New Jersey Announces Lottery Privatization Contract Award

The New Jersey Department of the Treasury today announced its intention to award a 15-year contract for the private operation of the state’s lottery that will bring a $120 million upfront payment to the state and an estimated $1.4 billion in additional net lottery revenue to the state over the life of the deal, relative to in-house operation. From the state’s press release:

To ensure the future performance of the New Jersey Lottery exceeds its past record of providing essential support to State institutions and education programs, the Department of the Treasury’s Division of Purchase and Property has issued a Notice of Intent to award a 15-year contract to Northstar New Jersey Lottery Group to provide the Lottery with services to support its marketing and sales operations.

As part of the contract terms which guarantee the State a minimum amount of income, Northstar NJ will provide an accelerated payment of $120 million to the State upon the final award and execution of the contract. It has also committed to generating at least $1.42 billion of total additional net income for the State from Lottery operations over the life of the contract with a potential actual increase in net income of $6.88 billion. The $1.42 billion mark is above and beyond what the State could expect to see if Lottery operations remain unchanged.

Northstar NJ is a joint venture consisting of GTECH Corporation of Providence, Rhode Island, Scientific Games International of Alpharetta, Georgia, and OSI LTT NJ Holdings, a unit of the Ontario Municipal Employees Retirement System (OMERS). GTECH and Scientific Games are two of the world’s leading companies in lottery management and OMERS is one of the largest pension funds in Canada.

“For more than 40 years, the Lottery has provided critical financial support to New Jersey’s institutions and educational programs. The contract we plan to enter into with Northstar New Jersey protects that legacy commitment to New Jerseyans by positioning the Lottery for sustained growth and continued success in the face of an increasingly complex and competitive marketplace,” said State Treasurer Andrew Sidamon-Eristoff.

Carole Hedinger, executive director of the Lottery, said the contract will immediately strengthen its operations. “GTECH and Scientific Games have outstanding records of success in helping public lotteries grow their revenues and improve their operations. Their business plan for the Lottery is solid, well-researched and builds upon our existing strengths.”

New Jersey now becomes the fourth state—after Illinois, Indiana and Pennsylvania—to move forward with a private management agreement for lottery operations in recent years. The shift to private management has already occurred in Illinois and Indiana, while officials in Pennsylvania continue to renegotiate their contract after the state’s Attorney General raised several legal concerns in February, which has slowed the process in the Commonwealth.

Check back to in the coming weeks for my state lottery privatization roundup as part of our Annual Privatization Report 2013.