declining, its charitable mission aborted and its impact on the local economy negligible, if not negative, it becomes harder to ignore the many ills casino gaming has brought to town – ills which will be the subject of the next piece in this series.
Rob Csernyik is a freelance journalist who was born and raised in Sydney, but currently lives in Saint John, New Brunswick. He has written for The Globe and Mail, The New Republic, Quartz at Work and Vice and edits Great Canadian Longform. Rob was selected for the 2019 investigative journalism intensive at The Banff Centre for Arts and Creativity where he started his research on the impacts of Nova Scotia’s casinos.
