Ohio board waves competitive bidding for state contract to operate video lottery terminals

9/26/2011

COLUMBUS — The state's Controlling Board voted unanimously Monday to allow Ohio's current lottery vendor, Intralot Inc., to skirt the state's competitive bidding process and win an additional $9 million over the next two years to develop the central gaming system that will operate slots-like video lottery terminals in the state.

Gov. John Kasich laid out the details of his plans to expand VLTs at Ohio's seven horse tracks in a June deal with the operators of the state's four casinos. Intralot, based in Athens, Greece, would set up the system that tracks the activity in all the machines, including the terminals' usage, their number of wins, payouts, and maintenance.

The Ohio Lottery Commission asked the legislative panel to award the new unbid business to the company, which already helps run the state's lottery games. The lucrative contract would not be available to other bidders under the scenario.

Danielle Frizzi-Babb, a spokeswoman for the Ohio Lottery Commission, said going with Intralot for the central gaming system enables the state to more quickly get the terminals up and running.

Submitting a competitive bid for the central gaming system could take four months, she said, and the state would lose money revenue it could get from the machines.

"For each month that a single race track with 1,000 machines is not operating, Ohio could conservatively see an opportunity loss of $2 million dollars in revenue, or $8 million over a four-month timeframe, which is the amount of time it would take to bid out the contract," Frizzi-Babb said. "The numbers are based on figures in the Spectrum Gaming report that estimate Ohio racinos should generate between $225 and $275 win per VLT per day."

The board's approval allows the state to amend its existing gaming contract with the company in the amount of $5.2 million for this budget year, and roughly $3.8 million for next year. Intralot's current contract expires in 2019.

Frizzi-Babb said the amount is more in the first year because it includes one-time installation fees. The cost is in line with what similar states have paid contractors, she said. "It was competitive, according to our research."

Intralot spokesman Byron Boothe said the company hopes to quickly sign the contract with the Ohio Lottery Commission. Intralot, whose U.S. headquarters is in Duluth, Ga., also plans to meet soon with representatives from the racetracks to discuss start dates for the video lottery terminals.

"As long as the state agrees, we're moving forward fast," Boothe said in a telephone interview.

In 2009, the Controlling Board approved a similar amended contract that would have allowed Intralot to set up the central gaming system for VLTs under former Democratic Gov. Ted Strickland's administration.

Strickland's proposal to legalize video lottery terminals at the tracks was sidelined by a court challenge and ultimately dropped.

Frizzi-Babb said the 2009 request would have paid Intralot $7 million in the 2010 budget year, and another $10 million in 2011.