Ohio to Pay $15M for a Gaming Consultant

Ohio will be paying for a consultant to tell the governor, the Ohio Lottery Commission and Casino Control Commission how to handle gaming in the state. That bill could be worth considerably more than $15 million for two out-of-state companies.

Moelis & Company, based in Los Angeles, and Spectrum Gaming, based in Linwood, New Jersey, will act as advisers to help the state maximize potential gaming revenues. They will advise the administration on gaming and casino-related tax issues as well as the installation of video lottery terminals at seven racetracks. In the contracts, it’s called “Strategic Advisory Services.”

According to copies of the proposals and contract agreements supplied to NBC4 by the Ohio Department of Administrative Services, Moelis & Company has been retained for at least a year at $200,000 per month and can potentially make a bonus of 3.25 percent on any additional state gaming revenue. That bonus is capped at $13 million for a maximum total payout of $15.4 million.

“To make certain that taxpayers get the maximum benefit out of these contracts, the bulk of the consultants’ pay is tied to whether or not they produce results,” says Pieter Wykoff, Director of Public Affairs for the Department of Administrative Services.

Moelis’ contract began on April 29 and runs through April 2012. DAS says the Ohio Lottery Commission has received the first invoice but has not yet made the first payment.

Looking through the Requests for Proposals and the final contracts, NBC4 found evidence of negotiations between the administration and Moelis. The initial proposals call for a $150,000 monthly retainer fee and 5 percent of the excess revenue; the final contract settled on $200,000 monthly retainers and 3.25 percent of the revenue. That gives the consulting company at least $600,000 more in guaranteed cash but could save the state millions in bonus payments.

The contract with Spectrum Gaming runs through March 1, 2012, and pays the company’s project manager $395 per hour with no fee cap. The Deputy Project Manager and each of the Spectrum attorneys gets $300 per hour. With the help of CPAs with gaming experience, investigators, regulatory specialists and administrative time, the total cost per hour is, potentially, $2,110 per hour.

Spectrum claims to have experience with lotteries and regulatory agencies in seven states, the District of Columbia and Puerto Rico. Rand Howard, the Assistant Director of the Department of Administrative Services, tells NBC4 that Spectrum was “uniquely qualified” among the six consulting firms that submitted proposals.

Spectrum Gaming will evaluate the regulatory options and help write the state’s new rules on gaming. Moelis & Company is expected to focus on how to generate the most revenue for the state.

Howard says there is some overlap in what the two firms do, but each is assigned its own task and has its own expertise.

Jo Ann Davidson, the chair of the Ohio Casino Control Commission, tells NBC4 that Moelis’ advisory services are specifically for the Kasich Administration, not for the CCC, but that the commission may also benefit from the information. She says the commission will, however, use Spectrum’s services directly on a pay-as-you go basis. Those services may be approved at the Commission’s next meeting on Wednesday.

In 2009, Ohio voters approved a constitutional amendment allowing casinos in Cleveland, Columbus, Cincinnati and Toledo. The language requires the operators to pay a $50 million license fee and then pay taxes of 33 percent on each casino’s gross revenues.

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