Let U.S. states privatize lotteries: banker

NEW YORK (Reuters) - The U.S. government should speed up public private partnerships by allowing states to sign long-term leases for lotteries, and make other changes to existing tax laws, a UBS managing director said on Wednesday.

"Lotteries have stumbled; what is needed is a federal law," Tom Osborne said at the Reuters Infrastructure Summit.

Last October, the Department of Justice told states that federal law bars them from privatizing lotteries, a money-raising strategy several had hoped to use for investments in education, roads, bridges and the like.

States that had weighed long-term leases for their lotteries included California, New Jersey, Illinois, Colorado, Florida, Michigan, Texas, New York and Indiana.

Gaming companies are eager to lease state lotteries because they say they can make them more profitable by selling tickets via cell phones and adjusting the games offered.

The new Build America Bonds program, which expires in two years, should also be extended, Osborne said.

Build America Bonds, the new federal taxable debt Congress created as part of its national stimulus plan, have proved exceptionally popular with nontraditional buyers of municipal debt, including insurance companies and pension funds.

The federal government subsidizes 35 percent of the interest costs, and states and authorities now find this debt is less expensive than traditional tax-exempt bonds.

Another way Congress could power up existing programs would be to expand loans under the Transportation Infrastructure Finance Act by boosting loan limits to 50 percent from 33 percent of the project's eligible cost, Osborne added.

(For summit blog: blogs.reuters.com/summits/)

(Reporting by Karen Pierog and Joan Gralla; Editing by Chizu Nomiyama)