Vermont Is Latest State to Consider Lottery Privatization

January 10, 2008

Last year a handful of states considered selling or leasing their lotteries, but so far no state has taken the plunge. As we have said before, an outright lottery sale, not a lease, would be good news as it would get the state out of the lottery business entirely.

Vermont is the most recent state to catch the lottery “privatization” bug, and is even hoping to beat the other states to the punch. A recent Vermont Public Radio report, reprinted on Lottery Post, delves into some of the perceived benefits and drawbacks of the plan. An excerpt of the report follows:

John Dillon (host): Earlier this month, the administration got a detailed briefing from the Lehman Brothers financial services firm on potential benefits of leasing the state lottery.

The 57-page Lehman report is stamped confidential but officials determined it was public under the state’s open record’s law.

. . .

(Dillon) Jim Reardon is Vermont’s finance and management commissioner. He briefed the state lottery commission this week on the privatization proposal.

Reardon said the state could invest the money and get a guaranteed annual payment of around $23 million dollars for the duration of the 40 year lease.

And, the administration hopes that whoever leases the lottery would also pay up to $56 million dollars in a one-time payment next year. Its money that Governor Douglas hopes will pay for school construction and to reduce statewide property taxes. Reardon says there could be even more money available.

(Reardon) “You’d then also would hope to receive a revenue stream over the course of the lease that would also involve potentially profit sharing.”

. . .

(Dillon) About a half dozen states – including Texas, Indiana and California – are also looking to lease or sell their lotteries. They’ve gotten similar proposals from Lehman Brothers and other investment banks.

But if Vermont leased its lottery next year, we would lead the pack. The Lehman report says the state could get a premium price it if it went first.

Finance Commissioner Reardon says he’d like the deal to go forward quickly, so the money would be available for next year’s budget.

.. .

(Douglas) “In recent years, the [lottery] proceeds have been relatively stable, so it doesn’t seem like there’s been much growth in sales activity lately.”

(Dillon) Lehman Brothers says a private company would increase sales through new marketing techniques and by using the Internet. The report says lottery tickets could be sold over mobile phones, interactive TV, or even through handheld devices like Blackberries or Palm Pilots.

The report does note that there could be questions about the legality of expanding sales to the digital age, because of the chance that people under 18 could participate.

(Dillon) Governor Douglas says he wants the Legislature to look seriously at the lease idea. He says if lawmakers don’t adopt the plan, they’ll have to find some other way to pay for school construction and property tax relief.

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