A legislative panel made an odd request of the Ohio Lottery last week: Come prepared with a presentation this week (MONDAY) that would explain just how the Lottery plans to maximize its profits.
The request comes 13 months after the Kasich administration paid a New York firm , Moelis & Co., more than $15 million to produce a plan to maximize profits from all of the state’s gambling endeavors: Horse racing, racinos, casinos and Lottery.
The Moelis deal was astonishing for two main reasons:
- The unusually high, multi-million dollar fee it received. The Plain Dealer’s Brent Larkin said Moelis’ work could have been done by “a bright, well-prepared fifth grader.’’
- It was not the low bidder – in ANY of the categories rated by a team of independent experts, according to the Columbus Dispatch. The paper also reported that Moelis’ payout was $15.6 million, not the $13 million initially reported .
There is no doubt that the Lottery is feeling the effects of competition from the new casinos and from the internet cafes, those mini casinos that lawmakers finally voted to ban. (More on that later. The ban won’t take effect any time soon). But it also is clear that the Lottery consistently has been well managed and its director knows how to keep the profits coming.
Last May, the Akron Beacon Journal reported this:
Instant tickets — the lottery’s most popular game with more than $1.4 billion sold a year — have seen sales fall 4 percent, or $59.6 million, over the past year when compared with the previous 12-month period.
The vast majority of that decline, about $58 million, was in the past six months, according to a Beacon Journal analysis of monthly revenue figures the Ohio Lottery Commission provided.
Lottery Director Dennis Berg explained how the slump could be rectified:
“The key for us is to find those new revenue enhancement products that will continue to keep us growing on our traditional lottery side….”
As the Internet Café bill moved through the General Assembly, interested parties began to coalesce around a new revenue enhancement plan that also would help veterans’ groups and schools.
The veterans’ groups testified that the cafes had a habit of hurting their bottom line because they often moved in right down the road, and veterans preferred the glitzy electronic slot machines found in the cafes to the legal, low dollar devices at the VFWs.
Behind-the-scenes negotiators agreed to allowed the veterans’ groups to offer a type of electronic slot machine that would fall under the authority of the Lottery. The benefits were many:
It would allow VFW halls to make some money, improve the Lottery’s sales and help the schools because Lottery profits help pay for public education.
Suddenly the deal fell through – before it became public.
Soon after, Hannah News Service reported that members of the State Controlling Board began pointing fingers at the Lottery. According to Hannah:
Sen. Chris Widener (R-Springfield) questioned Greg Bowers, the finance director for the Ohio Lottery Commission, saying legislators have been looking at decreasing lottery sales. He asked if the commission has a handle on what products it needs to have in order to maximize sales. Bowers said they are constantly reviewing the best options and looking at different products.
Still, Widener said he believes it is time for the commission to come before the General Assembly and present some kind of master plan on how the lottery will grow moving forward. He said a presentation would give the Legislature a whole snapshot.
What Widener did not disclose at the time is Internet Café supporters plan to gather the signatures needed to halt the ban from taking effect.
Each month that the cafes continue to operate means millions for café owners, more turmoil for Ohio veterans and more competition for the Lottery.
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