Taxpayers Lose With Rhode Island Lottery Contract

Taxpayers Protection Alliance

October 21, 2019

Across the country, states are increasingly seeing the benefits of legalized commercial gambling. But, even in the 24 states that foster the $260 billion casino gambling industry, disparate taxation systems, regulatory morass, and bidding procedures create significant uncertainty.¹ These problems are particularly pronounced in Rhode Island which lacks a transparent process for determining which companies produce, control, and maintain gaming machines. As a new lottery contract is debated and discussed, taxpayers have a significant stake in state officials choosing the right vendor. Follow-ing the status quo and not competitively bidding the new contract could mean billions of dollars of lost revenue.

In contrast to states such as Maryland, West Virginia, and New York, Rhode Island relies on no-bid contracting to determine the contractor(s) for state gaming services such as the state lottery. Casinos within the state are operated by the Rhode Island Lottery and management of video gambling (which generates approximately 80 percent of state gaming revenues) is outsourced to private companies.

A May 2003 agreement with the state gave 50 percent control of gaming machines to International Game Technology (IGT). This agreement, originally supposed to last until 2023, may soon be signifi-cantly expanded with the administration of Gov. Gina Raimondo currently petitioning the Rhode Island General Assembly to grant IGT a 20-year contract extension in lieu of a competitive process with multiple proposals.²

Despite little chance of consideration by the state, other companies have submitted their own pro-posals for administering gaming machines. International lottery company Camelot Lottery Solutions, in partnership with casino owner Twin River, has released a public proposal to the state with claims that their terms will offer significant savings to Rhode Island taxpayers and allow the state sufficient flexibility to change agreement terms if state officials are unsatisfied.³ If Camelot’s savings claims are true, Rhode Island is incurring significant costs by not establishing a competitive bidding process.

The Taxpayers Protection Alliance (TPA) has conducted an evaluation of the costs (as well as pro-jected benefits) of IGT’s and Camelot’s proposal in an attempt to quantify the impact of different contract scenarios on taxpayers and the state of Rhode Island. In addition, TPA analyzes the poten-tial consequences of Rhode Island pursuing a no-bid contract process for lottery services. While this analysis is comprehensive, there are additional factors to consider when comparing IGT’s proposal with a more competitive approach. For instance, the state is documented to have overpaid IGT for lottery central system services, which this research brief does not address. Therefore, TPA considers its estimates to be conservative.

¹ American Gaming Association. “State of the States 2019.”
² Sherman, Eli. “Raimondo defends $1B IGT contract to House lawmakers.” WPRI. September 24, 2019.
³ Twin River Worldwide Holdings, Inc. “Twin River Creates Partnership with Camelot Lottery Solutions to Offer Competing Lottery Proposal and Requests Opportunity to Bid.” PR Newswire. September 18, 2019.

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