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RI Lottery leaders grilled over 20-year IGT contract proposal

Politics

PROVIDENCE, R.I. (WPRI) — State lawmakers on Thursday kicked off a monthlong series of hearings to scrutinize the proposed 20-year extension of IGT’s gaming technology contract, receiving an extensive overview of the company’s history in Rhode Island and its role in operating the Lottery.

“It is the intention of this committee to conduct the most deliberative hearing process possible,” declared Senate Finance Committee Chairman William Conley, D-East Providence, at the start of the hearing. He promised the hearings would be “transparent, comprehensive and participatory.”

Gov. Gina Raimondo announced in June a tentative deal with IGT — formerly GTECH — that would continue the 2003 contract it negotiated with then-Gov. Don Carcieri and keep it in place through 2043. IGT’s obligations would include employing at least 1,100 workers in Rhode Island and paying the state $25 million upfront, in exchange for a cut of gaming activity worth roughly $50 million a year.

Twin River Worldwide Holdings, which operates Rhode Island’s two state-owned casinos, has spent months savaging the deal after IGT declined Twin River’s request to cut it in on the new agreement. Twin River put forward a new alternative offer on Wednesday in partnership with Camelot Lottery Solutions of London.

The battle will determine who manages the core technology that powers Rhode Island’s casino and traditional lottery games — a crucial task since the money they bring in represents the state’s third largest source of revenue, worth nearly $400 million during the 2018-19 fiscal year. The bulk of that came from slot machines at the casinos.

(credit: R.I. Department of Revenue)

• PDF: PowerPoint presentation on how RI Lottery works

At Thursday’s hearing, Senate Finance heard testimony from Senate staffers as well as the Department of Revenue, which includes the Lottery, aimed in part at explaining how and why the state has repeatedly awarded contracts without a competitive bidding process to both IGT and Twin River.

Kelly McElroy, legal counsel for Senate Finance, said most state purchases go through a public procurement process where potential vendors can submit proposals or bids. However, she said, lawmakers have occasionally passed special laws that waive the normal bidding process in order to authorize so-called “master contracts” with specific organizations.

The Department of Revenue cited five laws passed in recent years authorizing such no-bid master contracts: the statute passed in 2003 for GTECH, and statutes passed in 2005, 2010 and 2016 for Twin River and its predecessor companies. (Twin River is currently in the 14th year of what would be a 25-year master contract if all extensions are exercised.)

“It’s the legislature that has the authority to set what the procurement process is, and it has the prerogative to pass legislation that authorizes state agencies to enter into long-term contracts,” said Marilyn Shannon McConaghy, the Lottery’s top lawyer. She said other examples include the 1990s Providence Place mall deal or long-term property leases.

“What we haven’t done is negotiate a no-bid contract,” insisted Department of Revenue Director Mark Furcolo, who noted lawmakers are now getting a say over the tentative terms agreed to by IGT.

Yet the Raimondo administration officials were unable to answer questions about how Rhode Island’s approach compares with those of other states.

Furcolo said if lawmakers do not authorize a new master contract with IGT by January, Lottery officials will begin the process of putting its gaming technology contract out to bid.

While IGT’s current master contract does not expire until July 2023, Furcolo said officials estimate it would take three-and-a-half years to go through a bidding process and transition the technology to a new vendor. State Sen. Lou DiPalma — one of a number of committee members who asked skeptical questions — said he doubted it would actually take that long.

McConaghy argued the current process for the IGT deal is “much more open and transparent” than putting the contract out to bid, because the bid requirements and eventual decision process about selecting a winner would be determined by Lottery leaders without direct legislative input.

State Sen. Frank Ciccone, D-Providence, suggested lawmakers could put the terms IGT is currently offering into a bill that mandates a bidding process while also requiring all bids to match or beat the terms. McConaghy countered that other bidders might protest by arguing the requirements were crafted to benefit IGT.

Conley said one of the “core concerns” among senators is whether the more than two dozen changes Lottery officials have made to the original 2003 GTECH contract over the years were consistent with the enabling legislation they passed back then. He said lawmakers are considering what “standards, thresholds and safeguards” they can enact to govern amendments.

One question posed by Ciccone and other senators that didn’t immediately get a clear answer was what happened to GTECH’s original commitment to doing manufacturing in West Greenwich in the years since 2003.

Sen. Ryan Pearson pointed out that Carcieri’s original GTECH deal came together more quickly than this one has but nevertheless received widespread bipartisan support. He expressed reservations about the “unfortunate back-and-forths, especially through the media” that have taken place since the deal was announced.

Pearson warned his colleagues to “not get bogged down” and lose sight of the possibility that IGT could move its employees out of state.

The Senate panel is scheduled to hold five hearings on the IGT legislation. The next will be Oct. 1, when the committee expects to review hundreds of pages of documents that were provided by the Raimondo administration and IGT. The governor herself is also scheduled to testify that day. (A planned Oct. 15 hearing has been canceled and will be rescheduled.)

The House Finance Committee has planned two hearings of its own, the first next Tuesday, when the governor is also planning to testify.

Ted Nesi (tnesi@wpri.com) is WPRI 12’s politics and business editor and a Target 12 investigative reporter. He is a weekly panelist on Newsmakers and hosts Executive Suite. Follow him on Twitter and Facebook

Shiina LoSciuto contributed to this report.

Copyright 2019 Nexstar Broadcasting, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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