INDIANAPOLIS | It may be time to put the Hoosier Lottery next to the Indiana Toll Road as examples of privatized state assets performing well, but falling well short of their revenue targets.
The parent company of GTECH Indiana, which inked a 15-year contract in 2012 to manage Hoosier Lottery marketing, operations and sales, told investors Monday it expects to incur the maximum penalty for failing to meet its Indiana lottery income goal.
In a statement announcing quarterly financial results, Italy-headquartered GTECH said its lottery management services revenue decreased by $17.4 million -- about 14 million Euros -- due to "an anticipated shortfall in Indiana for the Hoosier Lottery's 2014 and 2015 fiscal years."
GTECH Indiana has contracted to produce $320 million in Hoosier Lottery income during the July 1, 2014 to June 30, 2015 period.
To do that, it must grow year-over-year ticket sales by $255 million, or 25 percent, to $1.27 billion.
If the company falls short, it must pay the difference between actual income and contracted income up to a maximum of 5 percent, or $16 million. The company receives a bonus if income exceeds the contracted amount.
During the 2014 budget year, GTECH Indiana made a shortfall payment of $1.6 million to meet its promised income of $256 million.
Indiana's State Lottery Commission is scheduled to reveal next week where lottery sales and income stand through one-third of the 2015 budget year.
However, GTECH's announcement of an expected maximum penalty indicates GTECH Indiana's Hoosier Lottery income is at least 5 percent below target.
The lottery commission can cancel GTECH Indiana's contract to operate the Hoosier Lottery if the company misses its income target by at least 10 percent two years in a row.
Next year, GTECH Indiana is required to produce $365 million in lottery income and $410 million during the 2017 budget year.
Despite failing to hit its income target, GTECH Indiana last year grew lottery ticket sales by $85 million, or 9 percent, to crack $1 billion for the first time since the Hoosier Lottery began in 1989.
Similarly, the privately operated Indiana Toll Road never has taken in more money, but has been unable to keep up with bond payments that anticipated even higher revenues.
In 2012, the final year for the state-managed Hoosier Lottery, ticket sales totaled $855 million and produced $205.2 million in income.
Indiana uses Hoosier Lottery profits to reduce vehicle excise taxes, support state and local construction projects and fund pensions for police, firefighters and teachers.