Sales and marketing of the Tennessee lottery will be controlled by lottery head Rebecca Paul, while other aspects of running the games will be handed over to private vendors.
That was the style Paul used when she ran the Georgia lottery for 10 years and that's how she plans to run the Tennessee lottery, she said yesterday.
On her second day on the job, Paul made several recommendations to the Tennessee lottery board, including what she plans to include in two major contracts with gaming vendors.
Board members deferred to her, with the board chairman saying it was a "solid approach."
"If the board had felt differently, you would have heard it," board Chairman Denny Bottorff said afterward.
The Tennessee Education Lottery Corp. approved a resolution giving Paul authority as chief executive officer and appointing her president, showering her with applause. She started work about a week earlier than expected.
Because Paul started working earlier than expected, the board yesterday adjusted the deadlines she will have to meet to receive incentive bonuses.
With her on board, Bottorff said, the board will relinquish day-to-day operations and take on its policy-making role.
Paul's priorities are writing two gaming contracts and hiring a staff, she told them.
The seven-year contracts will include nearly everything it takes to run a lottery printing and distributing tickets, setting up a telecommunications system, operating and installing lottery terminals, training retailers and lottery staff members. She will retain sales, marketing and financial controls, she said.
"It's very similar to a pretty successful operation," said Paul, referring to the Georgia lottery.
The vendors would be paid based on a percentage of sales.
Alternatives include hiring a scratch-off ticket vendor who sells tickets at a cost per thousand and provides no support services, putting the lottery in charge of warehousing and distributing, she said.
About nine or 10 states use that model, but it has its faults. Among them, if some scratch-off tickets are not popular, the lottery is stuck with a bunch of tickets it can't sell, she said. More important, the vendors become "partners" in the goal of maximizing profits if they get a percentage of sales, she said.
Paul plans to spend the next two weeks writing the contracts with lottery attorneys. She plans to put the bids out on Oct. 8, have proposals in by Nov. 5 and award the contracts by Nov. 26, the day before Thanksgiving, she said.
Paul expects to tap a vice president for human resources by the end of the week to help her hire the 300 people it will take to run the lottery headquarters and a handful of district offices. She has not yet decided where to put those offices.
Finding office space for her headquarters in Davidson County is also under way. Commercial real estate developer Ted Welch, a prominent Republican fund-raiser, has volunteered to work as the lottery's agent.
Paul said Welch won't be paid and has no conflicts because none of his properties is large enough.
Asked about Welch's strong ties with the state and national Republican Party, Paul said: "We're not a political organization. It makes no difference what anybody's political affiliation is. Integrity is what matters."
About eight to 10 locations, including spots downtown and near the airport, have been identified to suit the 90,000 square feet the lottery will need, officials said.
Paul can reach her top bonus by having scratch-off tickets available for sale by Feb. 10, having the electronic numbers game running by April 8 and raising $128 million in profits by June 30. Originally, her deadline for scratch-offs was Feb. 17.
P. CASEY DALEY / Tennessean
Rebecca Paul talks about online lottery during the Tennessee Education Lottery Corp. board of directors meeting.