Current vendor wins seven-year contract for S.D. video lottery

Capitol News Bureau
KELO Pierre map locator South Dakota

PIERRE, S.D. (KELO) — The South Dakota Lottery Commission approved a one-year extension of the current contract and awarded a new seven-year deal Thursday to the same company, Scientific Games, for the central communication system for video lottery.

There were 8,964 privately-owned machines spread throughout 1,242 establishments across South Dakota last month, according to a report to the commission.

State government takes 50 percent of the money that gamblers leave in the terminals. State revenue from them was a record $114.27 million for the state fiscal year that ended June 30, according to executive director Norm Lingle. He said the previous high was $110 million in 2008.

The Legislature approved video lottery in 1989 at the request of then-Governor George S. Mickelson. The South Dakota Supreme Court shut it down in 1994, saying the South Dakota Constitution didn’t allow it. Voters approved a constitutional amendment that November reinstating it.

Three companies competed for the new contract. Scientific Games had the highest total score of 74, followed by IGT at 71.6 and Intralot 68.

Lingle recommended the extension and the new contract go to Scientific Games. The current contract otherwise would have expired in November.

“We feel this has the least amount of impact to operators, establishments (and) lottery,” Lingle said.

One advantage Scientific Games had is its software is similar to some the state Bureau of Information and Telecommunications uses. The bureau is state government’s technology arm.

Scientific Games plans town-hall meetings in January to answer questions from operators and establishments about the coming system, according to Steve Angelo, a company vice president who attended the meeting.

“The current system is 10 years old. Technology has come a long, long way in 10 years,” Lingle told commissioners. He added, “Really the objective is to drive revenue, and do the things we can to drive revenue.”

Video lottery is state government’s second-largest source of general-fund revenue. The latest forecast for the current fiscal year that began July 1 is $121.65 million. That would set another record.

Lingle said Scientific Games agreed to reduce its percentage of lottery revenue to 0.28 percent in the new contract from the current 0.30, saving the lottery an estimated $280,000 based on current play.

He said the company also dropped its proposed prices to operators and establishments by more than $3.8 million over seven years.

The lottery invited proposals in January 2018. The lottery operates under the state Department of Revenue. Its leaders — secretary Jim Terwilliger and deputy secretary David Wiese — attended the entire meeting Thursday.

“A two year journey” was the description that commissioner Jamie Huizenga of Pierre gave as he called for the deal. “It’s an agreement we can all live with, hopefully,” he said.

“I feel confident the contract we have here is the best thing we could get,” commissioner David Wheeler of Huron said. He mentioned a long list of who could benefit including “taxpayers.”

The roll-call votes were 5-0 each for the extension and the seven years. Commission chairman Bill Shorma of Dakota Dunes called the new deal “a good compromise.”

“That was a good two-year slog. We’ve got a lot of work ahead of us,” Shorma said. He predicted all sides “would be proud of what we got.” 

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