Gambling News by Gambling Headquarters

Private companies seeking to operate the Hoosier Lottery couldn't rely on expanded gambling to increase profits under a bill filed yesterday. That might dampen enthusiasm among companies interested in Gov. Mitch Daniels' plan to lease the lottery to a private operator and use the proceeds to create scholarships and boost spending on higher education, one gambling consultant said. A ban on new gambling would "really handicap whoever's going to do this -- fairly significantly," said Kip Peterson, founder of the Thorsborg Institute, a gambling consulting company. "But it could still be done." Sen. Jim Merritt, R-Indianapolis, filed legislation yesterday to authorize Daniels' lottery proposal. It would require a company to bid at least $1 billion to operate the lottery for 30 years and pay the state another $200 million annually, money lawmakers would use to maintain existing programs. The bill allocates 60 percent of the private firm's upfront payment to a scholarship fund for the state's brightest students and the remaining 40 percent to lure top researchers to Indiana universities. Some lawmakers have been skeptical that any company would be interested in the deal unless it was permitted to expand the types of games offered by the lottery. House Speaker Pat Bauer, D-South Bend, has said a private vendor would likely launch keno, a fast-paced numbers game that is currently allowed under state law but has never been introduced. Or, Bauer said, the operator might want to offer video gambling similar to slot machines. But Merritt said he opposes any expansion of gambling, and so his Senate Bill 577 prohibits keno and video lottery games as well as sports wagering. In fact, the bill authorizes only those games the Hoosier Lottery already offers or variations of those games approved by the Indiana Gaming Commission. Yesterday House Majority Whip Dennie Oxley, D-English, said he's surprised the bill includes the ban. "I think it will certainly hinder the governor's efforts," said Oxley, who opposes the privatization proposal. "I think it will make it harder for the state to make any money on the deal." But Merritt said he's confident a company would still be interested in bidding to operate the lottery. David Schwartz, director of the Center for Gaming Research at the University of Nevada, Las Vegas, agrees. He said a private company doesn't need new gambling to improve the efficiency of a state operation.

"It's the same thing that happens when private companies take over publicly traded ones," he said. "They prune them and run them more efficiently."

He said a company probably could cut a lottery's operational costs significantly and therefore reap bigger profits.

But Peterson said Indiana is "asking a lot" of a private vendor. He said a company already would be taking a risk by signing a 30-year contract that could be changed by a later state law.

"Whoever puts this money down will want some ironclad agreement," he said.

The Daniels administration is already working to find suitable vendors. It has issued a request that companies interested in bidding for the eventual contract become pre-qualified.