Northstar New Jersey, the private contractor that manages the New Jersey Lottery’s sales and marketing operations, has agreed to a renegotiated contract that alters revenue projections to adjust for the absence of video lottery terminals in the state.
Northstar, a consortium of lottery vendors GTECH and Scientific Games and OMERS, a pension fund for workers in Ontario, Canada, had submitted a plan to the lottery to place video keno machines and other slots in bars and taverns across the state. The lottery rejected the plan because it did not want to implement VLTs that would compete for revenues with New Jersey’s casinos.
After its VLT plan was rejected, Northstar implemented a clause in its contract that allows for new settlement negotiations. Already criticized for missing revenue targets in the two years it has operated the lottery, officials of the vendor wanted the income targets adjusted for the absence of the potentially lucrative VLTs.
After several months of negotiations, lottery officials announced last week that they have reached an agreement with Northstar on a renegotiated management contract, under which Northstar pays the state $120 million up front to manage the lottery for 15 years, for a fee of up to 3 percent of net revenue on a sliding scale, provided the company meets net income targets. Those targets were reduced in the new contract, and the cap on net revenue to Northstar was reduced from 5 percent to 3 percent.
Under the new agreement, Northstar guarantees the lottery income of $960 million in 2016, $965 million in 2017 and $985 million in 2018. Northstar must write a check to make the lottery whole if the targets are not met.
