New York plans to put part of lottery up for sale

New York plans to retain the fastest-growing segment of its lottery as it moves ahead with plans to sell part of the business, the state’s budget division said.
Video-lottery games at horse racetracks, which are projected to account for 73 percent of the lottery’s growth in the year ended March 31, won’t be part of any sale, the Division of the Budget said in a statement Jan. 31, as it announced plans to select a financial adviser.
Governor Eliot Spitzer has proposed a sale or lease of the lottery to create a $4 billion endowment for the state and city university systems. Any additional money would go to elementary and high schools. New York’s lottery is the nation’s largest, providing $2.36 billion for education last year, all of it for kindergarten through 12th grade.
“Our first objective is to protect against the downside” of the lottery business, which faces competition from a growing number of casinos in New York and neighboring states, New York budget director Paul Francis said at a Jan. 10 press briefing to describe lottery-sale plans.
Excluding the video lottery terminals, state revenue growth from gambling games may slow to 3.4 percent in the year beginning April 1 from 3.8 percent in the current year, according to revenue projections in Spitzer’s budget. That revenue grew at a compounded 4.9 percent rate in the past nine years.
Next year’s growth assumes increases in advertising and the number of lottery sales outlets. It also assumes legislation is passed to eliminate restrictions on the QuickDraw game related to hours of operation and where it can be sold, the budget says.
QuickDraw game revenue has declined four consecutive years. It currently isn’t allowed at establishments of less than 250 square feet (23.2 square meters) or where food sales are less than 25 percent of revenue.
The video lottery terminals, which are allowed only at horse tracks, are projected to account for 80 percent of the lottery’s projected growth next year, with revenue rising to $764 million from $475 million. Total revenue at the New York lottery was $7.18 billion in the year ended March 31, 2007.
Francis said general talks with unidentified bankers last year led him to expect the state would opt for a partial sale or lease of the lottery business. Any plan must continue to provide $2.1 billion for education, in addition to creating an endowment for the universities that could generate about $200 million annually, he said.
Francis said he assumed an endowment for education could earn about 10 percent annually, allowing for a 5-percent cash distribution annually and long-term growth in the investments.
The spending plan from Spitzer, a first-term Democrat, also assumes $250 million of non-lottery revenue from the sale of development rights to install the video terminals at the Belmont Park horse racing track in New York City.
The state expects to select a financial adviser by about March 13, the Budget Division statement said. The adviser won’t be allowed to bid for the lottery.
Plans to expand the lottery business will require approval from the Legislature, where Assembly Speaker Sheldon Silver opposes it.
Spitzer’s budget adds $2.3 million over the next two years to expand compulsive gambling prevention programs. Any sale of the lottery must allow the state to retain control and not expand the business “in such a way that promotes an increase in problem or compulsive gambling,” the budget department statement said.
Silver said any lottery sale must provide assurances that the money it generates for education can grow in future years. &#8226