Illinois makes long-delayed move to replace lottery manager

CHICAGO (AP) — Illinois made a long-delayed move toward hiring a new private manager for the $2 billion-per-year lottery on Monday, years after the first of two governors tried to fire the current manager for missing sales goals.

Officials with the sole bidder and finalist for the 10-year contract, Camelot Illinois, presented an overview of its plan to increase sales and put more money in state coffers for schools and other programs. It includes new, more prominent displays for retail sales and increased marketing of online sales, with better technology such as a mobile app.

Camelot Illinois’ sister company, Camelot Global, runs the United Kingdom’s national lottery and has worked with lotteries in at least four U.S. states.

“We have an ambitious plan but the plan’s also proven,” CEO Nigel Railton said during a public hearing in Chicago.

But it could still be months before Camelot takes over for the lottery’s first private manager, Northstar Lottery Group — if it happens at all.

Lottery officials say they still must finalize contract details with Camelot. If that process is successful there will be a 14-day protest period, after which “a contract could be executed,” said Gregory Smith, the lottery’s acting director.

Smith said hiring a new manager has taken longer than initially expected because it’s a complex process with big financial ramifications.

“Rushing it provides no benefit to the state, nor to Camelot Illinois,” he said.

Illinois was the first state to privatize its lottery when lawmakers voted to do so in 2009. At the time, supporters said annual contributions to the state schools fund would increase each year, with additional revenues going toward building roads and other public projects.

Northstar took over management from the Department of Revenue in 2011. After reporting early record sales, the company fell short of its goals. In recent years lottery sales have remained mostly flat.

Then-Gov. Pat Quinn first tried to fire Northstar Lottery Group in 2014. But Attorney General Lisa Madigan blocked that move in 2015, calling it a bad deal for taxpayers.

Later that year Gov. Bruce Rauner announced a new termination agreement, which stated Northstar should be replaced by Jan. 1, 2017. The state extended Northstar’s contract after missing that deadline.

Meanwhile under the termination agreement inked with Rauner’s office, Northstar is eligible to receive up to $17 million per year in “disentanglement fees” and up to $14 million in annual management fees. Those payments must reflect actual costs determined by a third-party auditor.

After paying a final $10 million for missing revenue expectations, Northstar no longer has to pay additional penalties as it did under its original contract.

The lottery has faced other troubles. Northstar and the state went to arbitration over a disagreement of how goals were set and performance calculated. Earlier this year some lottery players sued Northstar after a Chicago Tribune investigation found that the lottery did not award many of the biggest prizes in some of its largest scratch-off, instant games.

Illinois’ budget woes also contributed to the problems. Some winners had to sue to get their payments after the state said it couldn’t pay out because of a budget impasse, and Powerball and Mega Millions sales were temporarily halted this summer before lawmakers finally approved a state budget for the first time in more than two years.