Thursday, September 16, 2010
 
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Illinois picks Northstar to run state lottery

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[September 16, 2010]  SPRINGFIELD -- Illinois is banking its luck on a few businesses to help boost its fortunes with the state lottery.

HardwareIn an unprecedented agreement for Illinois, Gov. Pat Quinn Wednesday selected the Northstar Lottery Group to enter into a contract with the state to privately manage the lottery.

In winning the contract, the Northstar consortium beat out the other finalist, the Camelot Group, which manages the national lottery in the United Kingdom. Last week, the two finalists gave their final pitches to state officials at a public hearing.

Lawmakers authorized the Illinois Lottery last year to find a private management group with explicit aims of raising sales and profits.

Last budget year, lottery proceeds topped $2.2 billion. Of that amount, $625 million went toward schools and $32 million toward public works projects.

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The state is hoping that private management can bring in an additional $1.4 billion over five years to go toward schools and public works projects.

But not all of the money under the lottery deal will come to state coffers.

Under the 10-year contract, the state would pay Northstar $15 million per year to manage the lottery. Northstar would also get a portion of lottery proceeds and the opportunity to earn bonuses if certain profit thresholds are achieved.

Quinn said the bottom line is that a private manager for the lottery would help bring in more money.

"(The lottery) has been for the past three or four decades a source of revenue that's been stable but rather stagnant," he said. "The decision was made by the Legislature to go in a new direction with a private manager to try and enhance revenues of the lottery and do so in a creative way."

State Rep. Jack Franks, D-Woodstock, is one of the lawmakers who does not support a private manager for the lottery.

He expressed concerned that Northstar is made up of three companies that already have contracts with the Illinois State Lottery -- GTECH Corp., Scientific Games Corp. and BBDO Worldwide.

"It's impossible for those three entities that are already running part of the Illinois Lottery, who have now won this new contract, to police themselves. We're allowing the foxes to watch the henhouse," he said.

Quinn said the bidding process was completely compliant with state laws.

"I want to make it crystal clear that I take the oath (of governor) very seriously. I do things honestly and openly. Everything I've done in life I've tried to do according to my conscience, and that is the only way to operate Illinois government," he said.

Jodie Winnett, acting director of the Illinois Lottery, said Northstar's knowledge of the state lottery system would help reduce costs and bring in more profits.

"They are familiar with Illinois, familiar with the lottery. Their plan is very much tailored to Illinois and (there is) lower risk in implementing that plan," she said.

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One of the companies not chosen as finalist for the private management bid also has some questions with Northstar and the bidding process.

Greece-based Intralot S.A., one of the largest lottery management firms in the world, submitted a preliminary bid to manage the state lottery but was eliminated without reason.

Byron Boothe, vice president of government relations with Intralot, said the company wants to know why the company's bid was rejected and has not ruled out filing an official protest.

"When the consortium was formed with Northstar and the consortium contained the current vendors (of the state lottery), it piqued our interest," he said.

The company has seven days to determine whether or not to file an official protest.

Carolyn Grisko, spokeswoman for Northstar, said the three companies did nothing wrong in teaming up to put forth a bid.

"They came together because they felt that by teaming up they would be able to offer the best level of service to the state of Illinois. And clearly, their business plan will generate the most revenue by the state's determination. That was what the Legislature wanted," she said.

The state has posted information on its procurement process for the private management of the Illinois Lottery on a state website: http://www.illinoislottery.com/
subsections/Management.htm

The state will need four to six weeks to allow an outside contractor to check into the business structure and ethical background of Northstar before the private management contract can be finalized.

[Illinois Statehouse News; By KEVIN LEE]

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