Is Ohio rolling dice on lottery?

The company that has been operating Ohio’s gambling systems since 2009 has a message for the keepers of the public purse regarding its contract: It ain’t broke, so don’t break it.

Indeed, Greece-based Intralot contends the state runs the risk of sacrificing the great deals it has enjoyed for years if it adopts a competitive bidding process.

The company’s pitch for maintaining the status quo was made by Bryon Booth, vice president of government relations, during a telephone interview with this writer.

Booth and Sandy Theis, a political consultant from Columbus, reached out in response to the May 28 column in this space headlined “Lottery is huge in Ohio.”

The column sought to explain why the State Controlling Board refused a request from the Ohio Lottery Commission to extend the contract with Intralot for two years. The commission also sought approval to exercise renewal options for the contract through mid-2027.

The Ohio Lottery Commission had not sought competitive bids when it decided to extend the contract with Intralot.

The new two-year agreement would have resulted in the Greek company earning an additional $71 million over that period.

In addition, Intralot would have been paid $12 million to purchase and operate up to 750 “Quick Keno” self-service lottery terminals at retailers.

Terminals, slot machines

Since it began operating in Ohio in 2009, Intralot has earned $259 million for providing the lottery terminals and the electronic slot machines at the racinos (horse racing tracks with slot-machine video terminals).

The controlling board, which is responsible for approving all state contracts, refused to go along with the lottery commission’s request.

In the words of Sen. Jay Hottinger, R-Newark, “There has been a long time since there has been a competitive bid.”

State lottery commission members contend that Intralot would provide nearly $70 million in savings, equipment and upgrades in exchange for the six-year contract extension.

Even that pitch didn’t sway the controlling board.

“But, candidly, I’m not certain we know how good the deal is,” said Sen. Hottinger. “It’s a large contract. It’s incumbent upon us to get out there every once in a while to see what the competition has.”

But Intralot’s Vice President Booth pointed out that an independent report on the Ohio Lottery concluded the state is benefiting financially from its relationship with the company.

He also noted that Ohio differs from the 11 other states Intralot serves, in that its contract is reviewed every two years to coincide with the state’s biennial budget.

Asked why the taxpayers would not benefit from a competitive bidding process in which the lowest and best bidder could get the contract, Booth contended that Ohio is already receiving the best rate in the country and has profited from the increase in gambling services in the last eight years.

Prior to 2009, G Tech (now International Game Technology) provided lottery services in the state, but then Intralot made a bid for the contract. It offered to operate the Ohio Lottery at a cost that was $26 million lower than what G Tech was charging.

The introduction of new games, including multi-state games, and additional drawings for additional games, has boosted revenue.

In fiscal year 2016, sales reached a record $3.06 billion, primarily from record jackpots for Mega millions and Powerball games.

To bolster his argument that Intralot had delivered everything – and more – the state wanted, Booth pointed to the various reports on the lottery that provide an in-depth look at what’s taking place.

For example, from July to December of last year, traditional lottery ticket sales brought in $1.47 billion, a 0.3 percent increase for the same period in 2015.

But it is the 2017 revenue projections from the traditional ticket sales that Intralot contends bolsters its case for a no-bid extension of its contract.

Sales could well exceed $3 billion.

“You can’t just be low bid,” Booth said of the contract. “You’ve got to be able to bring some other opportunities for the state because the state at that time was doing about $2.4 billion and they were looking for growth because they were funding education.”

Booth said Intralot set three goals when it secured the contract: provide the lowest rate in the United States for Ohio; establish a manufacturing plant in the state for the self-service machines; and, add to the value of the contract by increasing gaming content.

Booth insisted that every indicator used to evaluate gambling in Ohio shows that the Intralot-Ohio Lottery Commission relationship has worked well.

As for the consumers, the increase in revenue shows that the state has come up with an acceptable mix of gambling content.

“I think this is exactly how government should work,” the company vice president said.

But what about the notion that government should solicit competitive bids if for no other reason than to find out if there’s something better out there?

There are three major companies that operate state lotteries: Intralot in 12 states; Scientific Games in 9; and, International Game Technology in 26.

The State Controlling Board has informed the Ohio Lottery Commission that the contract with Intralot will be extended for a limited period while bids will be sought for a new two-year contract.

So what happens if Intralot submits a bid that’s lower than the competitors but higher than what it is now earning for operating the lottery? That’s a risk the controlling board is prepared to take.

From a public policy standpoint, getting the biggest bang for taxpayer dollars should always be the goal of governments at all levels.

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