D.C. Lottery Profits Fall $6 Million

A year after Mayor Marion Barry was relieved of authority for the faltering D.C. lottery, profits have declined by $6 million in the face of stiff competition from Maryland and Virginia, officials said.

The D.C. financial control board transferred authority over the lottery from the mayor to Chief Financial Officer Anthony A. Williams last year after profits dropped by $10 million to $75 million. Now, profits for the fiscal year that ends Sept. 30 have been calculated at $69 million.

"If I can take credit for the sunshine, I take credit for the rain," Williams said. "If you are looking to blame somebody, I ought to be blamed."

District officials attributed the decline in lottery revenue to the dwindling city population, increased competition from lotteries in neighboring jurisdictions and the city's failure to mount a television advertising campaign for three years. During that period, lottery gross revenue dropped from $230 million in fiscal 1995 to $210 million in 1996 and $204 million in 1997.

Williams and District lottery officials say things are about to change. A big eight accounting firm -- Arthur Andersen & Co. -- has been retained to audit the agency, and a consultant has been hired to review its management. The performance of each lottery employee has been evaluated, and those deemed ineffective may be fired, Williams said.

"We are not playing games with the lottery," Williams said. "We are putting in place short-term, intermediate and long-term business goals to maximize our return to the District."

The competition is daunting.

"The District is a valuable market for us," said Seth Katzen, spokesman for the Maryland State Lottery. The Maryland lottery has 3,800 agents statewide, offering 40 different games of chance. In fiscal 1997, it will tally more than $1 billion in sales.

Ed Scarborough, spokesman for the Virginia Lottery, said the more than 5,000 lottery agents across the Old Dominion will generate $924 million in sales this fiscal year.

Those comparatively huge competitors flood the Washington market with television advertising. District officials said that few people in the area are unfamiliar with the Maryland lottery jingle or Lady Luck, Virginia's television advertising character whose magic wand turns people who do not play the lottery into chickens.

For years, the District's popular Power Ball game -- which had jackpots that exceeded $100 million in 1995 -- lured the lottery dollars of Maryland and Virginia residents. But that competitive edge was undercut when the lotteries in both of those states joined in a comparable multistate contest called "The Big Game."

From the outset in Washington, the lottery has been controversial. Its very existence was opposed 20 years ago by church groups whose contention that games of chance sapped revenue for the poorest neighborhoods later was supported by a 1980 referendum on gambling in the District. The only voters to approve the ballot question were residents of some of the city's least affluent sections, such as Shaw, Anacostia and the Northeast Washington area north of H Street.

The control board, which was created by Congress two years ago to help cure the city's financial ills, transferred responsibility for the lottery to Williams last year amid allegations that Barry's political meddling with contracts, funds and management was responsible for the lottery's decline.

The transfer of authority was prompted by turmoil that led to the abolishment of the mayor's five-member board that had supervised the lottery.

The trouble began 15 months ago, when Frederick L. "Rick" King Jr., whom the lottery board had hired to reform the agency, moved to fire 22 agency employees. The layoffs infuriated lottery board members, who voted to fire King.

But the control board, which had ultimate authority over the lottery, stepped in. It abolished the lottery board, put Williams in charge and reinstated King to run the day-to-day operations. King's stormy tenure ended with his resignation in April, prompting Williams to appoint his own chief deputy, Jalal Green, as interim lottery head.

Green said his top priority is to make the lottery more competitive. He said he hopes to boost sales modestly in the fiscal year that begins Oct. 1, with a profit goal of $71 million.

"We are very optimistic about the future," Green said. "At one time, the D.C. lottery was voted the most efficient lottery in the country, and we want to get back to that."