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Batting cleanup is never easy

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Illinois

A much-heralded move by the Rauner administration to replace the private firm that operates the Illinois Lottery has a previously unreported string attached that will force the new operator to pay as much as $56 million if it wants to use its own supplier rather than incumbent firm Gtech.

The string—technically a clause dealing with “residual value”—is buried deep within a state bidding document that was quietly issued July 28.

Rauner administration and lottery officials say they had to include the clause because language originally drafted by former Gov. Pat Quinn’s administration “tied our hands” and that, despite the clause, the lottery will soon have a new and improved private manager.

But Rauner aides did not mention the clause when they fired Northstar Lottery Group as the lottery’s private manager a year ago. And a spokeswoman for IGT, which recently merged with Gtech, said it “negotiated with the Rauner administration and reached agreement on amicable terms.” […]

In a phone interview, [acting Lottery Director Tim McDevitt] defended the deal as better than the one struck by Quinn and still in the public’s interest. The new manager has the right to select its own supplier and may be able to run such an efficient and productive operation that it will be able to afford the payment and still make a profit, he said.

It doesn’t seem to cost taxpayers any money, so that’s good, at least.

The original press release from last year is here.

posted by Rich Miller
Thursday, Sep 8, 16 @ 11:59 am

Comments

um Gtech formed northstar to be the prvt manager. basically gtech is northstar. so we fired gtech prvt manager shell but promised to retain gtech and pay them 56 million???? seems like a horrible deal. we are paying the company we fired for incompetence to keep operating the infrastructure.

lottery was growing on its own 5% every year or more run by state. now we are giving the growth earnings all to a prvt company at the expense of schools…. and the state has lost money on this deal. why is giving money to another prvt person, taking it from school spurces funds a good plan???

Comment by Ghost Thursday, Sep 8, 16 @ 12:10 pm
This actually makes some sense - and as noted, does not cost the State any more (or less).

The Operator (in this case GTech) is not the problem. You want the network of sales terminals around the state to work and the gaming system to be secure and reliable. It is.

The Manager is the one that needs to do marketing, etc. and drum up sales. If they want to try to get a new one that’s fine I suppose. But don’t let the new Manager try to interfere with the part of the system that’s stable and works.

Comment by Bluegrass Boy Thursday, Sep 8, 16 @ 12:12 pm
OK, the Rauner folks acknowledge that contracts are binding and their hands are tied by one old clause they wish wasn’t there. But there’s nothing they can do, so they’re making the best out of bad situation.

Contrast that to, say, the pension clause in the Illinois Constitution and court rulings saying that retirement benefits are a legally binding contract.

They don’t seem as quick to acknowledge that reality and then deal with it.

Comment by Michelle Flaherty Thursday, Sep 8, 16 @ 12:15 pm
I truly believe that the lottery needs an overhaul. We have the most uninteresting lottery in the country. Take a look at the State of Michigan that offers a version of Keno in most of their bars / pubs. Everyone knows we need revenue. Here’s an opportunity to raise money without raising taxes.

Comment by Stones Thursday, Sep 8, 16 @ 12:20 pm
Any new bidder will consider that contract as part of their bid process. Unless the required contract has the same or lower costs than they would obtain with a new vendor, they will adjust their bid to reflect the higher costs. That will cost the State money.

Comment by Last Bull Moose Thursday, Sep 8, 16 @ 12:26 pm
Funny, the Quinn termination, announced in August 2014, well before the election, didn’t pay GTECH a dime for supposed ‘residual value’. Hmmm, $56M…no wonder the GTECH spokesperson thought the negotiations on the new termination were ‘amicable.’

Comment by Leon Trotsky Thursday, Sep 8, 16 @ 1:54 pm
Gambling shrinks the consumer economy away from purchases of cars, homes, furniture, clothing, education and personal retirement savings.

We say we want to grow our economy in Illinois. Then we should do away with the Illinois state lottery. Let’s start there.

Comment by Enviro Thursday, Sep 8, 16 @ 1:59 pm
Enviro. Give it up.

Comment by blue dog dem Thursday, Sep 8, 16 @ 10:10 pm