Ontario’s gambling expansion, which is crucial to the Liberal government balancing the books without raising taxes, is in disarray after Paul Godfrey’s removal from the helm of province’s gaming agency.

Godfrey, president and CEO of Postmedia newspapers, was let go as chair of the Ontario Lottery and Gaming Corporation by Premier Kathleen Wynne’s government late Thursday.

That triggered the mass resignation of the OLG’s “shocked” board of directors and has left Wynne’s fledgling administration scrambling to explain a major policy U-turn.

His dismissal capped a dramatic day on the gambling front that also saw Mayor Rob Ford concede his push for a downtown Toronto casino is dead unless the province promises a $100 million hosting fee.

As first revealed by the Star, the city would receive just $53.7-million annually for a new facility and existing slots at Woodbine.

A casino in Toronto or a surrounding municipality has been a key part of OLG’s “modernization” push to increase revenues to a provincial Liberal government desperate for money.

“Do I look like a guy who is worried?” Godfrey told the Star as he headed into the 45-minute meeting in Finance Minister Charles Sousa’s office.

Speaking to reporters later at the Fairmont Royal York, the one-time chair of the old Metro Toronto municipal government admitted he did not know why he had been let go.

“I haven’t been given any reason for this decision — nor do I think there’s a particularly good one. I was fired,” Godfrey, 74, told a hastily prepared news conference, adding Wynne indicated to him she was “uncomfortable with gaming.”

“It is quite fair for her to want her own person. Some people you connect with and some people you don’t,” he said, noting all his actions were approved by the Liberal government, including OLG executive compensation and a special deal that would have given Toronto $100 million for a hosting a casino.

Godfrey, who sources say declined the premier’s invitation to chat earlier in the week, expressed concern Wynne was risking more than $1 billion in gambling proceeds by unleashing such upheaval at the agency.

The prominent Progressive Conservative appointed to OLG by former premier Dalton McGuinty in 2009 to clean up a troubled corporation was shown the door after a one-on-one meeting with Sousa at Queen’s Park.

“Mr. Godfrey led a significant turnaround in the operations of the OLG,” the finance minister said in a statement that did not explain the government’s rationale for the decision.

“Under his leadership, OLG re-invented itself and became a modern and more efficient organization,” said Sousa.

Peter Wallace, the secretary of the cabinet and head of the Ontario public service, will serve as interim chair, he added.

Wallace will need a board to help him oversee the agency.

All seven members — including former City of Toronto chief administrative officer Shirley Hoy — resigned en masse upon learning of Godfrey’s sacking.

“The government has not advised us of any change in policy or direction,” they wrote in a letter to Sousa that stressed they were “shocked” by Godfrey’s leaving.

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“As a result of the government’s action, it is with significant regret that, we the undersigned, collectively tender of resignation,” they continued.

The former directors noted that “at all times we have carefully followed direction from government, including the Slots at Racetrack Program, where we received direction from cabinet that included both yourself and Premier Kathleen Wynne to end the program.”

That’s a reference to McGuinty’s decision to end the $345-million annual subsidy to racetracks that has hurt the Liberals in rural Ontario, leading Wynne to try to mend fences through “transition” funding that could be worth $180 million over three years to the industry.

Wynne, who succeeded McGuinty in February, has been slowly undoing her predecessor’s gaming plans, which is supposed to ultimately bring in an additional $1.3 billion in revenue annually.

“The delivery of that $1.3 billion is in jeopardy,” admitted a senior government official, noting that with an $11.7 billion deficit it may be impossible to get back in the black by 2017-18 as Wynne has promised.

Another Liberal source expressed concern the government would either have to raise personal income tax rates or hike the 13 per cent harmonized sales tax in order to make up any shortfall.

Other officials, however, insist that Godfrey leaving does not signal the end of the lottery and gaming modernization effort.

“This is about a new direction,” said one high-ranking Grit, adding “incorporating horse racing into modernization” is key.

“We didn’t fire him, just replaced him — a subtle difference but an important one,” the source said.

“There was disagreement on a lot of things. He put (the) $100 million number out there for Toronto. That’s a lot of money and we are not going to treat the rest of the province unfairly. Bottom line.”

Another noted that Wynne has never been comfortable with a Toronto casino and was lukewarm to the expansion when McGuinty and former finance minister Dwight Duncan unveiled it last year.

Deposing Godfrey, whose Tory credentials gave the Liberals political cover for increasing gambling, is a highly visible way for the new premier to differentiate her government from the previous administration.

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