SPRINGFIELD–(ENEWSPF)–March 18, 2013. llinois Lottery officials announced today that Northstar fell short of its net income target in FY2012 by only generating $757 million in net income according to the Private Management Agreement (“PMA”). This net income shortfall entitles the State to a $20 million payment from Northstar.
“The PMA is the contract that governs the relationship between the Illinois Lottery and Northstar. It contains provisions that reward Northstar for exceeding certain income levels and compensates the State when Northstar fails to reach certain net income targets set by itself in the bidding process,” said Lottery Superintendent Michael Jones. “Northstar won the private manager contract by projecting a net income of $851.2 million in FY12, but failed to reach this goal, consequently triggering a $20 million net income shortfall payment to the state. Northstar missed their initial net income commitment by $94 million. Our agreement requires Northstar be held accountable for this shortfall.”
As provided under the PMA, Jones says the Lottery plans to recoup this shortfall by withholding the future monthly payments that Northstar regularly receives as part of its management fee for operating the day-to-day operations of the Lottery.
“We look forward to continuing to work closely with the new team at Northstar to continue the creative marketing and brand-transformation efforts over the last six to eight months that broadened the lottery’s player base and generated new sales and profits,” said Jones.
Northstar is a consortium of Lottery industry vendors Gtech and Scientific Games, and was paid a total of $85.1 million for FY12 services.
Pursuant to the PMA’s dispute resolution provisions, a third party professional reviewed Northstar’s requests. This professional ultimately agreed with the State on many of its arguments and determined that only $28.4 million of the $119.2 million sought in FY12 downward adjustments should stand (only $2.9 million of the $143.7 million sought in FY13-16 downward adjustments were allowed to stand). As a result, Northstar has only been held to a $822.8 million net income target for FY12 as opposed to the original $851.2M million Northstar originally bid.
Calculation of FY12 Net Income Pursuant to the Illinois Lottery Private Management Agreement
*Deductions from Total Revenues shown in brackets
Profit and Loss Category Details
Calculation of FY12 Net Income Shortfall Payment Pursuant to the