Lottery lease worth several times more than gambling exec's offer

State Treasurer Michael Fitzgerald doesn’t make the news often, but I am grateful for his recent frank comments to the Des Moines Register:

Fitzgerald, a Democrat who is chief custodian and investor of state government’s money, said last week that a lottery leasing proposal made recently by Kehl Management to Gov. Chet Culver “was a terribly bad deal.”

The governor should have been embarrassed when the details became public, Fitzgerald added.

“I am against leasing the lottery until somebody proves to me that it is a really good deal for the state. I think the lottery is worth $1 billion – minimum – and that is why I am highly suspicious of selling it,” Fitzgerald told The Des Moines Register. […]

Kehl Management, headed by Riverside casino executive Dan Kehl, has proposed a one-time cash payment of about $200 million for a 49-year lease of the Iowa Lottery, plus a 22 percent annual tax on the lottery’s adjusted gross receipts.

I have no idea how Kehl arrived at the $200 million number. Maybe that was a lowball starting point for negotiation, or maybe he thought state officials might jump at the chance to cover a fourth to a third of the expected hole in next year’s budget.

Either way, Fitzgerald’s comments are on the mark. No one should be talking about leasing the lottery for a price that is well below its value. That’s not only bad policy, but also bad politics, since it would create the appearance of Democratic leaders providing a sweetheart deal for large donors. Kehl gave $25,000 to Culver’s campaign committee in 2008.

Fortunately, Senate Majority leader Mike Gronstal has said, “I’ve not seen much interest inside our caucus in proceeding with the sale of the lottery.”

It’s time for statehouse leaders to definitively take selling the Iowa Lottery off the table.

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