FAQ's
The OFNLP Agreement

Edition 2

2008 GAMING REVENUE SHARING ARRANGEMENT BETWEEN FIRST NATIONS AND THE PROVINCE OF ONTARIO


1. What is the difference between the Casino Rama Revenue Agreement (“CRRA”) and the 2008 Gaming Revenue Sharing and Financial Agreement (“Revenue Agreement”) regarding revenues?

As of April 1, 2011, the Casino Rama entitlement was replaced with a 1.7% share of all OLG gross revenue, divided into monthly installments – pursuant to the 2008 Revenue Agreement. The gross revenue calculation under this arrangement not only includes funds from Casino Rama, but also from all of the other commercial and charity casinos, racinos (e.g. Woodbine), lotteries, and other OLG gaming and non-gaming sources. As of April 1, 2011, there is no longer a direct connection to the Casino Rama business.


2. What happened to Casino Rama in 2011?

The Province and Rama signed a new agreement for the operation of Casino Rama and the sharing of certain revenues, entitled the Post-2011 Contract. Other First Nations, as represented by OFNLP and OFNLP2008, had no role in the negotiation of this new arrangement for Rama.


As of April 1, 2011, the 1.7% revenue share for First Nations (other than Rama) is tied to the entire gaming market of Ontario, and not just the net revenue of Casino Rama. Even so, based on provisions of the 2008 Revenue Agreement and other applicable agreements, OFNLP2008 maintains that First Nations remain entitled to the wind-down value of Casino Rama, should the gaming facility ever close down.

3. What are the financial benefits of the 2008 arrangement?

The Province transferred a one-time signing payment of $201 million to OFNLP2008 a few days after the closing of the Revenue Agreement in 2008. Since April 1, 2011, the First Nation Partners receive 1.7% of all gross gaming revenue generated by OLG throughout Ontario. Based on very long term OLG gross revenue projections, it is anticipated that the1.7% will generate approximately $3 billion to 2033.


The OLG projections were off-base and there was insignificant growth in OLG gross revenue up to March 31, 2015. There was a significant increase of $900 million in overall OLG gross revenue in 2015-2016, mostly attributable to the success of national lotteries. This is reflected in the current distributions to Partners. There is no guarantee that the increase in revenue will be sustained going forward.

 

Based on the perspective of 2016, the monthly revenue payments under the new arrangement are at least double what First Nation Partners would have received under a continuation of the CRRA and the net revenue of Casino Rama. The monthly payments under the new arrangement are stable and predictable, and there is no foreseeable possibility of a month without any revenue. These characteristics of the new arrangement are very favourable for long term financial planning for First Nations, including long term secured debt transactions.


In addition, First Nation Partners continued to receive the net revenue of Casino Rama from 2008 to 2011.

4. What is the status of the Golden Eagle Charity Casino?

The possibility of a gaming facility at Rat Portage has come back into play through the implementation of the 2012 OLG Gaming Business Strategy. One of the designated “zones” for a new facility includes Rat Portage/Kenora. While the matter is still in the midst of a bidding process, it appears that the new facility will end up in Kenora, as opposed to Rat Portage. Any new facility will be run by a private operator, subject to OLG oversight. It is up to the Rat Portage First Nation to negotiate any associated arrangements. The 1.7% revenue share pursuant to the 2008 Agreement will apply to the new facility at Rat Portage/Kenora.

5. What is the status of the reporting and accountability regime under the 2008 arrangement?

OFNLP2008 developed a Year End Reporting Handbook, which is sent to the First Nation Partners each April 1st. Appendix 5 of the Handbook deals with disclaimer, qualified, and adverse audit opinions. In the case of a disclaimer or qualified opinion, revenue distributions may be suspended, depending on the circumstances. Distributions will be automatically suspended in the case of adverse opinions. Distributions will be resumed when the financial reporting issues are resolved.


6. Has there been any discussions regarding the term of the 2008 Agreement?

No, not as of June, 2016.


OFNLP2008 will monitor any favourable “political” situations before 2031 to negotiate an extension of the Agreement. Other components of the Agreement could be examined at the same time.


7. What about Collective Funding?

The First Nation Partners may decide to set aside up to 15% of revenue over a given period for collective funding purposes (e.g. a collective investment fund). This is accomplished with an Extraordinary Resolution requiring a 66.66% positive vote at a duly convened Partners Meeting. Section 7.2 is the applicable provision of the Limited Partnership Agreement.


At the AGM of May 27, 2010, the First Nation Partners passed Resolution 10/15 discontinuing any Special Project or Collective Funding requests. This applies to OFNLP2008 unless there is a future contrary direction from the Partners. First Nation Partners have the alternative of voluntarily pooling their funds for worthwhile regional projects, as long as such projects are consistent with the five approved spending purposes.

 

A collective funding proposal involving a long-term investment fund was considered by the First Nation Partners at the AGM of June 2, 2016, as previously directed by the Partners. The Partners passed a motion directing no vote on an Extraordinary Resolution regarding this proposal.

8. What about the OLG Gaming Business Strategy of 2012?

The Gaming Strategy of 2012 was developed in secret by OLG without any meaningful consultation with First Nations. The Strategy calls for the privatization of most gaming sectors (commercial casinos, OLG casinos, and lotteries), subject to ultimate OLG oversight. Four or five new facilities are envisioned, along with a significant expansion of the very successful Woodbine facility in Toronto. The original revenue projections of the 2012 Strategy were wildly optimistic and there have been many delays and controversies, notably relating to the dislocation of the entire horseracing industry of the Province. The new internet site is not doing well. Some new facilities are now on the horizon, and the Woodbine expansion (approximate completion 2020) is likely to increase OLG gross revenue to a significant degree.


The 2012 Strategy does not have a direct impact on the 2008 Revenue Agreement. However, to the extent that OLG gross revenue is increased, First Nation Partners will benefit through the 1.7% share.

9.Why does the OFNLP organization still exist if the CRRA terminated on March 31, 2011 and the 1.7% revenue share flows through OFNLP2008?

OFNLP continues to exist as a legal entity because of a remaining litigation file (the Casino Rama Operating and Capital Reserves) and financial reporting for these funds. Also, OFNLP is the party to the claim to the residual value of Casino Rama at the time of wind-down. Once all the relevant matters have been resolved, OFNLP can be terminated. In the meantime, OFNLP will be dormant from a business point of view.

10. What are some of the details of the 2008 revenue sharing arrangement?

OFNLP2008, on behalf of the 132 First Nation Partners, receives 1.7% of the overall gross revenue of OLG. After business expenses are deducted, the revenue is distributed to compliant First Nation Partners in 12 monthly payments.


April, May, and June payments are estimated and are called an Interim Monthly Revenue Share Payment (“Interim MRSP”). In July, after the OLG approved audit, it becomes the Monthly Revenue Share Payment (“MRSP”). Since 2011, there has been only a small change between the two kinds of payment in a given fiscal year.


11. What is the status of the OFNLP2008 representative on the OLG Board?

OFNLP2008 has a contractual right to a representative on the OLG Board: Section 2.6 of the Revenue Agreement. This was one of the key expected benefits of the 2008 arrangement. Unfortunately, the Province delayed and refused to make the appointment after OFNLP2008 nominated qualified candidates. The lack of representation on the OLG Board for several years prejudiced First Nation rights and interests, particularly during the critical period when the 2012 Gaming Strategy was being formulated behind closed doors.


Finally, in 2015, an arbitration panel determined that the Province had breached the Revenue Agreement, acted in bad faith, and violated the constitutional principle of the Honour of the Crown. Steve Williams was appointed to the OLG Board in June of 2015. He has been instrumental in obtaining a more comprehensive picture of gaming in Ontario and in advancing First Nation positions and interests.