HB0414 EngrossedLRB097 03921 ASK 43960 b

1    AN ACT concerning State government.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Lottery Law is amended by changing
5Section 9.1 as follows:
 
6    (20 ILCS 1605/9.1)
7    Sec. 9.1. Private manager and management agreement.
8    (a) As used in this Section:
9    "Offeror" means a person or group of persons that responds
10to a request for qualifications under this Section.
11    "Request for qualifications" means all materials and
12documents prepared by the Department to solicit the following
13from offerors:
14        (1) Statements of qualifications.
15        (2) Proposals to enter into a management agreement,
16    including the identity of any prospective vendor or vendors
17    that the offeror intends to initially engage to assist the
18    offeror in performing its obligations under the management
19    agreement.
20    "Final offer" means the last proposal submitted by an
21offeror in response to the request for qualifications,
22including the identity of any prospective vendor or vendors
23that the offeror intends to initially engage to assist the

 

 

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1offeror in performing its obligations under the management
2agreement.
3    "Final offeror" means the offeror ultimately selected by
4the Governor to be the private manager for the Lottery under
5subsection (h) of this Section.
6    (b) By September 15, 2010, the Governor shall select a
7private manager for the total management of the Lottery with
8integrated functions, such as lottery game design, supply of
9goods and services, and advertising and as specified in this
10Section.
11    (c) Pursuant to the terms of this subsection, the
12Department shall endeavor to expeditiously terminate the
13existing contracts in support of the Lottery in effect on the
14effective date of this amendatory Act of the 96th General
15Assembly in connection with the selection of the private
16manager. As part of its obligation to terminate these contracts
17and select the private manager, the Department shall establish
18a mutually agreeable timetable to transfer the functions of
19existing contractors to the private manager so that existing
20Lottery operations are not materially diminished or impaired
21during the transition. To that end, the Department shall do the
22following:
23        (1) where such contracts contain a provision
24    authorizing termination upon notice, the Department shall
25    provide notice of termination to occur upon the mutually
26    agreed timetable for transfer of functions;

 

 

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1        (2) upon the expiration of any initial term or renewal
2    term of the current Lottery contracts, the Department shall
3    not renew such contract for a term extending beyond the
4    mutually agreed timetable for transfer of functions; or
5        (3) in the event any current contract provides for
6    termination of that contract upon the implementation of a
7    contract with the private manager, the Department shall
8    perform all necessary actions to terminate the contract on
9    the date that coincides with the mutually agreed timetable
10    for transfer of functions.
11    If the contracts to support the current operation of the
12Lottery in effect on the effective date of this amendatory Act
13of the 96th General Assembly are not subject to termination as
14provided for in this subsection (c), then the Department may
15include a provision in the contract with the private manager
16specifying a mutually agreeable methodology for incorporation.
17    (c-5) The Department shall include provisions in the
18management agreement whereby the private manager shall, for a
19fee, and pursuant to a contract negotiated with the Department
20(the "Employee Use Contract"), utilize the services of current
21Department employees to assist in the administration and
22operation of the Lottery. The Department shall be the employer
23of all such bargaining unit employees assigned to perform such
24work for the private manager, and such employees shall be State
25employees, as defined by the Personnel Code. Department
26employees shall operate under the same employment policies,

 

 

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1rules, regulations, and procedures, as other employees of the
2Department. In addition, neither historical representation
3rights under the Illinois Public Labor Relations Act, nor
4existing collective bargaining agreements, shall be disturbed
5by the management agreement with the private manager for the
6management of the Lottery.
7    (d) The management agreement with the private manager shall
8include all of the following:
9        (1) A term not to exceed 10 years, including any
10    renewals.
11        (2) A provision specifying that the Department:
12            (A) shall exercise actual control over all
13        significant business decisions;
14            (A-5) has the authority to direct or countermand
15        operating decisions by the private manager at any time;
16            (B) has ready access at any time to information
17        regarding Lottery operations;
18            (C) has the right to demand and receive information
19        from the private manager concerning any aspect of the
20        Lottery operations at any time; and
21            (D) retains ownership of all trade names,
22        trademarks, and intellectual property associated with
23        the Lottery.
24        (3) A provision imposing an affirmative duty on the
25    private manager to provide the Department with material
26    information and with any information the private manager

 

 

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1    reasonably believes the Department would want to know to
2    enable the Department to conduct the Lottery.
3        (4) A provision requiring the private manager to
4    provide the Department with advance notice of any operating
5    decision that bears significantly on the public interest,
6    including, but not limited to, decisions on the kinds of
7    games to be offered to the public and decisions affecting
8    the relative risk and reward of the games being offered, so
9    the Department has a reasonable opportunity to evaluate and
10    countermand that decision.
11        (5) A provision providing for compensation of the
12    private manager that may consist of, among other things, a
13    fee for services and a performance based bonus as
14    consideration for managing the Lottery, including terms
15    that may provide the private manager with an increase in
16    compensation if Lottery revenues grow by a specified
17    percentage in a given year.
18        (6) (Blank).
19        (7) A provision requiring the deposit of all Lottery
20    proceeds to be deposited into the State Lottery Fund.
21        (8) A provision requiring the private manager to locate
22    its principal office within the State.
23        (8-5) A provision encouraging that at least 20% of the
24    cost of contracts entered into for goods and services by
25    the private manager in connection with its management of
26    the Lottery, other than contracts with sales agents or

 

 

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1    technical advisors, be awarded to businesses that are a
2    minority owned business, a female owned business, or a
3    business owned by a person with disability, as those terms
4    are defined in the Business Enterprise for Minorities,
5    Females, and Persons with Disabilities Act.
6        (9) A requirement that so long as the private manager
7    complies with all the conditions of the agreement under the
8    oversight of the Department, the private manager shall have
9    the following duties and obligations with respect to the
10    management of the Lottery:
11            (A) The right to use equipment and other assets
12        used in the operation of the Lottery.
13            (B) The rights and obligations under contracts
14        with retailers and vendors.
15            (C) The implementation of a comprehensive security
16        program by the private manager.
17            (D) The implementation of a comprehensive system
18        of internal audits.
19            (E) The implementation of a program by the private
20        manager to curb compulsive gambling by persons playing
21        the Lottery.
22            (F) A system for determining (i) the type of
23        Lottery games, (ii) the method of selecting winning
24        tickets, (iii) the manner of payment of prizes to
25        holders of winning tickets, (iv) the frequency of
26        drawings of winning tickets, (v) the method to be used

 

 

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1        in selling tickets, (vi) a system for verifying the
2        validity of tickets claimed to be winning tickets,
3        (vii) the basis upon which retailer commissions are
4        established by the manager, and (viii) minimum
5        payouts.
6        (10) A requirement that advertising and promotion must
7    be consistent with Section 7.8a of this Act.
8        (11) A requirement that the private manager market the
9    Lottery to those residents who are new, infrequent, or
10    lapsed players of the Lottery, especially those who are
11    most likely to make regular purchases on the Internet as
12    permitted by law.
13        (12) A code of ethics for the private manager's
14    officers and employees.
15        (13) A requirement that the Department monitor and
16    oversee the private manager's practices and take action
17    that the Department considers appropriate to ensure that
18    the private manager is in compliance with the terms of the
19    management agreement, while allowing the manager, unless
20    specifically prohibited by law or the management
21    agreement, to negotiate and sign its own contracts with
22    vendors.
23        (14) A provision requiring the private manager to
24    periodically file, at least on an annual basis, appropriate
25    financial statements in a form and manner acceptable to the
26    Department.

 

 

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1        (15) Cash reserves requirements.
2        (16) Procedural requirements for obtaining the prior
3    approval of the Department when a management agreement or
4    an interest in a management agreement is sold, assigned,
5    transferred, or pledged as collateral to secure financing.
6        (17) Grounds for the termination of the management
7    agreement by the Department or the private manager.
8        (18) Procedures for amendment of the agreement.
9        (19) A provision requiring the private manager to
10    engage in an open and competitive bidding process for any
11    procurement having a cost in excess of $50,000 that is not
12    a part of the private manager's final offer. The process
13    shall favor the selection of a vendor deemed to have
14    submitted a proposal that provides the Lottery with the
15    best overall value. The process shall not be subject to the
16    provisions of the Illinois Procurement Code, unless
17    specifically required by the management agreement.
18        (20) The transition of rights and obligations,
19    including any associated equipment or other assets used in
20    the operation of the Lottery, from the manager to any
21    successor manager of the lottery, including the
22    Department, following the termination of or foreclosure
23    upon the management agreement.
24        (21) Right of use of copyrights, trademarks, and
25    service marks held by the Department in the name of the
26    State. The agreement must provide that any use of them by

 

 

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1    the manager shall only be for the purpose of fulfilling its
2    obligations under the management agreement during the term
3    of the agreement.
4        (22) Beginning on January 1, 2012, a requirement that
5    each retail location must have a device that allows the
6    purchaser of a lottery ticket to determine if that ticket
7    can be redeemed for a prize.
8    (e) Notwithstanding any other law to the contrary, the
9Department shall select a private manager through a competitive
10request for qualifications process consistent with Section
1120-35 of the Illinois Procurement Code, which shall take into
12account:
13        (1) the offeror's ability to market the Lottery to
14    those residents who are new, infrequent, or lapsed players
15    of the Lottery, especially those who are most likely to
16    make regular purchases on the Internet;
17        (2) the offeror's ability to address the State's
18    concern with the social effects of gambling on those who
19    can least afford to do so;
20        (3) the offeror's ability to provide the most
21    successful management of the Lottery for the benefit of the
22    people of the State based on current and past business
23    practices or plans of the offeror; and
24        (4) the offeror's poor or inadequate past performance
25    in servicing, equipping, operating or managing a lottery on
26    behalf of Illinois, another State or foreign government and

 

 

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1    attracting persons who are not currently regular players of
2    a lottery.
3    (f) The Department may retain the services of an advisor or
4advisors with significant experience in financial services or
5the management, operation, and procurement of goods, services,
6and equipment for a government-run lottery to assist in the
7preparation of the terms of the request for qualifications and
8selection of the private manager. Any prospective advisor
9seeking to provide services under this subsection (f) shall
10disclose any material business or financial relationship
11during the past 3 years with any potential offeror, or with a
12contractor or subcontractor presently providing goods,
13services, or equipment to the Department to support the
14Lottery. The Department shall evaluate the material business or
15financial relationship of each prospective advisor. The
16Department shall not select any prospective advisor with a
17substantial business or financial relationship that the
18Department deems to impair the objectivity of the services to
19be provided by the prospective advisor. During the course of
20the advisor's engagement by the Department, and for a period of
21one year thereafter, the advisor shall not enter into any
22business or financial relationship with any offeror or any
23vendor identified to assist an offeror in performing its
24obligations under the management agreement. Any advisor
25retained by the Department shall be disqualified from being an
26offeror. The Department shall not include terms in the request

 

 

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1for qualifications that provide a material advantage whether
2directly or indirectly to any potential offeror, or any
3contractor or subcontractor presently providing goods,
4services, or equipment to the Department to support the
5Lottery, including terms contained in previous responses to
6requests for proposals or qualifications submitted to
7Illinois, another State or foreign government when those terms
8are uniquely associated with a particular potential offeror,
9contractor, or subcontractor. The request for proposals
10offered by the Department on December 22, 2008 as
11"LOT08GAMESYS" and reference number "22016176" is declared
12void.
13    (g) The Department shall select at least 2 offerors as
14finalists to potentially serve as the private manager no later
15than August 9, 2010. Upon making preliminary selections, the
16Department shall schedule a public hearing on the finalists'
17proposals and provide public notice of the hearing at least 7
18calendar days before the hearing. The notice must include all
19of the following:
20        (1) The date, time, and place of the hearing.
21        (2) The subject matter of the hearing.
22        (3) A brief description of the management agreement to
23    be awarded.
24        (4) The identity of the offerors that have been
25    selected as finalists to serve as the private manager.
26        (5) The address and telephone number of the Department.

 

 

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1    (h) At the public hearing, the Department shall (i) provide
2sufficient time for each finalist to present and explain its
3proposal to the Department and the Governor or the Governor's
4designee, including an opportunity to respond to questions
5posed by the Department, Governor, or designee and (ii) allow
6the public and non-selected offerors to comment on the
7presentations. The Governor or a designee shall attend the
8public hearing. After the public hearing, the Department shall
9have 14 calendar days to recommend to the Governor whether a
10management agreement should be entered into with a particular
11finalist. After reviewing the Department's recommendation, the
12Governor may accept or reject the Department's recommendation,
13and shall select a final offeror as the private manager by
14publication of a notice in the Illinois Procurement Bulletin on
15or before September 15, 2010. The Governor shall include in the
16notice a detailed explanation and the reasons why the final
17offeror is superior to other offerors and will provide
18management services in a manner that best achieves the
19objectives of this Section. The Governor shall also sign the
20management agreement with the private manager.
21    (i) Any action to contest the private manager selected by
22the Governor under this Section must be brought within 7
23calendar days after the publication of the notice of the
24designation of the private manager as provided in subsection
25(h) of this Section.
26    (j) The Lottery shall remain, for so long as a private

 

 

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1manager manages the Lottery in accordance with provisions of
2this Act, a Lottery conducted by the State, and the State shall
3not be authorized to sell or transfer the Lottery to a third
4party.
5    (k) Any tangible personal property used exclusively in
6connection with the lottery that is owned by the Department and
7leased to the private manager shall be owned by the Department
8in the name of the State and shall be considered to be public
9property devoted to an essential public and governmental
10function.
11    (l) The Department may exercise any of its powers under
12this Section or any other law as necessary or desirable for the
13execution of the Department's powers under this Section.
14    (m) Neither this Section nor any management agreement
15entered into under this Section prohibits the General Assembly
16from authorizing forms of gambling that are not in direct
17competition with the Lottery.
18    (n) The private manager shall be subject to a complete
19investigation in the third, seventh, and tenth years of the
20agreement (if the agreement is for a 10-year term) by the
21Department in cooperation with the Auditor General to determine
22whether the private manager has complied with this Section and
23the management agreement. The private manager shall bear the
24cost of an investigation or reinvestigation of the private
25manager under this subsection.
26    (o) The powers conferred by this Section are in addition

 

 

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1and supplemental to the powers conferred by any other law. If
2any other law or rule is inconsistent with this Section,
3including, but not limited to, provisions of the Illinois
4Procurement Code, then this Section controls as to any
5management agreement entered into under this Section. This
6Section and any rules adopted under this Section contain full
7and complete authority for a management agreement between the
8Department and a private manager. No law, procedure,
9proceeding, publication, notice, consent, approval, order, or
10act by the Department or any other officer, Department, agency,
11or instrumentality of the State or any political subdivision is
12required for the Department to enter into a management
13agreement under this Section. This Section contains full and
14complete authority for the Department to approve any contracts
15entered into by a private manager with a vendor providing
16goods, services, or both goods and services to the private
17manager under the terms of the management agreement.
18    Except as provided in Sections 21.2, 21.5, 21.6, 21.7, and
1921.8, the Department shall distribute all proceeds of lottery
20tickets and shares sold in the following priority and manner:
21        (1) The payment of prizes and retailer bonuses.
22        (2) The payment of costs incurred in the operation and
23    administration of the Lottery, including the payment of
24    sums due to the private manager under the management
25    agreement with the Department and payment of sums due to
26    the private vendor for lottery tickets and shares sold on

 

 

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1    the Internet via the pilot program as compensation under
2    its contract with the Department.
3        (3) On the last day of each month or as soon thereafter
4    as possible, the State Comptroller shall direct and the
5    State Treasurer shall transfer from the Lottery Fund to the
6    Common School Fund an amount that is equal to the proceeds
7    transferred in the corresponding month of fiscal year 2009,
8    as adjusted for inflation, to the Common School Fund.
9        (4) On or before the last day of each fiscal year,
10    deposit any remaining proceeds, subject to payments under
11    items (1), (2), and (3) into the Capital Projects Fund each
12    fiscal year.
13(Source: P.A. 96-34, eff. 7-13-09; 96-37, eff. 7-13-09; 96-840,
14eff. 12-23-09.)
 
15    Section 99. Effective date. This Act takes effect upon
16becoming law.