By Jamey Dunn
Illinois will hand over the reins of its lottery to a private firm next summer.
The state finalized its agreement let Northstar Lottery Group manage the Illinois Lottery for the next 10 years in return for the promise of more revenue. According to the Division of the Lottery, which operates under the Illinois Department of Revenue, Northstar plans to grow profits by about 10 percent over the next five years.
Northstar Group represents gaming vendors that have previously contracted with Illinois -- Rhode-Island-based GTECH Corp. and New-York-based Scientific Games Inc., along with marketing partner Chicago-Based Energy BBDO.
Northstar’s pledge to increase revenues by $1.1 billion over the next five years topped the proposal by the United Kingdom's lottery manager, the Camelot Group, by more than $500 million. “The state will benefit from [Northstar’s] familiarity,” Jodie Winnett, acting lottery superintendent, said when Gov. Pat Quinn announced the winner of the contract.
Camelot protested the decision, saying the state gave Northstar advantages in the bidding process because, in part, of the firm’s previous relationship with Illinois. The state denied protests from Camelot and the other failed bidder, Intralot S.A, a Greek firm.
If Northstar cannot reach its profit goal, it will have to pay the state half of its projections. It the firm cannot reach the numbers that the state estimates the Division of the Lottery could have achieved on its own, the firm must pay the entire difference. New revenues will go, in part, to help fund the state's capital construction plan, approved by the General Assembly in May, 2009. Plans to privatize the lottery and since-stalled efforts to sell lottery tickets online and allow video poker in bars restaurants across the state were all part of the original funding for new construction in Illinois.
Susan Hofer, a spokesperson for the Illinois Lottery, said Northstar has not changed its business plan from the original proposal pitched to the state last September.
According to the proposal, the firm plans to expand into so-called big-box stores, such as Walmart.
Hofer said the group is “using this time to gear up, so that they can hit the ground” at the beginning of Fiscal Year 2012 — when they are set to take over management in July.
“The lottery office at the Department of Revenue will do the state’s portion,” Hofer said. She said if lottery sales are expanded, it will be up to the state to investigate new vendors. The lottery division would also continue to investigate any alleged violations or fraud associated with lottery ticket sales.
Showing posts with label Privitization. Show all posts
Showing posts with label Privitization. Show all posts
Wednesday, January 19, 2011
Friday, February 09, 2007
Moneymakers
Pressure is mounting for Illinois to milk the cow this year. Lawmakers need a long-term plan to pay for education, transportation, health care and public employee pensions, but there’s disagreement about which cash cow to milk.
HB/SB 750 tax reform
Sen. James Meeks reintroduced a so-called tax swap plan to raise income taxes, lower property taxes and expand the sales tax as a way to fairly fund education and significantly pay down the state’s pension obligations.
Ralph Martire, executive director of the Chicago-based Center for Tax and Budget Accountability, says the bottom 60 percent of income earners would not pay more in income taxes than they are now. And the money they saved in property taxes would be intended to offset the cost of sales taxes on consumer services, such as auto repair labor and haircuts.
Martire adds that the property tax relief would total $2.7 billion statewide. “No school district loses a penny,” he says.
He says the drafters of the legislation tried to “depoliticize” the distribution of the money. Of the state’s $5 billion net revenue, $720 million would go to downstate schools, $420 million to Chicago schools, $400 million to suburban Chicago schools, and $300 million for higher education.
Depoliticize is a bold word, considering this year's budget debate is expected to be a doozy. Gov. Rod Blagojevich has repeatedly said he would veto an increase in state taxes. Senate President Emil Jones Jr. also said on Inauguration Day that he definitely opposes expansion of the sales tax to consumer services. But he did leave the door open to other revenue ideas. “We do not have a spending problem. We have a revenue problem,” Jones said.
Good or bad, he'll have plenty of “creative” revenue ideas to consider.
Privatizing the lottery and the tollway
The governor is still considering selling the Illinois Lottery to fund a $6 billion plan to pump more money into education, school buildings, teacher quality and books. But the plan doesn't address pensions.
Sen. Jeff Schoenberg, an Evanston Democrat, is still considering privatizing the Illinois Tollway (scroll down to the August 29, 2006, blog) as a way to raise lots of money to pay the state’s unfunded pension liabilities and transportation costs. However, he said on Inauguration Day that he is convinced the state should not sell the tollway, but maintain majority ownership. He said the next step is to work with the Illinois attorney general’s office to get insight on the legal dimensions of such a lease.
Sen. Bill Brady’s solution to the pension liability problem is giving current state employees an option to participate in a self-managing plan (like a 401-k) that mirrors the private sector retirement options. New state employees would have to participate in the self-managed plan. The board of trustees of each of the five retirement systems would select up to seven companies where state employees could choose to invest their money as they wished. Brady, a Bloomington Republican, says it would save taxpayer money, reduce political influence on state investment decisions and prevent the state from raiding the five pension systems to pay for general state costs.
More to come
There’s also more creative — read politically risky — revenue ideas to come, potentially targeting businesses as one way to pay for the governor’s promised plan of universal health care. He gives his combined State of the State address and his budget address March 7.
Deanese Williams-Harris contributed to this post.
HB/SB 750 tax reform
Sen. James Meeks reintroduced a so-called tax swap plan to raise income taxes, lower property taxes and expand the sales tax as a way to fairly fund education and significantly pay down the state’s pension obligations.
Ralph Martire, executive director of the Chicago-based Center for Tax and Budget Accountability, says the bottom 60 percent of income earners would not pay more in income taxes than they are now. And the money they saved in property taxes would be intended to offset the cost of sales taxes on consumer services, such as auto repair labor and haircuts.
Martire adds that the property tax relief would total $2.7 billion statewide. “No school district loses a penny,” he says.
He says the drafters of the legislation tried to “depoliticize” the distribution of the money. Of the state’s $5 billion net revenue, $720 million would go to downstate schools, $420 million to Chicago schools, $400 million to suburban Chicago schools, and $300 million for higher education.
Depoliticize is a bold word, considering this year's budget debate is expected to be a doozy. Gov. Rod Blagojevich has repeatedly said he would veto an increase in state taxes. Senate President Emil Jones Jr. also said on Inauguration Day that he definitely opposes expansion of the sales tax to consumer services. But he did leave the door open to other revenue ideas. “We do not have a spending problem. We have a revenue problem,” Jones said.
Good or bad, he'll have plenty of “creative” revenue ideas to consider.
Privatizing the lottery and the tollway
The governor is still considering selling the Illinois Lottery to fund a $6 billion plan to pump more money into education, school buildings, teacher quality and books. But the plan doesn't address pensions.
Sen. Jeff Schoenberg, an Evanston Democrat, is still considering privatizing the Illinois Tollway (scroll down to the August 29, 2006, blog) as a way to raise lots of money to pay the state’s unfunded pension liabilities and transportation costs. However, he said on Inauguration Day that he is convinced the state should not sell the tollway, but maintain majority ownership. He said the next step is to work with the Illinois attorney general’s office to get insight on the legal dimensions of such a lease.
Sen. Bill Brady’s solution to the pension liability problem is giving current state employees an option to participate in a self-managing plan (like a 401-k) that mirrors the private sector retirement options. New state employees would have to participate in the self-managed plan. The board of trustees of each of the five retirement systems would select up to seven companies where state employees could choose to invest their money as they wished. Brady, a Bloomington Republican, says it would save taxpayer money, reduce political influence on state investment decisions and prevent the state from raiding the five pension systems to pay for general state costs.
More to come
There’s also more creative — read politically risky — revenue ideas to come, potentially targeting businesses as one way to pay for the governor’s promised plan of universal health care. He gives his combined State of the State address and his budget address March 7.
Deanese Williams-Harris contributed to this post.
Tuesday, August 29, 2006
Valuable toll roads
What’s the difference between $1 billion and $24 billion? A lot, considering Gov. Rod Blagojevich wants to put that cash into public education and other services if he wins re-election.
The governor proposed to raise that cash by leasing part or all of the Illinois Tollway system to private investors. The estimated value of such a lease was presented at a public hearing Tuesday.
The state’s bipartisan legislative Commission on Government Forecasting and Accountability paid Credit Suisse investment banking firm $30,000 to analyze the value of the state tollway system and how the state could maximize that value.
Sen. Jeff Schoenberg, an Evanston Democrat and co-chairman of the commission, said last week that the decision to lease the tollway “should not be decided by a handful of investment bankers in Armani suits.”
That’s partially why Credit Suisse’s analysis, presented to the commission in Glen Ellyn, was broadcast live on the Internet Tuesday (I hope to create a link if the commission posts it on its Web site soon).
“Don’t think of it as Geraldo Rivera,” Schoenberg joked in the Capitol last week (at one of seven Senate committee hearings on public-private partnerships). “We have decided to weigh in on the side of greater transparency.”
The Credit Suisse estimate counts Illinois’ four toll highways — 274 miles’ worth — as well as the fiber optic network beneath it and the buildings on it.
But the estimate depends on many factors, some the state can control and some it cannot. One of the most volatile is the interest rate on borrowing by potential investors. “Time begins to matter here,” said Steve Doll, director of Credit Suisse. “If interest rates continue to rise, the value of the system could deteriorate with time.”
Other factors were not detailed in the estimate. Among them were possible labor agreements between the state and a private investor that could impact the investor’s confidence in the deal.
Interested companies might also come up with different numbers based on their own assumptions, such as how much traffic will increase over the next 75 years. Credit Suisse calculated that if traffic grows 1.5 percent annually, “the range of difference goes from a system value of $8.3 billion to $15.4 billion,” Doll said.
The potential value could also drastically change depending on the length of the agreement. Twenty-five years is too short for investors to realize a profit, while 75-year leases are more appealing to investors, Doll said.
In short, the tiniest change in any lease agreement could mean billions for the state.
Rep. Terry Parke, a Hoffman Estates Republican and co-chairman of the commission, said the numbers presented Tuesday sounded great, but they start to dwindle when the state considers requests from special interest groups.
Schoenberg got an earful a week ago from AFSCME Illinois Council 31, Business Leaders for Transportation in the Chicago area, the Mid-West Truckers Association, the Transportation for Illinois Coalition, and the Laborers International Union of North America Midwest Region. Each offered wish lists for safeguarding wages, benefits, retirement and training of current tollway employees. They also urged caution in deciding how the extra state revenue would be spent.
Schoenberg voiced his own wish list for any extra revenue. He said it should be set aside as a cushion for taxpayers if toll rates increase, with the rest spent on transportation and paying down the state’s unfunded pension liabilities for public employees.
But the governor and the General Assembly first have to decide whether leasing the tollway system would be good public policy for the people who drive on it. We could see as soon as this fall’s legislative session whether they’ll crack under pressure to get that big influx of cash before interest rates rise.
NOTE I’m officially back! We’ve taken a month-long blogging break. Summer has been busy, but fruitful.
The governor proposed to raise that cash by leasing part or all of the Illinois Tollway system to private investors. The estimated value of such a lease was presented at a public hearing Tuesday.
The state’s bipartisan legislative Commission on Government Forecasting and Accountability paid Credit Suisse investment banking firm $30,000 to analyze the value of the state tollway system and how the state could maximize that value.
Sen. Jeff Schoenberg, an Evanston Democrat and co-chairman of the commission, said last week that the decision to lease the tollway “should not be decided by a handful of investment bankers in Armani suits.”
That’s partially why Credit Suisse’s analysis, presented to the commission in Glen Ellyn, was broadcast live on the Internet Tuesday (I hope to create a link if the commission posts it on its Web site soon).
“Don’t think of it as Geraldo Rivera,” Schoenberg joked in the Capitol last week (at one of seven Senate committee hearings on public-private partnerships). “We have decided to weigh in on the side of greater transparency.”
The Credit Suisse estimate counts Illinois’ four toll highways — 274 miles’ worth — as well as the fiber optic network beneath it and the buildings on it.
But the estimate depends on many factors, some the state can control and some it cannot. One of the most volatile is the interest rate on borrowing by potential investors. “Time begins to matter here,” said Steve Doll, director of Credit Suisse. “If interest rates continue to rise, the value of the system could deteriorate with time.”
Other factors were not detailed in the estimate. Among them were possible labor agreements between the state and a private investor that could impact the investor’s confidence in the deal.
Interested companies might also come up with different numbers based on their own assumptions, such as how much traffic will increase over the next 75 years. Credit Suisse calculated that if traffic grows 1.5 percent annually, “the range of difference goes from a system value of $8.3 billion to $15.4 billion,” Doll said.
The potential value could also drastically change depending on the length of the agreement. Twenty-five years is too short for investors to realize a profit, while 75-year leases are more appealing to investors, Doll said.
In short, the tiniest change in any lease agreement could mean billions for the state.
Rep. Terry Parke, a Hoffman Estates Republican and co-chairman of the commission, said the numbers presented Tuesday sounded great, but they start to dwindle when the state considers requests from special interest groups.
Schoenberg got an earful a week ago from AFSCME Illinois Council 31, Business Leaders for Transportation in the Chicago area, the Mid-West Truckers Association, the Transportation for Illinois Coalition, and the Laborers International Union of North America Midwest Region. Each offered wish lists for safeguarding wages, benefits, retirement and training of current tollway employees. They also urged caution in deciding how the extra state revenue would be spent.
Schoenberg voiced his own wish list for any extra revenue. He said it should be set aside as a cushion for taxpayers if toll rates increase, with the rest spent on transportation and paying down the state’s unfunded pension liabilities for public employees.
But the governor and the General Assembly first have to decide whether leasing the tollway system would be good public policy for the people who drive on it. We could see as soon as this fall’s legislative session whether they’ll crack under pressure to get that big influx of cash before interest rates rise.
NOTE I’m officially back! We’ve taken a month-long blogging break. Summer has been busy, but fruitful.
Friday, June 23, 2006
Going private, or not?
Gov. Rod Blagojevich is on the record saying he has no intentions of selling the state’s tollway system, a multibillion dollar idea Chicago and Indiana already pursued. At the same time, the state’s Commission on Government Forecasting and Accountability hired Credit Suisse (see links on the left) consulting firm to study the value of the Illinois Tollway. Sen. Jeff Schoenberg also scheduled four Senate committee hearings this summer, the next to be held in Springfield August 15. (You can listen to the May 26 and 31 meetings by clicking on the MP3 files to the left.)
While the governor says he has no intentions of selling the tollway, he has proposed selling another state asset, the Illinois Lottery, as a way to boost education funding (see my May 23 blog).
Want more context? Indiana reporter Pat Guinane explored the “Public to Private” trend in the June Illinois Issues. Charlie Wheeler will give another perspective, whether it’s fiscally responsible, in his column for the July/August issue.
While the governor says he has no intentions of selling the tollway, he has proposed selling another state asset, the Illinois Lottery, as a way to boost education funding (see my May 23 blog).
Want more context? Indiana reporter Pat Guinane explored the “Public to Private” trend in the June Illinois Issues. Charlie Wheeler will give another perspective, whether it’s fiscally responsible, in his column for the July/August issue.
Wednesday, May 17, 2006
Buckle up
State legislators will soon start talking about another way to bring fast cash to Illinois - privatizing the state's tollways. Indiana lawmakers approved the idea this spring.
State Sen. Jeff Schoenberg, an Evanston Democrat, said the Senate Appropriations II Committee will hold four hearings this summer:
1. Chicago, 9:30 a.m. Wednesday, May 31
2. Will County, June 13
3. Springfield, August 15
4. Chicago, September 13
More to come from Illinois Issues soon.
State Sen. Jeff Schoenberg, an Evanston Democrat, said the Senate Appropriations II Committee will hold four hearings this summer:
1. Chicago, 9:30 a.m. Wednesday, May 31
2. Will County, June 13
3. Springfield, August 15
4. Chicago, September 13
More to come from Illinois Issues soon.
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