1 1 TRANSCRIPT OF PROCEEDINGS 2 BEFORE THE 3 TEXAS LOTTERY COMMISSION 4 AUSTIN, TEXAS 5 6 COMMISSION MEETING OF THE § 7 TEXAS LOTTERY COMMISSION § THURSDAY, MAY 28, 2015 § 8 9 10 COMMISSION MEETING 11 THURSDAY, MAY 28, 2015 12 13 14 15 BE IT REMEMBERED THAT on Thursday, the 28th day of 16 May 2015, the Texas Lottery Commission meeting was held 17 from 10:00 a.m. until 11:52 a.m., at the offices of the 18 Texas Lottery Commission, 611 East 6th Street, Austin, 19 Texas 78701, before CHAIRMAN J. WINSTON KRAUSE and 20 COMMISSIONERS JEFF MEADOR, MARY ANN WILLIAMSON, JODIE G. 21 BAGGETT, and JOHN W. TOWNES, III, and the following 22 proceedings were reported via machine shorthand by 23 Lorrie A. Schnoor, Certified Shorthand Reporter, 24 Registered Merit Reporter, Certified Realtime Reporter 25 and Texas Certified Realtime Reporter. 2 1 APPEARANCES 2 CHAIRMAN: 3 Mr. J. Winston Krause 4 COMMISSIONERS: 5 Mr. Jeff Meador 6 Ms. Mary Ann Williamson Ms. Jodie G. Baggett 7 Mr. John W. Townes, III 8 GENERAL COUNSEL: 9 Mr. Robert F. Biard 10 EXECUTIVE DIRECTOR: 11 Mr. Gary Grief 12 CHARITABLE BINGO OPERATIONS DIRECTOR: 13 Mr. Alfonso D. Royal, III 14 15 16 17 18 19 20 21 22 23 24 25 3 1 TABLE OF CONTENTS 2 PAGE 3 PROCEEDINGS - THURSDAY, MAY 28, 2015 ........... 8 4 I. The Texas Lottery Commission will call the meeting to order....................... 8 5 II. Consideration of and possible discussion 6 and/or action, including proposal, on amendments to 16 TAC §§ 401.305 7 “Lotto Texas” On-Line Game Rule, 401.307 “Pick 3” On-Line Game Rule, 8 401.308 “Cash Five” On-Line Game, 401.312 “Texas Two Step” On-Line 9 Game, 401.315 "Mega Millions" On-Line Game Rule, 401.316 “Daily 4” On-Line 10 Game Rule, 401.320 “All or Nothing” On-Line Game Rule, 401.322 “Texas 11 Triple Chance” Lottery Game................ 11, 22 12 III. Consideration of and possible discussion and/or action, including withdrawal of 13 prior proposal and approval of new proposal, on amendments to 16 TAC §401.317 14 “Powerball®” On-Line Game Rule............. 11 15 IV. Consideration of and possible discussion and/or action, including adoption, on 16 amendments to 16 TAC § 401.368 (Instant Ticket Vending Machines), §401.158 17 (Suspension or Revocation of License), and §401.160 (Standard Penalty Chart); 18 and repeal of 16 TAC § 401.369 (Online Self-Service Terminals).................... 24 19 V. Consideration of and possible discussion 20 and/or action, including publication, of Notice of Intent to Review the 21 Commission’s rules set forth in 16 TAC Chapter 403, relating to General 22 Administration............................. 25 23 24 25 4 1 TABLE OF CONTENTS 2 PAGE 3 VI. Report, possible discussion and/or action on agency prime contracts, 4 including amendments on the contract for internal control system and 5 related services........................... 28 6 VII. Report, possible discussion and/or action on agency major contracts, including 7 contract for Dallas Cowboys Trademark License and Promotional Support services... 32 8 VIII. Report, possible discussion and/or 9 action on the agency’s comprehensive business plan and annual report pursuant 10 to State Lottery Act § 466.028............ 36 11 IX. Report, possible discussion and/or action on lottery sales and revenue, 12 game performance, new game opportunities advertising, promotional activities, 13 market research, trends, and game contracts, agreements, and procedures...... 37 14 X. Report, possible discussion and/or 15 action on transfers to the State........... 42 16 XI. Report, possible discussion and/or action on the 84th Legislature.................... 44 17 XII. Report, possible discussion and/or action 18 on external and internal audits and/or reviews relating to the Texas Lottery 19 Commission, and/or on Internal Audit activities, including approval of the 20 Fiscal Year 2016 Internal Audit plan....... 51 21 XIII. Report, possible discussion and/or action on the Charitable Bingo Operations 22 Division annual report for calendar year 2014................................. 58 23 24 25 5 1 TABLE OF CONTENTS 2 PAGE 3 XIV. Report by the Charitable Bingo Operations Director and possible discussion and/or 4 action on the Charitable Bingo Operations Division’s activities, including updates 5 on the Business Process Restructuring Project, licensing, accounting and audit 6 activities, pull-tab review, and special projects........................... 59 7 XV. Report, possible discussion and/or action 8 on IGT/GTECH Corporation................... 62 9 XVI. Report by the Executive Director and/or possible discussion and/or action on 10 the agency’s operational status, agency procedures, awards, and FTE status......... 62 11 XVII. Consideration of the status and possible 12 entry of orders in: Lottery NSF License Revocation Cases 13 (Default Unless Otherwise Noted) A. Docket No. 362-15-1933 – 14 Meat Market Victoria B. Docket No. 362-15-1934 – 15 Tarak Stop N Go C. Docket No. 362-15-1935 – 16 JBHAA INC. D. Docket No. 362-15-1936 – 17 Store Real #2 E. Docket No. 362-15-1938 – 18 Mt. Belveiu Mini Mart F. Docket No. 362-15-2315 – 19 Main Street Food Mart G. Docket No. 362-15-2316 – 20 Stop & Go Grocery H. Docket No. 362-15-2320 – 21 Pic N Pay Grocery I. Docket No. 362-15-2538 – 22 Mineral Wells Food Mart J. Docket No. 362-15-2539 – 23 Petroleum Products I K. Docket No. 362-15-2541 – 24 Charlies Exxon L. Docket No. 362-15-2542 – 25 Felders Texaco 6 1 TABLE OF CONTENTS 2 PAGE 3 M. Docket No. 362-15-2543 – Haz Mart 4 N. Docket No. 362-15-2991 – The Covered Wagon 5 O. Docket No. 362-15-2994 – O Kay Grocery Deli 6 P. Docket No. 362-15-2995 – Big Food Mart 7 Q. Docket No. 362-15-2996 – Parkway Chevron 8 Lottery Agreed Orders R. Docket No. 362-15-1768 – 9 Bob’s Food Mart S. Case No. 2015-474 – 10 Stop N Save T. Case No. 2015-601 – 11 K & M Foods Bingo Agreed Orders 12 U. Case No. 2014-241 – Cherry Lane Bingo 13 V. Case No. 2014-934 – Richland Plaza Bingo, Inc. 14 W. Case No. 2015-327 – Davico Enterprises, Corp. 15 X. Case No. 2015-725 – Victor Fuentes, Jr.................... 63 16 XVIII. Public comment........................... 21 17 XIX. Commission may meet in Executive Session: 18 A. To deliberate personnel matters, including the appointment, employment, 19 evaluation, reassignment, duties, discipline, or dismissal of the Executive Director 20 and/or the Charitable Bingo Operations Director pursuant to Section 551.074 of 21 the Texas Government Code. B. To deliberate the duties of the General 22 Counsel and/or the Human Resources Director pursuant to Section 551.074 of the 23 Texas Government Code. 24 25 7 1 TABLE OF CONTENTS 2 PAGE 3 C. To receive legal advice regarding pending or contemplated litigation or 4 settlement offers, or other legal advice, pursuant to Sections 551.071(1) 5 and (2) of the Texas Government Code, including but not limited to legal 6 advice regarding the following items: Pending and potential litigation regarding 7 Fun 5’s Instant Game #1592, including but not limited to Travis Co. District 8 Court Cause Nos. D-1-GN-14-004345 (Rule 202 Petition) and D-1-GN-14-005114 9 (Steele, et al. v. GTECH Corp.); Dallas Co. District Court Cause No. DC-14-14838 10 (Nettles v. GTECH Corp.); and El Paso District Court Cause No. 2014-DCV-4113 11 (McDonald v. GTECH Corp.) State of Texas v. Equal Employment 12 Opportunity Commission et al. Legal advice regarding the State Lottery 13 Act, Texas Government Code Chapter 467, the Bingo Enabling Act, the Open Meetings 14 Act, the Administrative Procedure Act, employment law, personnel law, procurement 15 and contract law, evidentiary and procedural law, and general government law. 16 Legal advice regarding any item on this open meeting agenda........................ 67 17 XX. Return to open session for further 18 deliberation and possible action on any matter posted for discussion in Executive 19 Session. Any matter posted for Executive Session also may be the subject of 20 discussion and/or action in open session prior to Executive Session................. 68 21 XXI. Adjournment................................ 69 22 REPORTER'S CERTIFICATE.......................... 70 23 24 25 8 1 P R O C E E D I N G S 2 THURSDAY, MAY 28, 2015 3 (10:00 a.m.) 4 AGENDA ITEM I 5 CHAIRMAN KRAUSE: Good morning. Come on 6 in. I'm Chairman Krause and I'm calling this meeting to 7 order of the Texas Lottery Commission. It's May 28, 8 2015, and it's exactly ten o'clock. Commissioners 9 Baggett, Meador, Townes, and Williamson are present. We 10 have not only a quorum, but we have a full commission 11 today. 12 So anyway, Gary you want to go ahead and 13 say something? 14 MR. GRIEF: Thank you, Mr. Chairman. 15 Good morning, Commissioners. We're 16 anticipating that today's meeting will be the last 17 meeting for Commissioners Meador, Williamson, Baggett 18 and Townes. And with that, I want to just take a moment 19 to thank each of you for your service and your time and 20 your dedication to this agency. 21 As you know, the Texas Lottery, more than 22 probably any other agency in state government, is really 23 a business operated by the state for the benefit of 24 public education and other good causes here in the 25 state. And I want you all to know that on behalf of not 9 1 just me but the entire team at the Lottery Commission, 2 we truly have appreciated the focus on the business that 3 this particular board has given to us. Your 4 encouragement, your patience, and your understanding of 5 the lottery industry -- know that we don't take that for 6 granted, and it has been greatly appreciated. 7 It's been a pleasure to work for each of 8 you, and we wish you each the best of luck in your 9 future endeavors and know that you are all going to be 10 greatly missed by your staff here at the Texas Lottery 11 Commission. 12 Thank you, Mr. Chairman. 13 CHAIRMAN KRAUSE: Well, I want to 14 personally thank my fellow commissioners. This is a 15 volunteer job. It is -- means no more to me than the 16 other important charitable undertakings that I'm 17 involved with. I'm on the Huston Tillotson board. I'm 18 active with the Boy Scouts. They're all important, and 19 this is just as important as that. Just one of the 20 volunteer things we do. 21 Now, I'm fortunate enough to live in 22 Austin. Jeff lives in Austin. And so it's really easy 23 for me to come to meetings. It's really easy for me to 24 get together with the staff. It's really easy for me to 25 go hike up to the capitol and go see a rep or a senator, 10 1 you know, and try and do what we do. But my other 2 commissioners all live out of town. So not only is this 3 a volunteer opportunity for them to serve, but it's not 4 just attending a meeting. It's coming in from out of 5 town giving that time. 6 Now, sure, there's a little per diem and 7 there's probably a little bit of travel money and all 8 that, but that pales in comparison to the commitment on 9 a volunteer basis that these outstanding commissioners 10 have provided their service selflessly to the state of 11 Texas. And I am grateful for them to have spent the 12 time working with me in this Commission to do good 13 things particularly for school children of Texas. 14 So Mr. Townes, Mr. Meador, Ms. Baggett, 15 Ms. William -- Ms. Williamson -- Ms. Williamson, thank 16 you. Thank you very much. And I certainly hope that 17 our association doesn't end here today because frankly 18 the Lottery is losing a significant amount of 19 institutional knowledge that has been gained over many 20 years. 21 Commissioner Williamson is the longest 22 serving, in my memory, of over seven years and has 23 served as chairman as well. And so that's -- there's a 24 special thanks that goes to you for that. 25 COMM. WILLIAMSON: Thank you. 11 1 CHAIRMAN KRAUSE: And for my other 2 commissioners that took on the -- and were -- you know, 3 at least exceeded my request to become the bingo 4 commissioners and to dig in and learn about an arcane 5 area of the law that doesn't help you anywhere else in 6 life except in here, thank you for putting in the effort 7 to get to know that area of the law and to understand 8 what the bingo division does. 9 So Commissioners, thank you, thank you, 10 thank you. 11 (Applause) 12 AGENDA ITEMS II AND III 13 CHAIRMAN KRAUSE: We have -- we have some 14 public comment on Items II and III. And so to expedite 15 that, I'm going to call -- let's see -- Lea Burnett to 16 come talk about Agenda Item II. And then immediately 17 after that, I'm going to call Deanne Rienstra to talk 18 about Agenda Item III. And once that's done, I'm going 19 to call our witness who wants to just, you know, talk on 20 both of those issues so that she can have a full say on 21 both and we can move expeditiously to hear what 22 everybody has to say. 23 So Lea, you're up. 24 MS. BURNETT: Thank you. Good morning 25 Chairman and Commissioners. For the record, my name is 12 1 Lea Burnett and I'm assistant general counsel. 2 I present to you for consideration a draft 3 submission to the Texas Register that authorizes the 4 publication of proposed amendments to Rules 16 TAC 5 401.305, 401.307, 401.308, 401.312, 401.315, 401.316, 6 401.320 and 401.322. These are in order to seek public 7 comment. 8 The purpose of the amendments is to 9 enhance and clarify the methods by which a lottery 10 player may communicate number and place selections to a 11 lottery retailer from whom the player purchases tickets. 12 Currently, we have three acceptable methods by which a 13 player may complete play selections in order to purchase 14 a ticket. The first is using a play slip to select 15 numbers. The second is requesting a quick pick. The 16 third is requesting a retailer manually enter the 17 numbers and play selections. 18 These amendments will add two additional 19 methods. One, using what is known as the play it again 20 function which allows a player to provide a previously 21 purchased lottery ticket to a retailer to obtain the 22 same play selections; or two, using the Texas Lottery 23 mobile application, a player can make play selections 24 that they wish to play and generate what is known as a 25 QR code capturing those numbers that the retailer may 13 1 then scan as a method to enter the play selections. 2 Staff believes that the addition of these 3 two types of play selections will enhance the efficiency 4 and overall play experience for the lottery players. 5 We noted in the preamble the following 6 statement which is up for your consideration, and the 7 staff has requested that it be read into the record of 8 this meeting to clarify that these rules do not modify 9 the method or locations for purchase of lottery tickets. 10 The Texas Lottery understands that the 11 introduction of new technology for use with lottery 12 games is a sensitive topic with many members of the 13 public and is very mindful it is the Texas Legislature 14 who provides the policy framework to administer the 15 lottery. The Texas Lottery therefore wishes in its 16 proposal to be very clear that the amendments proposed 17 here will in no way enable lottery players to purchase 18 lottery tickets or to play lottery games solely using 19 mobile devices or through the Internet. 20 The Texas Lottery strongly believes that 21 any questions regarding the sale of lottery tickets via 22 mobile devices or the Internet are policy decisions to 23 be determined by the Texas Legislature. 24 In the absence of clear expressed 25 authority delegated to the Commission by the Texas 14 1 Legislature, the Texas Lottery has no intention to 2 pursue mobile-based or Internet-based lottery ticket 3 sales. Accordingly, the Texas Lottery states here 4 nothing contained within this proposal enables the sales 5 of Texas Lottery tickets over mobile devices or the 6 Internet. 7 Bottom line, Commissioners, there are 8 several interlocking rules and statutes that require the 9 sale of lottery tickets to be conducted by licensed 10 retailers at their duly licensed locations or directly 11 from the Texas Lottery itself. None of those rules or 12 statutes are changing as the result of these proposed 13 amendments. Players must purchase tickets from licensed 14 lottery retail locations or from the Texas Lottery. 15 Therefore, staff recommends that the 16 Commission approve publication of the draft amendments 17 as presented in your notebooks to seek public comment. 18 To facilitate the collection of comments, we have 19 scheduled a public hearing for June 30th at 10:00 a.m. 20 in this room. 21 And I'm available to answer any questions 22 you might have regarding the rule proposal, and of 23 course we have lottery ops director Michael Anger here 24 to answer any questions regarding the mobile application 25 or the functionality of these two proposed features. 15 1 Thank you. 2 CHAIRMAN KRAUSE: Commissioners? 3 COMM. WILLIAMSON: I have one question. 4 Will you get sort of like a receipt if you were -- you 5 know, you put your, say, iPhone up there and you will 6 still get a printed out receipt showing what the numbers 7 were? 8 MR. ANGER: So the -- if you use the 9 mobile application to record your play selections and 10 create the QR code that Lea referred to, you present 11 your phone to the retailer, they'll scan that QR code, 12 and the receipt that you get is just the same as every 13 receipt for every transaction we do in that we're going 14 to create an actual physical ticket for the player that 15 records the numbers that they selected for that drawing, 16 and there will be a money exchange between them at the 17 retail -- at the retailer location in order to pay for 18 that transaction. So they receive a physical ticket 19 that acts as their receipt. 20 So what's done on the mobile application 21 is simply the player recording the numbers that they 22 would like to play for the particular draw game that 23 they would like to play. 24 COMM. WILLIAMSON: Okay. All right. 25 Great, thank you. 16 1 MR. ANGER: You bet. 2 CHAIRMAN KRAUSE: Question down this way? 3 (No response) 4 CHAIRMAN KRAUSE: Thank you, ma'am. 5 Ms. Rienstra. Ms. Rienstra. 6 MS. RIENSTRA: Thank you. 7 Good morning, Chairman, Commissioners. 8 I'm Deanne Rienstra, assistant general counsel, and 9 today I am presenting recommendations -- I'm going to 10 ask you to do two things. 11 In December we proposed amendments to the 12 Powerball online game rule, and I'm going to ask you to 13 withdraw that publication, that -- it was published in 14 the Texas Register, and I'm going to ask you to withdraw 15 that -- those amendments. The game has changed and -- 16 is going to change, and Robert is going to explain the 17 changes. 18 In addition to some conforming changes, we 19 are proposing -- we are recommending to propose for 20 rulemaking publication new changes to the Powerball game 21 that will go into effect in October. 22 And, Robert, you want to go ahead and 23 explain it? 24 MR. TIRLONI: Sure. Thanks, Deanne. 25 For the record, Robert Tirloni, products 17 1 and drawings manager. 2 This is a pretty brief presentation 3 because the changes that are being proposed to the 4 Powerball game by MUSL, the Multi-State Lottery 5 Association, are not very extensive this go around. 6 It was last Friday, on the 22nd of May, 7 that the Powerball group actually voted to adopt these 8 changes, and they decided that these changes are going 9 to debut in October of 2015. 10 This is the same slide I showed you with 11 some minor changes back in December. If you remember, 12 MUSL has been working with all of the member states for 13 quite some time now to evaluate and analyze the 14 Powerball game and think about changes that they've been 15 wanting to make to this game. 16 So since Powerball began in 1992, there 17 have been seven matrix and add-on changes. It was last 18 changed in January of 2012. That's when the game became 19 a $2 game. And actually when they made that change a 20 few years back, they actually decreased the size of the 21 matrix and they decreased the jackpot odds, so they 22 actually made it easier for players to win the jackpot 23 when they switched the game to a $2 price point game. 24 They've been refreshing, on average, the game every 25 three to five years just based on player demand and 18 1 changing consumer attitudes and expectations. 2 The reason we're here today, though, 3 really has to do with the number of people that are 4 basically playing the Powerball game. 5 Back in January of 2010 when we first 6 joined Powerball, the population that was playing was 7 around 126 million. That was before the whole 8 cross-sell initiative took place where Mega Millions 9 states started selling Powerball, and Powerball states 10 started selling Mega Millions. So it was 126 million 11 that were playing. After that cross-sell initiative was 12 implemented, that population jumped up to just under 13 200 million. And today, we have almost 300 million 14 players, or population, that can play the Powerball 15 game. 16 So what's really needing to happen here is 17 basically MUSL is calling it a maintenance change. It's 18 really an adjustment in the matrix to adjust the jackpot 19 odds based on this increased playing population. 20 So the game matrix is changing from 5 of 21 59, 1 of 35 to a 5 of 69, 1 of 26. I'll show you the 22 tiers in a second. Basically, we're increasing the odds 23 to win the jackpot based on that new population or the 24 population number I just showed you. 25 While they're making this change, they are 19 1 putting a 10X multiplier into the Power Play feature. 2 That 10X will be available any time the advertised 3 jackpot is $150 million or less. The 2, 3, 4 and 5 4 multipliers are always available. 5 So as I mentioned, the jackpot tier, the 6 odds are getting longer; one in 292 million. The 7 overall odds for the player are getting slightly better. 8 There's still nine tiers in the game. That hasn't 9 changed. This is a new prize tier in terms of the 10 amount of the tier. It used to be 10,000. Now it's 11 50,000. The Power Play feature I referred to, it does 12 not apply to the jackpot. It does apply to all of the 13 rest of the tiers in the game, though. 14 So just a quick timeline, we're proposing 15 the rule today asking you to proceed with publishing 16 this rule in the Texas Register so we can start to 17 receive public comment. We'll also put a link on the 18 home page of our website so people know that there is a 19 new draw game rule proposal that is -- that is out at 20 this time. We're going to have a public comment hearing 21 here at lottery headquarters at the end of June, on the 22 30th. The public comment period will end in mid July, 23 on July 13th, and then sometime over the summer, once we 24 get past that public comment period end date, we'll need 25 to bring the rule back to the Commission for adoption 20 1 consideration. 2 MUSL has slated Sunday, October 4th, as 3 the start of sales for this new matrix, and the first 4 drawing will be on Wednesday, October 7th. 5 And that is the summary of this game 6 change. Happy to answer questions. 7 CHAIRMAN KRAUSE: Well, so because there's 8 so many people playing, the odds need to change in order 9 to have big jackpots. 10 MR. TIRLONI: That's absolutely correct. 11 CHAIRMAN KRAUSE: And big jackpots is what 12 our customers want. 13 MR. TIRLONI: Correct. And that's what 14 drives the sales for these national large jackpot games. 15 CHAIRMAN KRAUSE: All right. So when we 16 hear people say that it's got to be easier for people to 17 win, what they're really doing is they're saying, "We 18 want to have small jackpots so that people will be 19 uninterested in playing"? 20 (Laughter) 21 MR. TIRLONI: Correct. 22 COMM. WILLIAMSON: That was an attorney 23 argument. 24 CHAIRMAN KRAUSE: Any other questions? 25 (No response) 21 1 CHAIRMAN KRAUSE: Okay. Thank you very 2 much. 3 And we're going to now hear from Dawn 4 Nettles on Items I and II. 5 COMM. BAGGETT: II and III. 6 CHAIRMAN KRAUSE: II and III. 7 AGENDA ITEM XVIII 8 MS. NETTLES: Does this work? 9 My name is Dawn Nettles. I'm with Lotto 10 Report out of Dallas. And I didn't have a chance to 11 read the rule or really don't know the real specifics of 12 it. The only thing I want to comment on is when Robert 13 says that it's easier to win, I would like to point out 14 that that's really not true. 15 It's easier to win on the bonus ball, for 16 people to win the $3 or $4 prize, but they're not 17 playing Powerball to win -- to match that one number. 18 So to me when you say -- when he tells you that the odds 19 have increased, they're changing the odds and making it, 20 you know, the higher of the 69 instead of 59 numbers, 5 21 out of 59 versus 5 out of 69, it's not easier to win. 22 And I have a problem when I hear that because it's not 23 true. People don't play to win $4. 24 And the reason that the sales have gone 25 down on Powerball is because of the $2 prize point. I 22 1 realize it's not going to do any good to comment on this 2 particularly because they're going to go on with it, but 3 I did want y'all to know it is not easier to win. And 4 until I have a chance to review the rule and see 5 everything, that's about the only comment I can make. 6 I have no comment on Item No. II. 7 CHAIRMAN KRAUSE: Okay. Well, one of the 8 things we're doing is we're opening up a public comment 9 period, and so you're welcome to come back when that is 10 ongoing and -- 11 MS. NETTLES: I understand, but -- 12 CHAIRMAN KRAUSE: -- give us your opinion. 13 MS. NETTLES: -- it -- it wouldn't do any 14 good. And I say that not anything against you-all. 15 It's just that it's all these states and they're not 16 going to change it. So this is what they're going to 17 do, and that's -- you know, that's the way it is. 18 But I just want y'all to understand. It's 19 not easier to win the game, and that turns players off. 20 That's what's wrong is they can't win. So y'all need to 21 consider that. Okay? 22 CHAIRMAN KRAUSE: Thank you, ma'am. 23 MS. NETTLES: Thank you. 24 AGENDA ITEM II 25 CHAIRMAN KRAUSE: All righty. Well, going 23 1 back to Agenda Item No. II, we have a motion. Probably 2 my most experienced commissioner. 3 COMM. WILLIAMSON: Yeah. I make a motion 4 to approve the recommendation to publish for public 5 comment Item No. II, which includes amendments to 16 TAC 6 401.305, 401.307, 401.308, 401.312, 401.315, 401.316, 7 401.320, 401.322, and any others that may be included 8 that I omitted in Item No. II. 9 CHAIRMAN KRAUSE: Do I hear a second? 10 COMM. BAGGETT: I second that. 11 CHAIRMAN KRAUSE: All in favor, say aye. 12 (All those voting in favor so responded) 13 CHAIRMAN KRAUSE: Any opposed? There's no 14 nays. It carries. 15 Commissioner Baggett would you like to 16 make a motion on Item No. III? 17 COMM. BAGGETT: Yes, I will make a motion 18 to approve the recommendation to withdraw the pending 19 proposal and publish the new proposal for public 20 comment. 21 CHAIRMAN KRAUSE: Do I hear any seconds? 22 COMM. WILLIAMSON: Second. 23 MR. TOWNES: Second. 24 CHAIRMAN KRAUSE: All righty. I'll call 25 for a vote. All in favor say aye. 24 1 (All those voting in favor so responded) 2 CHAIRMAN KRAUSE: Aye. Any opposed? 3 There's no nay. It carries by acclamation. 4 Thank you, Commissioners. 5 Dianne Rienstra, it's -- you're up again. 6 MS. RIENSTRA: Thank you. 7 CHAIRMAN KRAUSE: Deanne. I'm sorry. 8 AGENDA ITEM IV 9 MS. RIENSTRA: For the record, I'm Deanne 10 Rienstra, assistant general counsel. And today we have 11 recommendation for adoption of a rule -- several rules 12 we proposed in -- at the last meeting. And essentially 13 what we did with TAC 401.368 and 401.158, 401.160, and 14 the repeal of 401.369, we took two vending machine rules 15 and combined them into one since the self-service 16 vending machines now sell both type of instant tickets 17 and draw tickets. And at this time, Staff recommends 18 adoption of this rule or these changes and repeal. Any 19 questions? 20 CHAIRMAN KRAUSE: Comments, questions? 21 (No response) 22 CHAIRMAN KRAUSE: I have one. Is there 23 any way a thinking person could ever confuse this for 24 slot machines? The answer is no. 25 MS. RIENSTRA: No, not that I know of. 25 1 (Laughter) 2 CHAIRMAN KRAUSE: Thank you. 3 All right. Well, I'm looking for a 4 motion. Admiral? 5 MR. TOWNES: I recommend that we do, in 6 fact, adopt amendments to 16 TAC 401.368, 401.158, 7 401.160, and adopt the repeal of the repeal of 16 TAC 8 401.369. 9 CHAIRMAN KRAUSE: Any seconds? 10 COMM. BAGGETT: I second that. 11 CHAIRMAN KRAUSE: Call for a vote. All in 12 favor say aye. 13 (All those voting in favor so responded) 14 CHAIRMAN KRAUSE: All opposed? There 15 being no nays, it carries. 16 MS. RIENSTRA: Thank you. 17 CHAIRMAN KRAUSE: Thank you. 18 Mr. Biard? 19 AGENDA ITEM V 20 MR. BIARD: Good morning, Commissioners. 21 For the record, I'm Bob Biard, general counsel. 22 Item V is a request for your approval to 23 publish a notice of intent to review the Commission's 24 general administration rules at Title 16 Chapter 403 of 25 the Texas Administrative Code. 26 1 Every four years, by statute, a state 2 agency is required to review all of its rules and make 3 an assessment of whether the reason for each rule 4 continues to exist. The last time the Commission went 5 through this process was in the summer of 2011. 6 The Commission's rules are contained in 7 three chapters of the administrative code: One chapter 8 for lottery, one for bingo, and one for general 9 administration. And the general administration rules 10 are the ones I'm bringing for you today. The proposal 11 for the lottery and bingo rules is planned for the next 12 Commission meeting. 13 The names and numbers of the rules are 14 listed in the notice in your notebooks. These cover 15 everything from open records to the use of Commission 16 vehicles to the procedures for contract disputes, 17 handling contract disputes. 18 At the conclusion of this review -- this 19 notice would be published on the Texas Register to take 20 public comment. And at the conclusion of the review, 21 we'll come back to the Commission and ask you to approve 22 an order readopting each of the rules and containing an 23 assessment of whether the reasons for initially adopting 24 the rules continue to exist and if there's a need to 25 amend or repeal any rules. 27 1 And if the Commission decides to repeal or 2 amend a rule, the Staff will present a separate 3 rulemaking proposal to do that, and the public will be 4 provided an opportunity to comment. 5 So we recommend that you approve 6 publication today of the notice to review the general 7 administration rules in the Texas Register to receive 8 public comment. 9 I'll be glad to answer any questions. 10 CHAIRMAN KRAUSE: Questions, comments? 11 (No response) 12 CHAIRMAN KRAUSE: Do I hear a motion? 13 COMM. MEADOR: Yes, I vote we accept Bob's 14 recommendation to approve the publication of the notices 15 in the Texas Register. 16 CHAIRMAN KRAUSE: Outstanding. 17 Second? 18 MR. TOWNES: Second. 19 CHAIRMAN KRAUSE: Call for a vote. All in 20 favor say aye. 21 (All those voting in favor so responded) 22 CHAIRMAN KRAUSE: Any opposed? No nays. 23 It carries. 24 MR. BIARD: Thank you, Commissioners. I 25 have orders for you to sign for each of those four 28 1 rulemaking orders you just voted on. 2 CHAIRMAN KRAUSE: Excellent. 3 Mr. Fernandez. I always like hearing from 4 Mr. Fernandez. 5 AGENDA ITEM VI 6 MR. FERNANDEZ: And I always look forward 7 to being here, Mr. Chairman. 8 CHAIRMAN KRAUSE: Oh, you always say that. 9 MR. FERNANDEZ: Good morning, 10 Mr. Chairman, Commissioners. For the record, my name is 11 Mike Fernandez. I'm the director of administration. 12 Item No. VI in your notebook is a briefing 13 item, and it's to advise the Commission of Staff's 14 intent to amend a current contract with our ICS vendor 15 for the implementation of an alternative to lock down 16 for the Powerball game. If you have any questions, I'd 17 be happy to answer them. 18 CHAIRMAN KRAUSE: Questions, comments? 19 (No response) 20 CHAIRMAN KRAUSE: Go ahead with your next 21 item, please. 22 MR. GRIEF: Commissioners, if I could, I'd 23 like to preface Mike's layout of this particular item 24 with some comments of my own. 25 The contracts that Mike is going to cover 29 1 for you under this agenda item are in addition to -- a 2 very important addition to our existing partnership 3 agreement with the Dallas Cowboys organization. 4 As you know, our partnership with the 5 Cowboys over the years has yielded millions of dollars 6 in revenue for public education, and it's greatly 7 enhanced the brand of the Texas Lottery by partnering 8 that brand with not just one of the greatest brands in 9 the state of Texas but one of the greatest brands in the 10 world, that being the Dallas Cowboys. 11 We're now taking that partnership to a new 12 level. We're getting in on the ground floor of a 13 tremendous marketing opportunity similar to what we did 14 more than six years ago when AT&T stadium was being 15 built in Dallas. 16 You may recall at a previous meeting that 17 I showed you a video related to the future new corporate 18 headquarters of the Cowboys, known as The Star in 19 Frisco. The Texas Lottery will be one of the founding 20 partners and sponsors of this destination location, 21 location that will feature the Dallas Cowboys 22 headquarters, a 12,000 seat indoor stadium to be used by 23 both pro and high school teams, practice fields, world 24 class hotels, and numerous food and beverage 25 establishments. 30 1 Our brand, the Texas Lottery, is going to 2 be showcased throughout that development, putting our 3 brand on display before an ever-changing crowd of 4 thousands while at the same time putting a new focus, an 5 energized focus, if you will, on the important link 6 between the Texas Lottery and public education. 7 The marketing components that are going to 8 be provided to the Texas Lottery under the contract that 9 Mike's going to lay out for you are numerous, but I did 10 want to provide you with just a few highlights of the 11 items that will come to us under this contract. 12 First will be annual usage of the Star 13 indoor event center to host functions, such as our 14 annual statewide sales meeting, or to host our valuable 15 retailers who sell our lottery products. We're also 16 going to get consistent digital Texas Lottery signage 17 throughout the campus that will include being inside the 18 indoor stadium, throughout the campus main concourse, 19 and in the surrounding retail areas as well. 20 We're going to get marquis Texas Lottery 21 signage at the entrance to The Star in Frisco, which is 22 on the Dallas North Tollway. That's a corridor that's 23 currently being billed right now as the $5 billion-mile 24 due to the anticipated infrastructure, commerce, and 25 people traffic that's going to be brought in as a result 31 1 of The Star in Frisco. 2 Our brand is also going to highlight a 3 very special area within The Star development that's 4 located just inside the main entrance to the indoor 5 stadium. That's going to be an area that will be 6 designated full time for the Texas Lottery and will have 7 a direct tie in to high school football and to public 8 education. 9 And the agreement also provides us with 10 unique opportunities for us to highlight the Texas 11 Lottery and partnership with the Cowboys organization 12 for some community events and high school focused 13 activities emphasizing how the Texas Lottery provides 14 valuable funding for public education. 15 And finally, the contract will also allow 16 the Texas Lottery to have exclusive access to the 17 Cowboys corporate headquarters with opportunities to 18 hold all types of sales and marketing meetings, to have 19 retailer recruitment events in a world-class facility 20 that will allow us to showcase our brand, but more 21 importantly, highlight our beneficiary program. 22 I've mentioned to the Commission that I'm 23 very focused on finding more efficient ways to spend our 24 advertising dollars, which are very limited and very 25 important to our success. And I'm becoming more and 32 1 more convinced that the traditional advertising 2 approaches that we've taken in the past may need to be 3 refocused to some degree. The Star in Frisco is really 4 the first great opportunity that's come along to put 5 that into motion. 6 So rather than spending around $5 million 7 a year for a traditional advertising campaign, one that 8 goes into a marketplace for three or four weeks at a 9 time, and that's usually based on a TV commercial, one 10 that our players and our potential players may or may 11 not even see in this age of Tivoing, as we all know, I'm 12 moving to focus more of our dollars on partnership 13 opportunities like The Star in Frisco, opportunities 14 that will promote our brand year round and in 15 perpetuity, attempting to cement in the public 16 consciousness that important relationship between the 17 Texas Lottery and the critical revenue that the Texas 18 Lottery brings in for public education. 19 So Mike is going to be asking you to 20 approve this new agreement with the Cowboys. And 21 obviously, from my comments, I fully recommend and hope 22 that you do so. So with that, I'll turn it over to 23 Mike. 24 AGENDA ITEM VII 25 MR. FERNANDEZ: Thank you very much, Gary. 33 1 Again, for the record my name is Mike 2 Fernandez. I'm the director of administration. And, 3 you know, Mr. Chairman, I move -- I don't want to be 4 flippant. 5 Obviously Item VII in your notebooks is an 6 action item. And, again, to reiterate some of the 7 things that Gary said, it's building on our very 8 successful relationship with the Dallas Cowboys brand 9 and its organization. 10 And in so much as we're seeking approval 11 for two contracts, the first is a trademark licensing 12 and promotional agreement with Frisco Management for 13 marketing and promotional rights to use The Star complex 14 as Gary spoke to. And, again, as you know, the Dallas 15 Cowboys intend to relocate their training facility and 16 the world headquarters in this multi-use special event 17 center and entertainment destination. 18 As Gary said, this agreement will provide 19 us ongoing marketing and promotional presence there with 20 the use of digital signage throughout and all of the 21 things that Mr. Grief has alluded to. 22 If you have any additional questions about 23 this contract, I'd be happy to answer them. 24 CHAIRMAN KRAUSE: Do we have any visual 25 presentation? 34 1 MR. FERNANDEZ: No, sir, I do not. I 2 think -- I do think that Gary had shown us that video 3 here some -- couple meetings back. 4 MR. GRIEF: Nothing new to show you today, 5 Mr. Chairman. 6 CHAIRMAN KRAUSE: What a bore. 7 (Laughter) 8 CHAIRMAN KRAUSE: Okay. Well, so anyway, 9 this is an action item? 10 MR. FERNANDEZ: Yes, sir. 11 CHAIRMAN KRAUSE: And do I hear a motion? 12 COMM. WILLIAMSON: Yes, I make a motion 13 that we approve the recommendation as presented to us in 14 Item VII regarding the trademark license and promotional 15 support services. 16 CHAIRMAN KRAUSE: Second. 17 MR. TOWNES: Second. 18 CHAIRMAN KRAUSE: I guess I seconded that. 19 All right. Well, call for a vote. All in favor say 20 aye. 21 (All those voting in favor so responded) 22 CHAIRMAN KRAUSE: All opposed? No nays. 23 It carries. 24 Thank you, sir. 25 MR. FERNANDEZ: The second agreement is, 35 1 again, a trademark license and promotional agreement 2 with Pro Silver Star. And what this does is it expands 3 our current licensing agreement for the Dallas Cowboys 4 scratch-off ticket that will allow us to participate in 5 the other events that Gary has addressed at the Star 6 center. 7 So if you have any additional questions, 8 we'd be happy to answer them. 9 CHAIRMAN KRAUSE: Thank you. 10 Is that an action item? 11 MR. FERNANDEZ: Yes, sir. 12 CHAIRMAN KRAUSE: All right. Could have 13 done them both. 14 Anybody have a motion for me? 15 MR. TOWNES: I so move that we accept the 16 recommendation of the Staff to initiate the contract 17 proposal. 18 CHAIRMAN KRAUSE: Thank you. 19 Anybody want to second that? 20 COMM. WILLIAMSON: Second. 21 COMM. MEADOR: Second. 22 CHAIRMAN KRAUSE: Call for a vote. All in 23 favor say aye. 24 (All those voting in favor so responded) 25 CHAIRMAN KRAUSE: Any opposed? No 36 1 opposition. It carries. 2 MR. FERNANDEZ: Thank you. 3 CHAIRMAN KRAUSE: Yes, sir. 4 Mr. Anger. 5 AGENDA ITEM VIII 6 MR. ANGER: Good morning again, 7 Commissioners. For the record, my name is Michael 8 Anger, and I'm the lottery operations director. 9 Commissioners, before you you have a copy 10 of the Fiscal Year 2016 Comprehensive Business Plan and 11 Annual Report. I also provided a copy of the plan and 12 report to you in your packets last week. 13 Commissioner Baggett, I'll issue a public 14 apology to you. I know we had some difficulty in 15 getting yours delivered and you've got a late delivery 16 on that, but the document contains a summary of our 17 Fiscal Year 2014 results contained in the annual report 18 section of the plan, and it also contains our Fiscal 19 Year '16 business plan outline and our critical 20 criteria. 21 The plan conforms with requirements 22 detailed in the agency's sunset legislation laid out in 23 the 83rd Legislative session sunset bill that was passed 24 for the agency. 25 The business plan section contains ten key 37 1 performance factors identified by Staff to capture key 2 measures of agency efficiency and performance. The plan 3 contains targets and/or projections for each of the 4 these factors. 5 And that concludes my comments. I'd be 6 happy to answer any questions or respond to any comments 7 that you have prior to seeking your approval of the 8 plan. 9 CHAIRMAN KRAUSE: Questions, comments? 10 (No response) 11 CHAIRMAN KRAUSE: Okay. Looking for a 12 motion to approve the business plan and annual report. 13 COMM. BAGGETT: I move that we approve the 14 business plan. 15 CHAIRMAN KRAUSE: Second? Somebody 16 second. 17 MR. TOWNES: Second. 18 CHAIRMAN KRAUSE: All righty. Call for a 19 vote on this motion. All in favor say aye. 20 (All those voting in favor so responded) 21 CHAIRMAN KRAUSE: All opposed? Hearing no 22 opposition, it carries. 23 MR. ANGER: Thank you. 24 CHAIRMAN KRAUSE: Kathryn Pyka. 25 AGENDA ITEM NO. IX 38 1 MS. PYKA: Good morning, Commissioners. 2 My name is Kathy Pyka. I'm the controller for the 3 Commission. And with me to my right is Robert Tirloni, 4 our Commission's product and drawings manager. 5 Commissioners, the first chart that we 6 have for you this morning reflects the comparative sales 7 through the week ending May 23rd, and this is our 38th 8 week of the fiscal year. 9 Looking at the bottom of the chart, you 10 can see our total Fiscal Year 2015 sales are now at 11 $3,340,000,000. That is an increase of $64 million over 12 last fiscal year. 13 Focusing next on the instant ticket sales, 14 which are included on the second orange bar for Fiscal 15 Year 2015, total instant ticket sales year to date are 16 $2,552,000,000. And, Commissioners, that is a 17 $119 million increase over last fiscal year. 18 And looking at the allocation of instant 19 tickets as a percentage of our total sales, instant 20 ticket sales are now at 76.4 percent of total Commission 21 sales. And I wanted to note that over the last five 22 weeks, we have seen double-digit increases with our 23 instant ticket product with an average growth of 24 13 percent during that time period. 25 Commissioners, y'all may recall last 39 1 commission meeting, Robert shared the Super Ticket with 2 you. And over these last five weeks since it's been -- 3 it was introduced, we have now seen $40.9 million in 4 sales from the Super Ticket alone during this period. 5 To try to give you just a comparison, 6 our -- before this ticket was issued, the best-selling 7 ticket that we had was the Texas Black Ticket, and we 8 have seen $12.9 million more in Super Ticket sales than 9 that ticket, or 46 percent more in total sales. 10 Outstanding results from that ticket. 11 Like to move next to our draw sales, which 12 are outlined in the -- with the blue bar. Fiscal Year 13 2015 draw sales are at $788.5 million. This is a 14 $55 million decline from last fiscal year. And, 15 Commissioners, as we mentioned previously, that decline 16 is a lack of the larger jackpots that we had seen in 17 2014 that we've not experienced this fiscal year. 18 So with that we'll move on to our 19 cumulative average daily sales chart. And as included 20 at the very bottom of the chart, our daily sales rate is 21 now at $12.6 million. That's a $326,000 growth over 22 last fiscal year and a $375,000 per day growth over 23 Fiscal Year 2013. 24 Focusing next on our jackpot games, which 25 are highlighted with the white font, we've seen just 40 1 under a million eight per day in jackpot sales. And as 2 you can see, again, as we mentioned before, those 3 declines that we're seeing there, specifically on the 4 Mega Millions line item, we're seeing a quite large 5 decline in daily average sales as a result of not having 6 any large jackpots with that product this fiscal year. 7 We'll move next to our daily game 8 highlighted in blue font with a daily average of 9 1.2 billion -- million dollars a day. That's a $21,000 10 decline from last year. And most products are basically 11 at a flat rate. Looking at Pick 3, not much of a change 12 over last fiscal year. Daily 4 is experiencing a slight 13 increase over last fiscal year. And the biggest change 14 that we're seeing here is the All or Nothing product 15 with a decline. 16 And then I'll wrap that up with our 17 average daily sales for instant tickets, which are at 18 $12 million, $12 million six per day -- I'm sorry -- 19 9.6 million -- thank you, Robert. I was like that's -- 20 $9.6 million per day, and that's an increase of just 21 under a half million dollars over last fiscal year and 22 $676,000 over Fiscal Year 2013. 23 So with that, Robert will now move on to 24 actual sales by product. 25 MR. TIRLONI: So, Commissioners, this is 41 1 our comparison to last fiscal year broken down by our 2 product categories, and this is through this past 3 Saturday. 4 As Kathy mentioned, due to a lack of 5 jackpots, we're seeing a large deficit on the Mega 6 Millions game. We're down $40 million compared to last 7 fiscal, and that really is what is driving the 8 $48 million decline in the jackpot category. 9 We did have a $500 million jackpot on 10 Powerball back in February, so that is the reason for 11 this slight increase of just under, you know, $8 million 12 at the Powerball game. 13 We do have two very good-sized jackpots 14 going for both Powerball and Mega Millions at this time. 15 So we're hoping if one or both of those games can 16 continue to roll for a few more weeks, we can hope to 17 chip away at this $48 million deficit. 18 We're holding steady on our daily games in 19 blue. A slight decline fiscal year over fiscal year for 20 Pick 3. Again, the bulk of the deficit on the daily 21 games is a result of the All or Nothing game, so all 22 told, the draw game portion of the portfolio is down 23 $55 million; again, the bulk of that coming as a result 24 of lower jackpots this fiscal. 25 The instant portion of the portfolio is 42 1 making up for that with an almost $120 million growth 2 year over year. 3 As Kathy mentioned, the Super Ticket at 4 our $10 price point is doing very well. We also have a 5 new $20 spotlight game that is out, $500 million cash. 6 That game is being supported with TV, radio, outdoor 7 billboards, point of sale in store, and so that is also 8 starting to contribute to those very positive instant 9 sales. 10 For the year as a whole, we're up 11 $64 million. 12 And that concludes our report for this 13 morning. We're happy to answer questions. 14 CHAIRMAN KRAUSE: Questions, comments? 15 (No response) 16 CHAIRMAN KRAUSE: Sounds like good news. 17 COMM. WILLIAMSON: Good job. 18 MR. TIRLONI: Thank you. 19 MS. PYKA: Thank you. 20 CHAIRMAN KRAUSE: You may segue into the 21 next. 22 AGENDA ITEM X 23 MS. PYKA: Certainly. Commissioners, Tab 24 10 in your notebook includes information on the agency's 25 transfers to the state. 43 1 The crude revenue transfers and the 2 allocations to the Foundation School Fund and the Texas 3 Veterans Commission for the period ending April 30th, 4 2015, amounted to $757.6 million for the first eight 5 months of the fiscal year. 6 As we break that down by the recipient, 7 $710.7 million was the amount transferred to the 8 Foundation School Fund, $7.5 million was transferred to 9 the Texas Veterans Commission, with a remaining balance 10 of 39.4 million transferred from unclaimed prizes. 11 Commissioners, through April, this 12 represented an eight-tenths of a percent decline, or 13 $5.6 million, for the amount transferred during Fiscal 14 Year 2014 for the same period; but, Commissioners, I 15 wanted to note, as we just discussed, we've seen 16 double-digit increases with the instant ticket sales 17 product. So if we were to look at revenue today, we are 18 certainly showing an increase in total revenues as well 19 as obviously total sales as compared to last fiscal 20 year. 21 I'd be happy to answer any questions. 22 CHAIRMAN KRAUSE: Comments, questions? 23 (No response) 24 MS. PYKA: Thank you, Commissioners. 25 CHAIRMAN KRAUSE: Thank you very much. 44 1 Ms. Trevino. 2 AGENDA ITEM XI 3 MS. TREVINO: Good morning, Commissioners. 4 For the record, I'm Nelda Trevino, the director of 5 governmental affairs. 6 We provided you this morning with an 7 updated bill tracking report. And as you know, the 8 regular legislative session will conclude on Monday, 9 June the 1st. 10 Based on the house and senate rules, there 11 are various deadlines that come into play during the 12 last several weeks of the session related to actions 13 that must occur in order for a bill to continue to be 14 considered. As a result, many bills we have been 15 tracking are considered dead by procedural action. On 16 the other side, there are numerous bills we have been 17 tracking that have progressed through the legislative 18 process. Today I would like to briefly highlight and 19 provide a status on some of the bills' specific interest 20 to the agency and also provide an update on the agency's 21 legislative appropriations request for the next 22 biennium. 23 First of all, a couple of bills related to 24 charitable bingo. House Bill 2642 by Representative 25 Senfronia Thompson. If you recall, this is the bill 45 1 that includes some of the recommendations from the 2 legislative review committee and also includes 3 provisions that would have transferred the regulation of 4 charitable bingo from the Texas Lottery Commission to 5 the Department of Licensing and Regulation. 6 This bill was set on the house calendar 7 for the full house to consider, but it is one of the 8 many bills not considered by the action deadline under 9 the house rules. As a result, the bill is considered 10 dead by procedural action. 11 House Bill 7 by Representative Drew Darby. 12 This bill primarily relates to the state's dedicated 13 funds and accounts. The version passed by the house was 14 amended on the house floor to include provisions 15 directing the share of bingo prize fees currently 16 deposited in the state's general revenue fund to be 17 retained by the charitable organization conducting the 18 bingo game. However, the senate version of the bill 19 removed the provisions related to the bingo prize fees. 20 We are continuing to monitor further actions on what may 21 finally be enacted as it relates to this bill. 22 And then Senate Bill 759 by Senator Lois 23 Kolkhorst, this is the bill that includes provisions 24 repealing the tax imposed on the rental of premises for 25 the conduct of bingo and also making conforming changes 46 1 to the Bingo Enabling Act resulting from the repeal of 2 the gross rental tax. This bill appears to also be 3 considered dead by procedural action. 4 Next, there are two bills related to the 5 administration of the Lottery. House Bill 108, by 6 Representative Ryan Guillen, which relates to lottery 7 prize winner anonymity, and Senate Bill 397 by Senator 8 Jose Rodriguez relating to marketing and advertising of 9 the veterans instant ticket game. These bills 10 progressed through the legislative process, but again, 11 based on action deadlines, they are also considered dead 12 by procedural action. 13 There are three bills related to state 14 contracting I would like to mention, and these include 15 House Bill 15 by Representative John Otto, House Bill 16 1295 by Representative Giovanni Capriglione and Senate 17 Bill 20 by Senator Jane Nelson. These bills generally 18 provide for more transparency and accountability in 19 state agency contracting and procurement. 20 A few highlights on the provision of these 21 bills include the establishment of a contract management 22 and oversite team at the legislative budget board to 23 consult with agencies and approve high-risk contracts, 24 enhancing contract reporting requirements and oversite 25 mechanisms, requiring disclosure of interested parties 47 1 and contracts with governmental entities, and improving 2 the training process for employees and governing board 3 members involved in contracting. 4 Again, these are just a few general 5 highlights. And, as you know, contracting for goods and 6 services is a core function of this agency, and the 7 agency has well established policies and practices that 8 emphasize open and transparent contracting processes. 9 However, you can be assured the agency will fully 10 implement and comply with any requirements from these 11 bills that the agency may not have already implemented. 12 Next, a bill that impacts all state 13 agencies is House Bill 5 by Representative John Otto. 14 This bill directs the Legislative Budget Board to 15 perform a strategic fiscal review of state agencies in 16 an effort to promote transparency and identify waste and 17 inefficiencies within the state budget. The LBB 18 director would be required by September 1st of odd 19 number years to recommend to the Legislative Budget 20 Board which state agencies to undergo a strategic fiscal 21 review, and the board will select which agencies undergo 22 this review. A conference committee of house and senate 23 members has been formed to reconcile the differences 24 between the two versions of the bill. 25 A couple of bills related to ethics 48 1 requirements for public officers that I'd like to 2 mention. These include House Bill 3736 by 3 Representative Sarah Davis. This bill would require a 4 state agency governing board members and governing 5 officers to disclose conflicts of interest and refrain 6 from participating in decisions on matters for which 7 they had a conflict of interest. 8 And also Senate Bill 19 by Senator Van 9 Taylor. This bill is considered as the ethics omnibus 10 bill. Provisions of the bill generally expand the 11 transparency and disclosure requirements for state 12 ethics reports. (Coughing). Excuse me. 13 As you know, currently state law requires 14 each appointed commission member, along with the 15 executive director, the director of the lottery 16 division, the lottery security director, and the 17 director of charitable bingo to file personal financial 18 statements with the ethics commission. Again, this bill 19 expands what would be required to be reported. 20 We'll continue to monitor these bills for 21 final actions. 22 And then lastly, I want to also provide an 23 update as it relates to House Bill 1, the general 24 appropriations bill, and the legislature's consideration 25 of the legislative -- agency's legislative 49 1 appropriations request for Fiscal Years 2016 and 2017. 2 As reported at our last meeting, as a 3 result of a floor amendment by Representative Scott 4 Sanford, adopted by the full house, the house version of 5 the bill provided for a 10 percent reduction in the 6 agency's budget for the lottery operations and central 7 administration strategies. The senate version 8 maintained funding for the lottery operations and 9 central administration strategies consistent with the 10 agency's legislative appropriations request. 11 A conference committee comprised of both 12 house and senate members was formed to work out all the 13 differences between the two versions of the bill, and 14 the conference committee did adopt the senate version as 15 it relates to the lottery's budget, which, again, 16 maintains funding consistent with the agency's request. 17 The agency's right of request for 18 unexpended balance authority for the redesign project 19 for the automated charitable bingo system was not 20 adopted. So now the full conference committee report 21 for the appropriations bill is now scheduled to be 22 considered for final passage by both the house and the 23 senate. 24 And now finally, lastly, at the conclusion 25 of this regular session, the governmental affairs staff 50 1 will review the bills that we've been tracking to 2 identify those bills that have been enacted in order to 3 begin coordinating the agency's legislative 4 implementation project. 5 This concludes my report, and I'll be glad 6 to answer any questions. 7 CHAIRMAN KRAUSE: Go ahead. 8 COMM. WILLIAMSON: On your report, you 9 referred to House Bill 7 where the money would go 10 directly to the charities rather than the state. Is it 11 directed in statute how that would happen, or does this 12 bill get -- you know, get specific on how that is, or 13 would those be -- that be handled through rulemaking at 14 the Commission level? 15 MS. TREVINO: No. And, again, 16 Commissioner Williamson, it's in the house version and 17 it specifically stated in the -- it would be 18 specifically stated in the statute that that would be 19 directed back to the charities. I don't believe it 20 would require any rulemaking. 21 COMM. WILLIAMSON: Okay. But it doesn't 22 give the -- what I call the practical method of doing 23 that? We would have to form sort of a -- I mean, I 24 assume. Right? 25 MR. ROYAL: We would -- Commissioner, we 51 1 would have to take a look and see how we would have to 2 implement that. In the -- Representative Thompson's 3 original bill, 2642, it gave -- it outlined processes 4 for that to be handled by the comptroller's office. In 5 the present state, there is nothing in there. 6 COMM. WILLIAMSON: Okay. I was just 7 curious. 8 MS. TREVINO: It is directly stated in the 9 bill, I think, to answer the question. 10 COMM. WILLIAMSON: Okay. On how it would 11 be handled? 12 MS. TREVINO: On how it would be handled. 13 Again, that's only in the house version. The senate 14 version does not have that language. 15 COMM. WILLIAMSON: All right. 16 MS. TREVINO: So, you know, by here in the 17 next couple of days, we'll know what the final version 18 of that bill will include. 19 COMM. WILLIAMSON: All right. All right. 20 Thank you. 21 MS. TREVINO: Yeah. 22 CHAIRMAN KRAUSE: Thank you, ma'am. 23 Darlene Brown, please. 24 AGENDA ITEM XII 25 MS. BROWN: Good morning, Commissioners. 52 1 I'm Darlene Brown, internal auditor for the Texas 2 Lottery Commission. 3 I have two items for you today. The first 4 one is our regular status report that will inform you of 5 our activity since the last meeting, and then the second 6 item I'm asking -- I will be asking you to approve our 7 2016 internal audit plan. 8 So for our status report, since we met 9 last time, our efforts have continued to focus on the 10 restructuring project, which is now 71 percent complete. 11 The remaining activities, we are still on target for our 12 August 31st finalization of the restructuring. We are 13 still on target for the business process reviews and 14 everything within that project. 15 Our accomplishment so far, and nobody has 16 mentioned this yet -- I'm hoping Alphonso will -- but 17 BOSS went live since your last meeting, and everything 18 has been going very well with that. 19 We've also started drafting the written 20 procedures to -- that are based on the modified business 21 process rules and the modified way of doing business 22 based on the BOSS implementation. We are currently at 23 65 percent complete with the business process rules and 24 implementation of those. 25 The biggest focus of our efforts since 53 1 last time have been on the continuation of the bingo 2 ledger reconciliation project. Right now, as of 3 yesterday, 86 percent of the active organization's 4 ledgers are in some phase of review, whether it be the 5 initial phase or in the final phase of our second 6 review. 7 The amounts that we have left on here, we 8 have approximately 400 more to review and then we will 9 be completed with that project. We are on target for 10 the first round of review to be completed by the end of 11 June, and we will be finished with the entire project of 12 active ledgers organizations by August 31st. 13 That is the conclusion of my status 14 report, and I'd be happy to answer any questions. 15 CHAIRMAN KRAUSE: Any questions? Oh, I'm 16 sorry. We have a commissioner that has a question. 17 MS. BROWN: Okay. 18 COMM. WILLIAMSON: Those on the -- you 19 know, the unreconciled balance activity that we've done, 20 which is, of course, have been of interest to me being 21 an accountant, where did we start? What was the number 22 where we started from that we really didn't know what 23 the detail was? We were -- 24 MS. BROWN: We started -- when we received 25 the initial reports we were looking at about 1700 54 1 organizations with almost $800,000 worth of credits on 2 the books. 3 COMM. WILLIAMSON: So that was in theory 4 what we owed to 1700 people? 5 MS. BROWN: Correct. 6 COMM. WILLIAMSON: So where are -- how -- 7 what does that look like now? 8 MS. BROWN: As of yesterday, we had 9 completed our review of 500 of those organizations. 10 They had -- the books had originally noted $92,000 in 11 license fees that were owed back to the charities and 12 the organizations. Our reconciled balances on that are 13 that those organizations actually owe the state $63,000. 14 They do not have the $92,000 worth of credit balances. 15 In the prize fee category, our books 16 current -- at that time reflected $65,000 worth of money 17 owed to the state. Our reconcile balances are $111,000 18 owed to the state. So between the prize fees and the 19 license fees, the books for those 500 organizations that 20 we've completed our final review on reflected a total 21 balance due back to the organizations of 27,000. Our 22 reconciled balance show that they -- those same 500 23 organizations owe the state $175,000. 24 COMM. WILLIAMSON: So, I mean, this -- 25 that's been a significant reconciliation? 55 1 MS. BROWN: Correct. 2 COMM. WILLIAMSON: So that's -- I know we 3 all kind of groused about it when it started, but I 4 think that this has proven out that it was a worthwhile 5 activity for the state of Texas as well as for, you 6 know, our charities so they understand exactly, you 7 know, where they stand. So I think -- from my 8 perspective, I think it's been a worthwhile activity for 9 us to do that. 10 CHAIRMAN KRAUSE: All right. 11 MS. BROWN: Okay. 12 CHAIRMAN KRAUSE: Your next item? 13 MS. BROWN: Okay. Our next item is the 14 2016 proposed internal audit plan. We're presenting 15 that -- this to you today. 16 What we -- we came about -- in developing 17 the audit plan, we updated our risk assessment and we 18 also included the audits on the plan that we were not 19 able to do in 2015 due to our focus on the bingo 20 projects. 21 So for FY 2016, we are proposing to 22 continue the audit of the procure to pay cycle. We also 23 are going to look at the entity-wide performance 24 measures to make sure that those are accurate and 25 actually currently reflective of business as it is 56 1 today. We're going to look at the drawing process, the 2 jackpot estimation, human resources and the retailer 3 management. And then we will do a follow-up on the 4 bingo organization to make sure that they are still in 5 line -- implementing their business processes as they 6 were designed during all these projects this year. 7 Our plan is -- contains the same budget as 8 we have in the prior two years. We are going to do the 9 seven audits plus our regular compliance activity such 10 as these reports to you and the annual report to the 11 state auditor's office. 12 So we're asking for your approval for the 13 2016 audit plan, which is seven audits, 2200 hours. 14 CHAIRMAN KRAUSE: Any questions, comments? 15 (No response) 16 CHAIRMAN KRAUSE: Looking for a motion to 17 approve the 2016 internal audit plan. 18 COMM. MEADOR: I move that we approve the 19 2016 internal audit plan as presented. 20 CHAIRMAN KRAUSE: Excellent. 21 Looking for a second. 22 MR. TOWNES: Second. 23 CHAIRMAN KRAUSE: All in favor say aye. 24 (All those voting in favor so responded) 25 CHAIRMAN KRAUSE: All opposed say nay. No 57 1 nays. It carries. 2 MS. BROWN: Thank you. 3 CHAIRMAN KRAUSE: Thank you for your good 4 work. 5 MS. BROWN: Thank you. 6 MR. GRIEF: Mr. Chairman, if I could just 7 say one thing -- Darlene, before you go -- this 8 Commission made the decision sometime ago to outsource 9 our internal audit function, and I think you can tell by 10 the results that Darlene and her team have been 11 delivering, that was a very, very wise move on the part 12 of the Commission. 13 We've talked about this in private, but I 14 thought it might be important for the Commission to hear 15 in public, Darlene's personal situation that she's 16 been -- she's received a promotion within her company. 17 I thought she might want to share that on the record. 18 CHAIRMAN KRAUSE: Let's hear about it. 19 MS. BROWN: Thank you. 20 CHAIRMAN KRAUSE: Want to be proud of you. 21 MS. BROWN: Thank you. 22 I have been promoted to director of our 23 Enterprise Risk Services Practice. It comes along with 24 a lot more responsibilities, but I am still going to be 25 the face and the primary contact for this contract. I'm 58 1 very happy that I get to stay with you guys even though 2 I have these additional responsibilities. So thank you 3 for your support. 4 COMM. WILLIAMSON: Congratulations. 5 CHAIRMAN KRAUSE: Well, and while you're 6 going back to your seat, I want to echo what Gary said 7 because we did have on Staff internal auditors. And 8 when we had the opportunity to try something different, 9 it worked out very well. And so, you know, sometimes 10 you don't completely get it right the first time, but 11 apparently we did in this instance, and y'all have done 12 a great job. Thank you. 13 Let's see. Mr. Royal. Ready to hear from 14 you. 15 AGENDA ITEM NO. XIII 16 MR. ROYAL: Good morning, Commissioners. 17 In your notebook is the 2014 Charitable Bingo Operations 18 annual report. The annual report provides financial 19 information on the condition of bingo in the state of 20 Texas as reported by charities and lessors. 21 A few highlights from -- from the reports: 22 In 2014 gross receipts were $738.9 million, which is an 23 increase of 19.2 million, or 2.7 percent, in comparison 24 to the 2013 levels. 25 Prizes awarded were 565.8 million, which 59 1 is an increase of 16.4 million, or 3 percent, in 2 comparison to the 2013 levels. 3 Finally, charitable distributions were 4 $25.8 million, which is a decrease of 317,000, or 5 1.2 percent, in comparison to the 2013 levels. 6 I ask for your approval of the report. 7 CHAIRMAN KRAUSE: It's an action item. Do 8 I have a motion approving this report? 9 COMM. WILLIAMSON: Yes. I make a motion 10 that we approve the charitable bingo annual report. 11 COMM. BAGGETT: I second that. 12 CHAIRMAN KRAUSE: Calling for a vote. All 13 in favor say aye. 14 (All those voting in favor so responded) 15 CHAIRMAN KRAUSE: All opposed, say nay. 16 Carries a hundred percent. 17 Mr. Royal, carry on. 18 AGENDA ITEM NO. XIV 19 MR. ROYAL: I'd like to update you all on 20 the progress of resolving backlogs that were identified 21 during my assessment of the division and reported to the 22 Commission back in October. 23 We are still experiencing some challenge 24 in the licensing area. Over all there are 479 pending 25 applications, with 209 of them over 30 days old as of 60 1 May 26. That's an increase of three applications since 2 April's report. 3 I've recently temporarily assigned 4 additional staffing to the licensing area to assist with 5 this backlog. That combined with Staff's growing use 6 and familiarity of the BOSS system will reduce this 7 further toward my ultimately goal of 30 days. 8 Audit activities have decreased from 153 9 to 69 with 16 pending management responses and 34 10 pending the issuance of final reports in the next few 11 weeks. 12 We continue to remain current with 13 compliance activity and pull-tab testing. 14 The bingo account ledger project is 15 winding down. You've already heard from Darlene on this 16 item. I just want to emphasize that the monies owed to 17 the state are being collected in conjunction with 18 license renewals, so we will be receiving those monies. 19 Finally, an update on the Bingo Operating 20 Services System, BOSS, we are still on track and all key 21 deliverables are on schedule. 22 I'd like to provide you some data from a 23 user standpoint. Since the implementation of BOSS, at 24 the beginning of last month, 580 licenses and 310 worker 25 registries have been issued. There have been notable 61 1 improvements as compared to the same time period 2 reported in 2014. 3 On average, applications were issued 4 25 percent faster, renewal applications were issued 5 14 percent faster, and 2.25 million in quarterly tax 6 returns were filed online. That accounts for 30 percent 7 of quarterly returns filings. So there's -- there's 8 been a great amount of users using BOSS. 9 We still have a ways to go to fully 10 implement this system, but again, we are on track and 11 it's working. As with any system, there are fixes and 12 patches that are required. However, the project team is 13 an amazing group of folks to work with, and they are 14 extremely responsive not only to our needs but also the 15 needs of our licensees that they have had interaction 16 with the licensees as well. 17 Lastly, I traveled to Biloxi, Mississippi, 18 earlier this month to attend the Southern Gaming's Bingo 19 World Summit. I was part of a panel of regulatory 20 people that discussed how operators can successfully run 21 bingo halls and work together. Overall, the summit was 22 very informative and it was great to interact with 23 regulators and bingo operators in other states who are 24 experiencing similar challenges to the state of Texas as 25 it relates to bingo. Lodging and airfare for the summit 62 1 were paid by the Mississippi Gaming Institute. 2 Commissioners, before I complete my 3 report, let me thank you again also for your service. 4 Thank you for the confidence in hiring me in the bingo 5 position last year. Your guidance and inspiration has 6 helped shape bingo regulation for the betterment in this 7 state, and I do thank you. I wish you all the best that 8 concludes my report. 9 CHAIRMAN KRAUSE: Thank you, Mr. Royal. 10 You know, I'm gratified to get to come 11 here today and hear about the success of the full 12 implementation of the BOSS system, and I understand that 13 we are wanting to have more of our customers, you know, 14 use it and that kind of thing. But in my experience 15 when you hear about something, it's because it's not 16 going well, and so I was glad to not hear anything about 17 that, which means that you-all have quietly executed 18 flawlessly. So thank you from the Commission. 19 Gary, you're next. 20 AGENDA ITEMS XV & XVI 21 MR. GRIEF: Mr. Chairman, under both Item 22 15 and Item 16, I have nothing further to report other 23 than what's in your notebooks this morning. 24 CHAIRMAN KRAUSE: Outstanding. I make a 25 motion that we take a ten-minute break. I'm looking for 63 1 a second. 2 COMM. MEADOR: (Nods head) 3 CHAIRMAN KRAUSE: All right. All in 4 favor, say aye. 5 (All those voting in favor so responded) 6 CHAIRMAN KRAUSE: We are adjourned for ten 7 minutes. Oh, and it's ten after 11. 8 (Recess: 11:10 a.m. to 11:23 a.m.) 9 CHAIRMAN KRAUSE: This session of the 10 Lottery Commission is back in session at 11:23. 11 And so we're going to move on to the next 12 agenda item, which is going to be presented by 13 Mr. Robert Biard. 14 AGENDA ITEM XVII 15 MR. BIARD: Thank you, Commissioners. 16 Tab 17 contains 24 lottery and bingo 17 enforcement matters. These are cases where the 18 commission Staff found a violation of the statutes or 19 rules, and most of the time either the licensee failed 20 to appear at the hearing or the Staff and the licensee 21 have reached a settlement. I'll briefly describe the 22 cases, and you can take them up in a single vote if you 23 like. 24 Tabs A through Q are nonsufficient fund 25 lottery retailer license revocations, and these are 64 1 handled in a single order. Each of these cases were 2 presented at the State Office of Administrative Hearings 3 for revocation of the retailer's license on the grounds 4 the licensee failed to have sufficient funds in their 5 bank account to cover electronic funds transfers to the 6 Lottery Commission's account. In each case the 7 administrative law judge recommends revocation, and 8 Staff recommends that you vote to approve the order in 9 each case revoking the license. 10 Tabs R through T are lottery agreed 11 orders, and these are settlements. Tab R is for Bob's 12 Food Mart in Irving. In this case, a managing member of 13 the company tried to claim a $2,000 prize for a ticket 14 he purchased from a customer in violation of the Lottery 15 Act and Commission rules. He falsely stated he had 16 found the ticket. 17 The retailer's license has already been 18 surrendered. Under the agreed order, the licensee will 19 be allowed to reapply immediately provided that the 20 person who tried to claim the prize lays out for a year 21 essentially. He can't participate in the management of 22 the company. He cannot handle, sell, process, or manage 23 lottery tickets prior to March 30th, 2016, and even then 24 he can only handle lottery tickets if he completes a 25 lottery retailer training problem. 65 1 Tab S is for Stop N Save in Fort Worth. 2 In this case, the owner of the company tried to claim a 3 $1,000 prize for a ticket he purchased from a customer. 4 He falsely stated he had been given the ticket. Under 5 the agreed order, the retailer's license will be 6 suspended for 30 days. 7 Tab T is for K & M Food Stores -- K & M 8 Foods in Willis in Montgomery County. In this case, on 9 several occasions, the retailer accepted payment for 10 lottery tickets by credit card in a total of $13,712. 11 Under the agreed order, the license -- the licensee's 12 license will be suspended for 30 days. 13 Tabs U through X are bingo agreed orders. 14 These are all cases where the commercial lessors allowed 15 8-liners to be played during a bingo occasion. The 16 Bingo Enabling Act and the Commission's rules prohibit 17 any game of chance other than charitable bingo, a 18 charitable raffle or door prize to be conducted during a 19 bingo occasion. 20 Tab U is for Cherry Lane Bingo in White 21 Settlement. This case involved 26 gaming machines of 22 the Cherry Lane Bingo hall. Staff assessed an 23 administrative penalty of $15,600. 24 Tab V is for Richland Plaza Bingo in Fort 25 Worth. The lessor allowed the operation of 32 gaming 66 1 machines at the Town Center Bingo Hall. Staff assessed 2 an administrative penalty of $19,200. 3 Tab W is for Davico Enterprises, Corp. in 4 Fort Worth. In this case, the lessor allowed the 5 operation of six gaming machines at the East Side Bingo 6 Hall. 7 Tab X is for Victor Fuentes, Jr., in Waco. 8 The lessor allowed the operation of 20 gaming machines 9 at the El Rancho Bingo Hall. All of these machines in 10 all these cases awarded tickets that were then exchanged 11 for bingo products during bingo occasions. And Victor 12 Fuentes, Staff assessed a penalty of $12,000. 13 However, in each of these cases, the bingo 14 director has also agreed to suspend the penalty if the 15 licensee complies with all the terms of the order for a 16 period of three years. And the other terms include not 17 allowing any other game of chance to be played during a 18 bingo occasion and taking action to terminate the leases 19 and to evict bingo conductors who do not comply with 20 that -- that requirement. 21 And that concludes my presentation. And 22 you can take those all up in a single vote if you like. 23 CHAIRMAN KRAUSE: I do have one question, 24 and that is -- 25 MR. BIARD: Sure. 67 1 CHAIRMAN KRAUSE: -- that for the bingo 2 agreed cases, are all of these the corporate lessors? 3 MR. BIARD: Yes, sir. 4 CHAIRMAN KRAUSE: Good. I hate it when 5 the charities take it in the shorts for what the lessors 6 do. 7 Looking for a motion to approve Staff 8 recommendations on all these cases. 9 MR. TOWNES: I so move that we approve the 10 Staff recommendations relative to the lottery and bingo 11 infractions. 12 CHAIRMAN KRAUSE: Do I hear a second? 13 COMM. BAGGETT: I second that. 14 CHAIRMAN KRAUSE: All agreed -- oh, we're 15 going to have a vote. All agreed, say aye. 16 (All those voting in favor so responded) 17 CHAIRMAN KRAUSE: All opposed, say nay. 18 No nays. It carries a hundred percent. 19 MR. BIARD: Thank you, Commissioners. I 20 have orders for you to sign. 21 AGENDA ITEM XIX 22 CHAIRMAN KRAUSE: Excellent. 23 Well, and we don't have any public comment 24 because the public comments have already been had. And 25 so therefore we are going to go in executive session to 68 1 deliberate personnel matters, deliberate the duties of 2 the general counsel and other direct reports, to receive 3 legal advice regarding everything that we need legal 4 advice on. And so -- and I guess I'm looking for a 5 motion to go into executive session. 6 COMM. BAGGETT: I'll make a motion that we 7 go into executive session. 8 CHAIRMAN KRAUSE: Second? 9 COMM. WILLIAMSON: Second. 10 CHAIRMAN KRAUSE: All right. Well, let's 11 have a vote. Let's go into executive section. 12 Everybody say aye. 13 (All those voting in favor so responded) 14 CHAIRMAN KRAUSE: We are adjourned for the 15 time being. It is 11:29. 16 (Executive Session: 11:29 a.m. to 11:50 17 a.m.) 18 AGENDA ITEM XX 19 CHAIRMAN KRAUSE: We're out of executive 20 session at ten till 12:00 and we do have business to 21 conduct as a result of our executive session. So I'd 22 like to hear a motion. 23 COMM. WILLIAMSON: Yes. I move that we 24 give the charitable bingo director a 4 percent merit 25 raise effective June the 1st, 2015. 69 1 CHAIRMAN KRAUSE: Is there a second? 2 COMM. BAGGETT: I second that motion. 3 CHAIRMAN KRAUSE: All in favor, say aye. 4 (All those voting in favor so responded) 5 CHAIRMAN KRAUSE: All opposed, say nay. I 6 hear no nays. It passes, and well deservedly. 7 AGENDA ITEM XXI 8 CHAIRMAN KRAUSE: We are adjourned by my 9 own motion at 11:52. 10 MR. ROYAL: Thank you, Commissioners. 11 (Proceedings concluded at 11:52 a.m.) 12 13 14 15 16 17 18 19 20 21 22 23 24 25 70 1 C E R T I F I C A T E 2 STATE OF TEXAS ) 3 COUNTY OF TRAVIS ) 4 I, Lorrie A. Schnoor, Certified Shorthand 5 Reporter in and for the State of Texas, Registered Merit 6 Reporter, Certified Realtime Reporter and Texas 7 Certified Realtime Reporter, do hereby certify that the 8 above-mentioned matter occurred as hereinbefore set out. 9 I FURTHER CERTIFY THAT the proceedings of such 10 were reported by me or under my supervision, later 11 reduced to typewritten form under my supervision and 12 control, and that the foregoing pages are a full, true, 13 and correct transcription of the original notes. 14 IN WITNESS WHEREOF, I have hereunto set my hand 15 and seal this 8th day of June, 2015. 16 17 _________________________________ LORRIE A. SCHNOOR, RMR, CRR, TCRR 18 Certified Shorthand Reporter CSR No. 4642 - Expires 12/31/15 19 Firm Registration No. 276 20 Kennedy Reporting Service, Inc. 7800 North Mopac, Suite 120 21 Austin, Texas 78759 512.474.2233 22 23 24 25