State looks to privatize lottery

Posted: September 08, 2012

TRENTON - Four companies interested in running portions of the New Jersey Lottery attended a mandatory information session Thursday, taking the first step toward privatization.

The Treasury Department is looking to hand over sales and marketing operations to a vendor next year, with incentives to the vendor to boost sales.

The vendor would be penalized if revenue falls below expectations and would realize bigger profits if it exceeds targets.

The state would retain ownership of the lottery.

New Jersey has the eighth largest state lottery and employs 150 people, most of whom manage the network of lottery retailers.

The state believes a privately managed lottery could bring in more revenue, which it shares with education and social services programs. Last year, the lottery grossed $2.8 billion in revenue, and $950 million was directed to state programs and institutions.

"The goal of contracting out the lottery's sales and marketing functions is not to save money but to expand the lottery's revenue base so that it can continue to support the state's education programs and its institutions that serve veterans, the developmentally disabled, and psychiatric patients well into the future," Treasury spokesman Bill Quinn said.

New Jersey isn't the only state looking into privatizing lottery programs. Indiana is set to complete a deal to privatize its lottery by Nov. 1. Pennsylvania is researching whether to outsource its lottery, and Illinois took its lottery private last year.

In New Jersey, the selected vendor would be required to pay $120 million up front and sign a 15-year contract.

Vendors that intend to submit proposals to the state listened to a one-hour presentation Thursday morning. Afternoon site visits to lottery headquarters and warehouses also were required.

The four vendors that attended were GTECH Corp., which currently supplies lottery technology in New Jersey; Camelot Group; Scientific Games; and Intralot.

Vendors have until Nov. 15 to submit their proposals.

Carole Hedinger, the lottery's executive director, told the prospective contractors that New Jersey's demographics and other factors favor significant sales growth.

In the current fiscal year, the lottery is on pace to generate nearly 5 percent more revenue than last year, Hedinger said.

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