NY state may revisit privatizing lottery: sources | U.S. | Reuters

NY state may revisit privatizing lottery: sources | U.S. | Reuters

NY state may revisit privatizing lottery: sources
Wed Aug 13, 2008 6:56pm EDT

By Joan Gralla

NEW YORK (Reuters) - New York state may revisit a public-private partnership as a way of extracting more dollars from the state lottery, sources familiar with the discussions said on Wednesday.

Gov. David Paterson in late July opened the door to privatizing some operations, including roads and bridges. He has ruled out selling state assets, however, saying he would examine leases or management programs.

Former Gov. Eliot Spitzer had first proposed privatizing the lottery to raise $3 billion for the state's universities and colleges. He failed, however, to persuade the legislature.

A spokesman for Paterson, who has recalled the legislature to cut spending because the state faces a $26 billion deficit over the next three years, was not available for comment.

In many states, lottery sales are growing slowly or have leveled off as they compete with casinos and in some cases, have failed to modernize by selling lottery tickets on cell phones or over the Internet.

One source, who requested anonymity, said companies that might be tapped to boost lottery sales include Walker Digital, which has designed systems to help lotteries grow their businesses, and investment bank Goldman Sachs.

A Goldman official declined comment.

Walker Digital Chairman Jay Walker, who founded Priceline.com, declined to comment on any clients his Stamford, Connecticut-based company is working with.

But he did talk in general about ways that lotteries can improve their businesses and generate revenues for states.

"The lottery industry is poised for substantial growth if it deploys new products that serve customers using new technologies," he said by telephone.

"That growth could be monetized immediately in a public private partnership where the risk of the growth fell on the private sector and the guarantee of revenues was immediate to the public sector," Walker said.

In a lottery public-private partnership, a state could, for example, get a hedge fund or an investment bank to pay for new technology that would help increase sales.

The investor would then split the profits from any new sales with the state, with the state continuing to get the same amount of revenue it already gets from existing sales.

Walker confirmed one of Walker Digital's employees is a former New York lottery director, Nancy Palumbo. He said many of his workers also previously worked for state lotteries.