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Step Closer

January 14, 2013 | By | Posted in Governor

British bidder bets on profits, branding in lottery proposal

By Melissa Daniels | PA Independent

THE BRITISH ARE COMING: Sen. John Blake (center left) and Sen. Mike Brubaker (center right) questioned top officials of Camelot Global Services about their plans to take over service operation of the Pennsylvania Lottery.

HARRISBURG — A British company poised to manage the Pennsylvania Lottery plans to boost the bottom line by getting more people to play lottery games.

But some lawmakers are skeptical.

Senate Finance Committee Minority Chairman Sen. John Blake, D-Lackawanna, said he still has reservations about the Corbett administration’s pursuit of a private management agreement with Camelot Global Services, even after a four-hour hearing Monday.

The process was done without legislative oversight, and that worries Blake.

“This is a scale of a decision that probably should’ve been, I would’ve preferred and I think the leadership in my caucus and many members in my caucus would’ve preferred, was something that was put to the vote by people who represent 12.5 million Pennsylvanians and that’s the General Assembly,” Blake said.

Yet the deal is going ahead under the umbrella of the administration. The contract with Camelot hasn’t been signed and finalized, but that’s expected within the week. Friday, the administration submitted a “notice of award,” publicizing the intent to finalize the deal.

Senate Finance Committee Chair Sen. Mike Brubaker, R-Lancaster, was impressed with Camelot’s testimony. The hearing, he said, achieved its mission of getting on-the-record statements and giving the procurement process “the light of day.”

Camelot sent two of its top officials to the Harrisburg hearing. They gave a brief history of the company, touting its worldwide status as an industry leader. Camelot does not operate any lotteries in the U.S., but it has served as a consultant in California and Massachusetts.

Alex Kovach, managing director at Camelot who is handling the Pennsylvania operation, said about 30 percent of Pennsylvanians play the lottery weekly, according to Camelot’s research. In the United Kingdom, where Camelot runs the National Lottery, that figure is about 50 percent.

Cultural differences aside, Camelot thinks it can get more Pennsylvanians to play.

“There is a market currently not being focused on,” Kovach said.

Camelot plans to reach out to infrequent or lapsed players with expanded retail locations, and to “reduce barriers” to playing. The business plan includes introducing monitor-based games, such as Keno, to help grow profits.

The goal is to get “a lot of people playing a little, rather than a few people playing a lot,” Kovach said.

THOMPSON: Camelot CEO said that company would bring sales, marketing expertise to Pennsylvania Lottery.

Dianne Thompson, Camelot’s chief executive officer, pointed to a promotion in the United Kingdom that created “100 millionaires in one night.”

Pennsylvania Lottery profits fund programs for senior citizens, such as property tax rebates, at-home meal services and prescription drug benefits. It’s the only lottery in the nation with such a setup.

Pennsylvania’s elderly population is growing, and the state is looking to grow the lottery. The state’s executive branch points to Camelot’s “annual profit commitments” as a means to more consistency.

Secretary of Revenue Dan Meuser said commitments from Camelot are guaranteed and exceed any profit estimations made by the state. In the next five years, the state-run lottery would generate $30 million, Meuser said. Under Camelot, the commonwealth could see $1.2 billion.

Camelot will put up $200 million in collateral in case it doesn’t meet it its estimates. No such guarantee exists for any other state lottery, according to Camelot.

Total profits of about $34 billion are guaranteed over the life of the 20-year contract. The state says that figure is about $3 billion to $4.5 billion more than the state would generate, if it expanded games in a similar fashion.

State Sen. Rob Teplitz, D-Dauphin said after the hearing he is still unsure about the process in approving Camelot, which “seemed very sincere” when assuring lawmakers it would retain as many as employees as possible.

Teplitz isn’t sold.

His district includes about half of the lottery’s current employees, and there’s nothing in the Camelot contract to assure their continued employment, he said.

“I was happy to start getting answers, but I’m still skeptical,” Teplitz said.

Contact Melissa Daniels at melissa@paindependent.com

— Edited by John Trump at jtrump@watchdog.org

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Melissa Daniels is a reporter for PA Independent. She can be reached at 717-350-0962 or Melissa@PAIndependent.com

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