Sen. Steve Cohen, chief sponsor of legislation creating the state's new lottery and an increasingly frequent critic of Gov. Phil Bredesen, asked the governor Thursday why the lottery's board of directors was not allowed to choose its own credit provider.
Only days after Bredesen said he made a mistake by allowing a Nashville law firm with close ties to his administration to be appointed counsel for the Tennessee Lottery Corporation, the governor was again on the defensive.
At issue is an initial $15 million line of credit from a consortium of state banks. Bredesen said when his staff arranged for the credit, he was trying to jump-start the board, which hopes to have the lottery in business by early next year.
"We negotiated terms in advance on the line of credit so they had access to a line of credit and didn't have to start from scratch,'' Bredesen told The Tennessean on Thursday.
Legislation creating the lottery made the board independent of the governor, the legislature and the state attorney general, said Cohen, D-Memphis.
"Governor Bredesen said he was passing the baton to the board,'' he said. "The board is supposed to have the baton and do it all.''
The line of credit was arranged with First Tennessee Bank of Nashville, First Citizens Bank of Dyersburg, Citizens National Bank of Sevierville, First Farmers and Merchants National Bank of Columbia. The arrangement was approved by the lottery board after First Tennessee Bank formed the consortium.
The board was pleased with the terms and approved the proposal, Bredesen said.
He characterized the credit line as "not a particularly profitable piece of business,'' representing about 1 percent of the banking relationships the board will have.
The credit arrangement was not put up for bid, but other contracts for bank services will be when applicable, Bredesen spokesman Will Pinkston said.
"They will dventually bid out the full range of services,'' he said. Pinkston noted the board will pay a "standard'' interest rate for the line of credit.
Bredesen raised some eyebrows earlier in the week when Bass, Berry & Sims of Nashville was chosen as the lottery board's legal counsel. The firm was selected Monday by a panel appointed by the governor consisting of Attorney General Paul Summers, Finance Commissioner Dave Goetz and Director of Financial Institutions Kevin Lavender.
On Tuesday, Bredesen revoked that decision and said the selection process would be redone, with Bass, Berry & Sims not allowed to be a candidate. He said the lottery board would now choose the legal counsel.
Rep. Chris Newton, R-Cleveland, House sponsor of the lottery legislation, said he saw nothing wrong with the administration negotiating the line of credit.
"I think they had to have some kind of seed money to start off with,'' Newton said. "In terms of long-term banking relationships, that is something the corporation, at the appropriate time and at their discretion, can choose to put out (a request for proposals) to do competitive bidding.''
Cohen and Bredesen began butting heads early this year as the Legislature formed the lottery package.
In February, when the governor presented his ideas for the lottery, Cohen objected to Bredesen's suggestion that the executive branch appoint a majority of members to the lottery board.
Cohen, who had envisioned a board run by legislative appointees, refused to back down for almost the entire legislative process. He lashed out at Bredesen frequently, even once calling the governor a "bully.''
Eventually Cohen and Bredesen met privately to hash out their differences, and Cohen presented a plan calling for seven-member board appointed by the governor and confirmed by the General Assembly.