1 1 2 3 4 * * * * * * * * * * * * * * * * * 5 6 TEXAS LOTTERY COMMISSION 7 MEETING 8 9 SEPTEMBER 19, 2001 10 11 * * * * * * * * * * * * * * * * * 12 13 14 15 16 17 18 BE IT REMEMBERED that the TEXAS LOTTERY 19 COMMISSION meeting was held on the 19TH of SEPTEMBER, 20 2001, from 8:30 a.m. to 3:20 p.m., before Brenda J. 21 Wright, RPR, CSR in and for the State of Texas, 22 reported by machine shorthand, at the Offices of the 23 Texas Lottery Commission, 611 East Sixth Street, 24 Austin, Texas, whereupon the following proceedings 25 were had: WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 2 1 APPEARANCES 2 3 Chairman: Mr. C. Tom Clowe, Jr. 4 Commissioners: 5 Ms. Elizabeth D. Whitaker Mr. Walter H. Criner, Sr. 6 General Counsel: 7 Ms. Kimberly L. Kiplin 8 Executive Director: Ms. Linda Cloud 9 Charitable Bingo Operations Assistant Director: 10 Mr. Philip D. Sanderson 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 3 1 INDEX 2 3 Appearances...................................... 2 4 AGENDA ITEMS 5 Item Number 1.................................... 4 6 Item Number 2.................................... 32 Item Number 3.................................... 40 7 Item Number 4.................................... 40 Item Number 5.................................... 41 8 Item Number 6.................................... 43 Item Number 7.................................... 63 9 Item Number 8.................................... 65 Item Number 9.................................... 72 10 Item Number 10................................... 73 Item Number 11................................... 5 11 Item Number 12................................... 5 Item Number 13................................... 75 12 103 Item Number 14................................... 80 13 Item Number 15................................... 80 Item Number 16................................... 91 14 104 Item Number 16................................... 91 15 104 Item Number 17................................... 91 16 106 Item Number 18................................... 97 17 130 Item Number 19................................... 98 18 Item Number 20................................... 100 Executive Session................................ 103 19 Reporter's Certificate........................... 132 20 21 22 23 24 25 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 4 1 SEPTEMBER 19, 2001 2 CHAIRMAN CLOWE: Good morning. It is 3 8:30, September the 19th. Commissioner Criner is here 4 with me this morning. Commissioner Whitaker is caught 5 in traffic. I'm going to call the meeting to order 6 with a quorum, and Commissioner Whitaker will be 7 joining us shortly. 8 In light of the national disaster which 9 has occurred just a little over a week ago, 10 Commissioner Criner and I would like to open this 11 meeting with the Pledge of Allegiance to our flag. 12 And if you would stand and join us, we'll do that at 13 this time. 14 (Pledge of Allegiance.) 15 CHAIRMAN CLOWE: And, then, since we're 16 standing, if you would also join us in a moment of 17 reflection, paying tribute and respect to those 18 thousands of individuals who have lost their lives and 19 the many more who have suffered as a result of what 20 occurred on September the 11th. And also, by our 21 standing, to give a strong symbolism of the unity of 22 people in this country as well as all freedom-loving 23 nations, in support of our President, our government, 24 and our country, as we move into these times which are 25 different than any of us have faced in the past. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 5 1 Thank you very much. 2 We are now ready to go to the agenda as 3 published with the exception of, I would like to call 4 on the chairman of the Bingo Advisory Committee. I 5 believe his report is item number 11, and we're going 6 to consider 11 and 12 at this time as a courtesy to 7 you Bill. Good morning. 8 MR. NEINAST: Good morning, 9 Mr. Chairman, and good morning, Commissioner Criner. 10 I appreciate you moving me up on the agenda, Chairman 11 Clowe. I would like to make a brief report on the 12 meeting -- special meeting of the Bingo Advisory 13 Committee on August the 29th. 14 As you recall, we have set up a 15 schedule where we meet quarterly on specific dates, 16 but the one meeting we had in August, we could not get 17 through all of the items before we lost a quorum. I 18 did not submit to you for inclusion in your notebook, 19 a report of that August the 29th meeting because we 20 really did not take any action requiring or 21 recommending action to the Lottery Commission, with 22 one exception. We did review a large number of 23 proposed rules and rule changes. The committee 24 recommended some specific changes, and some of them 25 were recommended to the Bingo Division that they WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 6 1 consider revising some others, with the instruction 2 that once those changes are made, that they then 3 submit them directly to the Commission for 4 consideration and publishing in the Register and going 5 for a formal adoption. 6 I would like to discuss with you just 7 briefly, though, some of the items that were 8 discussed, and we'll be returning to some of these, 9 but in a way of alerting you to some of the problems 10 that the committee sees that are affecting bingo, some 11 in an adverse way. 12 One of them is the amount of fees that 13 are collected. If you recall, the Bingo Enabling Act 14 was enacted to allow charities to legally conduct 15 bingo and raise money for charitable events, 16 charitable activities. But as frequently is done in 17 the case -- it's been recognized in a way as a kind of 18 a cash cow for the government. The fees collected 19 vastly exceed the amount of money required to run the 20 Bingo Division. And some consideration or thought has 21 been given to whether there should be a substantial 22 reduction in the fees, because this is money that is 23 taken away from the charities, in effect, that goes 24 into the general account of the State Treasury. And 25 we think that maybe it would be more appropriate to WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 7 1 let this money stay with the charities to be used for 2 their charitable purposes. So that is something that 3 will be looked at again, and it's something that you 4 may want to consider when you think about what's going 5 on in the bingo activities. 6 My notes from that meeting are rather 7 sketchy, and I'm not sure that this is correct, but 8 it -- it appeared that something in the neighborhood 9 of 25 million dollars in fees and taxes are being 10 collected from the charities conducting bingo, and it 11 takes only about three million to run the business. 12 So there is definitely a wide disparity between what 13 is being collected and what is being used directly for 14 bingo. 15 CHAIRMAN CLOWE: Bill, I think at this 16 point we should acknowledge that Billy Atkins, who is 17 the director of the Charitable Bingo Division, is not 18 present this morning and is, in fact, in the hospital 19 having undergone an operation yesterday. And in his 20 place is Phil Sanderson, this morning, the assistant 21 director. And my recollection, having attended that 22 portion of your meeting, Bill, is that that would 23 require legislative action. And Phil, can you -- were 24 you at the bingo advisory committee meeting when this 25 subject came up and Billy commented on it? WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 8 1 MR. SANDERSON: I was in and out of the 2 meeting, and I don't recall that specifically. I do 3 know that the 25 million that Mr. Neinast refers to 4 that the State collects off of bingo, 3.4 million is 5 only directly from the charities as license fees. 6 Around 20 million dollars is from prize fees that are 7 collected from the winners who play bingo. And then 8 the other one and a half million is from the rental 9 tax that the lessors pay. 10 CHAIRMAN CLOWE: Okay. And that is a 11 legislative issue -- 12 MR. SANDERSON: They all three are 13 legislative issues. 14 CHAIRMAN CLOWE: -- if any changes were 15 to be brought about. 16 And Bill, are you bringing a 17 recommendation to the Commission on that subject at 18 this time, or was there just -- I don't recall that 19 you took action. I remember the discussion. What is 20 your request at this time on -- 21 MR. NEINAST: Just calling it to 22 your -- to the Commission's attention that this is 23 something that we think you will be asked to act on in 24 the future. This is kind of an alert to some of the 25 things that are being considered by the advisory WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 9 1 commission, action to be taken later. And I'm glad 2 Phil cleared up what that -- that explains my cryptic 3 notes of the 3.5 million versus the 22 million. But 4 there still is a tremendous gap there between the -- 5 those two. 6 CHAIRMAN CLOWE: Very good. 7 MR. NEINAST: The other item that we're 8 looking at, and have considered repeatedly, is the use 9 of debit cards to pay for bingo playing. There are 10 some issues of how to be accounted for because of the 11 lag in using the debit card and when the money is 12 actually credited to the operator's account and how 13 that's accounted for, strictly as a more of a -- an 14 accounting measure than anything else. And I think 15 Kim is looking at that also, are you not, Kim? 16 MS. KIPLIN: The use of debit cards? 17 MR. NEINAST: Yes. Or maybe it's just 18 the auditors that -- 19 MS. KIPLIN: I don't recall. 20 MR. NEINAST: But it is a problem that 21 we're... 22 CHAIRMAN CLOWE: Since we interrupted 23 you, Bill, I want to note for the record that 24 Commissioner Whitaker has now joined us. It is 25 8:40 a.m., and we have the full commission present. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 10 1 Go right ahead, please. 2 MR. NEINAST: In addition to use of 3 debit cards, considering the use of gift certificates. 4 That's been considered several times, and it's a 5 thorny issue that we're having problems working out, 6 with the requirements that puts on the audit people 7 for tracking those. But it's a proposed rule that has 8 been proposed, and we just could not agree on how far 9 it should go or whether it's even a good idea. Again, 10 all of these are items that you're going to see in the 11 future. I thought it might be well that you were 12 aware of them, things that are going to be coming up 13 for you to look at in the future. 14 CHAIRMAN CLOWE: Bill, it brings to 15 mind the purchase of lottery tickets and Scratch Off 16 tickets. This issue has come up before in this 17 regard, hasn't it? 18 MS. CLOUD: We can -- the retailers can 19 use debit cards, but that's in their own locations. 20 We don't even get involved in that. The -- they 21 cannot use credit cards. 22 CHAIRMAN CLOWE: Cannot. 23 MS. CLOUD: No. 24 CHAIRMAN CLOWE: So the debit card is 25 immediate availability of cash to the retail merchant. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 11 1 That's their own decision -- 2 MS. CLOUD: Way of collecting their 3 money for the ticket. 4 CHAIRMAN CLOWE: And, then, no credit 5 cards are allowed. 6 MS. CLOUD: That's right. 7 CHAIRMAN CLOWE: And thinking about 8 on-line gambling and keeping in mind the Internet 9 gambling situation, are you familiar, Linda, with what 10 the practice is in that area from your own personal 11 knowledge? 12 MS. CLOUD: From the information that I 13 have been receiving in meetings where we've discussed 14 Internet gaming and the countries that are -- which 15 are foreign countries, the only ones that I know of 16 that's legally doing Internet gaming, they actually go 17 through and set up bank accounts assigned to an 18 individual. I don't think the credit cards -- 19 Larry King can probably answer this better than I can, 20 but I don't think the credit cards are used in that 21 environment either. It's a predetermined account. 22 CHAIRMAN CLOWE: So they have a credit 23 balance in an account that they draw against. 24 MS. CLOUD: From what I understand. 25 MR. KING: I think they use credit WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 12 1 cards. 2 MS. CLOUD: Oh, they do use credit 3 cards? 4 MR. KING: Credit and debit. 5 MS. CLOUD: Okay. Sorry. 6 MS. KIPLIN: If I might add on that, 7 there have been some reported decisions that are 8 coming out with regard to the use of credit cards. 9 And in jurisdictions where gambling is illegal, 10 including Internet gambling, when the credit card 11 company goes against the holder for the debt owed on 12 the card, there have been -- suits have been filed 13 over the fact that that's an illegal contract, and no 14 debt is owed. And those decisions have been upheld. 15 So using a credit card is risky to those who are 16 looking to the money off that credit card. 17 CHAIRMAN CLOWE: I think this expansion 18 of the subject, Bill, is helpful, as you talk about 19 debit cards and gift certificates, to see what is 20 going on around the country and get a broader view. I 21 think it'll help the Commission understand and keep 22 your subject in the right perspective. 23 MR. NEINAST: Well, Kim just raised an 24 issue that has not been addressed, and I think it's a 25 good one. It's not been considered in the use of WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 13 1 credit cards. It would apply also to using a credit 2 card for bingo, since it's considered a game of 3 chance, so we might have the same problem that -- and 4 that's one that has not been addressed by the 5 Commission -- I mean, by the committee, Kim, is -- 6 MS. KIPLIN: Well, I think so long as 7 the wager is lawful in a jurisdiction, that would not 8 be an issue. But with regard to the Internet 9 gambling, that, in many jurisdictions, is illegal. 10 It's an illegal form of gambling, illegal conduct. So 11 anything, of course, involved with an illegal contract 12 is -- 13 MR. NEINAST: Oh, okay. 14 CHAIRMAN CLOWE: Thank you. 15 MR. NEINAST: But the primary problem 16 with the debit -- using the debit card for bingo is 17 the accounting involved because of the type of record 18 that the operator has to make and account for money 19 on -- on that day, and it's not credited to the 20 account in the bank until the -- a day or two later. 21 So that's the -- one of the problems that -- faced 22 with use of debit cards. 23 CHAIRMAN CLOWE: Bill, is there a 24 policy in bingo halls -- Phil, maybe I ought to ask 25 you this -- of the acceptance of checks offered by WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 14 1 players? 2 MR. SANDERSON: Most halls accept 3 checks. 4 CHAIRMAN CLOWE: It's uniformly 5 generally accepted? 6 MR. SANDERSON: Yes, sir. 7 MR. NEINAST: Another long discussion 8 on -- and apparently there is really no solution to 9 this -- is to the use of -- or establishing by rule or 10 legislation, a minimum price per card in the bingo 11 halls. The large operators are undercutting the small 12 operators, and the small operators are saying, this is 13 unfair competition. The hard question is, what would 14 be the minimum price that you would set, and I don't 15 think there is an answer to that question. But we 16 probably will visit that again, because there is a 17 considerable amount of interest in that problem by the 18 bingo industry. 19 The -- another one that there is no 20 answer to is the concern on the part of some bingo 21 operators who keep their accounts current, but there 22 are others who do not have their accounts current. 23 And the rule requires distributors not to furnish any 24 product to a -- an operator or anyone else, any 25 licensee who is in arrears in their accounts. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 15 1 There -- it's not proper or legal under the rules for 2 distributors to do that. Billy and the division is 3 aware of that, and they do have a delinquent account 4 and watch it, but by the time the account shows up as 5 delinquent, it's already been taken care of. So it's 6 a problem without an apparent solution. But then, 7 again, there are some of the operators who keep their 8 accounts current, are concerned about the problem of 9 distributors, primarily in the field of electronic 10 cards, and electronic operations not being current and 11 still getting to use that. So, again, I'm sure we'll 12 look at it again, and maybe we can come up with a 13 proposed solution. But at this point, there does not 14 appear to be one. 15 CHAIRMAN CLOWE: Phil, do you have a 16 comment? 17 MR. SANDERSON: I have one comment. 18 The law states that a distributor can only provide 19 supplies on a C.O.D. basis. They can still get 20 supplies, they just have to be C.O.D. instead of 21 charge. 22 MR. NEINAST: But the allegation is 23 that that's not being done either. They've been 24 providing them without -- 25 MR. SANDERSON: There is -- we're WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 16 1 looking into it. There are some that do report the 2 organizations as being delinquent, and they do require 3 C.O.D. on delivery -- cash, you know, cash or check 4 there at the hall when they deliver. 5 MR. NEINAST: But apparently some of 6 the distributors don't report it because if they 7 report a company, they're losing a customer, and maybe 8 other customers. And that's -- so there are some 9 accounts that the operators know that are delinquent 10 but never show up on the delinquency list here in the 11 division. But it's a -- a problem and a concern to a 12 number of the -- particularly the smaller operators, 13 licensees. 14 And finally, and you'll be hearing of 15 this one, I'm sure. It probably will require 16 legislation. Is a system whereby all the operators, 17 say, in Corpus Christi, can get together and have some 18 type of generic advertising for bingo. That would 19 come out of the -- be an allowable expense. It's 20 something we visited several times and will visit 21 again to come up with some way that we can have -- or 22 the industry can have generic advertising, just 23 advertise bingo, but not advertise, come play with the 24 local VFW or Elk's Club, or what have you. 25 And that basically are the items we WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 17 1 discussed. A number of those will be on the next 2 agenda, which will be October the 10th, and we have 3 already developed a large agenda for the next meeting. 4 CHAIRMAN CLOWE: Questions? 5 COMMISSIONER WHITAKER: Not at this 6 time. 7 CHAIRMAN CLOWE: Bill, going back to 8 the comment that you made about a minimum price per 9 card. My understanding is that that is not covered by 10 the statute. Is that right, Phil? 11 MR. SANDERSON: The statute allows the 12 Commission to set a price, or a price schedule, by 13 rule. 14 CHAIRMAN CLOWE: Have we done that? 15 MR. SANDERSON: No, sir. 16 CHAIRMAN CLOWE: So it is now left to 17 the individual halls to do that. And you're telling 18 us that the division can look into that and can make a 19 recommendation to the Commission to establish a 20 minimum price. 21 MR. SANDERSON: Just to give you some 22 history. Back in February of '96, the Commission did 23 take up setting a minimum price per card face. And I 24 believe after two meetings and the discussions on it, 25 they decided to let the market regulate the price of WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 18 1 the cards. 2 CHAIRMAN CLOWE: That's interesting. I 3 didn't know that history. It raises in my mind, Bill, 4 the issue of how much government we want here. And 5 whether the Commission as a governmental agency should 6 enter into what seems like a business practice, and I 7 have a question in my mind about that. I'm glad the 8 issue has been raised, but I would imagine the 9 Commissioners would like to, not only have the history 10 prior to deliberations, but a lot of input from the 11 industry before undertaking some action in that area. 12 Those questions are raised in my mind. 13 MR. NEINAST: And it's a very difficult 14 issue. We appreciate and we discussed the same thing 15 that you have just mentioned, Mr. Chairman. And the 16 harder issue, if you decide that this is what is 17 appropriate, this is what the State may want to do, is 18 what should that minimum price be? And I don't think 19 we will ever reach a consensus on that. But it is -- 20 and this was an item that was raised by the general 21 public. It goes back to something we've discussed 22 before; the value of having meetings possibly outside 23 of Austin where we can get more of the operators, 24 licensees, in than we get here. But this is a matter 25 of -- an item of concern to some of the smaller WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 19 1 licensees. 2 CHAIRMAN CLOWE: I'm personally a 3 little bit concerned about the idea of a governmental 4 agency entering into that, and I can liken it to a 5 number of other industries where there has been a 6 beneficial result from having competition, as opposed 7 to regulation. But that's just a -- a reaction that I 8 have, and I've been thinking about it since your 9 meeting. I think we need to hear a lot more in the 10 way of views from industry members and others who have 11 experience in this area, the division, and know the 12 history of the deliberations of the prior commission, 13 before we want to enter into some decision making on 14 that. 15 MR. NEINAST: Would one of those 16 industries you're talking about be the trucking 17 industry? 18 CHAIRMAN CLOWE: The trucking industry 19 is an excellent example and, then, just most recently, 20 you know, the setting of gasoline prices this last 21 week. I have watched that with great interest. And 22 the government has a tremendous tax that's applicable 23 to regular motor fuel. And it's interesting to see 24 the variance in prices around the state, and I hope 25 the State of Texas never regulates the price of WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 20 1 gasoline. I don't think that's a good idea. And I 2 have to think about that in regard to us. 3 MR. NEINAST: Well, I personally agree 4 wholeheartedly with your philosophy, but I also feel, 5 as chairman of the committee, I'm bound to let the 6 public come in and raise these concerns and for us to 7 consider them -- 8 CHAIRMAN CLOWE: Absolutely. 9 MR. NEINAST: -- and keep you advised 10 of what is of concern to the bingo industry. 11 CHAIRMAN CLOWE: I couldn't agree with 12 you more, Bill, and I want to say that my attendance 13 of your meeting this last time was very beneficial. I 14 think you had a good turnout. You had more than a 15 quorum, and there was a very proactive discussion 16 there. And I would like for you to tell the members 17 of the committee, the Commissioners appreciate their 18 taking the time to be involved in that work and 19 bringing us these issues and the feedback that we're 20 receiving from you. Your next meeting is October the 21 10th, I think you said. 22 MR. NEINAST: Yes, sir. 23 CHAIRMAN CLOWE: And I hope you have 24 good attendance, and I think the Commission has 25 signaled to you that they are responsive to the idea WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 21 1 of having meetings around the state if your group 2 feels that will be beneficial. 3 Phil, did you have a comment? 4 MR. SANDERSON: I think the meeting is 5 October the 9th. It was originally scheduled for the 6 10th, which was a Wednesday, because of a -- but 7 because of another commitment in the auditorium and a 8 commitment by Billy, that it was changed to the 9th. 9 But I'll check and make sure on that. 10 CHAIRMAN CLOWE: Would you do that 11 before this meeting is adjourned, and let us all know? 12 MR. SANDERSON: Yes. 13 CHAIRMAN CLOWE: Does that conclude 14 your -- 15 MR. NEINAST: That's all I have, yes, 16 sir. Thank you. 17 CHAIRMAN CLOWE: Then for 18 Commissioner's Whitaker's benefit, we started on item 19 11. 20 COMMISSIONER WHITAKER: I figured that. 21 CHAIRMAN CLOWE: We didn't get there 22 already. 23 And, Bill, did you want to comment on 24 or, Phil, do you want to comment on item number 12? 25 MR. SANDERSON: The Bingo Advisory WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 22 1 Committee appointments? 2 CHAIRMAN CLOWE: Yes. 3 MR. SANDERSON: We had one resignation 4 from a manufacturer distributor representative, 5 Fabian Hoffner. And in your notebook is a letter from 6 Mary Magnuson who is an attorney for NAFTM, which is 7 the North American Fund-raising Ticket Manufacturer 8 Association, where Fabian also worked. In the past, 9 when we've had a person leave the committee, a 10 surviving spouse or somebody has replaced them for the 11 interim of their appointment. And it's the 12 recommendation of staff that, since there were no 13 other nominations in that category and Mary Magnuson 14 has offered to complete Fabian's appointed term, that 15 our recommendation is to go ahead and appoint her for 16 the remaining time until nominations are sought after 17 the first of the year. 18 CHAIRMAN CLOWE: Very good. And Bill, 19 do you have a comment on that? 20 MR. NEINAST: The only comment I would 21 make -- I do not know this individual, but I was 22 concerned and am still concerned about having members 23 on the Texas Bingo Advisory Committee from outside the 24 State. Now, there may not be anyone else qualified in 25 this particular category, but since we are talking WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 23 1 about Texas bingo, I wonder if it wouldn't be better 2 to have a distributor, if there are some Texas 3 distributors, as the representative of that industry 4 rather than someone from outside the State. Fabian 5 did an excellent job. I'm sorry that he is no longer 6 on the committee, but it's just a -- an item of 7 perception on my part. 8 COMMISSIONER WHITAKER: And he was from 9 Texas? 10 MR. NEINAST: No, ma'am. 11 COMMISSIONER WHITAKER: He was out -- 12 MR. NEINAST: No, ma'am. Minnesota. 13 COMMISSIONER WHITAKER: All right. So 14 we'd basically be continuing that particular pattern 15 in this one instance. 16 MR. SANDERSON: Yes, ma'am. 17 CHAIRMAN CLOWE: And your interest, if 18 not concern, would be considered perhaps as the 19 nominations are considered for the next slate. 20 MR. NEINAST: Yes. That if there are 21 any Texas distributors that are interested and are 22 nominated, I think they should be given the primary 23 consideration. It's more a matter of perception than 24 anything else, because Mr. Fabian was a -- really a 25 great addition to the committee when he was serving. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 24 1 CHAIRMAN CLOWE: I understand. 2 Does this require a motion? 3 MS. KIPLIN: For an appointment to the 4 Bingo Advisory Committee, yes, it would. It will 5 require an action by the Commission. 6 CHAIRMAN CLOWE: Is there a motion? 7 I move that the commission appoint -- 8 may I have the lady's name correctly? 9 MR. SANDERSON: Mary Magnuson. 10 CHAIRMAN CLOWE: Ms. Mary Magnuson. 11 And her affiliate corporate-wise? 12 MR. SANDERSON: She's the attorney for 13 NAFTM, North American Ticket -- National Association 14 of Fund-raising Ticket Manufacturers. 15 CHAIRMAN CLOWE: That she be appointed 16 to the Bingo Advisory Committee. Is there a second? 17 COMMISSIONER WHITAKER: Second. 18 CHAIRMAN CLOWE: The motion is made and 19 seconded. All in favor please -- 20 COMMISSIONER CRINER: Question: Is 21 this nomination just for the end of the year? 22 CHAIRMAN CLOWE: Correct. 23 COMMISSIONER CRINER: And then we'll 24 deal with what Bill is talking about later, folks from 25 Texas. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 25 1 CHAIRMAN CLOWE: What is the time of 2 appointment, Phil? 3 MR. SANDERSON: I believe Billy said 4 that they were hoping to get the nomination forms out 5 after the first of the year, in January. 6 CHAIRMAN CLOWE: And what would the 7 term beginning date be? 8 MR. SANDERSON: I believe it's either 9 the end of March or the first part of April. 10 COMMISSIONER WHITAKER: So she is being 11 appointed for the rest of his term, which goes through 12 March or April of next year. 13 MR. SANDERSON: Yes, ma'am. 14 COMMISSIONER WHITAKER: Okay. 15 CHAIRMAN CLOWE: Virtually six months. 16 MR. NEINAST: As it stands now, that 17 would be two meetings. And we'll have a meeting in 18 October, and another one in February. And I think -- 19 I agree with Phil, it's somewhere -- March the 1st or 20 March the 30th is when the term is up. 21 COMMISSIONER CRINER: My point, 22 Mr. Chairman, is Bill's perception of having someone 23 from Texas in that seat in the future and would like 24 them to be able to have something to say about it 25 before we just wipe them out. I think that answers my WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 26 1 question. 2 CHAIRMAN CLOWE: Very good. Any 3 further questions? 4 COMMISSIONER WHITAKER: Well, I would 5 just -- well, let's go ahead and move, and then I'm 6 going to make a comment. 7 MS. KIPLIN: One thing I would say is 8 that it's not a finite term. They serve until you 9 vote to put somebody else in that spot, just like a 10 vacancy on a commission, so... 11 COMMISSIONER CRINER: Does the -- does 12 the -- 13 MS. KIPLIN: Yes, sir. 14 COMMISSIONER CRINER: The advisory 15 committee -- 16 MS. KIPLIN: Yes, sir. 17 COMMISSIONER CRINER: Make the 18 recommendations to us? 19 MS. KIPLIN: You know, I don't recall, 20 Commissioner, whether in the past that has occurred or 21 not, and I would defer to Mr. Sanderson. 22 MR. SANDERSON: In the past, it's -- we 23 sent out nomination forms and received them from 24 organizations, and the conductors, distributors, 25 lessors, to make their nominations. After all the WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 27 1 forms have come in, we provide the Commissioners with 2 a summary of the nominations, along with staff 3 recommendations. And in the past, the Bingo Advisory 4 Committee, I believe, has not offered direct input 5 into the nomination process. 6 CHAIRMAN CLOWE: That is correct as far 7 as my discussions with Billy Atkins. The 8 recommendations for nominations have come from the 9 director of the Charitable Bingo Division and staff. 10 COMMISSIONER CRINER: Okay. Do you 11 have any input in that? 12 MR. NEINAST: Yes. I would like to add 13 that that was a specific item on -- agenda item at our 14 last meeting, and it appeared that I was the only one 15 really concerned about it, thinking that the committee 16 should review those and have some input. But there 17 was no interest on the part of any other member 18 expressed to do that, so -- 19 COMMISSIONER CRINER: Nobody wants to 20 take that shot but you. 21 CHAIRMAN CLOWE: That's my recollection 22 of the discussion. 23 MR. NEINAST: But I feel strongly that 24 the committee should at least take a look at them 25 because they may know, and this is a remark I made at WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 28 1 that meeting, that there might be someone on there 2 that a committee member would say, that would be the 3 first person to put on the committee out there that 4 would know something about a nominee that the division 5 may not know. 6 COMMISSIONER WHITAKER: Well, I would 7 hate to have an advisory committee and not give you 8 the opportunity to look at it if you chose to. So I 9 would make that recommendation to you, sir. And also, 10 I would feel uncomfortable with approving Ms. Magnuson 11 if she was going to stay on by default past April. I 12 do think that it's important that we understand that 13 this just be for the stub period. 14 MR. SANDERSON: The committee serves 15 until the Commission appoints new members, so when the 16 nomination forms go out, at that point in time when it 17 comes time to make the appointments, then you can 18 reappoint Ms. Magnuson, if you so desire, or any other 19 nominee from the manufacturer distributor category. 20 COMMISSIONER WHITAKER: And we'll be 21 given that chance in April. Correct? 22 MS. KIPLIN: We'll be glad to notice it 23 up whenever the Commission would like. The one -- I 24 guess the point of clarification I would say is that 25 the members are appointed for a one-year term. And WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 29 1 they'll -- but they -- and they serve at the pleasure 2 of the Commission. They continue to serve in that 3 capacity until the Commission appoints a successor. 4 Just as if there was a vacancy on the Commission, if 5 somebody were to resign from a commission, they 6 continue to actually serve until there is an 7 appointment made. So that would be the same with 8 regard to somebody who is a holdover. For example, if 9 your term is six years and there is a holdover, that 10 continues on until there is an appointment. And it 11 would be the same. 12 CHAIRMAN CLOWE: Did you know that? 13 COMMISSIONER WHITAKER: My goodness. 14 CHAIRMAN CLOWE: It's sort of like for 15 life if the Governor doesn't let you off the hook. 16 MS. KIPLIN: The only true vacancy for 17 a commission is death. 18 COMMISSIONER WHITAKER: Well, if you 19 put it that way... 20 CHAIRMAN CLOWE: And I might -- Bill, 21 correct me if I'm wrong on this. The problem has not 22 been people who wanted to stay on the Bingo Advisory 23 Committee forever, and we couldn't get them to move 24 off. The problem has been really finding and getting 25 proactive individuals who will come to the meetings WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 30 1 and take active parts. That is really the challenge, 2 I think, of the staff, in coming to the Commission 3 with nominations and getting people that will be 4 active and productive members. And, Bill, you've had 5 a lot to do with the activity of the Bingo Advisory 6 Committee. Do you share in that concern or that 7 observation that I made or not? 8 MR. NEINAST: I've got to defer to Phil 9 on that because we've not been -- the committee has 10 not been involved in the process up until this point, 11 so I will defer to Phil. 12 COMMISSIONER CRINER: Well, we're kind 13 of putting you in that chair and rolling you in that 14 direction right now. 15 MR. NEINAST: Which I don't object to. 16 As I mentioned, that would be my recommendation. 17 COMMISSIONER WHITAKER: Well, have we 18 tried to find a Texas distributor manufacturer 19 representative to take this place? Has there been an 20 effort made? 21 MR. SANDERSON: At this point in time, 22 there has not. Because the resignation just took 23 place about a month to six weeks ago, and then we 24 received the letter from Ms. Magnuson that she would 25 be glad to fill this term. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 31 1 COMMISSIONER WHITAKER: Mr. Neinast, 2 let me put you on the hot spot. Is it your 3 recommendation that we make that effort this time, or 4 would you feel it acceptable to approve Ms. Magnuson 5 until April? 6 MR. NEINAST: I think, in view of the 7 fact that we have only two more meetings left on what 8 you might consider the current term, and Fabian did an 9 outstanding job, and I'm sure Ms. Magnuson would also, 10 Because she is also an attorney and Fabian was an 11 attorney. 12 And you have no other request or 13 nomination, Phil, that you have received? 14 MR. SANDERSON: We've not received any 15 other requests. 16 MR. NEINAST: For that reason, I would 17 not object to it, but look at it when we get around to 18 having a whole new slate. Again, as I -- I want to 19 repeat that my objection is one of the perception of 20 having a Texas advisory committee, you might call it, 21 and representation from outside the state on the 22 committee. 23 COMMISSIONER WHITAKER: Okay. 24 CHAIRMAN CLOWE: Any further questions? 25 I think we have a motion and a second. All in favor WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 32 1 say aye, please. Opposed, no. 2 The vote is three-zero in approval. 3 MR. NEINAST: That's all I have, 4 Mr. Chairman. Thank you, Mr. Chairman. 5 CHAIRMAN CLOWE: Thank you, Bill. 6 COMMISSIONER WHITAKER: I want to thank 7 you for the compliment you made generally about 8 lawyers. 9 CHAIRMAN CLOWE: I noticed that, and I 10 voted for her, not because she is an attorney. I want 11 you to know that. That was a pretty all-inclusive 12 remark, wasn't it? 13 We're now ready to go to item number 14 two on the agenda: Report, possible discussion and/or 15 action on lottery sales and trends. 16 Good morning, Toni. 17 MS. SMITH: Good morning, 18 Commissioners. For the record, I'm Toni Smith, 19 marketing director of the Texas Lottery Commission. I 20 usually start out reporting year-to-date total sales, 21 but I want to make note that the Commission's fiscal 22 year just started September 1. So in this reporting 23 we're going to see a difference between fiscal year 24 '02 which represents, in this report, the last three 25 weeks of sales, and fiscal year '01. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 33 1 In the first two weeks of fiscal year 2 '01, our Lotto Texas jackpots ranged from 29 million 3 to 60 million in the first two weeks. So the result 4 of that is a 28.68 percent decrease in sales, when you 5 look at total fiscal year '02 sales to date of 6 105,389,429. And that's down, compared to 7 147,764,730. 8 Our current weekly average for those -- 9 the past three weeks is 35,129,709, compared to the 10 first few weeks of last fiscal year of 49,254,910. 11 To look at a year-to-date comparison by 12 product, again, we will see a decline. The Instant 13 product currently is at 66,696,731. It represents 14 63.29 percent of sales, compared to the first few 15 weeks of fiscal year '01 at 71,722,674, and at that 16 time, represented 48.54 percent of sales. 17 To look at Lotto Texas in that same 18 time frame, we're currently at 21,427,475, 19 representing 20.33 percent of sales, compared to last 20 year's 58,049,295. And at that time, it represented 21 39.28 percent of sales. So with that product, alone, 22 in those first two weeks, we're seeing a 63 percent 23 decline, but it's because of the larger jackpots. 24 And if you look at the last page of my 25 report, you'll see that in those first few weeks, the WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 34 1 week ending the 2nd, we had a jackpot on Wednesday of 2 29 million, and a jackpot of 36 million. And then the 3 next week, we had a 46 million dollar jackpot and a 60 4 million jackpot. So that really is the difference in 5 such a short time frame that we see the decline in 6 these first few weeks, compared to this year. 7 And then to look at just this week, 8 compared to last week, total sales for the week ending 9 9-15-01, were 46,718,422. This is down 5.27 percent 10 from the previous week ending 9-8-01, with total sales 11 of 49,319,865. The primary factor this past week has 12 been a decline in Instants. They were down nearly 13 nine percent. But in light of this week's events, you 14 know, people's spending habits are just not the same, 15 and we feel that that's probably what has had an 16 impact on our sales this past week. 17 Because we didn't, in the last 18 meeting -- the scheduling -- I would like to go back 19 for just a moment and look at year-end sales 20 comparison for fiscal year '01 versus fiscal year 21 2000. Because we have ended the fiscal year in 22 between these. These are unaudited figures, and I'm 23 sure Bart can give us audited figures once we have 24 those. 25 But looking at the total year for WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 35 1 fiscal year '01, sales were 2,826,223,010 dollars, 2 compared to fiscal year 2000, of 2,658,040,572. So 3 this resulted in a 6.33 percent increase of fiscal 4 year 2001, compared to fiscal year 2000. I just 5 wanted to make note of that, for the record, that we 6 did see an increase over that whole year. 7 And that's all I have, Commissioners. 8 I would be happy to answer any questions regarding 9 sales if you have any. 10 COMMISSIONER CRINER: Well, Toni, in 11 light of the events of last week -- 12 MS. SMITH: Yes, sir. 13 COMMISSIONER CRINER: -- and the 14 projected layoffs from Texas-based companies, what are 15 we going to do? To me, that says that our market is 16 not going to have as much money. 17 MS. SMITH: Right. Right. 18 COMMISSIONER CRINER: So what do we do 19 to maintain? 20 MS. SMITH: I think the main thing is 21 to continue to do what we've always done and to get 22 the product out there on time, have it available for 23 our players. We -- because we are at the beginning of 24 the fiscal year, we have the plans to put in place 25 that we were going to put in place for the new year WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 36 1 anyway. One of those is some customization of the 2 Instant product so that we really take a good look at, 3 not only the product and the inventory our retailers 4 have, but the product and inventory that we have in 5 our warehouse. And we are moving towards a 12-week 6 inventory for each game that we introduce, and we will 7 produce smaller print runs on the Scratch Off tickets 8 in hopes that they will sell out in 12 weeks, so that 9 we can keep the games available to the players fresh 10 and have new games out there for them. And that's a 11 move we had planned on making, and I think will also 12 keep those games exciting for players. When they go 13 into the store, there will be something new there for 14 them. 15 And we're also looking at some 16 enhancements to -- we're talking about, both Cash 5, 17 and Pick 3. I don't know if Linda wants to elaborate 18 on that, but we are looking at both of those games. 19 Those are the two on-line games that we have not -- 20 that we have left that we could maybe tweak a little 21 bit. And, then, we are also working on our 22 advertising. We have found out in the past that 23 players enjoy, and it adds to the credibility of the 24 Lottery, advertising that shows real winners, or the 25 fact that real people do win or just, you know, the WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 37 1 concept that people are winning. So we're working 2 with both King Group and Fogarty, Klein & Lowe on 3 campaigns for this coming year that actually show some 4 real winners or people in situations of winning that 5 are true stories of what could happen to them. So I 6 think as we implement our plans for this year, 7 hopefully, that will help, you know, with the events 8 that are going on and keep people enthused about the 9 Texas Lottery. 10 COMMISSIONER CRINER: Do we have any 11 historical -- we can't have any Texas historical data 12 on what happens when the economy takes a dip because 13 we didn't have a lottery in the '80s. 14 MS. SMITH: Right. 15 COMMISSIONER CRINER: But anybody that 16 rode out the '85 to '90, '91, has some bruises. 17 MS. SMITH: And with regard to other 18 lottery jurisdictions? 19 COMMISSIONER CRINER: No. Just -- yes. 20 In regards to the economy. The Texas economy kind of 21 got up and went in 1985. And it didn't show back up 22 until '90 something. So what can we do to plan for 23 what happens if our economy takes such a dip? 24 MS. SMITH: We can definitely take a 25 look at that. And I would also like to look at other WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 38 1 states, if they have been a situation with a decline 2 in the economy, what those lotteries did. And we'll 3 look at both of those. 4 COMMISSIONER CRINER: Mr. Chairman, I 5 would like to propose a motion at this time, if I 6 could, about forecasting. I would like to have -- 7 propose that at our next regularly-scheduled meeting, 8 we get a preliminary, not a finite, but some kind of a 9 draft of what our plan of action will be, based on the 10 projections of the Texas economy, after what has 11 happened. 12 CHAIRMAN CLOWE: I think you can just 13 direct staff to do that, Commissioner. 14 MS. SMITH: We will have that for you. 15 COMMISSIONER CRINER: All right. Thank 16 you. 17 CHAIRMAN CLOWE: Any other questions or 18 comments for Toni? 19 COMMISSIONER WHITAKER: Well, let me 20 ask you this: Do you -- are we seeing the buying 21 picking back up as of yesterday and Friday and 22 Saturday? 23 MS. SMITH: I can look at today's daily 24 sales and then report back to you later on in the 25 meeting, if that would help. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 39 1 COMMISSIONER CRINER: Toni, my point 2 is, let's have a plan. 3 MS. SMITH: Yes, sir. 4 COMMISSIONER CRINER: So if we end up 5 looking at a real bad economy, we know what we have 6 got to do. 7 MS. CLOUD: Well, I think some of the 8 things that we had already established as being this 9 year's go-forward plan on customizing the inventory 10 and not printing 20 million tickets per game, only 11 printing 12, cutting down on that part of our 12 inventory process, is a step in the right direction, 13 especially under the circumstances that we're facing. 14 And tweaking our games -- all we can do is do the best 15 we can to keep the games interesting and on the 16 street. And we'll be more than happy to -- there is 17 lotteries out there that are over 20 years old. 18 They've been up and down and up and down, and those 19 are the lotteries we need to look at, and we will. 20 I'm sure Gtech can help us get some of those numbers 21 as well. 22 CHAIRMAN CLOWE: Very good. Thank you, 23 Toni. 24 MS. SMITH: Thank you, Commissioners. 25 CHAIRMAN CLOWE: The next item, number WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 40 1 three, also includes advertising, promotions, and 2 media criteria, which you're discussing to some 3 extent. Do you have something further on that for us? 4 MS. SMITH: With regard to advertising, 5 nothing in addition to what I had just mentioned about 6 the campaigns we have planned. But we continue to do 7 our promotions throughout the state at other events 8 and fairs and festivals. And we are gearing up for 9 the State Fair that starts the end of this month and 10 runs through the first couple of weeks of October. So 11 we always have a huge presence there and have become a 12 very popular site to visit for State Fair goers. So 13 we're looking forward to that exposure, too. That's 14 all I have, Commissioners. 15 CHAIRMAN CLOWE: Anything further, 16 Linda? 17 MS. CLOUD: Nothing. 18 CHAIRMAN CLOWE: Any questions? 19 Thank you, Toni. 20 MS. SMITH: Thank you. 21 CHAIRMAN CLOWE: The next item is a 22 report, possible discussion and/or action on the 23 operator -- lottery operator procurement and the 24 lottery operator consultant. 25 MR. BENNETT: Good morning, WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 41 1 Commissioners. For the record, my name is Ridgely 2 Bennett. I'm the Deputy General Counsel of the Texas 3 Lottery Commission. It's actually going to be a very 4 short report. We remain in negotiations with Gtech 5 Corporation for the Lottery operations and services 6 contract. I'll be happy to respond to any questions 7 that you may have. 8 COMMISSIONER WHITAKER: What is your 9 deadline at this point in time? 10 MR. BENNETT: We don't have a set, firm 11 deadline at this point in time. There is no current 12 drop-dead date. 13 COMMISSIONER WHITAKER: Right. But 14 what is your goal at this point? 15 MR. BENNETT: Within the next few 16 weeks, next couple of weeks. 17 MS. CLOUD: Hopefully, before the next 18 commission meeting. 19 CHAIRMAN CLOWE: Any other comments or 20 questions? 21 Thank you, Ridgely. 22 MR. BENNETT: Thank you, Commissioners. 23 CHAIRMAN CLOWE: The next item, number 24 five, consideration of and possible discussion and/or 25 action on external and internal audit activities and WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 42 1 the internal audit department's activities. 2 Good morning, Debra. 3 MS. McLEOD: Good morning, 4 Commissioners. For the record, I'm Debra McLeod, 5 internal audit director. We finished the fiscal year 6 and completed or started all scheduled audits that 7 were asked of us to perform. As a result, we have 8 draft reports with management for their comment, 9 including the gameplan verification, advertising 10 performance measures, the bingo debit card controls, 11 accounts receivable, and the bingo licensing 12 background. 13 Two audits that are currently in 14 process are the bingo compliance audit, which is 95 15 percent complete, and the bingo tracking information, 16 which is 45 percent complete. We are currently 17 working with management on their annual risk 18 assessment plan. That's what I would like to report 19 for internal audits activities. 20 With the Comptroller of Public 21 Accounts, they have performed a claims audit. We're 22 still waiting for their findings and their draft. The 23 State auditor's office is still here with their MAS 24 group. They have done a statewide survey of a certain 25 issue with internal -- with information technology. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 43 1 We have not received any additional requests for 2 information or result of that survey as of yet. And 3 to my knowledge, that's all the audits that I'm aware 4 of. 5 I would like to say that Linda, and 6 Mike Pitcock, and myself, attended a meeting with the 7 State Auditor's Office. It was a breakfast networking 8 opportunity for all of the executive directors through 9 every State agency, their security directors, and 10 internal audit directors to meet to discuss -- it was 11 a breakfast meeting right before a fraud conference 12 for the State Auditor's Office. And it was an 13 opportunity for us to meet our counterparts in other 14 state agencies to discuss certain issues, and I 15 thought it was beneficial. 16 CHAIRMAN CLOWE: Very good. I believe 17 there are no comments or questions, Debra. Thank you. 18 The next item, number six, report, 19 possible discussion and/or action on the drawing 20 studio. 21 MS. CLOUD: Vance, would you like to 22 come up and give an update on the construction? 23 MR. DEVINE: Good morning, 24 Commissioners. For the record, my name is 25 Vincent James Devine. I'm the Texas Lottery WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 44 1 Operations and Facility manager for support services. 2 And I guess I'll be reporting to you on the progress 3 thus far of the studio and claim center building. I 4 have some notes here if I can get them real quick, and 5 I apologize. I didn't know that we were number six on 6 the list. 7 As you are aware, on August 31st, we 8 vacated the 501 I-35 studio facility and occupied, 9 what I call, the 601 East Six Street studio facility 10 here at the Texas Lottery headquarters. It began 11 operating that evening, Saturday, had a live draw. 12 And I guess we're on, what, our 20th draw now? So 13 we're doing real well. 14 On the 7th of September, the claim 15 center staff and the rest of the security staff 16 occupied the rest of the building. And I guess the 17 best way to report is, today, we're doing the little 18 punch-out items that are typical in construction, in 19 remodeling. And we anticipate, on about the 24th, 20 little patches, paint jobs, and items such as that 21 will be completed. 22 We're very happy with the project. We 23 had some outstanding vendors, contractors, architects, 24 and some amazing internal staff here in both 25 purchasing, information technology, legal -- legal WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 45 1 helped me push some interesting procurements through 2 quickly, just some outstanding crew. And I was very, 3 very happy to work with all of the staff. To say the 4 least, Linda and I and other people were standing on 5 the sidewalk watching the studio draw the first night, 6 from the window out on the street. And it was a neat 7 thing to see. 8 That's about all I have to report. 9 COMMISSIONER CRINER: Well, I'll 10 have -- 11 COMMISSIONER WHITAKER: Is that the 12 Walter Criner window? 13 MR. DEVINE: I'm not sure how that got 14 coined. It almost got engraved over the top of it, 15 but I wasn't sure that that would be appropriate, but 16 yes, ma'am. 17 CHAIRMAN CLOWE: I don't think he wants 18 his name up there. 19 MS. KIPLIN: That was one of those 20 purchases we helped them on a little -- 21 COMMISSIONER CRINER: I'll have you 22 know that I was hanging in that window last night and 23 saw the drawing and then went down on the street and 24 watched the drawing, watched them prepare. It's a -- 25 it's really interesting. I don't think the world WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 46 1 knows it's really happening. But as people pass by 2 and watch it, I think it'll be a really nice 3 attraction to the city. And, especially, once the 4 Convention Center -- because there were several people 5 came up last night and saw the logo on the sidewalk 6 that's beamed down on the sidewalk and ran down the 7 street to buy tickets and then come back and stand 8 there and watch the drawing, which was -- I like that 9 part. And so it's a -- 10 MS. CLOUD: Well, I'm happy you got to 11 witness the draw. And I'm excited. The first 12 night -- I haven't been there at night since the first 13 night, with traveling that I've been doing, but I plan 14 to be there. Our first real busy Sixth Street event 15 is coming up, Pecan Street Festival, is I don't think 16 this weekend, but next weekend, and I plan to be here 17 for that because I want to see what it's like when we 18 really have a crowd on Sixth Street. 19 And we have been getting, from what I 20 have been told, anywhere from 20 people to 50 people 21 standing at those windows. That's a wonderful, 22 wonderful opportunity for us to have witnesses to the 23 actual drawing, so that we hear less of this, that our 24 drawings are rigged. People can see what is going on, 25 and they understand it a lot better. And I'm very -- WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 47 1 I'm very happy with the project. And, you know, 2 knowing that we've improved the facility, but also, 3 the viewing, for the public as well as saved the State 4 a million dollars, it's a good -- I think it's a good 5 thing. 6 COMMISSIONER CRINER: I enjoyed it. 7 MS. CLOUD: Good. 8 COMMISSIONER CRINER: Thank you. 9 CHAIRMAN CLOWE: And, Vince, I talked 10 with Mike this morning, who is in charge of security 11 on Sixth Street, and he tells me that the lights are 12 going to be installed out there very shortly, as well 13 as sound. So when Commissioner Criner is on the 14 street again, he can hear as well as see the drawing 15 through his window. 16 MS. CLOUD: I'm sure he had security 17 wrapped around him pretty good, though. They're 18 really good at that. 19 COMMISSIONER CRINER: Yes, they were. 20 CHAIRMAN CLOWE: And the bars, or 21 grill, is being fabricated now for the windows, which, 22 hopefully, will be in before the Pecan Street Festival 23 occurs. That will give us an extra measure of 24 security there. 25 I would like to also mention that we WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 48 1 have a new security video system installed, with the 2 claims center people moving out of the foyer here into 3 the claims center, which, by the way, is very 4 attractive and is very welcoming and accommodating to 5 winner ticket holders. 6 The security area now has been 7 refurbished, and for the Commissioners' benefit, if 8 you haven't seen that as well, there is a 9 state-of-the-art latest digital camera system which 10 protects this building and many of the areas outside 11 on the sidewalk and the street, as well as internal 12 security. Mike, I don't know how much of that you 13 want to talk about, but I invite you to come up and 14 tell the Commissioners and those in attendance 15 whatever you would like us to know about that. 16 MR. DEVINE: While he's getting seated, 17 I can tell you the bars for the windows are going up 18 tomorrow and Friday. And we're going to punch them 19 out, clean them up, and shape them up over the 20 weekend. The glass and everything that you see now 21 installed is what we call, the choice that our 22 security chose for very defensive glass. So with the 23 bars, the glass combination, it's a nice combination. 24 The gates will be going up. I'll let Mike speak more 25 to that. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 49 1 But you're absolutely right. A lot of 2 the security features that we felt necessary at this 3 facility, with this studio, now have been put in 4 place. And, you know, I overlooked mentioning the 5 security staff were outstanding. We had one minor 6 injury on this accident, a painter fell off a ladder. 7 And we had no theft, we had no injuries. And that's 8 an amazing feat. Mike's group runs risk management 9 and security, so that doesn't always happen on 10 construction projects of this speed. 11 MR. PITCOCK: Mike Pitcock, director of 12 security of Texas Lottery. The only comments I'll 13 make -- I'm not going to get into the details of our 14 security system because I think that's something that, 15 you know, I want to keep, you know, as well organized 16 as I can. But I think our security system is a 17 state-of-the-art system, and just some of the comments 18 I've heard from other law enforcement is that we have 19 one of the best that's out there for State agencies. 20 Based on the events that have happened this week, it's 21 come into play, we've stepped up security around the 22 building. And it's one that the system offers us the 23 ability to not only secure the buildings, but make it 24 a safe work environment for the people who come work 25 here. Plus, any individuals that want to watch the WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 50 1 Lottery, we have to take into concern their safety, 2 also. And out on the sidewalk or inside, we have an 3 area inside also that allows people to come in and 4 watch the drawings inside if they want to sit and 5 watch the process. 6 Security is all encompassing, and I 7 think it's one that each of us need to understand that 8 it's the whole Lottery staff that has to be concerned 9 with security. And I compliment our staff because the 10 Lottery staff, as a whole, takes that very seriously. 11 And my staff, you know, the police officers and the 12 security staff that do the draw and the security staff 13 that work inside our office, it's a coordinated effort 14 with Linda and legal and all the other entities to 15 work this, and it has to all work together for it to 16 be successful. 17 And I think from 1992 to the present, 18 you know, we've gotten better, and we're going to get 19 better. And we have to keep looking at new 20 technology, new ideas about security, and I will tell 21 you that I watch and try to learn to see what is 22 happening in other buildings in security-type 23 situations. And we're going to continue to do that to 24 improve our system, not only by personnel, but 25 technology also, but it is a coordinated effort of WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 51 1 everybody. Security today, especially today, is not a 2 simple process, and is one that we have to take it 3 very seriously. 4 MS. CLOUD: Commissioners, I would like 5 to -- 6 CHAIRMAN CLOWE: Just a minute, Linda. 7 Mike, while you are speaking to us, are you still 8 moving the machines into the secured area at the end 9 of the drawings every night now, or are you planning 10 to leave them in place at some point? 11 MR. PITCOCK: We are moving them into 12 the vault areas, we call it, every night, because 13 there is lot of construction, as Vince said, punch out 14 and work in the actual studio area that is going on 15 and a lot of testing, you know, for different things. 16 So we have elected to move it each night, out, so we 17 don't hamper that process. As you see, the windows 18 are not completed, and some of the things that they 19 have to do, you know, they need access inside that. 20 If we leave the machines out, we have to have an 21 auditor come over and to break seals and stay there 22 that continuous time. So we felt that it's better to, 23 each night, for the time being, to leave them in the 24 vault. 25 CHAIRMAN CLOWE: I think we all WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 52 1 understand that concern. When do you see that 2 practice stopping? 3 MR. PITCOCK: I -- actually, I've been 4 talking to Captain Jim Ziegler, which is over the 5 draws, and he has recommended that we start looking 6 towards October, maybe November, of possibly leaving 7 the machines out. We've still got to work out some of 8 the technical things on that to make sure our machines 9 are covered, the cameras are covered, access is 10 covered, basically, as far as security to those 11 machines. Because Linda puts the highest security on 12 those machines, and she does not want that to be 13 compromised in any way, so we had to study that to 14 make sure we are intact for with what she wishes for 15 us to do. 16 MS. CLOUD: Commissioners, I just 17 wanted to make a point that this new ADT security 18 system that has gone into this whole building is a 19 replacement of a unit and an upgrade of what we had 20 when we moved in the building. The bid was -- the 21 contract with ADT was out, we bid the contract out, 22 and the replacement of the security that we have, as a 23 result of that bid process, was in the making. It was 24 not something that we did that was because we put the 25 studio and the claim center there. It was part of the WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 53 1 process. Had we not had the studio in this facility, 2 part of the ADT equipment would have gone in the TPFV 3 location. So this is not because of anything that 4 we've done. It was a matter of a contract running out 5 and us rebidding the contract, and this is what came 6 out of the bid process. 7 CHAIRMAN CLOWE: Since you mentioned 8 that, Linda, the new passes do not have the photograph 9 on them. Would you speak to that issue? 10 MS. CLOUD: The security auditors for 11 two audits have commented on us having the name of the 12 organization, as well as a picture of the individual 13 and their titles. In the event those badges get lost, 14 we do -- we are going to have an address so the badge 15 can be returned to us, if people would do that if they 16 find a badge that's missing. 17 Am I on track with that, Mike? 18 MR. PITCOCK: Yes. Partially, the 19 reason is that, again, in punch out, we still haven't 20 gotten the camera from ADT that takes the photographs 21 of the individuals. The actual template, it's already 22 in place in the computers, and we're waiting for ADT 23 to finish that part and install the camera that takes 24 the actual picture. The pictures that the staff have 25 are their old pictures from our old system. They're WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 54 1 glued on there and what we're going to do is, we'll 2 take the new pictures and with the new templates that 3 Linda is describing, and that will be forthcoming. 4 It's just one of the things that they're completing. 5 Actually, this last week they completed the actual 6 desk out front. And we have to incorporate the camera 7 system and stuff in the back, so they're at that part 8 now. That's what they're this week doing. 9 MS. CLOUD: Okay. Let me correct what 10 I said. Part of that security audit didn't take the 11 pictures, but it just took the titles. 12 MR. PITCOCK: It took -- what they were 13 concerned is the address, any type of identification. 14 There was two things that the security audit was 15 concerned about, is the two-part badge, and the actual 16 address and logo and anything that identifies the 17 Texas Lottery. They feel like that these badges were 18 given, and if -- like, for example, I'm the commander. 19 If it's given out, somebody got it in the wrong hands, 20 they could utilize it. Our system wouldn't allow 21 that, because if we lose a badge, the employees are 22 required to report it so we can, you know, immobilize 23 that badge immediately. 24 The two part, I spoke against, because 25 in studying it with ADT, we had them look at a study WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 55 1 as to the one-part badge versus the two-part. We felt 2 like that the two-part badge offered us some benefits 3 far-reaching the one-part badge. One-part badges are 4 still new in the technological field because you have 5 got to incorporate sensors and different things inside 6 these badges. And the one-part badge, right now, did 7 not fit what I thought we needed at this building, so 8 we're going to stay with the two-part badge in lieu of 9 what the security audit told us because of the 10 features that it offers us and the benefits as far as 11 security. So we decided to stay with two-part badges. 12 CHAIRMAN CLOWE: Define, for our 13 benefit, one-part and two-part badges, if you would. 14 MR. PITCOCK: Well, if you look at the 15 badge, which you can't see, but it -- the two-part 16 would actually be -- the front of it would be the 17 picture and the identification of the individual from 18 the Lottery, which is taken through one computer 19 system. The back part is a flat gray area that 20 incorporates the computer chips and the necessary 21 technical mechanisms to activate our door sensors and 22 the other parts into the building. It's one that, 23 again, at a later date, I would be glad to explain, 24 you know, the security aspects of it, but at this time 25 I would not like to do that. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 56 1 CHAIRMAN CLOWE: So we are, then, going 2 to go to the two part, and we will have the photograph 3 of the individual as well as the address of the agency 4 that will be a visual representation? 5 MR. PITCOCK: We're going to stay with 6 the two part and not go to the one part as recommended 7 because of the benefits offered, security benefits 8 that I think far reach the one part. 9 MS. CLOUD: But you will have the 10 pictures -- 11 MR. PITCOCK: We will have the 12 pictures. 13 MS. CLOUD: Okay. And you will have 14 the address of the building? But not the name of the 15 agency? 16 MR. PITCOCK: We'll have the address, 17 but not the name. 18 MS. CLOUD: Right. 19 MR. PITCOCK: That's correct. 20 CHAIRMAN CLOWE: Well, since we're 21 going to be changing the photographs, I have a high 22 school photograph that I would like to use. If that's 23 all right. 24 MS. CLOUD: Commissioners, I just want 25 to add one more thing before Vince gets away from me. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 57 1 CHAIRMAN CLOWE: Commissioner Whitaker 2 just made a very uncomplimentary remark which is off 3 the record. 4 MS. CLOUD: We have had a lot of 5 projects that we've had to be involved in, since 1992. 6 And I think Vince came on board in about '93. 7 MR. DEVINE: '94. 8 MS. CLOUD: '94. And he has been one 9 of the most tremendous employees that this agency has 10 ever had. He has handled these projects. He has not 11 had -- he has made sure that he has kept me informed 12 on what was going on. He has not come whining or 13 begging or -- he has always got a plan. He lays his 14 plans out, and I just want to say, it's a -- it's a -- 15 it's a great honor to have him on our staff. And I 16 really -- he has given everybody else kudos, but I 17 think he deserves the most. 18 CHAIRMAN CLOWE: I think the 19 Commissioners share in that appreciation of the job 20 you've done, Vince. And we've asked you, from time to 21 time, are we on schedule and are we under budget, and 22 you've always answered affirmatively. And I assume -- 23 we know we're on schedule, but I assume we're still on 24 budget. Is that correct? 25 MR. DEVINE: Yes, sir. We actually had WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 58 1 somewhat of a mild surprise and have some reserve, 2 which was nice. 3 CHAIRMAN CLOWE: Well, that's most 4 unusual. And we are all grateful, I think, all three 5 of the Commissioners, for the good job you've done. 6 And I think you are wise to give credit to the subs 7 and the others who have participated. Excellent job. 8 COMMISSIONER WHITAKER: Let me just 9 say, my perception has been, it's gone very, very 10 smoothly. Normally, when I think of construction, I 11 think of delays, but not in this case. And I am -- 12 those are wonderful comments, and you are to be 13 commended. Thank you. 14 MR. DEVINE: Thank you. 15 COMMISSIONER CRINER: And since I stood 16 outside your window last night, it was very good. 17 MR. DEVINE: It's your all's window 18 now. 19 CHAIRMAN CLOWE: Now, Keith, if you'll 20 come up, I have a question or two for you and perhaps 21 the other Commissioners do, as well. 22 One of the questions that we have 23 received continuously about this studio in the request 24 for capital funds was the pick-up of the signal by the 25 TV stations and the statewide broadcasting. And our WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 59 1 answers were that we feel it's vitally important that 2 these drawings be televised and that you are working 3 to enhance our coverage and the interest of the TV 4 stations in broadcasting these drawings. I'm not 5 going to ask you specifically this morning for any 6 details. You have furnished that to the leadership 7 and to us in the past, but I want to express, on 8 behalf of the Commission, a continuing interest, high 9 interest, in that work and in doing everything 10 possible to see that these broadcasts are picked up, 11 and that the new format which the new production has 12 enabled us to have, which I think is more attractive 13 than those which we've used in the past, is used to 14 see that we get a broader coverage. 15 I know there is an item on the agenda, 16 Linda, today in regard to that. But since we're 17 talking about the production studio right now, I want 18 you to know, the Commissioners are very interested in 19 that, and it's my expectation that we will be asked to 20 report back to the leadership, results on this 21 project, and where we stand in regard to that 22 particular issue. Have you got any comments for us in 23 that regard? 24 MR. ELKINS: Yes, just a few comments. 25 Just a few comments, Mr. Chairman. For the record, WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 60 1 Keith Elkins, Communications Director, Texas Lottery. 2 Good morning. We share, here at the 3 Commission, your same concerns. We have been working 4 now for the better part of a year in addressing that 5 very issue, trying to look for ways that we can get 6 more TV interest in carrying the live drawings. We 7 have superior coverage right now, as you know, on the 8 results. All the stations have found that that is 9 something that their viewers certainly want, is to 10 know what the winning results are. I think that it is 11 a testament to what we do here from a security 12 standpoint that the TV stations don't feel the need to 13 carry the drawings live because they don't question 14 the integrity of that drawing. But we're trying to 15 show them now that this is also a benefit to them, and 16 we do have some plans that we are recommending to the 17 executive director that we'll be ready to share with 18 you at a later time. 19 Also, I might add that since we have 20 made the switch to the new studio, starting September 21 1, we do now have the capability also of watching the 22 drawings live via Internet. You can either watch on 23 the Internet live, or you can call it up on demand 24 minutes, hours, days later, by date. We will be 25 broadcasting that as well at the proper time. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 61 1 MS. CLOUD: Commissioners, that's a 2 real asset. That's something we've never had before. 3 So it provides all of our players who have computers, 4 if they can't get the drawing aired on their 5 television stations, they can actually go to their 6 computer and watch it live. 7 COMMISSIONER WHITAKER: Do we have, 8 like, RealPlay, or does any interface work? 9 MR. ELKINS: There is about four or 10 five different players, depending on the type of 11 computer system that you have. Our website 12 coordinator and broadcast studio manager working with 13 the private vendor, the M&S Works Company, have tried 14 to address every potential computer need out there, 15 all the way from Macintosh to personal computers, and 16 the different browsers that people use. 17 COMMISSIONER WHITAKER: It would be 18 nice to have a report as we get into that as to how 19 many viewers utilize that service. 20 MR. ELKINS: We can make that available 21 to you. I would just caution that at this point we 22 haven't advertised that far and wide. I know that the 23 first night, September 1st, we had, I think, 40 people 24 that were on the Internet watching the live drawing. 25 I can't tell you how many of those were staff or, you WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 62 1 know, vendor employees, but we did have interest. We 2 have just not put out the word yet because we wanted 3 to roll it all out at one time. We wanted to make 4 sure all the bugs were out as well. 5 COMMISSIONER WHITAKER: That's a good 6 idea. 7 MS. CLOUD: And this -- we actually 8 really didn't expect to be able to start the -- the 9 day we started with our own studio here, that the 10 vendor would be able to provide the on-site, on-line 11 capability at the up-front. We thought it was going 12 to be several weeks into the contract before that part 13 of it would be available. But they had it ready, and 14 it was available the night of the first draw. 15 MR. ELKINS: The only final comment I 16 would like to add is, with the plans that we're 17 looking at that we will be bringing to you, if those 18 do go forward, I feel convinced that we will have good 19 coverage across the state as far as getting live TV 20 coverage for our drawings. 21 CHAIRMAN CLOWE: Thank you, Keith. 22 COMMISSIONER CRINER: In looking 23 through that window, I saw that last night. 24 COMMISSIONER WHITAKER: Uh-huh. 25 COMMISSIONER CRINER: At least, the WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 63 1 security took me and the web designer was there in the 2 back, in the control room, the little control room 3 where they were actually feeding everything to the Web 4 site, and they bring it up and you could see it live. 5 They're really working on it. 6 COMMISSIONER WHITAKER: Well, I've got 7 to look at it next time. 8 MR. ELKINS: Thank you. 9 CHAIRMAN CLOWE: Thank you, Keith. 10 The next item is number seven, 11 consideration of and possible discussion and/or 12 action, including procurement, on the instant tickets 13 and services contract. Linda? 14 MS. CLOUD: Commissioners, this is just 15 to let you know that we are at the point in our 16 instant ticket contracts to put them back out for bid 17 again. We're going to be working on the RFP process 18 for our instant product. And we just wanted you to 19 know we were going out for bid for the instant ticket 20 procurement. 21 MS. KIPLIN: Commissioners, ordinarily 22 this is the type of contract that in the past the 23 Commission has wanted to have oversight on, whether to 24 go out to bid or to exercise an extension. This 25 contract had no extensions; it only had a primary term WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 64 1 of three years, so there is -- there is really no 2 option other than to go out to bid. 3 CHAIRMAN CLOWE: What's the expiration 4 date of the current contract, please? 5 MS. CLOUD: I think it's August 31st, 6 isn't it, of 2002. 7 CHAIRMAN CLOWE: '02. 8 MS. CLOUD: So it takes about a year. 9 We'll be rewriting just like we did the lottery 10 operator contract, rewriting the RFP, having 11 briefings, and the actual bid process, and the 12 evaluation, and then the award. 13 CHAIRMAN CLOWE: This is the second 14 largest contract the Commission awards, if my memory 15 serves correctly. And there are issues around this 16 contract which came up when we awarded it the last 17 time, which we would appreciate you dealing with in 18 the bidding process so that we have the greatest 19 number of vendors interested that are, of course, 20 qualified, and we have the broadest coverage in the 21 industry that's possible. I'm sure you'll advertise 22 and qualify those vendors so we can have a goodly 23 group competing for this contract. 24 MS. CLOUD: When you talk about goodly 25 groups, there are only three vendors that are out WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 65 1 there manufacturing instant tickets. So I'm sure all 2 three will be bidding. 3 CHAIRMAN CLOWE: We want all three. 4 MS. CLOUD: Yeah. They'll all three be 5 bidding, I'm sure. 6 CHAIRMAN CLOWE: Any comments on that, 7 or questions about it? 8 COMMISSIONER WHITAKER: No. 9 CHAIRMAN CLOWE: Thank you, Linda. 10 Nelda, I think we're ready for your 11 item, number eight, possible discussion, action, 12 report on the Council on Competitive Government's 13 activities relating to the Commission. 14 MR. SANDERSON: Mr. Chairman, while 15 Nelda is passing those out, the BAC meeting is 16 scheduled for October the 9th. It's a Tuesday, at 17 10:00 a.m. 18 CHAIRMAN CLOWE: Thank you, Phil. 19 MS. TREVINO: Good morning, 20 Commissioners. For the record, I'm Nelda Trevino, the 21 Director of Governmental Affairs. What I have 22 provided each of you is a copy of the project plan 23 that's been provided to us by the Council on 24 Competitive Government staff that was provided to us 25 this last Monday. And what I would like to do is just WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 66 1 briefly highlight a couple of items that are stated in 2 the project plan. 3 Starting with the background, that 4 basically states the rider language that's in our 5 agency bill pattern. The council is also to submit 6 the final report to the Governor and to the LBB, no 7 later than January the 15th. In regards to the 8 purpose and the scope of the work, you will note that 9 in addition to the review of the agency's public 10 information, media, and advertising functions, the 11 review will also include the in-sourcing versus 12 out-sourcing of the Lottery drawing studio. 13 The project team is clearly identified 14 in the project plan, and with us today are some 15 members of the project team, including Dan Contreras, 16 who is the director of the Council's -- for the 17 Council. 18 On the second page where deliverables 19 are noted, I wanted to highlight just a couple of 20 dates that are noted on there, and particularly, 21 December 20th, 2001. That is an open meeting of the 22 Council to discuss the draft report. It is my 23 understanding that that will be the opportunity for 24 the agency to provide comment in regards to the draft 25 report. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 67 1 Also, in discussing with the CCG staff, 2 my understanding is that we will receive a copy of the 3 draft report -- an advance copy of the draft report 4 sometime after that December 10th date, where it's 5 noted that the Council members will be receiving a 6 copy of the draft. So that leaves us a pretty short 7 period of time from the time that we receive the draft 8 in order for us to review and prepare comment for that 9 December 20th meeting. 10 Another date is the January 8th, 2002 11 date. And that's also noted as another open meeting 12 for the Council to approve the report. And then 13 again, that final -- final report due to LBB and the 14 Governor on January the 15th, 2002. In regards to the 15 time line, while it's not noted on the project plan, 16 we have worked with the Council over the last several 17 months providing them information and documentation in 18 regards to the items that they're going to be 19 reviewing. 20 Based on where we are today, the 21 Council staff will be interviewing staff from the 22 marketing division this week and meeting with some of 23 our vendors next week. I believe that they will begin 24 interviews with our communications staff at the 25 beginning of November. And, again, as I've already WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 68 1 highlighted, that final report is due on January 15th, 2 so, again, a very short time period for the council to 3 do their work and a short period of time for us to be 4 able to review their draft report. 5 At this point, I'm happy to answer any 6 questions, and, as I mentioned, Dan Contreras, who is 7 the director of the council, is also here and, I 8 think, available to answer any questions that you may 9 have. 10 COMMISSIONER CRINER: Mr. Chairman? 11 CHAIRMAN CLOWE: Yes, sir. 12 COMMISSIONER CRINER: I'm looking at 13 your time line, Nelda, and I wonder if you could bring 14 the Council over to look through the window at a 15 drawing. 16 MS. TREVINO: I would like to defer to 17 Dan on that. I know that they have made -- they made 18 a site visit. 19 COMMISSIONER CRINER: Can Dan hold his 20 hand up so I know who he is? 21 MR. CONTRERAS: How are you doing, sir? 22 COMMISSIONER CRINER: Mr. Contreras. 23 MR. CONTRERAS: Good morning. Dan 24 Contreras, Director of the State Council on 25 Competitive Government. The answer is, yes, I've WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 69 1 asked Keith Young (phonetic) to attend the drawing, 2 the evening of the Pecan Street Festival, so... 3 COMMISSIONER CRINER: Oh, okay. As you 4 can see, we're kind of excited about that. 5 COMMISSIONER WHITAKER: Are you going 6 to visit our website, too? 7 MR. CONTRERAS: Is he smiling right 8 now? 9 COMMISSIONER WHITAKER: Yes. 10 MR. CONTRERAS: Yes. We had attended a 11 drawing at the -- at the 501 post, with the Lottery 12 Commission. We -- I think we got there about 6:00 13 o'clock one evening and stayed through the entire 14 preparation. And Lottery staff was very gracious in 15 taking us around, showing us the process, behind the 16 scenes, all of the activities that they went through. 17 We were there before the internal auditors showed up 18 and the internal auditors breaking the seals and 19 going through the entire process, and we stayed 20 through the drawing. Linda came out and the -- I 21 think the majority of the project staff was there at 22 that time, too. So we did definitely want to come out 23 and take a look at the drawing at new studio and see 24 how the process goes there, also. 25 COMMISSIONER CRINER: I just wanted to WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 70 1 make sure -- 2 MS. CLOUD: Was this individual that 3 you were going to have come from -- to be with me on 4 the Pecan Street Festival, was he at TPFV the night 5 you saw that drawing? 6 MR. CONTRERAS: No. Keith Young is 7 new. 8 MS. CLOUD: I think the people that 9 were at the studio there needs to be at the studio 10 here. 11 MR. CONTRERAS: All of the project team 12 will be at the new studio, also. 13 COMMISSIONER CRINER: We're kind of 14 excited about that window. So we want you to see it, 15 too. Thank you. That's all. 16 CHAIRMAN CLOWE: Dan, we really 17 appreciate you being here with members of your staff 18 this morning. And I want to assure you on behalf of 19 the Commissioners that we want our staff, Linda and 20 all of her directors, to provide to you whatever 21 information you need. 22 Nelda, are you convinced at this point 23 that we have done everything for his -- for Dan's 24 group that you can do and others as well to provide 25 that information? WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 71 1 MS. TREVINO: Yes, sir, I feel very 2 confident about that. 3 CHAIRMAN CLOWE: The only exception, 4 Dan, is this agency is involved in a lawsuit regarding 5 some issues that require us to follow legal 6 guidelines. And we want you to understand we're 7 trying to follow good practice there, but save and 8 except for that area of litigation, we want to be 9 totally forthcoming and eager to supply you with 10 whatever you need. 11 And if there is ever any question of 12 that in your mind, I would invite you to contact any 13 one of the three Commissioners, and we will come to 14 your support and assistance readily. 15 MR. CONTRERAS: Great. Also, too, I 16 believe that the Lottery Commission staff has been 17 very responsive to our requests, and we understand the 18 situation with the lawsuit. 19 CHAIRMAN CLOWE: Great. Well, again, 20 thank you for being here today. We really appreciate 21 it. 22 COMMISSIONER WHITAKER: If you couldn't 23 introduce the folks that came with you. 24 MR. CONTRERAS: I'm sorry. We have 25 Keith Young as a project analyst with the Council on WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 72 1 Competitive Government, and Shannon Franklin is a 2 senior project analyst with the Council, also. 3 COMMISSIONER WHITAKER: Great. Thank 4 you. 5 CHAIRMAN CLOWE: They can buy lottery 6 tickets, can't they? 7 MS. KIPLIN: We have no contract with 8 them currently. 9 CHAIRMAN CLOWE: Okay. Nelda, I 10 believe the next item, number nine, was yours as well. 11 Report, possible discussion, action on the 77th 12 Legislature, including the agency's implementation of 13 legislation involving the agency. 14 MS. TREVINO: Yes, sir. Not much -- 15 not much new news to report from our last commission 16 meeting. Our implementation task forces continue to 17 meet and implement any necessary actions that need to 18 take place in regards to legislation. Today you will 19 be taking up a rule as a result of one of the bills 20 that did pass in relation to a vehicle inscription 21 requirement. And we will continue to bring those to 22 your attention as appropriate. So unless you have any 23 other questions, I don't have anything else to report. 24 CHAIRMAN CLOWE: Thank you, Nelda. 25 Next is item ten. Gary, I believe this WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 73 1 is yours; report, possible discussion and/or action on 2 the Sunset process involving the agency. 3 MR. GRIEF: Good morning, 4 Commissioners. For the record, my name is Gary Grief, 5 and I'm the Director of the Lottery Operations 6 Division for the Texas Lottery Commission. And I'm 7 also serving as the agency project manager for our 8 Sunset review process. As you know, the Lottery 9 Commission self evaluation report was submitted to the 10 Sunset Commission on the due date, August the 17th. 11 And this report has also been posted on our agency, 12 Texas Lottery Commission, website. And it's also 13 available for viewing on the Texas Sunset Commission 14 website. 15 The Sunset Commission appointments to 16 fill the vacant seats on the Senate side have been 17 made, and those include the appointment of Senator 18 Jane Nelson as chairman of the Sunset Commission. And 19 I believe this information was faxed to you late last 20 Monday afternoon. The vacant seats on the House side, 21 we understand those should be filled by the end of 22 this month. And I'm currently working with certain 23 Lottery Commission staff to put together packets of 24 information on each of the policy issues that we 25 raised in the self evaluation report. We're preparing WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 74 1 these packets in advance in order to provide Sunset 2 Commission staff with readily-available, comprehensive 3 information on each of the issues that we raised. And 4 I'll be maintaining copies of these packets of 5 information in my Sunset files as well. 6 Also of note, I have worked with our 7 information technology division recently to develop a 8 database that will be accessible by all of our Lottery 9 Commission staff statewide in order to track our 10 interaction with Sunset Commission staff throughout 11 the life of the project. And I demonstrated this 12 database yesterday at our directors meeting, and our 13 Executive Director has given her approval to use this 14 when the review process begins. 15 And that concludes my report this 16 morning. And I would be happy to answer any questions 17 that you may have. 18 COMMISSIONER WHITAKER: None at this 19 time. 20 COMMISSIONER CRINER: I notice you've 21 been smiling a lot today, now that you have got that 22 report turned in. 23 MR. GRIEF: Yes, sir. 24 CHAIRMAN CLOWE: And Gary, we continue 25 to be very pleased with the job that you and your WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 75 1 staff are doing, and we appreciate that. I think the 2 Sunset review is of great importance, and I think the 3 work that you all are doing to supply them with timely 4 and complete information is a great help there. 5 MR. GRIEF: Thank you. 6 COMMISSIONER CRINER: Great job. 7 CHAIRMAN CLOWE: We have concluded 8 items 11 and 12, and that brings us to item 13, Gary, 9 which is also yours, in regard to the approval of a 10 lease amendment. Do you have a comment on that? 11 MR. GRIEF: Yes, sir, I do. I'm before 12 you today to provide you with information about an 13 option the Lottery Commission has regarding the future 14 location of our headquarters facility. And I would 15 like to begin by giving you a brief history of how we 16 have come to be located in our current facility. 17 In approximately mid 1996, when the 18 Lottery Commission was housed at the American Founders 19 Building, located at 6937 I-H 35 North, our lessor at 20 that time began making proposals to the Commission 21 regarding a lease/purchase transaction for the 22 American Founders Building. At that time, there were 23 several pending issues the Lottery Commission had with 24 the lessor regarding that facility, including heating 25 and cooling equipment, building safety concerns, and WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 76 1 the like. 2 Those building issues, coupled with 3 some unexpected circumstances surrounding Lottery 4 Commission executive management at the time, led the 5 Commission to reject that lease-purchase offer, along 6 with a subsequent lease renewal offer for the American 7 Founders Building. Now, due to that lease expiring in 8 May of 1997, the Lottery Commission had to move 9 quickly and very aggressively to procure a new lease 10 space for our headquarters facility. 11 And in January of 1997, we entered into 12 a lease agreement with the Grant Building Austin 13 Limited Liability Corporation, owner of our current 14 facility, the Grant Building, under a three-year 15 emergency term, beginning on May 8th, 1997. And it's 16 important to note that the Texas Lottery Commission 17 worked very closely with the General Services 18 Commission throughout this procurement process, and we 19 involved the GSC in a thorough review of the final 20 lease document. 21 Included in our three-year emergency 22 lease agreement was a clause which allowed the Texas 23 Lottery Commission, at our sole discretion, to 24 exercise a five-year extension of the emergency lease. 25 This cause was placed in the original agreement to WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 77 1 allow the Commission a degree of flexibility, not 2 knowing what the market conditions in Austin would be 3 at the conclusion of the original three-year term. In 4 May of 1998, the Lottery Commission once again sought 5 out the expertise of the General Services Commission, 6 and we asked the GSC to perform a space use study of 7 the Grant Building so the Lottery Commission can -- 8 could gain insight into our long-term administrative 9 needs, determine how effectively our space was being 10 utilized, both now and in the future, and improve the 11 efficiency of the use of our space. The GSC 12 accommodated our request, and the space use study was 13 provided to the Lottery Commission. In the report, 14 the GSC recommended that the Lottery Commission 15 exercise the five-year extension available under the 16 current lease, with the understanding that the Lottery 17 Commission would maintain flexibility to transition to 18 State-owned space at the end of that extension period. 19 At the time, there was much discussion 20 in the legislature about acquiring the property that 21 was previously used for Robert Mueller Airport and 22 developing it for use for State agency use. And that 23 is a plan that has never come about. The Lottery 24 Commission headquarters lease was renewed for the 25 additional five-year period, with an expiration date WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 78 1 of May 7, 2005. In addition, two additional five-year 2 extension options at the sole option of the Lottery 3 Commission were written into that lease extension. 4 That brings you up to date with our current building 5 situation. 6 I'm before you to today seeking your 7 approval to exercise one of the additional five-year 8 extensions available to us under our current lease at 9 terms and conditions that are mutually agreeable to 10 both parties. This will extend our headquarters lease 11 until May 7, 2010 and will provide the agency with 12 reasonable, predictable lease expenditures in an 13 otherwise very unpredictable Austin real estate 14 market. You may want to discuss the specific terms of 15 this lease extension in executive session before you 16 give me direction in this area. 17 And that concludes my report on this 18 issue this morning. I would be happy to answer any 19 questions that you might have. 20 CHAIRMAN CLOWE: Commissioners, this is 21 an item that can be discussed in executive session. 22 It is specifically provided for, and the Commission is 23 at will to announce this as a subject in executive 24 session and discuss the details with Gary, at that 25 time, if you should so wish. Or you can deal with WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 79 1 this in public, whatever your pleasure is. 2 COMMISSIONER WHITAKER: I would like to 3 discuss it in executive session. 4 COMMISSIONER CRINER: Okay. 5 CHAIRMAN CLOWE: Gary, I think the 6 Commission doesn't have any questions of you except, I 7 would like to say my recollection is that in the 8 execution of the five-year contract, that vote was two 9 members of the Commission, Commissioner Sadberry and 10 myself, in favor. Commissioner Myers abstained. Is 11 that correct? 12 MR. GRIEF: I believe you're correct, 13 sir. 14 CHAIRMAN CLOWE: She recused herself 15 because of a possible conflict of interest, and at the 16 time Commissioner Sadberry and I voted for that 17 five-year term. It was at a favorable rate 18 comparative to competitive rates in the metropolitan 19 Austin area. 20 MR. GRIEF: Yes, sir, that's correct. 21 MS. KIPLIN: One other point I would 22 like to add, and maybe I just didn't hear it. But we 23 also had the General Services Commission involved with 24 that amendment and the inclusion of those extensions. 25 And I think that it's fair to say -- and they were WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 80 1 also in attendance at the Commission meetings for the 2 Commissioners to call on as a resource at that time. 3 And they were very supportive of that language being 4 included based on the exact reasons that have been 5 discussed this morning. 6 CHAIRMAN CLOWE: Correct. Gary, if 7 you'll be available in the motion to go into executive 8 session, this is also an item to be discussed. 9 MR. GRIEF: Yes, sir. 10 CHAIRMAN CLOWE: Now we are to item 11 number 14, which is the consideration and possible 12 discussion and/or action, including adoption, on 13 certain rules. 14 Kim, will you, when you're ready, take 15 us through that? 16 MS. KIPLIN: Yes. Commissioner, I'd be 17 glad to. 18 This item was before you and is before 19 you today for your consideration. The staff would 20 respectfully request that you pass this item for 21 action today, as well as the next item, and that would 22 be the proposed rulemaking on the Lotto Texas and 23 Texas Two Step rule. While both of these rules are 24 ripe for your consideration today for adoption, the 25 staff believes that in light of the events that WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 81 1 occurred last week, that it was difficult for people 2 to travel to a scheduled rulemaking comment hearing 3 that occurred on Friday. And there were -- there were 4 issues with regard to trying to get notice to the 5 public on that. 6 Rulemaking, of course, is to -- is to 7 set out an agency's policies, and it does provide for 8 and allow for public comment, and the staff wants to 9 make sure that those who wished to comment in an oral 10 forum are given that opportunity. And so we would 11 respectfully request that you pass these two items 12 until we've had an opportunity to have that reschedule 13 or renotice of rulemaking comment hearing. 14 In connection with that, Commissioners, 15 I am looking to a day for that rulemaking hearing. It 16 really is the Commission's rulemaking. It's your 17 policy that you set out for the rule. And I'm 18 thinking of next Friday. That would give, if we 19 noticed it tomorrow, reasonable notice to the public, 20 but I look to you for your direction on when you would 21 like to have that rulemaking hearing. In connection 22 with that, I will say that the Subchapter D game rules 23 were published for public comment beginning May 11th 24 in the Texas Register. And there is a requirement 25 within the Administrative Procedure Act that an agency WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 82 1 act on a proposed rule within six months of the 2 proposal, or that matter expires by operational law, 3 and it will require to be renoticed. 4 And having counted on my fingers, I 5 think that we are clearly within the six-month period, 6 and probably that will occur through -- I'm thinking 7 it was November. For sure, October. So we have the 8 time to have the rulemaking and come before you in 9 October for your consideration. I think the Executive 10 Director would like to move as expeditiously as the 11 Commission would allow because the -- in particular, 12 the Subchapter D game rules have been there out there 13 for the opportunity for written comments since May. 14 I'll defer to her for any additional comment. 15 MS. CLOUD: Commissioners, I would 16 like -- there are several things within the rule 17 making and changing the rule that has implications on 18 us going forward with changing or adding draws to, 19 say, Pick 3, allowing our claims centers to be able to 20 pay prizes up to 900,000 dollars and 999,000. This is 21 all part of that. And we can't move forward on any of 22 that until these rules have been approved or until you 23 have either made a decision one way or the other. So 24 that is why I would like to see us, since this rule 25 has been out there for quite a while, have a WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 83 1 commission meeting as soon as possible in October and 2 be able to -- after, of course, the rulemaking hearing 3 to the public. 4 CHAIRMAN CLOWE: For the -- 5 COMMISSIONER WHITAKER: You would 6 notice -- you would notice the meeting when? 7 Tomorrow? Or today? And then it be next Friday? 8 MS. KIPLIN: Well, my thinking is to 9 try to -- to notice it either today or tomorrow for a 10 September 28th comment hearing, which would give -- 11 would give them ten days. But I look to you all if 12 you would like to provide a different -- you know, 13 have a different day or a different timing. I'll 14 leave it to y'all for that direction. 15 COMMISSIONER WHITAKER: I mean, that 16 sounds like adequate time. Is there any -- 17 MS. CLOUD: No. That would be fine. 18 CHAIRMAN CLOWE: For the Commission's 19 knowledge, there were no public witnesses that 20 appeared last Friday, for good reason, I know, and 21 therefore, no comment was received. And what has been 22 the extent of the written comment received today? 23 MS. KIPLIN: I have received both 24 written comment in a -- in a letter form and also 25 petition form, I'm going to estimate, possibly 100 to WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 84 1 200 commenters. All are opposed to the change on the 2 advertised jackpot. The general theme of the comments 3 that I have reviewed today are threefold. The 4 opposition to the advertised jackpot on both the Texas 5 Two Step and the Lotto Texas, and also a -- an 6 opposition to a deletion or elimination of a 7 requirement that the agency create a game report on an 8 instant game after that instant game is closed. Those 9 are the three themes that I recall right off the bat. 10 There was another opposition, and it 11 had to do with, I think, a misinterpretation of what 12 the proposed language was, because the comment was 13 opposed to making people come to commission 14 headquarters to claim prizes that were in an amount of 15 600 dollars or more. That was never the intent of the 16 rulemaking, and, frankly, that's why we like getting 17 comments, because it was clear, at least from the 18 staff's perspective, that the language that had been 19 drafted was not -- was not clear and confused people. 20 And so we will clarify that language that we were not 21 requiring nor was it the intent of that amendment to 22 require people to come to the Commission to claim 23 prizes in 600 dollars or more. It was trying to get 24 to a generic term, commission, to include claims 25 centers. And we'll make that clearer in the text. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 85 1 CHAIRMAN CLOWE: I think it's important 2 that, in this timing, the Commissioners have the 3 opportunity to review those written comments. I have 4 received some correspondence which I have answered and 5 made a part of the record. And I would think that we 6 need to go beyond your characterization of the 7 comments and have the opportunity, time-wise, to view 8 those written comments before we deal with this issue. 9 MS. KIPLIN: I'll be happy to make 10 those available any way you would like. If you would 11 like me to make copies for you and then just send 12 those to you so that you can see them, I'll be glad to 13 do that. If you would like to come -- I'm maintaining 14 the rulemaking record. If you would like to come to 15 the Lottery and look at those comments at your 16 leisure, then that is fine. It's really whatever your 17 preference is. I will tell you that, as part of the 18 requirements on an adopted rulemaking, the agency is 19 required to summarize the comment, and in the -- in 20 the -- in the event that the agency disagrees with the 21 comment, it is required to respond and give reasons 22 why it disagrees. But it's really up to each one of 23 you, individually, how you would like for me to make 24 sure, if you want to see that comment, how you would 25 like that comment. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 86 1 CHAIRMAN CLOWE: And I would suggest 2 each individual Commissioner communicate that to you 3 and deal with that as an individual issue. 4 The General Counsel has laid out her 5 plan. Does that require a motion or just agreement on 6 behalf of the Commissioners? What is your -- 7 MS. KIPLIN: It does not require an 8 action. I'm just looking for direction. 9 COMMISSIONER WHITAKER: I would say -- 10 COMMISSIONER CRINER: I just have one 11 question. 12 MS. KIPLIN: Yes. 13 COMMISSIONER CRINER: Are there anybody 14 that comes to these hearings have to come from far 15 distances? 16 MS. KIPLIN: I think the furthest that 17 people have come are Dallas, Houston, San Antonio, 18 metropolitan areas, as I recall. 19 In -- and written comment is fine. I'm 20 receiving written comment. There has been criticism 21 about me not wanting to receive comment by e-mail, and 22 also to receive comment in an oral form over the 23 telephone. The oral form over telephone, the inherent 24 problem with that is that I don't get it right. And 25 then I have misinterpreted the comment. And that's WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 87 1 the purpose of a rulemaking comment that's envisioned 2 by Administrative Procedure Act. The reason that I am 3 not inclined and have not accepted comment by 4 e-mail -- and that is a criticism that I have received 5 in the form of comments, so, you know, it's something 6 I want to make sure you're aware of -- is because I 7 did try that on the last Lotto Texas rulemaking 8 because of the interest that that rulemaking 9 generated. 10 The comment came to me either through 11 being forwarded by somebody, it was comment that was 12 received by people who were using pseudonyms, 13 acronyms, and the like. Because of the technology, it 14 became problematic that I would receive comment at the 15 same time that you all were trying to consider the 16 adoption, knowing that comment may still be coming 17 into my office, and arguably needing to be 18 incorporated into the rulemaking record. 19 So for those reasons, I have said that 20 I'll be glad to receive it by mail, by fax, and in the 21 rulemaking format, which does comply with the 22 Administrative Procedure Act. But I wanted to make 23 sure that you were aware of the issues with the 24 e-mail. I guess it's to the -- it's up to the 25 Commission, if you want to direct me to begin to WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 88 1 receive comment by e-mail, I will do that. I think 2 the problem -- there are inherent problems with that, 3 and those are the ones that I've laid out. 4 CHAIRMAN CLOWE: Well, you have raised 5 another issue. 6 MS. KIPLIN: Yes, I have. 7 CHAIRMAN CLOWE: And the Commissioners 8 may wish to deal with that at this time, or they may 9 not. And then we have the issue before us of passing 10 these two items and directing you to publish for a 11 public hearing on the 28th. And all it requires is 12 direction. 13 MS. KIPLIN: Yes. I will notice it up 14 today or tomorrow for the rulemaking hearing on the 15 28th. And I'm thinking of starting at 10:00 in the 16 morning. 17 COMMISSIONER WHITAKER: Okay. 18 CHAIRMAN CLOWE: Commissioners, is your 19 pleasure -- 20 COMMISSIONER WHITAKER: Yeah, I think 21 so. And I would like to talk to Ms. Kiplin about the 22 e-mail issue and to study it a little bit more. 23 MS. KIPLIN: Sure. 24 CHAIRMAN CLOWE: I think that's very 25 appropriate. Are you okay with that then, WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 89 1 Commissioner? 2 COMMISSIONER CRINER: Yes. 3 CHAIRMAN CLOWE: Very good. Then, 4 those two items, number 14 and number 15, are passed. 5 You mentioned, Counselor, an early 6 meeting in October. And Commissioner Criner has a 7 thought that I think this might be a good time to 8 bring up if you're amenable to that, Commissioner. 9 COMMISSIONER CRINER: Which one of my 10 thoughts was that? 11 CHAIRMAN CLOWE: I'm not reading your 12 mind. Set meeting date. 13 COMMISSIONER CRINER: Specifically set 14 a meeting date so that we can kind of -- I was asking 15 the chairman, when we're trying to set meetings, we're 16 bouncing around my schedule, and I'm like, how come we 17 can't have a meeting every third Wednesday of every 18 month, and that way I can just block it out and say, 19 that's where I can come. I can be in Austin on that 20 day and work everything else around that. I was just 21 wondering why we weren't doing that or -- 22 CHAIRMAN CLOWE: Commissioner Whitaker, 23 this issue surfaced before you arrived, and we wanted 24 to wait until you were here. And probably want to 25 give the staff time to react and give it some thought WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 90 1 as to what their reaction would be. I think it would 2 be well if you would think about the possibility of 3 setting the third Wednesday of every month or some day 4 that we could shoot for, and then that would be 5 subject to a change if necessary. 6 We have been very consistent about 7 going forward with the full commission. And I would 8 say that my priority is to have a full commission, if 9 at all possible, over going forward with only two 10 Commissioners, to save a date that's preset. That's 11 just one comment that comes off the top of my head. 12 Commissioner Criner, would you be 13 satisfied, having laid that out for everyone to think 14 about, to perhaps discuss further at the next meeting 15 and invite comments from that staff in the interim 16 period so that we could think about that? 17 COMMISSIONER WHITAKER: I will add this 18 thought, and that is, as long as we have the exception 19 when we can't make it that we would take it to another 20 day, the predictability of knowing when the meeting 21 is -- is a plus. However, because of the 22 inflexibility of some of our commitments, I think the 23 chances that all of us could be there would go down. 24 So with that exception, I think that we solve, 25 actually, both concerns. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 91 1 CHAIRMAN CLOWE: Well said. All right. 2 Then we'll, having mentioned this, revisit this, if 3 you will put it on the next agenda, Kim. 4 MS. KIPLIN: Yes. 5 CHAIRMAN CLOWE: And I believe you have 6 received direction from the Commission now to pass 7 this issue -- these two issues, or items on the 8 agenda. 9 MS. KIPLIN: Yes. 10 CHAIRMAN CLOWE: And we're ready to go 11 to number 16 on the agenda. 12 MS. KIPLIN: And I'm thinking that item 13 is also one that is to pass. Because that was the key 14 to the possible adoption of those rules today. 15 CHAIRMAN CLOWE: All right. If there 16 is no objection, item 16 will be passed. 17 And that takes us to item 17, 18 consideration of and possible conclusion and action, 19 including proposal, on new rule relating to the 20 lottery retailer cashing commission. 21 MS. KIPLIN: Commissioners, what you 22 have before you is actually a proposed amendment to an 23 existing rule. I don't believe that it creates a 24 notice problem, because what you're noticing for the 25 public to know today is that you want to consider a WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 92 1 rulemaking item and the subject matter of that 2 rulemaking item, which is the retailer cashing. This 3 is the rule that your executive director mentioned to 4 you, I think, a couple of meetings ago, and her desire 5 to offer a one percent cashing bonus to lottery 6 retailers who cash mid and high-tier prizes. The 7 purpose of it is to recognize the benefit that the 8 Commission has in using retailers' money in an upfront 9 fashion, because they're paying these prizes and then 10 later they obtain their money. So it's to recognize 11 their costs in administering our system as well as the 12 incidental administrative burdens that are imposed on 13 them for that. And what we're looking for today is 14 your authorization invoked to propose this amendment 15 to this rule, which is 16 Texas Administrative Code, 16 Section 401.353, for public comment. There is a 17 fiscal note that is attached to it, and it's contained 18 in the text of your document. And if you need copies, 19 I'll be glad to provide copies to you. 20 CHAIRMAN CLOWE: Questions? 21 COMMISSIONER CRINER: I have a question 22 to Linda. You've been a retailer. Does this help 23 them not feel a pinch so much? 24 MS. CLOUD: Yes. We have, since -- for 25 almost ten years now, required our retailers to pay WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 93 1 prizes. We -- they must pay up to 50 dollars, but 2 they are encouraged to pay up to 599. And then 3 anything over 599 has to go to a claims center. 4 For some of our retailers, they are 5 paying up to 599. For some other retailers, they're 6 only paying the low-tier prize. And if a prize 7 happens to be more than 50 -- really, more than 25 8 dollars, they're sending them to another retailer to 9 get paid. Your players are inconvenienced, your 10 retailers are out the money, but they are paying it. 11 And this is just a way that we can compensate those 12 retailers that are paying mid-tier and high-tier 13 prizes, which is, all prizes from 50 dollars to 599. 14 And I think it will be very beneficial 15 with the relationship between us and our retailers. 16 We hear this at every town hall meeting. Our retailer 17 wants -- our retailers want more money because they 18 don't think the five percent covers their 19 administrative costs to operate the Lottery. 20 So what we want to do is to make sure 21 that -- and this is a legitimate area, is they're 22 tying up their capital in order to pay our prizes. 23 Their week starts on Sunday, and they go a whole week 24 in paying prizes before we sweep their bank account 25 and reimburse them for what they paid out of pocket WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 94 1 for that week. 2 COMMISSIONER CRINER: I thought that 3 was the answer, but I knew you had been a retailer and 4 I -- 5 MS. CLOUD: Yes. 6 COMMISSIONER WHITAKER: Have you gotten 7 specific feedback from them on this proposal? 8 MS. CLOUD: Yes. 9 COMMISSIONER WHITAKER: And this is 10 what satisfies them? 11 MS. CLOUD: For now. 12 COMMISSIONER WHITAKER: They -- if you 13 pass this, they're going to say, we're happy, or 14 they're going to say -- 15 MS. CLOUD: Well, we had a town hall 16 meeting last night in Brownsville, and this -- I did 17 talk about this. And these retailers think that this 18 is an excellent way to go. First of all, especially 19 the ones that are paying over 50 dollars and up to 20 599. Because other stores are sending their players 21 that are buying tickets from them to other retailers 22 for the validation and the cashing of the tickets. 23 And so it's making it an unfair balance out there. 24 And this is one way that we can help balance that. 25 The retailers that are only going to pay 25 dollars WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 95 1 are not going to get this cashing bonus. 2 So I think we can't afford to give our 3 retailers more commission. We pay -- they get five 4 percent commission on tickets that they sell, and at 5 this particular time, we don't have the funds within 6 our administrative dollars to pay more commission. 7 But we do have the funds to do this much for those 8 retailers that are paying our prizes. 9 CHAIRMAN CLOWE: Is Bart here? 10 MS. CLOUD: Yes. 11 CHAIRMAN CLOWE: I have a question on 12 the fiscal impact in regard to the sums stated here of 13 two and a half million dollars annually and what the 14 offset is on that of cost to us relative to use of the 15 retailers' funds. Has he done a study on that? 16 MS. CLOUD: I'm not sure he has done 17 that study, Commissioners. 18 This -- Commissioners, I would like for 19 you to understand that we're probably the only lottery 20 that I know of that is only paying a cashing bonus on 21 the mid-tier and high-tier. Most lotteries pay a one 22 percent cashing bonus across the board. That was a 23 tremendous amount more expense to the Lottery, and we 24 couldn't afford to do that either. So what we're 25 trying to do is reach the -- the boundary that we stay WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 96 1 within our means of responding to this need, where 2 other lotteries pay a higher commission to their 3 retailers, more than five percent, and they pay a one 4 percent cashing bonus as well. 5 COMMISSIONER WHITAKER: What's the 6 average of commission paid? 7 MS. CLOUD: It's changing from six, 8 seven percent, on -- of sales, percentage of sales, in 9 most lotteries. 10 COMMISSIONER WHITAKER: Plus -- 11 MS. CLOUD: Plus the one percent 12 cashing bonus. Some are even higher than that. I 13 think Oregon is up to ten percent, based on year sales 14 range. 15 COMMISSIONER CRINER: That's what I was 16 getting ready to ask you. 17 MS. CLOUD: Yeah. 18 COMMISSIONER CRINER: Is there a 19 performance -- 20 MS. CLOUD: Well, and that's what we 21 proposed before our prize payout was reduced. We were 22 working with a statistician at the time on a sales 23 incentive commission, which would mean the retailers 24 would have to increase their sales above their base in 25 order to get that commission, but we can't afford to WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 97 1 do that either right now. Our sales just aren't back 2 to the level where our administrative dollars could 3 cover that. 4 CHAIRMAN CLOWE: You're asking for a 5 motion from the Commission now to publish this rule 6 for public comment? 7 MS. KIPLIN: Yes, sir. 8 COMMISSIONER CRINER: So moved. 9 CHAIRMAN CLOWE: The motion is made. A 10 second? 11 COMMISSIONER WHITAKER: Second. 12 CHAIRMAN CLOWE: All in favor, please 13 say aye. Opposed, no. 14 The vote is three-zero in favor of 15 publishing this rule for comment. 16 The next item is number 18, 17 consideration and possible discussion and action on 18 adoption of a new rule relating to the agency's fleet 19 management. 20 MR. BENNETT: Once again, for the 21 record, my name is Ridgely Bennett. 22 Commissioners, agency staff recommends 23 that the Texas Lottery Commission adopt new Rule 16 24 TAC, Section 403.401, relating to the assignment and 25 use of commission motor vehicles, without changes to WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 98 1 the proposed text published in the July 13th, 2001 2 issue of the Texas Register. The Commission received 3 no comments on the rule. 4 CHAIRMAN CLOWE: Any questions? 5 COMMISSIONER CRINER: Has this varied 6 much from what we got out of the legislature? 7 MR. BENNETT: This is the language 8 that's required by the Government Code that each 9 agency adopt. So it's required by statute. 10 COMMISSIONER CRINER: Okay. 11 CHAIRMAN CLOWE: Is there a motion? 12 COMMISSIONER WHITAKER: So moved. 13 COMMISSIONER CRINER: Seconded. 14 CHAIRMAN CLOWE: Moved and seconded. 15 All in favor, please say aye. Opposed, no. 16 The motion is approved three-zero. 17 MR. BENNETT: Thank you, Commissioners. 18 I have an order for you to sign. 19 CHAIRMAN CLOWE: And, Ridgely, when 20 you're ready, I think you have the next item as well, 21 number 19. 22 MR. BENNETT: Thank you, Commissioners. 23 Agency staff recommends that the Commission propose 24 for publication new Rule 16 TAC 403.402, relating to 25 the exemption from the vehicle inscription WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 99 1 requirements that are required by the Transportation 2 Code. During the last legislative session, pursuant 3 to Senate Bill 817, the Commission received authority 4 to exempt the security division's surveillance 5 vehicles from the requirement that the words Texas 6 Lottery Commission be painted on the side of each 7 vehicle. The statute requires that the Commission 8 adopt a rule to implement this motion. And that is 9 what this current rule does. 10 CHAIRMAN CLOWE: Are there any 11 questions? 12 COMMISSIONER CRINER: Yeah. I'm sorry, 13 Ridgely. That's what I was asking you, the question 14 I -- 15 MR. BENNETT: Oh, I'm sorry. This is 16 the second rule. 17 COMMISSIONER CRINER: I got confused. 18 MR. BENNETT: Both rules require -- are 19 statutory and require Commission action. 20 CHAIRMAN CLOWE: Is there a motion? 21 COMMISSIONER WHITAKER: Move to adopt. 22 COMMISSIONER CRINER: Second. 23 MS. KIPLIN: Propose. 24 COMMISSIONER WHITAKER: Propose. 25 Excuse me. Move to propose it for publication. I'm WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 100 1 sorry. 2 CHAIRMAN CLOWE: Moved and seconded. 3 All in favor, please say aye. Opposed, no. The vote 4 is approved three-zero. 5 MR. BENNETT: Thank you, Commissioners. 6 CHAIRMAN CLOWE: Ridgely, I think 7 you're finished. 8 MR. BENNETT: Hopefully, not forever. 9 CHAIRMAN CLOWE: Just these two agenda 10 items. Commissioners, the next item, number 20, is 11 consideration and possible discussion and action on 12 whether the negotiation of the lottery operator's 13 contract in an open meeting would have a detrimental 14 effect on the Commission -- Commission's position in 15 the negotiations. The executive director has notified 16 the Commission that she wishes to discuss this in 17 executive session, and we are allowed to do that. It 18 does require a motion in order for it to be placed on 19 the executive session agenda. 20 MS. KIPLIN: It requires the Commission 21 to enter into a written determination. And 22 Commissioners, if you'll recall, you did that the last 23 commission meeting. I have -- and the Commission did 24 not want that to be a running determination. You 25 wanted to take this up at each opportunity to go into WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 101 1 a closed meeting. I have prepared for you today the 2 same written determination for you to take up and 3 consider. And so I would think that your motion would 4 be to make that written determination. 5 COMMISSIONER WHITAKER: So moved, based 6 on staff recommendation. 7 COMMISSIONER CRINER: Second. 8 CHAIRMAN CLOWE: Moved and seconded. 9 All in favor, please say aye. Opposed no. 10 The vote is three-zero in favor. 11 We've come, at this time, to -- on the 12 agenda, the executive session motion, but I want to 13 ask if there are members of the public in the audience 14 who may wish to address the Commission on any items of 15 interest before we do that, in order to -- as a 16 courtesy to deal with that in the morning hours. Is 17 there anyone here that would like to address the 18 Commission on a subject? 19 Seeing none, I would then, at this 20 time, 10:31, move the Texas Lottery Commission go into 21 executive session to deliberate the duties and 22 evaluation of the Executive Director, Internal 23 Auditor, and Charitable Bingo Operations Director, 24 pursuant to Section 551.074 of the Texas Government 25 Code. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 102 1 To deliberate the duties of the General 2 Counsel and Security Director, pursuant to section 3 551.074 of the Texas Government Code. 4 To receive legal advice regarding 5 pending or contemplated litigation and/or to receive 6 legal advice pursuant to Section 551.071, (1) (A) or 7 (B) of the Texas Government Code and/or to receive 8 legal advice pursuant to Section 551.071 (2) of the 9 Texas Government Code, including but not limited to: 10 TPFV Group, Inc. versus Texas Lottery Commission, 11 Retired Sergeant Majors' Association, et al. versus 12 Texas Lottery Commission, et al., contract regarding 13 the Charitable Bingo System employment law, personnel 14 law, procurement and contract law, and general 15 government law Lottery operator contract. 16 To deliberate the Texas Lottery 17 headquarters building lease pursuant to Section 18 551.072 of the Texas Government Code. 19 To deliberate the negotiations of the 20 lottery operator's contract pursuant to Section 21 467.030 of the Texas Government Code. 22 In connection with the deliberation of 23 the negotiation of the lottery operator's contract, 24 based on consultation with the Commission's General 25 Counsel, it is my understanding that the amendment to WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 103 1 section 467.030 of the Government Code allows the 2 Commission to have a closed meeting if it determines, 3 in writing, that an open meeting would have a 4 detrimental effect on the Commission's position in the 5 negotiation. The Commission has made such a 6 determination today, and it is in writing and is 7 signed at this time. Is there a second? 8 COMMISSIONER WHITAKER: Second. 9 CHAIRMAN CLOWE: All in favor, please 10 say aye. 11 The vote is three zero in favor. 12 The Texas Lottery Commission will go 13 into executive session. The time is 10:34 a.m. Today 14 is September the 19th, 2001. 15 (EXECUTIVE SESSION.) 16 CHAIRMAN CLOWE: The Texas Lottery 17 Commission is out of executive session. The time is 18 2:36 p.m. There is action to be taken as a result of 19 the executive session, and it relates to the renewal 20 of the contract by the Commission for its facility at 21 this location. 22 Gary Grief, would you come up, please? 23 Gary, this item was discussed under the 24 rules in executive session. You informed the 25 Commissioners and answered their questions, and what WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 104 1 is the request for action that you would give us at 2 this time, please? 3 MR. GRIEF: I would request that the 4 Commission give us the approval to go forward with 5 negotiating the five-year extension to our current 6 lease and give the Executive Director permission to 7 sign that agreement, if we can reach such, with our 8 landlord. 9 CHAIRMAN CLOWE: Is there a motion? 10 COMMISSIONER CRINER: So moved. 11 COMMISSIONER WHITAKER: Second. 12 CHAIRMAN CLOWE: All in favor, say aye, 13 please. Opposed no. 14 The motion is approved three to zero. 15 Thank you, Gary. 16 We're now ready to go to item 16, which 17 is a consideration of the status and possible entry of 18 orders in various docket numbers. Kim, will you help 19 us with this item, please. 20 MS. KIPLIN: Yes, I'll be glad to. 21 Commissioners, all but the last case 22 are Lottery-related cases. They are all to revoke the 23 Lottery license or deny an application -- pardon me, 24 just to revoke the Lottery license. And they're for a 25 variety of reasons, either NSFs or out of business. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 105 1 There are none that I'm aware of that are atypical or 2 unusual. And the staff would recommend that you do 3 approve the orders and the proposal for decisions that 4 were issued by the administrative law judge in that 5 matter. 6 The last item is a bingo item. It's 7 the Heart of Texas Black Chamber of Commerce. This 8 was a matter that was taken to the State Office of 9 Administrative Hearings. There was an -- a very 10 extensive hearing. My understanding is, it went on 11 for about eight to nine hours. And the proposal for 12 decision was issued, and it was the administrative law 13 judge's recommendation that the renewal application be 14 denied for the reasons and for the findings and 15 conclusions that were set out in this matter. 16 Exceptions were filed by the staff, and 17 it was mainly just to make clear that it's a 18 conductor's license and not an operator's license and 19 things of that matter. The ALJ did issue an amended 20 proposal for decision, and shortly thereafter, the 21 respondent filed exceptions to the amended proposal 22 for decision. 23 I placed a call to the judge's office 24 yesterday to ascertain whether the judge intended to 25 issue any other document from her office in light of WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 106 1 the filing of the exceptions to the amended proposal 2 for decision. And I received a communication this 3 morning that indicated the answer to that was no. So 4 this matter is ripe for your consideration, and the 5 staff would recommend and request that you do enter an 6 order that's consistent with the amended proposal for 7 decision, and that would deny the respondent's 8 application for a renewal of a license to conduct 9 bingo. 10 COMMISSIONER WHITAKER: So moved. 11 CHAIRMAN CLOWE: Second? 12 All in favor, please say aye. Opposed 13 no. 14 The vote is three-zero in favor. Thank 15 you, Kim. 16 Linda, we'll ask you to wait for just a 17 minute while we sign these orders, and then we'll be 18 ready for your report. 19 (OFF THE RECORD.) 20 CHAIRMAN CLOWE: We are now ready for 21 item number 17, the report by the Executive Director. 22 Linda? 23 MS. CLOUD: Commissioners, I'm going to 24 have Bart Sanchez, our financial director, to walk you 25 through the last -- the end of the -- the last month WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 107 1 of our fiscal year transfer. 2 MR. SANCHEZ: Good afternoon, 3 Commissioners. My name is Bart Sanchez. I'm the 4 Financial Administration Director. In front you, you 5 should have the August 15th transfer. And this one 6 was a little bit different. We had to transfer two 7 amounts. We transferred the amount for the period 8 ending July 31st. We also had to transfer an amount 9 for the estimated August sales, per House Bill 2914. 10 So we transferred 68 million for the July sales. We 11 also transferred 63 million, which was the estimated 12 for the sales for the month of August. And this was a 13 little bit unusual than, I guess, all the past years 14 that I've been here. 15 And then for the September 15th, which 16 you don't have it in front of you, we also transferred 17 an additional eight million, because we underestimated 18 the -- we overestimated the prize expense. So there 19 was an additional amount of eight million transferred 20 to the Foundation School Fund. This also does not 21 include what we will transfer later, I guess, in a 22 couple of months for the unspent administrative funds. 23 There's also going to be -- that's going to be an 24 additional transfer. So I guess for the total fiscal 25 year '01 cash basis, we have transferred WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 108 1 835.8 million. Then, of course, you have the 2 transfers to the multi-categorical Teaching Hospital 3 will be 11.8 million. Tertiary Care Facility account 4 of 17.1 million, which, in September 15th, we 5 transferred an additional nine million. 6 Do you have any questions? I will be 7 glad to try to answer. 8 CHAIRMAN CLOWE: I believe not. Thank 9 you, Bart. 10 MS. CLOUD: Okay. And under HUB 11 reporting, Robert, do you want to come up and give 12 Commissioners a HUB report? 13 MR. HALL: Good evening, Commissioners. 14 For the record, my name is Robert Hall, Director of 15 Minority Development Services, Texas Lottery 16 Commission. At the end of August, we are reporting to 17 you a total utilization of minority and HUB 18 participation of over 16 million dollars, which 19 includes the subcontracting amount of 11.92 percent. 20 I know you've had an opportunity to look at the 21 report, so I'll be happy to answer any questions you 22 may have regarding the report. 23 COMMISSIONER WHITAKER: I don't have 24 any questions. But I do want to note, for the record, 25 that you and I spoke earlier today, and I was WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 109 1 satisfied with your answer. And I've given that 2 information to Kim, and she will be in touch with you. 3 MR. HALL: Okay. 4 COMMISSIONER WHITAKER: Okay. And 5 thank you so much. 6 MR. HALL: You're welcome. And the 7 information that you had requested -- 8 COMMISSIONER WHITAKER: The name of 9 that person who talked to me yesterday. 10 MR. HALL: Yes, ma'am. 11 And I want to let you know, the 12 information that you requested will be forwarded to 13 you, I think, tomorrow, for sure. I was working on 14 the cover memo for you today. 15 COMMISSIONER CRINER: Mr. Hall. 16 MR. HALL: Yes, sir. 17 COMMISSIONER CRINER: How are you 18 doing? 19 MR. HALL: I'm fine. Good evening. 20 COMMISSIONER CRINER: We had a HUB 21 forum in July. Right? 22 MR. HALL: Yes, we did. Yes, sir. 23 COMMISSIONER CRINER: How is that -- 24 July, August, is basically when the State agencies do 25 their purchasing. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 110 1 MR. HALL: End of year purchasing, yes, 2 sir. 3 COMMISSIONER CRINER: Right. For the 4 next year. 5 MR. HALL: Yes, sir. 6 COMMISSIONER CRINER: And the bids come 7 out and everybody has got to dance and then September 8 1, hopefully, you win. How have we been in terms of 9 those folks that came in July, the 19th of July, 10 whatever, forum? 11 MR. HALL: Okay. 12 COMMISSIONER CRINER: How are they 13 performing in terms of interfacing with you? Are we 14 tracking them, do we have any results from that? 15 MR. HALL: Well, we track them by -- 16 every vendor that we -- whenever we attend a HUB forum 17 or a vendor fair or expo, et cetera, we have every 18 vendor sign in that we talk to just -- and discuss 19 opportunities with. And during that we have an 20 opportunity, we also collect business cards and let 21 them know of potential contacts in the agency that 22 they actually should know about, such as our 23 purchasing people, and also us. And we make them 24 aware of potential opportunities that we're aware of 25 that will be coming out very soon. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 111 1 Now, as far as how they're interacting 2 with us for future contracts, it depends primarily on 3 the vendor. Our effort is to make them aware of what 4 we have for inclusion of opportunities, and after that 5 fact, we look for -- if they contact us and they're 6 awarded an opportunity, if that actually happens, 7 we'll give them (inaudible) putting the forth the 8 effort to get there. But there is no real mechanism 9 that's in place to actually track when they may 10 contract with us at any given point in time. 11 COMMISSIONER CRINER: So can I have a 12 conversation? We had this forum, and everybody came 13 and said it was good. But we don't have any vendors, 14 or we may or not have any vendors. How do we track 15 the performance of that forum? How do we figure out 16 whether that forum was successful or not? And I think 17 you and I talked on the phone one day, that a lot of 18 folks just don't come back because they don't want to 19 fill out the paperwork. 20 MR. HALL: Right. 21 COMMISSIONER CRINER: And, you know, 22 sometimes you can say, the paperwork is not that 23 difficult to fill out. Maybe we have to have a 24 training in that forum on how to fill out that 25 paperwork and to bridge that gap. I'm concerned that WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 112 1 not only this agency have a forum, but several 2 agencies have forums every summer, every spring, 3 and -- 4 MR. HALL: Yes, sir. 5 COMMISSIONER CRINER: -- I don't hear a 6 lot of talk that those forums have vendors knocking at 7 the door asking for bids, presenting unsolicited 8 proposals, or trying to be a vendor. And so I want us 9 to be a little different. 10 MR. HALL: Okay. 11 COMMISSIONER CRINER: I would like for 12 them to be knocking at the door or calling you back. 13 Is there something -- maybe you and Linda could put 14 your heads together, if we -- if that's not happening. 15 If it's happening, then that's fine. But we need to 16 invite those folks that came to the forum to 17 communicate with us. Because success in bidding is 18 bidding. 19 MR. HALL: Right. 20 COMMISSIONER CRINER: And if you don't 21 bid often and consistently, you will be left out. And 22 that's very easy for somebody to say, well, the 23 Lottery is doing all this, and we got left out. Well, 24 you got left out because you didn't show up. And in 25 our discussion that we had on the phone that day, WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 113 1 you've just got to go tell them to come back and show 2 up again. 3 MR. HALL: Right. 4 COMMISSIONER CRINER: So I'm concerned 5 that we have a forum, and we pat ourselves on the back 6 about the forum. But from my perspective, the forum 7 is not good if we don't have any bidders and any 8 winners as a result of that. So is there a way that 9 we can track that? I would like for us to really be 10 an exemplary agency when it comes to our HUB 11 participation, our HUB performance. We don't have 12 goals and objectives. I just want to be real 13 successful, overly successful at that, because I don't 14 see anybody else really trying to be any more 15 successful than what they need to be. 16 MR. HALL: Well, I can share one 17 success story with you. And, of course, I'll take 18 your advice and we'll get with Ms. Cloud on other 19 recommendations. We talked about, for example, our 20 HUB auditing, financial -- excuse me -- auditing 21 services vendor fair we had recently, and we invited 22 HUB vendors to that fair. And one of the vendors that 23 attended actually was a HUB vendor and actually 24 received the award of contract. And that was 25 McCullum Jones, and they are a HUB vendor, and they WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 114 1 actually had the contract previously and were awarded 2 a successful proposal on this particular contract. 3 And now we were trying to schedule a 4 new opportunity such as the Bucks and Trucks vendor 5 fair tomorrow. But due to limited vendor 6 participation in that, we postponed that event until 7 another time. But that was the type of vendors we are 8 trying to make to ensure that vendors are aware of 9 opportunities for inclusion, to invite them to the 10 table to learn about the procurement process, and also 11 learn about the opportunity in advance so we can 12 discuss obstacles that may be a deterrent for some 13 vendors during bidding and see, can we reconcile those 14 before we actually put the RFP out on the street. 15 COMMISSIONER CRINER: Our prime 16 vendors -- I've always heard prime vendors say, I just 17 don't know any HUBs. And it's just -- it's always an 18 easy out. And I always slap them upside the head and 19 say, I'm one. Okay? But the thing of it is, is that 20 I view the HUB program as a great opportunity to get 21 Americans to meet each other and understand how to do 22 business together. And I really want you -- this 23 agency, through you and Ms. Cloud, to focus on making 24 that a real reality in terms of our HUB vendors. That 25 we have, not one success, but several successes, and WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 115 1 that the successes help our prime contractors grow and 2 develop better in this state and in this area -- in 3 this arena as well. It's unbelievable what you can 4 deal when folks start teaming. And if we can be a 5 catalyst where everybody teams, then we end up being 6 the -- I guess, the show horse for the state in terms 7 of how do it. I think you're the right person to do 8 that. I really do. 9 MR. HALL: Thank you. 10 COMMISSIONER CRINER: And if you and 11 Linda focus on that, then each time you sit before us, 12 you could have a success if we had some kind of bid 13 out. And it can be extremely successful if your HUB 14 vendors become what is now being known as a partner, 15 with primes. And it's a partnership where the -- a 16 lot of times the HUB vendor knows more key leaders 17 than the prime contractor will know. And when you 18 team a small company with a large company, you will be 19 surprised the value added to the State and to the 20 agency and to the community in doing that. So I 21 just -- that's kind of like a -- let's have a little 22 conversation, me and you, about how we can make this 23 whole HUB program the exemplary HUB program in the 24 State. 25 MR. HALL: Well, one of the ways that WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 116 1 we talked about, and we can get there, but we 2 definitely -- after we start the initiation of our 3 mentor project program, which will be coming very 4 soon, for you, the Commissioners, Executive Director, 5 and all directors to see, is to look at how we can 6 meet with our primary vendors. I believe right now, 7 in an analyzation of our contracts, there is not a lot 8 of direct contracts that we can award to small 9 under-utilized businesses, but there are some. Most 10 of the contracts that our HUBs are getting are less 11 than a hundred thousand dollars and mostly less than 12 25,000. When it comes to be over a hundred thousand 13 dollars, we start to see that there's less 14 participation directly with HUB vendors. So we -- I 15 think some of the success we're going to see is going 16 to be in the area of subcontracting. And the Lottery 17 itself probably is one of the leading agencies that 18 spends a lot of money in subcontracting. And this 19 past year, we're probably going to spend about eight 20 million dollars in subcontracting, total. So we're 21 leading in that area, so let me suggest to you that 22 we'll look at the primary area for direct spending and 23 look at how we have used the list of vendors that we 24 currently have and see if we can get those certified. 25 And if we can, they'll be eligible for potential WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 117 1 counting toward that HUB participation. And then also 2 look at our subcontract people. 3 COMMISSIONER CRINER: Well, as you well 4 know, everybody that walks up to me, I tell them to 5 call you. I say, you want to visit with the Lottery, 6 call Robert Hall. 7 But, you know, all of those folks are 8 not going to be the right people or the right business 9 or the right this, that, and the other. But there has 10 got to be an answer. It's the best thing for our 11 community. When folks start teaming as subs and 12 primes, and they start working -- if you start working 13 with one agency together, the next thing you find out, 14 they're working two agencies together. They may get a 15 25,000 dollar contract here, but they may go down the 16 street and get another 25,000 dollar contract. And 17 the more places they can team with the big prime 18 companies, the better off our community, our state, 19 and everybody else. I know I'm preaching to the 20 choir, but I want you to -- I don't want you to miss 21 my charge when it gets in that direction. I really 22 want to see some successes, and I want us to set the 23 pace for the rest of the agencies to want to -- 24 MR. HALL: Yes, sir. 25 COMMISSIONER CRINER: -- ask how we got WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 118 1 this done. 2 MR. HALL: Yes, sir. I'll be -- we'll 3 track that information and hopefully give you more 4 updates as the year goes by. 5 I would like to also share at this 6 time, if I may, Chairman Clowe, information that we 7 just submitted our HUB statewide reporting 8 information. So October 15th was the date of release 9 regarding that report, so I'll hopefully share with 10 you next month, with Linda's concurrence, information 11 on how we've actually done from a statewide 12 perspective. And you'll know better then what we're 13 doing on some of the subcontracting and also direct 14 spending. 15 In addition to that, you are going to 16 receive copies, via mail, of a memorandum that was 17 sent to Linda and also Patsy, and also it was 18 discussed in our director's meeting yesterday, 19 regarding the State auditor's report on 19 agencies 20 that were audited on HUB compliance. I want to assure 21 you that our agency was not one of the agencies that 22 was audited, first of all. 23 Second of all, it was -- of all the 19 24 agencies, none of them actually passed the audit. So 25 I wanted to send the memorandum to make sure that our WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 119 1 Executive Director knew, as well as you knew, we feel 2 very assured, at this point in time, that we are more 3 than in compliance with the requirements of the HUB 4 rules. 5 One aspect remains, and that is our 6 mentor project initiative, and we hope to have that in 7 place by October 1. So I want to make sure that you 8 are aware when you get that document, don't be 9 alarmed. We're okay. So I think we're moving in the 10 right direction. 11 MS. CLOUD: Commissioner Criner, the 12 one thing that we may not have laid out for you as 13 well, and Robert can probably explain this better than 14 I can, but because of the amount of money we pay to 15 Gtech, based on a percentage of sales, that puts 16 our -- that number is added into our minority -- I 17 mean, our spending on contracts, and then the minority 18 contractors, subcontractors that Gtech has, doesn't 19 bring their percentage up to where it needs to be only 20 because the volume is so great they just can't get 21 there. And that brings our entire percentage down, 22 because that number is added into the total that we 23 spend. 24 COMMISSIONER CRINER: Is it called a 25 catch 22? WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 120 1 MS. CLOUD: Well, we've tried -- we've 2 tried to get that looked a little differently, but 3 that hasn't worked for us so far. 4 COMMISSIONER CRINER: I know. But I -- 5 but we -- you know, we can do it. And Gtech can help 6 us do it. And, you know, we have these forums to get 7 people to come and pay attention. The thing of it is, 8 is that the amount of attention people pay is based on 9 their results. If they don't feel like there is going 10 to really be any result, they come, they look. All 11 was nice, you had us over. You had us over for 12 dinner, but you didn't offer us a seat. And so we 13 have to figure out how to help people do the seat. 14 Robert and I had a discussion, and I don't make that 15 public, but it's that sometimes the seat is right 16 behind the person. And you just have to tell them to 17 sit right here, and there you are. 18 MS. CLOUD: We have been a very -- 19 COMMISSIONER CRINER: Different kind of 20 help to make this thing work. 21 MS. CLOUD: We have been very proactive 22 in the minority program since I've been in this job. 23 And we do have minority contracts, primary contracts, 24 with our auditors for our security, drawings, our 25 financial auditor, our advertising agency. So we do WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 121 1 have some major dollars going -- prime contracts to -- 2 COMMISSIONER CRINER: I don't challenge 3 you on any of that, Ms. Cloud. 4 MS. CLOUD: We're still trying to do 5 better. 6 COMMISSIONER CRINER: Yeah. And I'll 7 say it each time we meet. I just want to make sure 8 we're doing it and that everybody understands that I 9 really want us to, not only achieve, but overachieve. 10 And -- 11 MS. CLOUD: I agree. 12 COMMISSIONER CRINER: -- that bar -- I 13 don't know how high that bar is. It can be six inches 14 or a foot. But the programs that we create, the 15 mentoring program, and everything else that we've 16 created to try to make it work should be exemplary so 17 that the rest of the state will want to follow. And 18 if we set the path that makes it a -- that makes the 19 whole thing obtainable, then we will achieve those 20 numbers. And if we have to ask our primary vendors to 21 do that, then we ask our primes to get down and help 22 us understand how to do that. 23 MS. CLOUD: That is part of their 24 requirement in their contract. 25 COMMISSIONER CRINER: Okay. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 122 1 MR. HALL: That's all I have. Thank 2 you. 3 CHAIRMAN CLOWE: Robert. 4 MR. HALL: Yes, sir. 5 CHAIRMAN CLOWE: I have the memo and 6 the article that you referred to right here, and I 7 appreciated you sending that to the Commissioners. 8 And, you know, one of my questions, which you've 9 answered, was how would we have stacked up if we had 10 been audited. And you have assured us that we would 11 have done better than these 19 that were selected. Do 12 you have any knowledge of how these agencies were 13 selected for this article and this audit? 14 MR. HALL: No, sir, I do not. I have 15 no knowledge at all how they were selected. 16 CHAIRMAN CLOWE: Well, I attended the 17 seminar that you all sponsored along with other 18 agencies, that Commissioner Criner mentioned, and one 19 of the problems that he has pointed out is the 20 difficulty that HUB companies have in responding to 21 the RFP. I assume that would be in the role as a 22 prime as opposed to being a sub. And he says that 23 that completion of that information in that form as 24 laid out in the process is onerous to a small company 25 that is dealing with it for the first time. And that WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 123 1 seems to be a real problem. What can we do, if 2 anything, as part of the charge that Commissioner 3 Criner is laying out, to help educate those firms, 4 small companies, and in many cases, probably just a 5 few people, how can we support them and help them get 6 through that format to where they can be considered 7 serious bidders for contracts that we have? 8 MR. HALL: One of the things, as I said 9 before, we're always doing, particularly for contracts 10 over one hundred thousand dollars worth, we're always 11 hosting a preproposal conference or a prebid 12 conference. So we're recommending that to discuss the 13 new requirement for the business subcontracting plan. 14 And whenever possible, discuss the new HUB 15 requirements as well. 16 The other avenue that we can take to 17 assist vendors is, we can host our own forums here to 18 discuss just that. Our procurement process, how it 19 works, the forums that we -- that you're required to 20 complete. And if you're interested in doing business 21 with the Lottery, this is how you need to do it. So 22 that's another avenue we haven't talked about doing 23 just yet, but we've used the avenues, particularly 24 from the bid conferences, respective to address those 25 issues. Now, even though we've had preproposal WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 124 1 conferences and prebid conferences, there are still 2 some challenges with some of our vendors not 3 completing the paperwork. Now, I want to say, it's 4 just not HUB vendors. It's also nonHUB vendors that 5 we've had that experience with. 6 CHAIRMAN CLOWE: Well, I would like to 7 suggest, based on what Commissioner Criner said, to 8 have you consider having that seminar, or that 9 session, and encouraging people who are interested in 10 doing business just with the Lottery Commission to 11 come in and be educated on how to go through this 12 format. And, you know, Commissioner Criner is a great 13 example of a company that has been successful in this 14 process. And I think that you could probably get him 15 there to talk to the companies, and I would be 16 happy -- we probably need to come at different times 17 so we don't have a quorum, but Commissioner Whitaker 18 may be interested in being able to do that, but I 19 think we need to demonstrate that we want to make a 20 serious effort towards helping these companies. I 21 don't think it's enough, based on what I've heard 22 Commissioner Criner say, to just lay out this business 23 and say, here it is, you know, come bid on it. These 24 are, in many cases, I think, small companies that, you 25 know, don't have administrative staff and don't have WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 125 1 the experience, and it's a difficult challenge for 2 them to get through those forms and that RFP 3 paperwork. So maybe that can be a focus for us over 4 the next fiscal year to try to help those companies 5 get in the bidding process. Commissioner Criner has 6 told us that the more you do it, the more often you 7 engage in the process, the more comfortable you get 8 with it, and probably your chances of being successful 9 are enhanced. 10 MR. HALL: Not a problem. We've had -- 11 we had, when I first got here, a round table 12 discussion with all of our -- we invited all of the 13 primary vendors that we were contracting with at that 14 time, and I think our participation was at somewhere 15 around between 50 -- between 40 and 50 vendors that 16 actually came. So we can actually do that again and 17 keep on doing things like that, inviting them in to 18 discuss the procurement process itself, and invite our 19 purchasing representatives down as well, and see how 20 it actually flows. Now, that's exactly what I just 21 said about vendors not understanding the process. I 22 don't even know, from a vendor standpoint -- some 23 vendors have actually told me they haven't understood 24 what an RFP is versus an IFB. So there is differences 25 there that they need to know about as well. So we'll WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 126 1 look forward to doing something like that. 2 CHAIRMAN CLOWE: Great. Thank you. 3 MR. HALL: Thank you. Have a good 4 evening. 5 MS. CLOUD: Commissioners, I would like 6 to go back to the request for sales information based 7 on the events of last week, and we have presented you 8 with a report that marketing provided for us to show 9 the week prior to the tragedy, the week of, and the 10 week after. And it -- the week after, of course, is 11 this week and our last -- this week. And you will see 12 that we are starting to make a reversal. On the 11th, 13 the day of the bombing, the sales were down. They 14 stayed down, except for Lotto Texas, and we had a 15 higher jackpot amount, and the Lotto Texas sales did 16 not drop. On this week as well, the sales for a 17 couple of days declined, but they are -- the last day, 18 they were getting back to a normal sales day for most 19 of the games. 20 CHAIRMAN CLOWE: Thank you, Linda. 21 MS. CLOUD: And we'll continue to track 22 that. 23 FTE totals. We have 315 active FTEs, 24 we have 19 vacant positions, we have six in the 25 selection, acceptance pending, five in the recruiting, WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 127 1 screening, interviewing process, no positions being 2 processed for posting at this time, and there are 3 eight vacant positions with no HR activity. And we 4 had one newly-filled position. 5 Lottery conferences, we -- I think we 6 still have the national conference on the forefront 7 here, October the 11th. Yesterday, the NASCO 8 executive committee was to have a conference call, and 9 I was not able to be here for that call. We were 10 flying down to Brownsville. So the call was to decide 11 whether the conference would carry on or not. And I 12 have not had information yet, and I will have to check 13 back with David today. 14 International lottery, this was going 15 to be a world meet. There was going to be a lot of 16 international lotteries at this conference, and it's 17 very unlikely that a lot of them will be able to get 18 in for that conference. So I think the decision was a 19 little up in the air. It was going to be, at this 20 point, a pretty big financial loss to NASCO because 21 they put deposits on nine hotels. And so it was -- 22 they had a big decision to make yesterday, and I just 23 don't have the answer. But I will make sure you and I 24 know what's going on before -- 25 CHAIRMAN CLOWE: That was going to be WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 128 1 in -- 2 MS. CLOUD: Albuquerque. 3 CHAIRMAN CLOWE: -- Albuquerque, New 4 Mexico, and I understand Commissioner Criner was going 5 to light the balloon. 6 MS. CLOUD: Yeah. Go up on a balloon 7 ride. 8 Okay. And last -- yesterday, we had a 9 retailer town hall meeting in Brownsville. It was our 10 first town hall meeting in Brownsville. The last one 11 we had in that area was in Harlingen. It was a very 12 successful meeting. We had about 90 retailers there. 13 We were very grateful for Leticia. She went with us, 14 representing communication. There was a good number 15 of our retailers who couldn't speak English, so she 16 did a real good job of interpreting for us. 17 Retailers were very nice. I only had 18 one retailer that said he did not like the Lottery 19 and didn't -- would not buy any more tickets. So I 20 did ask the question of all the retailers, was there 21 anyone else in the room that had the same feelings 22 that he did. And no one else did. So they were very 23 positive, and they asked a lot of very good questions 24 and had some really good suggestions. 25 COMMISSIONER WHITAKER: Why did he say WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 129 1 he didn't want to buy more tickets? 2 MS. CLOUD: It turns out -- I mean, I 3 was real concerned about that statement. It was, 4 like, early on, ten minutes into the meeting. And 5 they -- I think he just was a disgruntled manager of 6 the store. He was not the owner. But he wanted a new 7 play station and Gtech was going to see that he got a 8 new play station. But whether that was part of the 9 reason he didn't like us or not. But he didn't even 10 hold up his hand when I asked if there was anyone else 11 that had that same feeling, or would like to see the 12 Lottery go away, and nobody did. They were all very 13 positive and did not want to see the Lottery go away. 14 CHAIRMAN CLOWE: How many did you have 15 in attendance? 16 MS. CLOUD: We had 90 retailers. 17 CHAIRMAN CLOWE: It's a great program. 18 I think the Commissioners would urge you to continue 19 that. It's excellent communication. 20 MS. CLOUD: I think it's really been 21 beneficial to us. It's so -- it's so amazing how much 22 the different geographic locations are different in 23 the types of games that they want to sell or the way 24 they run their stores or what we can do to help. I 25 mean, they asked for Spanish language signs that said WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 130 1 what nights the Lotto and the on-line drawings were, 2 and we have never thought about that before. So -- so 3 anyway, we -- we're very -- we bring these things 4 back, and we put a lot of things into place because of 5 what they've said. 6 CHAIRMAN CLOWE: Great. 7 MS. CLOUD: Thanks. 8 CHAIRMAN CLOWE: Thank you, Linda. 9 We're now ready to go to the next item 10 on the agenda which is the Charitable Bingo Division 11 director's report. Phil, I believe you'll be making 12 that for us. 13 MR. SANDERSON: Chairman and 14 Commissioners, in your notebook is the memo from 15 Billy Atkins on his report to the Charitable Bingo 16 Division. And if you have any questions, I'll be glad 17 to answer those questions. The one note that I would 18 like to make, there is, on the conference and 19 seminars, there was a NAGRA seminar and conference 20 scheduled for this week in Milwaukee, and it was 21 canceled. The next NAGRA convention will be in 22 Charleston, South Carolina, April 21st through the 23 24th of 2002. 24 CHAIRMAN CLOWE: Great report, Phil. 25 COMMISSIONER CRINER: We'll let you off WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 131 1 this time. 2 CHAIRMAN CLOWE: I'll ask once more 3 before we adjourn if there is anyone here in the 4 public who would like to make a comment to the 5 Commissioners since it's the last item on the agenda. 6 Seeing no one, we will be adjourned at 3:05 p.m. 7 Thank you all very much. 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 132 1 REPORTER'S CERTIFICATION 2 3 STATE OF TEXAS ) 4 COUNTY OF TRAVIS ) 5 6 I, BRENDA J. WRIGHT, Certified Shorthand 7 Reporter for the State of Texas, do hereby certify 8 that the above-captioned matter came on for hearing 9 before the TEXAS LOTTERY COMMISSION as hereinafter set 10 out, that I did, in shorthand, report said 11 proceedings, and that the above and foregoing 12 typewritten pages contain a full, true, and correct 13 computer-aided transcription of my shorthand notes 14 taken on said occasion. 15 16 Witness my hand on this the 3RD day of 17 OCTOBER, 2001. 18 19 20 21 BRENDA J. WRIGHT, RPR, 22 Texas CSR No. 1780 Expiration Date: 12-31-02 23 1609 Shoal Creek Boulevard, Suite 202 Austin, Texas 78701 24 (512) 474-4363 25 JOB NO. 010919BJW WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363