April 12 (Bloomberg) -- New Jersey plans to award a 15-year lottery marketing contract to Northstar, a business partnership, in a move that may raise state revenue as much as $6.88 billion beyond what it might get by retaining current management.
The partnership will make an upfront payment of $120 million once the contract is signed, under terms announced today by the New Jersey Treasury Department. The agency said the venture has committed to generating at least $1.42 billion more in net income for the state over the accord’s life than would have been collected from the gaming operation with no change.
“For more than 40 years, the Lottery has provided critical financial support to New Jersey’s institutions and educational programs,” Treasurer Andrew Sidamon-Eristoff said in the announcement. The agreement with Northstar New Jersey Lottery Group will position the operation “for sustained growth and continued success in the face of an increasingly complex and competitive marketplace,” he said.
In New Jersey’s fiscal 2012, which ended in June, the lottery had $2.76 billion in revenue and produced $950 million in income for the state, according to the Treasury announcement. It said the Northstar group may produce an increase in the state’s take of as much as $6.88 billion over the life of the agreement, which involves sales and marketing for the operation.
The partners that make up the Northstar group were identified as Gtech Corp. of Providence, Rhode Island, New York-based Scientific Games Corp., and a unit of the Ontario Municipal Employees Retirement System, based in Toronto. Scientific Games is 38 percent owned by billionaire investor Ron Perelman.
Bob Vincent, a Gtech spokesman, said the new venture is “grateful” for the contract. He declined to comment on the company’s plans, saying the deal has yet to be consummated.
Since it began in 1970, New Jersey’s lottery has provided more than $20 billion in support for state institutions and educational programs. In the 2012 fiscal year, lottery revenue totaled $2.76 billion and it contributed $950 million to state coffers, according to Sidamon-Eristoff’s statement.
With the deal, Republican Governor Chris Christie’s administration joins Ohio, Pennsylvania and Indiana in seeking to put public assets under private management to maximize profits. In Illinois, where Northstar runs the state lottery, revenue fell $100 million below promised levels, according to an analysis by the Chicago Tribune. An arbitrator ruled in November that the shortfall stemmed from state decisions.
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