Ministerial Statement on Gaming – March 2016
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Madam Speaker, the gaming sector has had a long association with this State. In December 1968, Tasmanians were asked to vote whether or not a casino licence should be granted to the Wrest Point Hotel. On the back of the ‘yes vote’, Hobart became host of Australia’s first ever legal casino in 1973, and in the 1980s, the Country Club Casino was developed as Australia’s first resort-style casino.
In 1993 the Federal Group and the then Government entered into a 15-year Deed to provide commercial certainty for the Company’s business model by retaining exclusivity in relation to the operation of casinos, Electronic Gaming Machines (EGMs) and Keno (which was then a casino game only). That provided the platform to underpin new developments in the Tasmanian tourism and hospitality sector, while delivering a number of tax and regulatory changes to the operation of EGMs in Tasmania.
In 2002, around six years before the 1993 Deed expired, the then Government agreed a new Deed that underpinned a further round of capital investment and introduced accompanying measures relating to harm minimisation, a cap on the number of EGMs in Tasmania, higher tax revenues and an increase in the Community Support Levy on EGMs in hotels and clubs. Those arrangements are detailed in the 2003 Deed, which is now enshrined in the Gaming Control Act.
Madam Speaker, under the terms of that 2003 Deed, the Federal Group has the exclusive right to operate EGMs, Keno and casino table games in Tasmania until at least 30 June 2023.
That Deed has two phases – a fixed 15 year phase, which concludes in 2018, and a rolling five year phase, which automatically commences in 2018. Under the Deed, if no action is taken by the Minister responsible for the Gaming Control Act (currently the Treasurer) before 30 June 2019, the period of exclusivity under the Deed will extend by one year, to 30 June 2024. This arrangement then rolls over every year unless action is taken to cease it.
This Government has been clear for a long time now – we are not going to seek unilaterally to reach in and change the rights that are held by the Federal Group. They were negotiated in good faith, reviewed by Parliament and enshrined in law.
Madam Speaker, as members are aware, in late 2014, Mr David Walsh expressed a desire to operate a “high rollers, non-residential” casino at MONA to help financially support the very successful and internationally acclaimed museum that he has developed. This could only have occurred under the current structural framework specified in the Deed with the agreement of the Federal Group.
Coincident with the approach from Mr Walsh, the Federal Group also approached the Government about its next round of investment, flagging its desire to gain a longer period of certainty on its current business model to assist in financing that investment.
The Government brought those two separate initiatives together and tested whether the MONA casino could be progressed earlier than that provided under the Deed, namely 2023.
The Federal Group indicated it was prepared to consider a variation to the Deed to allow Mr Walsh’s casino proposal to proceed ahead of 2023, provided that its arrangements under the 2003 Deed were extended. The Federal Group also proposed to commit to new capital works worth $100 million at its facilities as a part of those arrangements.
However on 14 September 2015, Mr Walsh withdrew his proposal and indicated that he was not prepared to be a party to an arrangement that extended the Federal Group’s EGM monopoly. With that declaration, the Government ended the process that it had started to find a path for the MONA casino to be developed.
Let’s be clear, Madam Speaker, these two quite separate proposals would be excellent developments for Tasmania’s burgeoning tourism industry. However the Government has made it clear that we are not prepared to enter into bilateral negotiations with Federal Group as previous Governments have in the past without their being an open and transparent process that the community and other stakeholders can engage in.
In light of the potential for a MONA casino to be progressed being raised last year, there has been significant public and media interest in relation to how the rights to conduct gaming activity will be determined in the future. It is important to remember that in the context of the 2003 Deed, there is no decision to be made on this issue until mid-2019.
Madam Speaker, it is quite plain that in addition to the Federal Group and Mr Walsh, a broad range of interested stakeholders also have strong and competing views, including community sector organisations, the THA, other tourism industry bodies, unions, the TCCI and individual businesses.
Following Mr Walsh’s decision to withdraw his proposal, I requested that the Department of Treasury and Finance provide me with advice on the issues and options and the process for determining the market structure and regulatory arrangements that might apply after 2023.
Having considered Treasury’s advice, it is clear that there is a complex range of issues that must be considered and resolved, involving a diverse range of stakeholders with strong and differing opinions regarding how the gaming market should operate after 2023.
Madam Speaker, we have carefully considered these issues and we want all stakeholders to know where we stand on a number of key structural matters in relation to the post 2023 gaming environment in Tasmania. Today I will outline the principles which are guiding our thinking and also the Governments policy positions on key structural elements of the Tasmanian gaming sector post 2023.
Proposed Guiding Principles
Our first guiding principle is that gambling is a lawful form of entertainment for many Tasmanians, and a wide range of gaming products should be available to consumers that are fair, and which provide an acceptable average return to players.
Secondly, the regulation of the gaming industry should be designed to create a sustainable industry with the highest standards of probity whilst minimising harm caused by problem gambling.
Thirdly, the financial rewards from the gaming industry should be shared appropriately among the industry, players and the Government representing the community.
Fourthly, the placement or relocation of EGM’s into new venues outside of the casino environment should not be solely determined by the industry and the public interest should be taken into account.
Our fifth guiding principle is that the duration of a gaming licence should be commensurate with, among other things, the level of investment necessary to underpin the delivery of the gaming operation.
Proposed Policy Position
Madam Speaker, consistent with these five guiding principles, the Government has determined a set of policy positions in relation to the structural arrangements for casino gaming operations and hotel and club EGM gaming post 2023.
Firstly, in relation to Casino and Keno operations, the Government’s position is that the rights to conduct gaming in the existing casinos including EGMs and table gaming and the operation of keno are to remain with the Federal Group, subject to the standard probity and regulatory performance arrangements and satisfactory negotiations regarding term as well as taxation and license fee arrangements.
Since commencing Australia’s first casino in 1973, the Federal Group have clearly established that it is a sound casino operator, employing around 2000 Tasmanians and has been a very good corporate citizen in Tasmania, and the Government sees no basis to change this arrangement.
Secondly, the tax rates and license fees for casino gaming and keno are to be reviewed against the broader Australian market with a view to ensuring that returns to players, the licensed entity and the community via the Government are appropriate.
Thirdly, given the emergence of the MONA proposal, the Government’s position is that limited new “high roller, non-residential” casino licenses should be available in Tasmania in addition to the Federal Group’s two casinos.
Naturally, any high-roller non-residential casino would be subject to a rigorous licensing and probity process. The Government’s view is that in the first instance, the opportunity to apply for such a licence should be afforded to Mr Walsh, given he initially came forward with a proposal in respect of financially supporting the MONA museum.
If that licence opportunity were taken up, subject to Mr Walsh meeting the necessary and rigorous licensing and probity process, the Government is of the view that one additional licence could be made available for a location in the North of the State, should there be market demand for such a casino.
Hotels and Club EGMs
Madam Speaker, in relation to EGMs in hotels and clubs, our policy position is that the rights to operate these machines post 2023 will be allocated and priced by a market-based mechanism, such as a tender.
The Government has an open mind as to alternative structural options for the ownership of EGMs in hotels and clubs post 2023 – the current single network model could continue, with the rights to own and operate that network put to the market, or alternative models such as individual venue ownership under a common network control platform could also be considered. The finalisation of a policy position on this will be informed by a public consultation process.
Madam Speaker, in relation to overall EGM numbers from 2023 onwards, the Government’s policy position is that the current statewide EGM cap of 3680 will be decreased to the level of EGMs that is in place as of today. I am advised that this is 3530 machines – this is a reduction of 150 machines.
The Government’s third policy position on hotel and club EGMs is that the tax rate and licence fees for these machines are to be reviewed with a view to ensuring that returns to players, the licensed entity (or entities), venues and the community via the Government are appropriate and reflective of the broader Australian market. Our starting proposition is that the returns to hotels and clubs, and the community, should be at least in the same position they are today.
Madam Speaker, related to this, the Government considers that the Community Support Levy, which is applied to EGM activity in hotels and clubs, will be reviewed to ensure that it is set at an appropriate level delivering outcomes that are in the best interest and meeting the requirements of the community.
The Government’s final policy position in relation to hotel and club EGMs is that the relocation of EGMs into new hotel and/or club venues – that is those venues that currently do not have machines today - will be subject to a new public interest test to be applied by the Tasmanian Liquor and Gaming Commission. This will give local communities a voice in determining the future location of EGMs in their community, which has been lacking. The Government intends the regulatory instrument that delivers this outcome would have effect from today onwards. However, the Government will not create uncertainty for hotels and clubs that currently have machines in place today by requiring any form of retrospective approvals.
In the context of the Government indicating a willingness to consider up to two “highroller non-residential” casinos and a market-based mechanism for the operation of EGMs in hotels and clubs, it is the Government’s intention that the Coordinator General be the point of contact for inquiries from interested potential participants prior to a formal expression of interest process.
However, the process for ultimately awarding any new gaming licences would not be completed by the Coordinator General, rather it would be undertaken at arms-length from the Government via a formal independent process once the new structural arrangements have been finalised.
Public Process to Inform Structural Arrangements
Madam Speaker, having set out the Government’s policy position, I will now turn my attention to the public process that the Government intends to establish shortly in relation to further refining policy development for the future of gaming in Tasmania post 2023.
The processes that led to the development of the earlier Deeds caused concern in the community and cast a shadow over the appropriateness of structural arrangements. The Government does not want a repeat of this outcome. There needs to be a fully transparent public consultation process that enables interested Tasmanians, whether directly involved in the sector or not, to have their say on the future structure of the gaming sector post 2023, with the Government’s policy position as the starting point.
Accordingly, the Government proposes that a Joint Select Committee of both Houses be established, comprising three members from the House of Assembly (one from each party) and three independent members from the Legislative Council to undertake this public consultation process and report by the end of the year.
This committee would be resourced with a secretariat provided by the Department of Premier and Cabinet with input from relevant Government agencies including Treasury and the Department of Health and Human Services, and with sufficient resources to obtain independent expert advice should it be required.
While the Terms of Reference are to be finalised, and will ultimately be determined by both Houses, the Government’s view is that the Terms of Reference for the Committee would include:
The Joint Select Committee Review would serve as an open and transparent ‘fact finding’ process to provide information for the formulation of the more detailed structural policy elements within the policy framework I have set out today to help inform the Government’s final policy position.
Whilst it would ultimately be up to the Committee, I would hope that it would be able to report by the end of 2016, enabling this matter to be clearly determined ahead of the 2019 decision point and to provide certainty to all stakeholders.
In closing Madam Speaker, the Government has developed a number of clear policy positions that we want the community to have the opportunity to comment on in a transparent and open way.
We are bringing this process forward now to provide certainty to all of the various stakeholders as well as the broader community well before the 2019 decision point.
Madam Speaker this is a significant departure from what has occurred in this State in the past with respect to gaming policy and we understand that there will be a range of views on what we propose.
Our very firm view is that this policy position and the open and transparent process I have outlined is the right way forward and in the best interests of the State.