The Clinton Herald, Clinton, Iowa

State News

June 23, 2014

Lottery contractor likely $200M short on profits

SPRINGFIELD, Ill. — Illinois’ private lottery contract has never reached the lofty sales promises it used to win a bid four years ago and is expected to fall more than $200 million short of what it owes the state when the budget year ends June 30.

But Northstar Lottery Group says it’s been hamstrung by state officials, with whom they have an already frosty relationship and accuse of throwing up road blocks — from canceling games it wanted to launch to prohibiting the sponsorship of Chicago’s Pitchfork Music Festival in 2013 because of headliner R.Kelly.

Regardless, Northstar’s 10-year contract with the state details that falling short of its goals by 10 percent two years in a row is grounds for ending the partnership, no questions asked. It missed targets by almost 20 percent last year, and is on track to do the same this year.

A top lawmaker has said he’s disappointed because a massive construction program was supposed to be funded with money Northstar claimed it could deliver.

The lottery giant’s contract has been under scrutiny from the start. A report released by Illinois Auditor General Bill Holland just days before Northstar took over in July 2011 showed irregularities in the decision-making process to select the corporation. In one case, a panel member submitted his evaluations of proposed business plans for the $2 billion state lottery after Northstar won the bid.

Yet, company CEO Tim Simonson says it has done well despite factors working against it.

“Those were ambitious goals we set for ourselves, and we have fallen short of those goals. But the full perspective, we believe is important,” Simonson said, arguing that his company has run the lottery better than the state.

In some cases, that’s true. Northstar boosted lottery profits by almost 10 percent in 2012 and improved income is expected — even if marginally — this year. Plus, Illinois has accumulated millions of dollars in penalty payments from the company when lottery profits don’t reach expectations.

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