State Street: Lone bid for rich lottery contract raises eyebrows

By - Last modified: January 14, 2013 at 5:39 AM

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Eyebrows were raised when just one bidder came forward Dec. 27 to take over sales and marketing for the New Jersey Lottery, a potentially lucrative 15-year contract that could generate millions in profits if the winning bidder is able to boost lottery revenue. The deal requires the outside firm to make an upfront payment of $120 million to New Jersey.

The lone bidder is the joint venture Northstar New Jersey, which includes GTECH, a Lottomatica subsidiary that has supplied lottery technology to New Jersey for nearly 30 years. Also in the group is Scientific Games of New York, a global lottery services firm; the third member of the group is one of the largest pension funds in Canada. Some critics are saying that Treasury, which runs the lottery and also awards state contracts, should throw out the bid and start over.

But Treasury spokesman Bill Quinn said a lone bid isn't a deal-breaker. "Our bidding procedures and rules are designed to make sure that the final product is a competitive contract that is in the best interests of the state, even in situations where only one bid is submitted."

A longtime Trenton watcher said that while a contract can certainly be awarded to a single bidder, it's not the best practice: "Usually they like to have two or more because it's more competitive, obviously." Another observer suggested that "One bidder means the bid was not constructed equitably. The lack of competition signals a problem with the RFP and the assignment, which is consistent with what detractors were saying all along."

Seth Hahn is policy director for the state CWA. The lottery staff includes CWA members, and only those involved in marketing and sales are expected to see their jobs impacted by the outsourcing plan. The RFP requires that displaced state employees be considered for jobs with the new company. Hahn said, "We think that protecting the integrity of the lottery is a core public function, and we think that public workers should work with small-business owners who are currently doing an excellent job selling lottery products to strengthen the lottery and bring in more revenue for the state."

A Trenton source said, "It is very rare for (Treasury) to accept one bid, but I'll bet my bottom dollar they accept this one."

According to Treasury, just because there is only one bid doesn't mean the state has no leverage. If the bid is deemed to meet the state's requirements, the state can negotiate better terms than the bidder initially offered. – Beth Fitzgerald

Business ponders Christie move
minimum wage bill

Time is winding down for Gov. Chris Christie to act on a bill that would raise the minimum wage to $8.50 per hour and allow for automatic increases based on changes in the Consumer Price Index. The state Senate approved the bill on Dec. 3, and the governor has 45 days to sign or veto the measure.

At the New Jersey Business and Industry Association, President Phil Kirschner said it's hard to know what to expect from the governor.

"It's even hard to know whether there's been any negotiation," Kirschner said.

The governor has come out against the CPI linkage, but he's complained in the past that the Legislature has been unwilling to discuss a compromise.

There's plenty of room for negotiation. The automatic increases could be nixed, the wage figure could be changed, or the new wage could be phased in on a negotiated timeline. Kirschner said the governor's office has been quiet on the issue, but he thinks the governor might use
his conditional veto pen to spur more talks.

"I'd say an educated guess might be a CV with his views on what is a fair number and phase-in," he said.

If Christie were to veto the bill entirely, legislative Democrats have warned they would bring the issue to voters. Both houses of the Legislature already have approved a resolution to do just that, but they'd have to approve a second resolution this year to place it on the November ballot.

"Again we're hopeful that the parties can sit down and work something out," he said. "In this political climate I'm not sure that that will happen and there may be some people who actually want the minimum wage question on the ballot in November 2013."

Sports betting push
lack of applications

Just because the lawsuit against New Jersey's sports betting law can go forward doesn't mean the law's implementation cannot.

"There's plenty of work behind the scenes on the issuance of licenses and setting up the operations and all the work that goes into that," said Bill Pascrell III, a lobbyist with Princeton Public Affairs Group.

Pascrell said talks also are ongoing regarding the gaming regulations that will be adopted.

"Nobody's sitting and waiting," he said.

In late December, Federal Judge Michael Shipp ruled that the National Collegiate Athletic Association and four major professional sports leagues had standing to challenge sports betting in New Jersey.

Pascrell said the state's attorney, Ted Olsen, did a "superb job" but he said the judge's ruling wasn't a shock.

"The standard for allowing people to have standing in a federal court case is very, very small," Pascrell said. "So it did not take a lot for the professional leagues to argue the principal of granting them standing. We were not surprised."

While the judge's ruling did nothing to stop New Jersey from moving forward, Pascrell said it's still having an impact, because the lingering legal case will make some in the industry proceed more cautiously than they would have had Shipp ruled against the leagues.

"All this ruling did, unfortunately, was prevent New Jersey from benefitting in these tough financial times from bets that are going to be placed on the Super Bowl," he said.

Notice that Pascrell thinks it's a given that people will bet on the game. The only question is whether they can do so legally in New Jersey.

NJBIZ reported last week no one has applied for a sports betting permit with the Division of Gaming Enforcement, but Monmouth Park Chairman Dennis Drazin plans to submit an application this week. The DGE had planned to start issuing licenses on Jan. 9. The next hearing in the case is set for Feb. 14.

Correction appended: An earlier version of this story had the wrong amount for the upfront payment on the state lottery contract.

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