Media Clipping – July 21, 2007, The Daily News

Money is easy, but is cost too high?

BY Stéphane Massinon

Walk into a new NSLC store and the difference is immediately striking. The design is warm and inviting. The store is laid out to make sense. The selection is slowly growing to cater to different tastes. And if you don't know which vintage of wine to enjoy with fresh salmon, you can ask someone for help - and get it.

The old days of buying booze in a bag from indifferent workers are long gone. Organizing bottles in alphabetical order is also a thing of the past.

If you're one of the few who have walked into the NSLC's distribution centre, the difference is equally striking. Workers whiz around a warehouse that's now organized electronically - rather than a single fax machine that once received all orders - to retrieve orders and move them along expeditiously.

Revamped stores, a more efficient warehouse and customer-friendly service means the liquor corporation runs like a business. And a profitable one at that.

In 2006-07, the NSLC is forecasting surpassing the half-billion-dollar mark in total gross sales for the first time. That's up more than $50 million from only two years before.

More than $188 million will go to provincial coffers this year from the NSLC.

NSLC spokesman Rick Perkins says the change is all going according to plan. In 2001, the NSLC wanted to get away from its operating model and create stores people would actually want to go to.

"Fixing that box is the easy part," Perkins says. "Taking 1,400 employees and changing them from a monopoly mentality to a customer-service mentality is different."

In those early years, focus groups used to laugh when asked about customer service at the NSLC, he says. To make people happy, the NSLC asked what they wanted and started delivering: stores next to grocery stores and selling cold beer, for example.

Profitability at the NSLC is projected to keep rising. By 2010, its goal is to write cheques to the province for $215 million.

So the province is making buckets of money in liquor sales - an average $540 per Nova Scotian man woman and child.

But with every dollar that flows to the province in revenue, there is a cost. It's one that is paid by health care, policing and lost productivity.

To most drinkers, alcohol poses little to no problem. But the province's Department of Health Promotion and Protection estimates that one in five drinkers are "high-risk drinkers." Their drinking negatively effects their health and well-being and that of friends and family.

According to the 2002 study, Costs of Substance Abuse in Canada, the province took a $418-million hit due to alcohol. That's $97 million in direct health-care costs, $78 million in direct law-enforcement costs, $30 million in other direct costs and an estimated $212 million in lost productivity.

The Canadian Centre on Substance Abuse, which conducted the study, this year released what it calls its magnum opus, a national alcohol strategy calling for a culture of moderation.

In an interview, its CEO, Michel Perron, says government liquor monopolies are the best way to regulate the harmful side effects associated with drinking.

"There is no question that liquor control boards generate a tremendous amount of profit for governments. Governments need to be mindful that as they go to the liquor boards and say, 'We need you to increase sales by 20 per cent next year,' that you can optimize profits, you don't need to maximize profits," Perron says.

"There is a lack of connectivity. It is becoming clear, that you can only increase profits so much before you will be seeing a corresponding increase in harm downstream."

It comes as no surprise that video lottery terminals bring in a lot of loonies for the province.

They alone brought in $151 million to the Nova Scotia Gaming Corporation in 2006-07. With $25 million in expenses and $30 million in retailer commissions, VLTs feed the the gaming corporation.

At the NSGC, total revenues this year were $465 million. But it is making less money than it used to. In 2004-05, the cheque written by the NSGC to the province was for $187.5 million, while this year it's gone down to $162.3 million as the province sheds some VLT machines.

"The cash cow comment and the 'government is addicted to gambling revenue' comment, I would look at those and say that's fair comment by people who have different views about the industry," says Margaret McGee, spokeswoman for the NSGC. "I take no issue with that at all.

"I would tend to focus it more positively to say we give money to government and to taxpayers every year that contributes to very important programs. To social programs, to schools, to hospitals, to roads and amateur sport.

"This is money that the people need, this is money that the government needs to respond to what the people are telling them they want. I would frame it in a more positive light, but absolutely accept how people want to frame it as long as we're engaged in an on-going conversation about gambling and the future of gambling," McGee says.

In 2005, she says, the province's gaming strategy emphasized removing VLTS.

"For most corporations, declining revenue would be a bad thing, but for us, it's success because it is meeting the accountability that we have to the province to implement the gaming strategy and listen to the voice of the people around issues as seen fit by government."

Asked if the corporation will try to recoup that money elsewhere, McGee says the government charts out the corporation's plans.

"For this year it's about stability and staying the course. Will we grow? I don't know the answer to that question, but responsible growth is certainly possible."

A Saint Mary's University ethicist says the issue of governments making money from the sale of alcohol and gambling is so accepted, it's rarely thought about.

But ethical questions around the issue still abound.

"There's the question that given the type of industry that this generates, is this the sort of thing where governments perhaps should be concerned about keeping their hands a little more clean?" asks philosophy professor Chris MacDonald.

"I mean, presumably, you wouldn't have a Nova Scotia Tobacco Corporation, you wouldn't have a Nova Scotia Pornography Corporation, even if they were profitable. It would just be the sort of thing where it would be kind of unseemly for government to be engaged in those types of profit-making activities.

"No doubt, if there were a Nova Scotia Pornography Corporation, Nova Scotia schools would be quite well funded. That's a lucrative industry, but still kind of unthinkable."

When asked about the vast profits made by liquor and gambling, politicians and NSLC and NSGC spokespeople are quick to point to where the money is going.

They say 100 per cent of profits go to public coffers, which in turn go to the public good. Roads get paved, schools get funded and important medical equipment is purchased.

But MacDonald says it's not like liquor and gambling create new wealth.

"These things don't manufacture money, they transfer money from one group of people into public coffers.

"I'm not an expert on the evidence, but my understanding from what I've read is that it's basically transferring predominately from the lower socioeconomic segment into public coffers.

"It's effectively a regressive income tax. The people that can least afford it are paying the most. And arguably in some cases it's the people who are going to benefit the least because people who are playing Video Lottery Terminals and lotteries are also the least likely to be sending their kids to university," MacDonald says.

Political scientist Lori Turnbull of Dalhousie University says the issue is how governments weigh the concept of the public good.

"The interesting part to me is the question of public interest and how the government can weigh the interest of some against the interest of many," Turnbull says.

Concerns of the some - addicts - must be balanced with the overwhelming amount of money that's generated. In turn, that money flows to public coffers.

Take away that money, she says, and surely taxes would have to go up.

"If government said it was going to get out of the business entirely, then I don't know that people would be really supportive of some type of tax increase in order to make up for lost revenue."

Gambling costs are paid by a very small portion of the population. But they certainly are paid.

The province estimates that less than one per cent of adults is addicted to VLTs, a figure VLT opponents dispute. The Department of Health Promotion and Protection says 6,400 adults, less than one per cent of Nova Scotian adults, are "seriously dependent" and paid 53 per cent of its VLT revenue. On average, they lost about $10,000 each in after-tax income.

But coming up with an overall cost of gambling is tricky. Local think-tank GPI Atlantic tried it in 2004, only to conclude that there is a large cost, but measuring it remains elusive.

The report highlights mainly economic benefits of generating public money and jobs, but stumbles when trying to precisely determine costs. Yes, there are suicides, family break-ups, lost productivity and crime, but the pricetag is hard to pinpoint. That's because gambling is often associated with other addictive behaviours.

"In order to cost something out, you actually have to be able to say this is specific, quantitative, gambling attributable part and that's very difficult to do," says Ron Coleman, GPI Atlantic director.

Mental-health issues, addictions and other factors can lead to excessive gambling, so saying that gambling causes a specific cost is elusive. But what is known is that the province cashes in while some Nova Scotians lose their houses, families, jobs and savings all in the pursuit of a quick buck. It is the illusion of winning free money

And both government and addicts are doing it.

(smassinon@hfxnews.ca)