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reworked 20-year no-bid Lottery deal for Internation Game Technology (IGT) and its new partner, Bally’s Corporation, in Rhode Island won the approval of a key House committee yesterday with a 10-2 vote, after a tough year that has led the House GOP leader to question whether Rhode Island should rethink the numbers, reports the Providence Journal.
The bill is now headed to the full House for a vote next week.
In exchange for exclusive control through 2043 of the technology that runs Rhode Island’s state-sponsored gambling from the Keno machines to the two Twin River casinos, the bill obligates the IGT-led partnership to 1,100-plus jobs in Rhode Island.
Blake Filippi, the House GOP Leader said: “The first bill that came out 16 months ago was better. At least it didn’t extend ‘Twin River’s agreement with the state by 13 additional years.”
Filippi questioned why Rhode Island would leave the state with only 12.7% revenue, after expenses, while giving the casino 84.43% of the net table game revenue when “Massachusetts’ take [is] 25%.”
“It’s our business,” he contended. “They are our agents. In Massachusetts, right across the border, where the license belongs to the casino owner, they pay 25% of the revenues from the tables to the state. Why are we getting half? That’s $20 million a year, and for the next 20 years, that equals $400 million.”
Filippi also questioned the unprecedented 20-year Lottery deal with a technology company, saying: “Twenty years ago I think I still had a beeper or a flip phone.”
Filippi added before voting against the bill: “This contract has so many problems with it, I think we are doing a major disservice to the taxpayers of this state.”
However, none of the Democrats on the other side of the party-line vote said anything about the reworked bill that was first posted for public viewing on Tuesday.
House leaders who negotiated the reworked deal with IGT and Bally’s (formerly Twin River) have chosen not to respond to Filippi’s concerns.
It is unclear what percentage of the gambling revenue would go to IGT and Bally’s. Nevertheless, a consultant’s analysis pegged the percentages paid IGT at 7% for the “lease” of the electronic gambling machines; 2.5% of total sales for operating the “central system” that connects the machines, and 5% for its role in the traditional Lottery.
According to a summary provided by the Lottery on Thursday, In Fiscal Year 2019, the last full year of operation, the Lottery paid IGT alone $56.8 million. The amount paid to Twin River that year was $287 million.
Underlying Filippi’s concerns is the state of Rhode Island’s state-run gambling empire, which has been the state’s third-largest source of income behind income and sales taxes. Although the pandemic worsened it, it is not solely responsible for the double-digit revenue decline.
The state’s take dropped significantly, from $397.3 million in Fiscal Year 2019 to $283.9 million in the year that ended on June 30, 2020.
The Lottery’s financial statement shows a 12% drop in revenue from the video-gambling machines at the Twin River casinos in Lincoln and Tiverton in the nine months before the pandemic shuttered Rhode Island.
According to the Lott’s latest financial report, “The net revenue decrease during fiscal 2020 was largely attributable to the opening of a new casino in Massachusetts,” but the mid-pandemic closing of the R.I. casinos in the last quarter of the year “worsened the overall decline … and resulted in a 32% decrease in revenue for fiscal 2020.”
Table games’ net revenue at the two casinos dropped 32% through March 2020 (pre-pandemic) and an overall 49% through the end of the fiscal year.
The current 20-year IGT contract dates back to 2003, which gave the company “the right to be the Lottery’s exclusive vendor of hardware and software, together with the related services necessary for the operation of the Lottery’s computerized games, through June 30, 2023.” In return, the provider made a one-time payment of $12.5 million to the Lottery as consideration for this exclusive contract right. In the proposed new deal, IGT is to make an upfront payment of $27 million.
