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Iowa Looks to Selling Lottery
DES MOINES, IOWA --
Iowa, trying to find ways to fill in the state budget deficit, is thinking about leasing the state lottery for the next forty-nine years for a sum greater than $200 million. Even after leasing the gambling program, Iowa would still be able to tax the leasees on gross income, charging them the same twenty-two percent paid by licensed casinos in the state.
Dan Kehl of Kehl Management said his group of investors approached Iowa lawmakers with the deal. Pressure is on legislators in the state to resolve a budget shortfall of almost $800 million.
The Iowa lottery generated $57.2 million in profit after operating costs last year. Under the Kehl plan, the investment group would pay to run the lottery, and receive the profits. But the tax, as applied to last year's figures, would have netted the state $22.4 million.
Iowa Senate Majority Leader Michael Gronstal, a Council Bluffs Democrat, told the Des Moines Register, "I think the biggest challenge if we go down that road is to figure out if we are getting a fair price for it; whether we are getting taken to the cleaners and if somebody is going to make a boatload of money. ... There are a lot of unanswered questions."
Using those numbers, the deal seems exceptional for Iowa. Tax keeps the state receiving better than a third of what it was getting in total profits, and the state gets $200 million upfront against what the numbers, if static, would indicate as $175 million in lost revenue over the next fifty years.
Of course, Kehl is betting on strong growth in lottery sales, as well as savings in streamlining costs. But the state gets the money now, and the future value of the lottery money diminishes next to the use of that money for fifty years before it would otherwise be earned.
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