Frequently Asked Questions

FAQ's

Edition 2
2008 GAMING REVENUE SHARING ARRANGEMENT BETWEEN FIRST NATIONS AND THE PROVINCE OF ONTARIO

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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

Who are the parties to the new arrangement?

The parties are the Province of Ontario, the Ontario Lottery and Gaming Corporation ("OLG"), the existing Ontario First Nations Limited Partnership ("OFNLP"), and the new Ontario First Nations (2008) Limited Partnership ("OFNLP2008 "). These are the parties to the Gaming Revenue Sharing and Financial Agreement (“Revenue Agreement”). The existing OFNLP represents all First Nations in Ontario except the Chippewas of Rama First Nation ("CRFN"). OFNLP2008 is intended to represent the same First Nations.

What happens to First Nations that do not sign on to the new Partnership?

They are called Unsigned First Nations. An Unsigned First Nation's share of revenue under the new arrangement is placed in a segregated account. The held amount and interest are distributed to the First Nation when it signs on to the new Partnership. If the First Nation does not sign by the termination date of the new arrangement (fiscal year 2033), the held amount and interest are distributed amongst the other First Nation Partners.

What happens to the money from Casino Rama that First Nation Partners have been receiving since 2000?

First Nation Partners are entitled to 100% of the net revenue from Casino Rama until March of 2011, distributed on a monthly basis as usual. The extent of net revenue available for distribution will depend on the business performance at Casino Rama. After March of 20 11, the Casino Rama entitlement will be replaced with a 1.7% share of the gross gaming revenue of the Province of Ontario, divided into monthly installments. The gross revenue calculation will include funds from Casino Rama, along with other commercial and charity casinos, racinos, lotteries and other sources. There will no longer be a direct connection to Casino Rama.

What happens to Casino Rama in 2011?

The Province and CRFN have signed a new agreement for the operation of Casino Rama entitled the Post-2011 Contract. It is effective for 20 years starting on August 1, 2011. It has two options to extend the agreement for successive periods of ten years and then five years. As of April 1, 2011, the revenue share of First Nations (other than CRFN) will be tied to the entire gaming market of Ontario, and not just the net revenue from Casino Rama.

What about the 35% court case?

The 35% trial started in Toronto on February 13, 2008. A judgment in favour of OFNLP was issued in September, 2008. The 35% net revenues have been collecting in a segregated account with interest since 2001, when CRFN refused to follow a decision made by the Chiefs in Assembly that the 35% funds be distributed to First Nations.

The Ontario Superior Court of Justice decided in favour of OFNLP on September 15, 2008. CRFN appealed to the Ontario Court of Appeal. The appeal was dismissed on January 22, 2010. CRFN filed an application for Leave to Appeal with the Supreme Court of Canada on March 23, 2010. On July 8, 2010, the Supreme Court of Canada denied CRFN’s application. This was the court of final jurisdiction for appeals.

A Special Chiefs Assembly (“SCA”) was held on July 21, 2010. Pursuant to the terms of the CRRA, the Chiefs in Assembly passed Resolution 04/10 – Distribution of Casino Rama 35% Funds to Ontario First Nations Limited Partnership, directing OLG and the Province to release the 35% funds to OFNLP as soon as possible.

What did First Nations give up in order to achieve the new revenue sharing arrangement?

In order to achieve the benefits contained in the new revenue sharing arrangement, it was necessary for First Nations to give up or transfer two very valuable assets, namely:

i. the 20% WinTax law suit against the Province of Ontario; and,
ii. any direct interest in Casino Rama after March of 20 11.

The 20% law suit was potentially worth close to $2 billion. The business relationship between First Nations and CRFN had become strained and difficult to manage, as evidenced by the 35% case and other disputes.

Does the new arrangement affect First Nation constitutional rights to gaming?

No. The new arrangement is a strictly commercial or business deal with no impact on rights. There is a non-derogation clause that protects any relevant existing Aboriginal and Treaty rights recognized by s. 35 of the Constitution Act, 1982. The Revenue Agreement defines the following as a default: “Casino Gaming not in accordance with Applicable Law”. The key phrase "Applicable Law" is specifically defined to include constitutional law, which would include any constitutional rights to gaming that First Nations can establish. So, if an alleged Casino Gaming default is taken to the arbitration process under the new arrangement, the First Nation can defend its operation based on constitutional rights. Arbitration rulings can be appealed to the courts on points of law. There is no guarantee that the arbitration and judicial appeal process will uphold claimed constitutional rights. So, the constitutional rights of First Nations in relation to gaming are the same before and after the new arrangements. If First Nation revenue sharing funds are forfeited as a result of a final arbitration/court ruling, they will be distributed to the other First Nation Partners, and not to the Province.

What about bingo?

Bingo is not specifically included or excluded from the definition of Casino Gaming in the new arrangements. However, at the SPM in Thunder Bay on February 6, 2008, the provincial Minister for Aboriginal Affairs, Michael Bryant, went on record before the Chiefs/Partners in the clearest possible terms confirming that the new arrangement is not intended to include bingo. The Minister knew that his assurance would be relied on by the Chiefs/Partners when they ratified the new arrangement the next day. This will make it difficult, if not impossible, for the Province to later take the position that "unlicensed" bingo is a breach of the new arrangement. So, there will be no consequences in terms of revenue sharing.

What are the principal financial benefits of the new arrangement?

The Province transferred $201 million to OFNLP2008 a few days after Closing. It was distributed to the First Nations that had signed the new Partnership Agreement and were compliant with the financial reporting and other requirements of the existing Partnership Agreement, and it was based on the existing formula. The elements in this formula are: 50% for population; 40% base amount; and, 10% for remoteness. Starting in April of 2011, First Nations will receive 1.7% of all gross gaming revenue in the Province of Ontario. Based on very long term OLG gross revenue projections, it is anticipated the 1.7% should generate approximately $2.971 billion to 2032/33, the end of the specific term of the new arrangement. First Nations may receive more or less, depending on the actual performance of the entire Ontario gaming market starting in 2011. Taking into account the $201 million payment in 2008, the total projected absolute dollar value of the compensation is estimated at $3.172 billion.
In addition, there are: (i) the funds First Nations will receive from Casino Rama until 2011; and, (ii) the award from the 35% law suit, including the funds in the segregated account and the net revenues until March, 2011).

What happened to the Golden Eagle Charity Casino outside Kenora?

The Golden Eagle ("GE") Charity Casino was a feature of the previous revenue sharing offer from the Province, rejected by the Chiefs/Partners at the June 2007 SPM. At a follow-up SPM in July, First Nations made it clear that any new deal had to be a straight revenue sharing arrangement, with no impact on First Nation jurisdiction over gaming. The concern was that this jurisdiction was undermined by the extent of provincial red tape and control associated with the GE project. The new revenue sharing arrangement does not refer to GE in any way.

What is the reporting and accountability regime under the new arrangement?

The reporting and accountability rules are essentially the same as under the existing Casino Rama Revenue Agreement ("CRRA") in place since 2000. First Nation Partners are required to spend the available funds on the five well-known purposes: community development; health; education; economic development; and, cultural development. These purposes are broad and undefined, effectively permitting any legitimate local government expenditure. Per capita distributions continue to be prohibited.

Annual audited schedules continue to be required, breaking the funds down based on the five broad categories, as opposed to detailed expenditure reports. There is a new provision that equates a qualified audit with a failure to report, but only if the qualification relates to funds distributed under the new arrangement. The Province can waive this requirement. If there is no waiver, a First Nation Partner can take steps to resolve the compliance issue, subject to the terms of the legal agreements. It should be noted that separate annual audited schedules continue to be required. The existing CRRA still requires an audit submission and the new OFNLP2008 requires an audit submission (Schedule 9.1and Auditor's Report) and began with the closing transfer and distribution share of $201 million for the year ending March 31, 2008. The CRRA reporting requirement for a First Nation Partner will continue until all distributed net revenue from Casino Rama is accounted for.

What is the term of the new arrangement?

The specific guaranteed term is 25 years (fiscal year 2032/2033). The parties are committed to good faith negotiations with regard to an extension of the term. The OFNLP position is that the arrangement or a similar arrangement is guaranteed beyond 2033 as long as the Province is still conducting gaming.

What about collective funding?

The First Nation Partners may decide to set aside up to 15% of revenue in a given year for collective funding purposes. This is accomplished with an Extraordinary Resolution requiring a 66.66% vote. Collective funding is not limited to the five spending purposes. This means that any collective funds may be invested in a wide variety of ways to generate future new revenues for First Nations. When investment returns are eventually forwarded to First Nations, they must be spent in accordance with the five spending purposes. In the new arrangement, the Province agreed to remove most of the external restrictions on collective funding, leaving it up to First Nation decision making.

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. As recommended by the Board on July 20, 2010, First Nation Partners have the alternative of voluntarily pooling their funds for worthwhile regional projects, without the need of a Collective Funding resolution from an AGM or SPM.

When will the deal be finalized?

The new arrangement required a sign-up of 89 First Nations. At the Special Partners Meeting ("SPM") on February 7, 2008 in Thunder Bay, 109 First Nations signed on as Limited Partners of OFNLP2008 . The current number is 130 (at August, 2010). The closing process involved the exchange of legal documents, the filing of a motion in court to discontinue the 20% law suit, and final approvals from the provincial Cabinet and other agencies.