For the first time since 2005, the City of Richmond is looking at casino revenues coming in below expectations. The city estimated that its 10 per cent share of River Rock Casino and Resort’s gaming revenues would amount to $18 million. By the second quarter, however, the city received only 49 per cent of its projected revenues. Since the city has already directed $14.2 million to specific budget lines, any shortfall will affect the “major capital community facility replacement” budget, which is where any surplus revenue would normally go.
2016 marks the second year of casino revenue decline after earnings peaked in 2014. Revenues from River Rock Casino amounted to $21 in 2014, a 19 per cent increase from the previous year. This sharp uptick in city revenues led city officials in 2015 to direct 2% of the city’s gaming revenue toward a Council Community Initiatives Account to fund one-time initiatives for various community infrastructure projects.
City financial reports suggest the decline in gambling revenues is closely linked with a decreased number of VIP players as a result of British Columbia Lottery Commission’s initiative to combat money laundering. At the end of first quarter 2015, for example, gambling revenue was up from the same quarter in 2014, but as of fourth quarter 2015, gaming revenue was down nearly 20 per cent compared to the same quarter the previous year. This drop coincided with BCLC’s new requirement that VIP players show source of funds used to purchase chips. While the long term impact of this requirement is still unknown, the short term shows a significant reduction in revenues at all BC casinos, especially those, like River Rock, that cater to high limit, VIP play.
Since 2004, Richmond has received an average of $14 million per year from River Rock, although that figure has been significantly higher in recent years. In fact, Richmond’s 5 Year Consolidated Financial Plan (2016-2020) projects roughly $18 million per year from gaming revenue. However, the city’s vulnerability to fluctuations in gaming income is limited, as projected gambling earnings account for only about 4.7 per cent of the city’s total revenue, roughly a third of which is applied to the general Capital Reserve.
Despite its conservative approach to using casino money in its budget, Richmond still faces challenges should its revenues from River Rock fall significantly as a result of changes in its 2015 allocation model. At the March 23, 2015 Council Meeting, Council approved an updated model for allocation of gaming money in which only the $5 million toward the Minoru pool loan and the costs of four additional RCMP officers (currently about $700,000) represent fixed expenses. The other four budget lines are determined by percentages. For example, 30 per cent goes toward the general Capital Reserve, 15 per cent goes toward grants, and 2 per cent goes toward the Council Community Initiatives account. Anything left over goes into the Major capital community facility replacement program (Capital Building and Infrastructure Reserve).
Any shortfall in gaming revenue would affect the amount of money the city would have to budget towards grants and one-time initiatives. For example, Gateway Theatre receives $1.2 million in community grants, while over $1 million from the Community Initiatives account has been approved for Canada 150 celebrations. The Richmond Olympic Oval, at $50 million, represents the largest percentage of money from gambling proceeds, but casino money has also funded nearly $40 million to other capital projects since the program began. If casino income falls too much below expectations, then these types of community funded projects could see significant reduction in City Council support.