Renegotiated Gambling Deal Approved By Rhode Island’s House Panel

After a difficult year that has led the House GOP leader to question whether Rhode Island should reconsider the numbers, a reworked 20-year no-bid Lottery deal for International Game Technology (IGT) and its new partner, Bally’s Corporation, in Rhode Island was approved by a key House committee on Thursday with a 10-2 vote.

The bill will now be voted on by the whole House next week.

The bill obligates the IGT-led alliance to 1,100+ jobs in Rhode Island in return for exclusive ownership of the technology that operates Rhode Island’s state-sponsored gaming from the Keno machines to the two Twin River casinos through 2043.

The House GOP Leader, Blake Filippi, 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.”

When “Massachusetts’ take [is] 25 percent,” Filippi wondered why Rhode Island would leave the state with just 12.7 percent revenue after expenditures while giving the casino 84.43 percent of the net table game revenue.

“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 percent 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.”

Lottery’s unprecedented 20-year contract

Filippi also challenged the Lottery’s unprecedented 20-year contract with a technology firm, 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.”

None of the Democrats on the other side of the party-line vote, on the other hand, said anything about the reworked bill, which was first made public on Tuesday.

Signed reworked agreement

Filippi’s concerns were not addressed by House leaders who signed the reworked agreement with IGT and Bally’s (formerly Twin River).

What percentage of the gambling income will go to IGT and Bally’s is unknown. Nonetheless, according to a consultant’s report, IGT was paying 7 percent for the “lease” of the electronic gambling machines, 2.5 percent for running the “central system” that connects the machines, and 5 percent for its position in the conventional Lottery.

According to a summary given by the Lottery on Thursday, the Lottery paid IGT alone $56.8 million in Fiscal Year 2019, the last full year of service. That year, Twin River received $287 million in compensation.

The state of Rhode Island’s state-run gambling empire, which has been the state’s third-largest source of revenue after income and sales taxes, is at the root of Filippi’s concerns. Although the pandemic exacerbated the issue, it is not solely to blame for the double-digit revenue drop.

The state’s revenue fell sharply from $397.3 million in Fiscal Year 2019 to $283.9 million in Fiscal Year 2020, which ended on June 30, 2020.

In the nine months leading up to the pandemic, income from video-gambling machines at the Twin River casinos in Lincoln and Tiverton dropped by 12 percent, according to the Lottery’s financial statement.

Opening of a new casino in Massachusetts

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 percent decrease in revenue for fiscal 2020.”

Table games’ net sales at the two casinos fell by 32 percent from March 2020 to the end of the fiscal year (pre-pandemic), and by 49 percent overall.

The new IGT contract, which began in 2003 and runs until June 30, 2023, gives 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 exchange for this exclusive contract right, the provider paid the Lottery a one-time payment of $12.5 million. IGT will make a $27 million initial payment in the proposed new contract.