Some of the risks of leasing the lottery
I have an estimate of what a 25 year lease of the lottery might be worth over at OneMan's Thoughs but I figured I would share some thoughts about the risks someone leasing the lottery might face.
Changes in how they are taxed by the state or how they are taxed by any entity of government in the state.
Changes in law that impact their abiltiy to sell.
Changes in the marketplace (more casinos)
Changes in public opinion about the lottery
Changes in my regulatory environment.
So if I were leasing the lottery here is some of what I would expect to have in the contract and if I didn't get it the discount goes up (perhaps significantly)
1) Protection from any legislative changes that would impact my ability to sell tickets. For example, making sales at bars illegal.
2) Some consideration if gaming is expanded in any way within the state, be it new casinos, slots at racetracks, etc.
3) Any change in the way my revenue was taxed (I saw what you did to the casino people)
4) Any change in the way lottery winnings are taxed.
5) Any changes within MegaMillions that impact me differently than any other state
6) Any changes within the state pension program for my employees if I have to keep them in the state plan.
7) I want the current marketing restriction on targeting groups lifted. I want free reign to market to people over 18.
8) I want to be and want my retailers to be protected against any local taxing change. So if Chicago decides to tax lottery tickets I am covered.
9) I would expect an exclusive contract, that is the state couldn't let someone else sell lottery like products within the state.
There would be a much longer list but this is just some of the concerns I think any buyer would have.
OneMan.
5 comments:
9. [...] including the State of Illinois starting another lottery like product.
10. I would want to sell them on the internet. (This will never happen.)
Your point is well made. Anything less than the PV could well be (if assumptions are correct) dollars we would be losing, not gaining. That's the discount, and it's the major factor in analysing the financials of a deal.
I would be more concerned with the uses to which the revenues would be put. Should we 1) pay down existing debt? Probably not, since most of our current debt has attractive interest rates 2) pay off unfunded pension liability? YES! HOME RUN! 3) Provide additional operating funds to education? Probably not, but that will likely be the price of the deal, if there is one.
The net result would probably be that education would get less over the life of the deal than they would have received otherwise, but get some decent amount of it somewhat sooner.
Sounds to me like a great public policy question for the administration and the GA (and the media) to look at and debate.
I hope we don't lease it to the Rotis.
When evaluating this yet-to-be unveiled plan, the legislature needs to take a very close look at just how accurate these net revenue projections are. Mr. Scnorff is correct in his above parenthetical note (if assumptions are correct). The Governor's office doesn't have a great track record when it comes to budget credibility.
Nevertheless, this kind of deal may have some merit, especially if revenues are intended for pension debt or necessary school capital projects. If it's to be used for funding reoccuring operational needs, then this might not be a good fiscal move. Again, the concept is worth a good look, but be very wary of the numbers.
I see some very rosy predictions coming out of the guv's office on how much that "investment fund" is going to pay off.
Plus a lot of public relations spin to make sure the voters forget
the amount that the lottery is already throwing off for education.
Plus minimizing who actually buys those lottery tickets...mainly the poor and the working class.
A free lunch, the guv and his
spinsters will say.
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