TORONTO - Hundreds of Ontario Lottery and Gaming Corp. employees will lose their jobs April 30 when the Crown corporation shuts down its slot machine operations at racetracks in three border cities.

The slots at Windsor Raceway, Fort Erie and Hiawatha in Sarnia were closed to the public Wednesday so OLG could talk to the 560 affected employees, but will reopen on Thursday.

While OLG regrets the workers will lose their jobs, closing the slots was a "difficult" but "necessary" step, OLG president and CEO Rod Phillips said Wednesday.

"Unfortunately in the current reality, having facilities within nine or 10 kilometres of each other -- in some cases as in Windsor, having facilities in the same city -- don't make sense. In (these) locations ... the demand for customers, principally because of the U.S. border, has dropped off," he said.

The closures are part of a sweeping OLG plan to expand and "modernize" gambling in the province to help eliminate Ontario's $16-billion deficit by 2017-18.

OLG plans to close or relocate "underperforming" gaming facilities in favour of opening new ones closer to potential customers, including a Toronto-area casino, and expand slots beyond racetracks.

OLG is also mulling a gaming facility in Ottawa, which would compete with Quebec's Casino du Lac-Leamy just across the river. It also plans to axe a revenue-sharing agreement with racetracks next year that gives them a cut of the slot profits, amounting to $345 million a year.

Municipalities that host the slots also get a share of the revenues, which can add up to millions of dollars each year.

Racetrack operators and affected municipalities will continue to receive a cut of the slot revenues until March 31, 2013, so long as live horse racing events continue, Phillips said.

But the move is a devastating blow to communities that have barely recovered from the recession, said Sarnia Mayor Mike Bradley.

At its peak, Sarnia received $2.4 million and was expecting to receive $1.5 million this year.

Not only will the move kill 140 OLG jobs in Sarnia, but thousands of other jobs that depended on the slots will also disappear, he said.

"This is a body blow because there were jobs in tourism, there were jobs that went all the way from the horse gate to the farm gate and help contribute to the economy," he said.

OLG blindsided him and the local racetrack owner, who was "in tears" after spending hundreds of thousands of dollars to build new stables and upgrade the facility, he said.

Other municipalities that want to make a pitch for a gaming facility in their community should beware, Bradley added.

"If they ask me what the OLG is like, I will say it was like dealing with the Sopranos," he said.

"They didn't consult. They came in today bringing a letter from the chairman to give us to say that the relationship's over. They did not respect the host communities."

Windsor and Fort Erie will be hard hit too, said the Ontario Horse Racing Industry Association.

Fort Erie's 115-year-old racetrack is the town's largest employer and Windsor already has the highest unemployment rate in the province at 10.7 per cent, it said.

But Phillips argues that it's a necessary step in OLG's plan to modernize gambling in Ontario and add $1.3 billion a year to provincial coffers. Profits from gaming facilities close to the U.S. border have dropped from $800 million to $100 million over the past decade, and they keep shrinking, he noted.

Offshore gaming websites, plummeting U.S. traffic and increased competition in American states are taking a bite out of OLG's revenues -- almost $2 billion of which goes to the province each year.

The workers will receive severance, but Phillips declined to say how much it will cost the corporation to close the facilities.

OLG chairman Paul Godfrey, who made the announcement in Windsor with Finance Minister Dwight Duncan, said taking the slots out of that city's racetrack was aimed at protecting its local casino.

"Of course it's because of the economy and because of a number of other things, it's challenging times," he said. "We felt that we had to do everything in our power to ensure the long-term longevity of Caesars Windsor."

Duncan, who gave the green light to the OLG plan and represents a Windsor riding, was unavailable for comment Wednesday on the closures.

Progressive Conservative Leader Tim Hudak, who represents his hometown of Fort Erie, was in New York City and also unavailable for comment.

Fort Erie councillor John Teal questioned where the Opposition were on the closures.

"I don't hear a word," he said. "They're letting (Premier) Dalton McGuinty operate like he's running a majority government, and he's not."

PC critic Monte McNaughton, who held a press conference Wednesday to ask for an end to business subsidies, called for competition to determine which communities should have slot machines.

"I think we need to allow the free market to decide and at least the government should accept proposals from different sites and locations to see if they make a business case to keep these," he said.

The Liberals were quick to point out that McNaughton, whose southwestern riding includes a racetrack, condemned the government a few days ago for cutting off racetracks from getting a share of the slot profits, saying it would kill thousands of jobs in rural Ontario.

The New Democrats accused the Liberals of deserting workers who will lose their jobs due to the closures.

"Not only has this minority Liberal government folded on the dedicated workers who run these facilities, but they've also dealt another losing hand to supporting industries in these already hard-hit communities," NDP MPP Taras Natyshak said in a statement.

OLG is moving ahead with other initiatives to "modernize" gambling, including selling lottery tickets online and at checkouts in grocery and big-box stores.

According to the OLG, the measures will bring in an extra $4.6 billion over six years and create 2,300 new jobs in the gaming industry and another 4,000 service industry jobs at hotels, restaurants, entertainment and retail industries.