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Tenn. lottery chief offers advice to fledgling Wyoming Lottery

Jul 10, 2013, 10:07 am

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Wyoming Lottery

The Wyoming Lottery Board received some much-needed advice — and a stern warning — from someone who has helped shepherd other states through the the complicated process of launching state-sponsored games of chance.

Rebecca Hargrove is the CEO of the Tennessee Lottery and is known as a guru on how to get lottery startups off the ground and running. Board Chairman Brian Scott asked her to pay a visit to help outline a game plan for the board at its second-ever meeting on Tuesday.

The energetic executive has a Southern lilt, pizzazz and evident knowledge that the newly appointed board needs at the nascent stages of the Wyoming Lottery. On her Casper visit she dropped names, passed out phone numbers, clarified legislative matters, and warned the nine-member board of the pitfalls that arise when starting a lottery. She left the board meeting with a laundry list of things she promised to help the board deal with while it's getting its feet wet.

Her biggest piece of advice to the board was the scariest.

"This is a zero-mistake business," she said.

The board has a target of getting the Wyoming Lottery Corporation off the ground by the beginning of 2014, but no dates are set in stone. It has an overwhelming amount of work in front of it, Hargrove said.

In the coming months, there will be thousands of contracts and a litany of business decisions that need to be carried out by someone with experience in the industry, she said. No member of the board has any connection to gaming or lottery, so the most important thing the board can do is hire an industry-savvy CEO as soon as possible, she said.

The board will begin to advertise and may hire a search firm to help get the lottery corporation a pool of candidates. It chose Cheyenne over Casper to use as its home office.

"It's an attractive place to CEOs," said Barry Simms, a former Taco John's CEO and vice chairman of the board.

At its first meeting the board questioned whether it should spend the money on hiring a search firm. Potential candidates have already been inquiring with the governor's office and power players in the lottery industry.

There's value in a search firm, Hargrove said.

Search firms hired by Tennessee and Georgia lured Hargrove from lottery CEO positions she was then holding when they were in the early stages of developing their lotteries.

"Their philosophy was that you're probably not going to want to hire someone who is actively looking for a job," she said.

The board will start tapping lottery trade organizations and lottery CEOs in states across the country to ask for help in finding a candidate, Scott said.

Whether the board will use a search firm is still not known, Scott said.

The board has heard numerous figures on an approximate starting salary for CEOs with experience in launching lottery startups. The decision on what to pay a CEO of a startup is different from asking, "What do CEOs make in the industry," Hargrove said.

There were murmurs of a number between $100,000 and $175,000, but Hargrove said that was too low if the board wants to attract a candidate who is currently working somewhere else.

"Getting someone to pick up and leave everything and come here can cost between $225,000 and $700,000," she said.

Hargrove's next piece of advice was to secure capital.

Board members were combing Wyoming to search for startup funds because the state Legislature didn't allocate any general fund monies to start the Wyoming Lottery Corporation.

There were worries that the Wyoming lottery — without collateral and a guarantor to take on liability in the unlikely case of a default — would have trouble acquiring a loan. But the fears have faded since the board began meeting. Lenders have contacted Scott and Simms to show interest in granting it a loan.

The board should have its startup capital within a month's time and plans to use a Wyoming bank, Scott said.

The board is pushing to borrow $1 million for six months, but it all depends on what the banks want, Scott said.

Hargrove wasn't the only guest the board welcomed to Wyoming. The nation's three largest gaming vendors — distributors of the terminals that sell tickets at retail stores — gave the board sales pitches. The winning company is likely to furnish more than 300 retailers in the state.

Representatives from Scientific Games, Intralot and GTECH are all vying for a contract with the Wyoming Lottery in a competitive bidding process. The state is a prize for all of the companies because Wyoming is the 44th state to adopt a lottery and is considered one of the last that will do so.

GTECH runs the Colorado and Nebraska lotteries, and Intralot runs the Montana and Idaho lotteries. Scientific Games runs North Dakota's.

The winning company will provide research, gaming equipment, communications and labor to the lottery corporation.

Representatives estimated that the fee for using a vendor would range between 5 and 12 percent of the revenue the lottery earns each year.

Hargrove advised the board to not bite on the lowest bid.

"Wyoming needs to choose the vendor that gives it the best value — not the best price," she said.

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