1 1 2 3 4 5 TEXAS LOTTERY COMMISSION 6 7 8 COMMISSION MEETING 9 10 11 12 AUGUST 8, 2017 13 14 9:00 a.m. 15 16 AT 17 18 TEXAS LOTTERY COMMISSION 19 20 611 East 6th Street 21 22 Austin, Texas 78701 23 24 25 2 1 APPEARANCES 2 CHAIRMAN: J. Winston Krause 3 COMMISSIONERS: Doug Lowe Carmen Arrieta-Candelaria 4 Robert Rivera Peggy A. Heeg 5 GENERAL COUNSEL: Robert F. Biard 6 EXECUTIVE DIRECTOR: Gary Grief 7 CHARITABLE BINGO OPERATIONS 8 DIVISION DIRECTOR: Alfonso D. Royal III 9 LOTTERY OPERATIONS DIRECTOR: Michael Anger 10 ADMIN. DIVISION DIRECTOR: Michael R. Fernandez 11 ASST. GENERAL COUNSEL: Deanne Rienstra 12 ASST. GENERAL COUNSEL: Ryan S. Mindell 13 ASST. GENERAL COUNSEL: Stephen White 14 CONTROLLER: Katheryn J. Pyka 15 PRODUCTS MANAGER: Robert Tirloni 16 McCONNELL JONES LANIER & MURPHY, LLP: Darlene Brown 17 PRODUCTS & DRAWINGS MANAGER, 18 LOTTERY OPERATIONS DIVISION: Robert Tirloni 19 20 --oo0oo-- 21 22 23 24 25 3 1 TABLE OF CONTENTS 2 Page 3 I The Texas Lottery Commission will call the meeting to order. 4 Pledge of Allegiance to the U.S. and Texas flags........................................... 7 5 II Report, possible discussion and/or action on proposals for internal audit services (RFP No. 6 362-17-0002), including approval of to execute contract........................................ 7 7 III Report, possible discussion and/or action on agency major contracts, including the 8 procurement for the contract for advertising services, drawing studio and production 9 services, and scratch ticket manufacturing and services................................... 7 10 IV Report, possible discussion and/or action on agency prime contracts, including procurement 11 for the contract for drawing CPA services...... 8 V Consideration of and possible discussion 12 and/or action, including adoption, on (i) the repeal of existing 16 TAC 401.315 ("Mega 13 Millions" On-Line Game Rule), and (ii) new 16 TAC 401.315 ("Mega Millions" Draw Game 14 Rule)........................................... 8 VI Consideration and possible discussion and/or 15 action, including adoption, on amendments to 16 TAC 401.371 (Collection of Delinquent 16 Obligations for Lottery Retailer Related Accounts........................................ 10 17 VII Consideration of and possible discussion and/or action, including proposal, on new 18 16 TAC 401.324 (Prize Winner Election To Remain Anonymous....................................... 11 19 VIII Consideration of and possible discussion and/or action, including proposal, on amendments to 20 16 TAC 401.153 (Qualifications for License)..... 14 IX Consideration of and possible discussion and/or 21 action, including proposal, on the repeal of 16 TAC 401.323 ("Monopoly Millionaires' Club" 22 Game Rule)...................................... 20 X Consideration of and possible discussion and/or 23 action, including proposal, on new 16 TAC 401.207 (Written Answer; Default 24 Proceedings).................................... 21 25 4 1 XI Report, possible discussion and/or action on lottery sales and revenue, game performance, 2 new game opportunities, advertising, promotional activities, market research, 3 trends, and game contracts, agreements, and procedures................................... 23 4 XII Report, possible discussion and/or action on transfers to the State and the agency's budget 5 status....................................... 32 XIII Report, possible discussion and/or action on 6 the 85th Legislature, including but not limited to the agency's legislative appropriation for 7 FY 2018-2019................................. 34 XIV Report, possible discussion and/or action on 8 the FY 2018 Operating Budget................. 37 XV Report, possible discussion and/or action on 9 external and internal audits and/or reviews relating to the Texas Lottery Commission, 10 and/or on Internal Audit activities, including approval of the retailer management internal 11 audit report.................................. 40 XVI Report by the Charitable Bingo Operations 12 Director and possible discussion and/or action on the Charitable Bingo Operations 13 Division's activities, including licensing, accounting and audit activities, pull-tab 14 review, and special projects................... 42 XVII Report by the Executive Director and possible 15 discussion and/or action on the agency's operational status, major contracts, agency 16 procedures, awards, and FTE status............. 42 XVIII Consideration of the status and possible 17 of orders in enforcement cases................. 42 18 Lottery NSF License Revocation Cases (Default) A. Docket No. 362-17-3951 - SGN Inc. 19 B. Docket No. 362-17-3952 - Super Amigos C. Docket No. 362-17-4365 - KP Food Store 20 D. Docket No. 362-17-4366 - Cookville Quick Stop Lottery Agreed Orders 21 E. Docket No. 362-17-2904 - Ruby's Food Mart #1, #3, #4, #5, & #6 22 F. Case No. 2017-926 - Highlands Lakes Chevron Quaano's Subs 23 G. Case No. 2017-927 - Spencer Shell Bingo Agreed Orders 24 H. Case No. 2017-437 - Berry Bingo I. Case No. 2017-794 - Sacred Heart Church 25 J. Docket No. 362-17-1856.B - Immaculate Conception Church 5 1 K. Docket No. 362-17-3060.B - Catholic War Veterans Post 1907 2 L. Docket No. 362-17-3061.B - LULAC Council 4483 3 M. Docket No. 362-17-4398.B - Deborah Sellers (Worker Registry) 4 Bingo License Revocation and/or Denial Cases N. Docket No. 362-17-1854.B - Our Lady of 5 Guadalupe Reformed Catholic Church (Default) XIX Public comment.................................. XX 6 XIV Commission may meet in Executive Session........ 67 A. To deliberate personnel matters, including 7 the appointment, employment, evaluation, reassignment, duties, discipline, or 8 dismissal of the Executive Director and/or the Charitable Bingo Operations 9 Director pursuant to Section 551.074 of the Texas Government Code. 10 B. To deliberate the duties of the General Counsel and/or the Human 11 Resources Director pursuant to 551.074 of the Texas Government Code 12 C. To receive legal advice regarding pending or contemplated litigation or 13 settlement offers, or other legal advice, pursuant to 551.071(1) and 14 (2) of the Texas Government Code, including but not limited to legal 15 advice regarding the following items: Pending and potential litigation 16 regarding Fun 5's Scratch Ticket Game #1592, including Travis Co. 17 District Court Cause No. D-1-GN-005114, Third District Court of Appeals 18 Cause No. 03-16-00172-CV (Steele, et al. v. GTECH Corp.); Dallas Co. District 19 Court Cause No. DC-14-14838, Fifth District Court of Appeals Cause 20 No. 05-15-01559-CV (Nettles v. GTECH Corp. and Texas Lottery Commission); 21 and El Paso County Court Cause No. 2014-DCV-4113 (McDonald v. GTECH 22 Corp.), State of Texas v. Equal Employment Opportunity Commission et al. 23 Legal advice regarding Texas Government Code Chapters 466 (State Lottery Act) and 24 467, the Bingo Enabling Act, the Open Meetings Act, the Public Information Act, 25 the Administrative Procedure Act, employment and personnel law, procurement 6 1 and contract law, evidentiary and procedural law, ethics laws, and general 2 government law. Legal advice regarding any item on this 3 open meeting agenda. XXI Return to open session for further 4 deliberation and possible action on any matter posted for discussion in Executive 5 Session. Any matter posted for Executive Session also may be the subject of 6 discussion and/or action in open session prior to Executive Session.................... 67 7 XXII Adjournment................................... 68 8 Reporter's Certificate.............................. 69 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 7 1 P R O C E E D I N G S 2 AGENDA ITEM I 3 CHAIRMAN KRAUSE: I will call to order 4 the Texas Lottery Commission meeting and ask our pledge 5 commissioner to lead us in our pledges. 6 (Pledges recited.) 7 AGENDA ITEM II 8 CHAIRMAN KRAUSE: Mr. Fernandez. 9 MR. FERNANDEZ: Good morning. For the 10 record, my name is Mike Fernandez. I'm the Director of 11 Administration. Item II in your notebook is an action 12 item. Staff is seeking Commission approval to execute a 13 contract with McConnell, Jones, LLP for internal audit 14 services. For the record, the Commissioners have all 15 independently confirmed they have no financial interest 16 in McConnell, Jones. And that will require a vote of 17 the Board. 18 COMMISSIONER ARRIETA-CANDELARIA: So 19 moved. 20 COMMISSIONER RIVERA: Second. 21 CHAIRMAN KRAUSE: All in favor say aye. 22 (Chorus of "ayes.") 23 CHAIRMAN KRAUSE: Passed by acclamation. 24 AGENDA ITEM III 25 MR. FERNANDEZ: Item III in your notebook 8 1 is also an action item, Commissioners. Staff is seeking 2 permission/approval to issue requests for proposals for 3 advertising services, drawing studio and production 4 services, and Scratch Ticket manufacturing services. If 5 you have any questions, I'd be happy to answer. That 6 will also require a vote of approval, Mr. Chairman. 7 CHAIRMAN KRAUSE: I suppose everybody's 8 been briefed on that. 9 COMMISSIONER RIVERA: Move for approval. 10 COMMISSIONER ARRIETA-CANDELARIA: Second. 11 CHAIRMAN KRAUSE: All in favor say aye. 12 (Chorus of "ayes.") 13 CHAIRMAN KRAUSE: Passed by acclamation. 14 AGENDA ITEM IV 15 MR. FERNANDEZ: And, lastly, Item IV in 16 your notebook is a briefing item; and it is to advise 17 the Commission of staff's intent to issue a request for 18 proposal for drawing CPA services. 19 CHAIRMAN KRAUSE: Outstanding. Thank 20 you, sir. 21 Ms. Rienstra, Item V, VI, and VII. 22 AGENDA ITEM V 23 MS. RIENSTRA: Good morning, 24 Commissioners. Deanne Rienstra, Assistant General 25 Counsel. The first item I have today is consideration 9 1 of possible discussion and/or action, including 2 adoption, on repeal of existing 16 TAC 401.315, the 3 "Mega Millions" On-Line Game Rule and the adoption of a 4 new rule at 16 TAC 401.315, "Mega Millions" Draw Game 5 Rule. 6 In your notebook is the proposed repeal 7 of the existing rule and the proposed adoption of the 8 new rule. Both the repeal and the proposed new rule 9 were published in the Texas Register on June 16th and 10 available for public comment for 30 days. We received 11 only one comment from an individual who disagreed with 12 the price increase to purchase a ticket. 13 The adopted version of the new rule, as 14 proposed at the June Commission Meeting, will increase 15 the cost of play, change the game matrix, and add a new 16 optional jackpot-only wager called Just the Jackpot. 17 These changes anticipate larger and faster-growing 18 jackpots, increased ticket sales and revenue to the 19 Foundation School Fund. The new "Mega Millions" game 20 changes are expected to be implemented on October 28, 21 2017. 22 The Commission received one written 23 comment, which I already said. Also, I'd like you to 24 know that this is presented with non-substantive changes 25 that are specifically outlined in the preamble. 10 1 Staff recommends the Commission adopt the 2 repeal of existing "Mega Millions" On-Line Game Rule and 3 adopt the proposed new "Mega Millions" draw game rule. 4 I am happy to answer any questions. 5 CHAIRMAN KRAUSE: Commissioners? 6 (No response.) 7 CHAIRMAN KRAUSE: I'm looking for a 8 motion. 9 COMMISSIONER HEEG: So moved. 10 COMMISSIONER RIVERA: Second. 11 CHAIRMAN KRAUSE: All in favor say aye. 12 (Chorus of "ayes.") 13 CHAIRMAN KRAUSE: Done. 14 AGENDA ITEM VI 15 MS. RIENSTRA: Also in your notebook on 16 Item VI it is for your consideration for adoption of 17 proposed amendments to 16 TAC Section 401.371, 18 Collection of Delinquent Obligations for Lottery 19 Retailer Related Accounts, as published in the Texas 20 Register on June 16th. We did not receive any comments 21 during the 30-day public comment period. 22 As presented in the June meeting, the 23 purpose of the proposed amendment is to update the 24 existing procedure regarding mailing demand letters and 25 to update the referenced citation to the Texas 11 1 Comptroller of Public Account's Accounting Statement 28. 2 Staff recommends adoption of the proposed rule amendment 3 to 16 TAC Section 401.371. I'm happy to answer any 4 questions. 5 CHAIRMAN KRAUSE: Commissioners, 6 questions? 7 (No response.) 8 CHAIRMAN KRAUSE: Motion to adopt staff's 9 recommendation. 10 COMMISSIONER HEEG: So moved. 11 COMMISSIONER RIVERA: Second. 12 CHAIRMAN KRAUSE: All in favor say aye. 13 (Chorus of "ayes.") 14 MS. RIENSTRA: Thank you. 15 AGENDA ITEM VII 16 MS. RIENSTRA: Also in your notebook is a 17 proposal for a new rule addressing HB 59, which was 18 passed by the 85th Legislature and signed by 19 Governor Abbott on June 12th. The purpose of the 20 proposed new rule is to permit a lottery prize winner of 21 $1 million or more, who is a natural person, the 22 opportunity to elect to remain anonymous in certain 23 instances, thereby prohibiting all personally 24 identifiable information from being released to the 25 public. 12 1 Prior to this legislation, the name of 2 the prize winner, whether a natural person or a legal 3 entity, was public information pursuant to the Texas 4 Public Information Act. The name of the legal entity 5 and its authorized representative will still be 6 available to the public unless the authorized 7 representative is a beneficial owner of the legal 8 entity. In that case, just the name of the legal entity 9 will be available. 10 Additionally, the name of a prize winner 11 who is a natural person but who elects to receive the 12 prize payments in periodic installments will only be 13 withheld for 30 days from the date of the claim. After 14 that time, the prize winner's name will be available for 15 the public. House Bill 59 requires the Commission to 16 adopt rules and procedures to implement this law no 17 later than December 1st, 2017; and this rule will apply 18 to claims submitted after January 1st, 2018. 19 Staff recommends the Commission initiate 20 the rulemaking process by publishing the attached 21 proposal in the Texas Register to receive public comment 22 for a period 30 days. I'm happy to answer any 23 questions. 24 CHAIRMAN KRAUSE: Commissioners? 25 COMMISSIONER HEEG: I have a question. 13 1 MS. RIENSTRA: Yes, ma'am. 2 COMMISSIONER HEEG: Do you know the 3 rationale why someone that receives payments in 4 installments is not allowed to remain anonymous? 5 MS. RIENSTRA: It's my understanding that 6 periodic installments, because our State Lottery Act 7 allows prize payments to be sold to third-party 8 factoring companies, that it allows those factoring 9 companies to determine who might be interested in 10 selling their future payments. 11 COMMISSIONER LOWE: Their lobby is pretty 12 strong. 13 (Laughter.) 14 COMMISSIONER ARRIETA-CANDELARIA: Yes, 15 they are. 16 CHAIRMAN KRAUSE: I actually had one 17 person who said they'd start playing lottery now because 18 they can play anonymously. 19 MS. RIENSTRA: They do still have to 20 provide their identification to the Lottery. It's not 21 like they can come in and not tell us who they are. We 22 do have processing requirements. 23 CHAIRMAN KRAUSE: Alrighty. Do I already 24 have a motion or not? 25 COMMISSIONER RIVERA: Move for approval. 14 1 COMMISSIONER ARRIETA-CANDELARIA: Second. 2 CHAIRMAN KRAUSE: All in favor say aye. 3 (Chorus of "ayes.") 4 CHAIRMAN KRAUSE: Adopted. 5 MS. RIENSTRA: Thank you. 6 CHAIRMAN KRAUSE: Yes, ma'am. 7 Ryan Mindell. 8 AGENDA ITEM VIII 9 MR. MINDELL: Good morning, 10 Commissioners. My name is Ryan Mindell, Assistant 11 General Counsel. 12 In your notebook is Item VIII, a proposal 13 for an amendment to existing 16 TAC 401.153, 14 Qualifications for a License. The purpose of this 15 amendment is to add language required by another newly 16 enacted statute, House Bill 1555, which permits the 17 Commission to license certain retail locations who sell 18 alcoholic beverages if they derive less than 30 percent 19 of their gross receipts from the sale or service of 20 alcoholic beverages. 21 To match the rule to the statute, staff 22 recommends the Commission initiate the rulemaking 23 process by publishing the attached proposal in the Texas 24 Register to receive comment for a period of 30 days. 25 I'm happy to answer any questions about 15 1 the proposed amendment. 2 CHAIRMAN KRAUSE: Commissioners? 3 COMMISSIONER LOWE: So the 30 percent, 4 that's just what they report? They say: That's all we 5 sell is 30 percent? 6 MR. MINDELL: I believe that's correct. 7 It's going to be -- it's location based, but it's going 8 to be reported to us as part of the licensing process. 9 COMMISSIONER LOWE: So how do you monitor 10 that? After they get their permit, how do you monitor 11 it? 12 MR. MINDELL: I'm sure we have some 13 people in licensure who can speak to that. What we're 14 trying to do here is match the rule language, that part 15 of the rule, match it up to the statute. So their might 16 be additional procedures we're working on. 17 MR. ANGER: Good morning, Commissioners. 18 For the record, my name is Michael Anger. I'm the 19 Lottery Operations Director. 20 So, Commissioner, in response to your 21 question, that is a self-reported standard. So they're 22 attesting to that when they apply for a license with us. 23 So they'll sign a statement. They sign an affidavit, 24 essentially, indicating that they're below that 25 30-percent threshold. 16 1 If we were to get a complaint that 2 somehow they were in violation of that, we would proceed 3 with investigative resources to try to work through a 4 process to determine that with them. The challenge is 5 that a lot of these companies hold this information as 6 private primarily because they don't want to share that 7 information with their competitors. So this does 8 present a unique challenge for us in working through 9 this. And we're following this affidavit process, which 10 is in addition to our standard licensing process to make 11 sure that they assert that that's where they stand; and 12 then we'll have to evaluate that if an issue comes up or 13 if there's a complaint that addresses that. 14 COMMISSIONER LOWE: So if we get a 15 complaint, can we ask for their records to validate or 16 how -- 17 MR. ANGER: Under our statute, they have 18 to provide their lottery related sales records. So we 19 would have to work with legal services and our 20 investigative arm and enforcement under Mario Valdez to 21 try to get them to share that information with us. 22 MR. MINDELL: I think our licensees, 23 they're our partners so they're going to want to work 24 with us and demonstrate that they're meeting the 25 requirements of the statute. 17 1 COMMISSIONER LOWE: I don't think we have 2 a problem with HEB or Whole Foods or companies like that 3 because they're going to do the right thing; but if you 4 get somebody that's an outlier, they might test you a 5 little bit and say, "Well, what are you going to do to 6 us? We're not going to give you our records." 7 MR. ANGER: Right. And not cooperating 8 with a Commission investigation, is a matter that we can 9 address under our administrative rules. So that would 10 be the mechanism that we would pursue in that situation. 11 COMMISSIONER LOWE: So, ultimately, if we 12 determine that they're 35 percent or -- 13 MR. ANGER: They would then be barred 14 from licensure, and we would pursue revocation of that 15 license. 16 MR. BIARD: It's an eligibility issue, so 17 it's lottery-related. Those records are definitely 18 lottery-related. 19 COMMISSIONER LOWE: It's just that we're 20 kind of moving into new territory. I know that the 21 retail grocery business is changing because you can go 22 eat dinner at Whole Foods or -- we don't have any of 23 those in Palestine. So when you come to Austin, you can 24 go eat at Whole Foods. Anyway, thanks. I appreciate 25 it. That's all I have. 18 1 COMMISSIONER ARRIETA-CANDELARIA: 2 Michael, so someone who already has a license is 3 grandfathered in, basically, by the prior chapter; or is 4 this something brand-new. 5 MR. ANGER: No. They would all have to 6 seek and complete an affidavit asserting that they meet 7 this requirement. So they wouldn't just be 8 grandfathered in under a separate provision. This goes 9 to what Commissioner Lowe was referring to. We have a 10 lot of the standard traditional modern trade styles. 11 Really, it's grocery and to some extent 12 convenience. We'll have situations where a convenience 13 store may have a attached restaurant that has a doorway 14 that moves through both businesses. So that situation 15 and then the example the Commissioner used, a Central 16 Market or an HEB location has an attached restaurant 17 that also serves open container beer and wine at that 18 restaurant. That's the type of trade style this 19 addresses. 20 There's a license type at TABC called a 21 BG license. So they can acquire a license in grocery 22 and C stores that have an attached restaurant but 23 there's one umbrella license that covers sale of alcohol 24 for off-premise consumption, beer and wine for 25 off-premise consumption, and open container sales of 19 1 beer and wine through that other area of their business. 2 So it's one license and this carve-out 3 provision, as I understand it from the changes in the 4 bill, allows us to carve out and allow that particular 5 license type to be licensed provided that they will 6 assert that they're below that threshold. 7 COMMISSIONER ARRIETA-CANDELARIA: And 8 then two other things. So can't you also -- I think 9 they have to report sales to the State Comptroller's 10 Office, anyway, right? And isn't there a beverage tax 11 that we could -- 12 MR. ANGER: I believe there's visibility 13 into beverage sales. What there's not visibility into 14 is their overall business sales. So that's the issue we 15 get into in looking into one of these matters is that 16 business would have to be willing to provide essentially 17 their books and records or assert what their level of 18 overall sales are as compared to these alcohol sales. 19 COMMISSIONER ARRIETA-CANDELARIA: Okay. 20 I still think that there's some data at the State 21 Comptroller's Office for sales tax and stuff like that. 22 You can get an inkling as to what their sales volumes 23 would be. They have to report that when they pay for 24 their tax. 25 MR. ANGER: And we would certainly 20 1 explore that as a part of any effort that we have to 2 make as far as someone who might not be in compliance. 3 COMMISSIONER HEEG: This rule doesn't 4 address enforcement of this rule? 5 MR. MINDELL: That's correct. 6 CHAIRMAN KRAUSE: Any other questions? 7 (No response.) 8 CHAIRMAN KRAUSE: Would y'all like to 9 vote on it? 10 COMMISSIONER ARRIETA-CANDELARIA: So 11 moved. 12 COMMISSIONER RIVERA: Second. 13 CHAIRMAN KRAUSE: All in favor say aye. 14 (Chorus of "ayes.") 15 CHAIRMAN KRAUSE: It's adopted. 16 AGENDA ITEM IX 17 MR. MINDELL: The next item, Item IX, is 18 mine, as well, for consideration. It's a proposal for a 19 repeal of existing 16 TAC 401.323, the "Monopoly 20 Millionaires' Club" Game Rule. The purpose of this 21 repeal is just to remove a reference to a discontinued 22 lottery draw game no longer offered. Therefore, the 23 staff recommends the Commission initiate the rulemaking 24 process by publishing the proposal in the Texas Register 25 to receive public comment for a period of 30 days. 21 1 Happy to answer any questions. 2 CHAIRMAN KRAUSE: Commissioners? 3 COMMISSIONER HEEG: So moved. 4 COMMISSIONER RIVERA: Second. 5 CHAIRMAN KRAUSE: All in favor say aye. 6 (Chorus of "ayes.") 7 CHAIRMAN KRAUSE: The rulemaking process 8 is commenced. 9 MR. MINDELL: Thank you. 10 CHAIRMAN KRAUSE: Mr. White. 11 MR. WHITE: Yes, sir. 12 AGENDA ITEM X 13 MR. WHITE: Good morning, Chairman, 14 Commissioners. My name is Stephen White, Assistant 15 General Counsel. 16 Before you under Tab X is the staff's 17 proposed new rule, 401.207, entitled Written Answer; 18 Default Proceedings. The purpose of this proposed new 19 rule is to set forth in a rule the Commission's process 20 for handling default contested case proceedings. In 21 addition to describe the Commission's recently- 22 developed default process, the proposed rule requires a 23 Respondent or Applicant file a written response to the 24 Commission's Notice of Hearing with the State Office of 25 Administrative Hearings at least ten calendar days prior 22 1 to the date of the hearing or at least five calendar 2 days prior to the date of the hearing in lottery summary 3 suspension cases if the Respondent or Applicant intends 4 to appear at the hearing and contest the allegations in 5 the Notice of Hearing. 6 If no response is filed or if the 7 Respondent or Applicant does not appear at the hearing, 8 SOAH and the Commission's staff will proceed to disposed 9 of the case by default. 10 If an Applicant or Respondent appears at 11 the hearing without first filing a written response, the 12 rule contemplates that the Commission staff would 13 request a continuance of the hearing in order to prepare 14 for a fully litigated contested case. 15 Staff anticipates this rule will result 16 in a more efficient use of State resources by preparing 17 for fully litigated contested cases only in instances 18 where the Respondent or Applicant intends to appear at 19 the hearing and contest the allegations in the Notice of 20 Hearing. 21 The staff recommends the Commission 22 initiate the rulemaking process by publishing the 23 attached proposal in the Texas Register to receive 24 public comment. 25 CHAIRMAN KRAUSE: Discussion, questions, 23 1 comments? 2 COMMISSIONER LOWE: This makes a lot of 3 sense to me. We really don't need to be -- we need to 4 know if they're going to show up. If they show up, it's 5 a good way of handling it just to ask for a continuance 6 and get ready. 7 So I'll move to adopt it unless there's 8 further discussion, Mr. Chairman. 9 COMMISSIONER ARRIETA-CANDELARIA: Second. 10 CHAIRMAN KRAUSE: All right. All in 11 favor say aye. 12 (Chorus of "ayes.") 13 CHAIRMAN KRAUSE: Done. Thank you. 14 MR. BIARD: I have orders for six 15 rulemaking items. 16 CHAIRMAN KRAUSE: Ms. Pyka has the next 17 four items on our agenda. 18 AGENDA ITEM XI 19 MS. PYKA: Good morning, Commissioners. 20 My name is Kathy Pyka, Controller for the agency. With 21 me this morning is Robert Tirloni, Lottery Operations 22 Products Manager. 23 Commissioners, our first chart that we 24 have for you this morning reflects our comparative sales 25 through the week ending July 29th, 2017. Our total 24 1 fiscal year 2017 sales through this 46-week period are 2 $4,569,000,000, which is a decrease of 104 million or 3 2.2 percent, compared to the same period last fiscal 4 year. 5 Commissioners, due to strong Scratch 6 Ticket sales in the last couple of months, our deficit 7 that was 126 million the last time that we met has now 8 been reduced to 104 million, a net positive change of 22 9 million over the previous 7-week period. To better put 10 that into perspective, we have had 14 weeks of 80-plus 11 million Scratch Ticket sales this fiscal year, while 12 last fiscal year we had 3 weeks of Scratch Ticket sales 13 exceeding $80 million. 14 So on to Scratch Ticket sales, which is 15 the second orange column, of fiscal year 2017, are right 16 at $3.6 billion, which is an increase of $193.9 million; 17 and our Scratch Ticket sales amount to 78.8 percent of 18 total sales through this period. 19 Our fiscal year 2017 draw sales, 20 reflected on the second blue bar, are at $969.2 million, 21 which is a 298-million-dollar decline or 24 percent 22 under the same period for last fiscal year. 23 Robert will now provide a report on 24 additional sales information by product. 25 MR. TIRLONI: Thanks, Kathy. 25 1 Good morning, Commissioners. 2 I'll start with the draw game total. We 3 are down $298 million this fiscal compared to last. 4 I'll point out the deficits that we're 5 seeing on "Mega Millions" and Megaplier, the add-on 6 feature or "Mega Millions," and Powerball and Power 7 Play. Power Play is the add-on feature for Powerball. 8 So that deficit for those two products and their add-on 9 features total just about 280 million of that 10 298-million-dollar deficit for the draw game portfolio 11 overall. And that's just to highlight that the lack of 12 jackpots that we've had from both of those multistate 13 games this year has had a dramatic impact on draw game 14 sales overall. 15 Now, you just adopted a rule to change 16 "Mega Millions" in October, and so we certainly hope 17 that that change will help generate jackpots next fiscal 18 year for us. 19 We do have two decent jackpots going 20 right now, though. Powerball has climbed up to 21 307 million. That's for tomorrow night's drawing, and 22 "Mega Millions" is at 346 million for tonight's drawing. 23 So we hope if those games continue to roll, we can 24 continue to chip away at that deficit over the next few 25 weeks. 26 1 Scratch tickets do continue to be very 2 strong. We're up $194 million. That's 6 percent growth 3 year over year. So, again, very, very strong sales, 4 good results on the Scratch portion of the portfolio; 5 and that has helped us get to a 104-million-dollar 6 deficit. So, hopefully, over the next few weeks we 7 continue with some jackpot rolls and strong Scratch 8 sales; and, hopefully, we can get that deficit even 9 lower before the end of the fiscal year. 10 And that's it for our sales report. 11 COMMISSIONER LOWE: Can I ask you a 12 question? Once we've adopted this new game, we have 13 this "Just the Jackpot"? 14 MR. TIRLONI: "Just the Jackpot" feature. 15 COMMISSIONER LOWE: Are you going to 16 track those separately so we can see on the report who's 17 playing "Just the Jackpot"? 18 MR. TIRLONI: Yes, sir. It will be a 19 separate sales line item. 20 COMMISSIONER LOWE: Okay. Thanks. 21 MR. TIRLONI: Yes, sir. 22 COMMISSIONER HEEG: To what do you 23 attribute the increase in Scratch-offs? 24 MR. TIRLONI: The short answer to that is 25 we have a lot more levers that we can pull with the 27 1 Scratch-off product. We have price points ranging from 2 $1 up to $50. We have the flexibility to create new 3 games quickly, and the games pretty much market 4 themselves because of the way they're displayed at 5 retail. 6 In the industry we often talk about the 7 draw games as being the invisible product because, 8 basically, you've got to go in and know to ask for it; 9 and it's basically a computer terminal that sits on the 10 counter at retail. So it really doesn't have the 11 strong marketing ability that the Scratch product has. 12 That's the short answer for the challenge 13 between those two product categories; and I'll tell you, 14 the marketing and the sale of the draw games nationwide 15 is a challenge for lotteries when you compare Draw to 16 Scratch. 17 COMMISSIONER HEEG: Thank you. 18 MS. PYKA: Any other questions? 19 (No response.) 20 MR. GRIEF: Mr. Chairman, if I could 21 interject for just a moment while Mr. Tirloni is at his 22 seat, I think this would be a good opportunity to share 23 some information with you regarding Robert. 24 Some of you, Mr. Chairman, know that 25 Robert has been with the Lottery Commission now for over 28 1 20 years. He's held several operational and management 2 positions over that time. He's worked in games 3 compliance. He was an instant product specialist, a 4 draw product specialist. However, his most significant 5 contributions have come during the last 13 years when he 6 has been our Products and Drawings Manager. 7 It's no accident that during that same 8 13 years in that critical position we have had 13 9 consecutive years of generating at least a billion 10 dollars in sales -- or, in revenue, rather for the 11 Foundation School Fund and for veterans. Our success in 12 large part has been due to the efforts of Robert and his 13 team to bring those innovative products that he was 14 mentioning to market and to market quickly in order to 15 capture the interest of our lottery players and to drive 16 the continued enthusiasm for our lottery games. 17 Robert works very closely with all three 18 of the companies that print scratch tickets here in the 19 United States and around the world; and as you know, we 20 have a portfolio of over 90 Scratch games that we 21 introduce every single year. He also oversees that draw 22 game portfolio that he mentioned. We have nine draw 23 games that offer four unique add-on features, adding 24 another layer of complexity. And he also oversees a 25 drawings team that conducts 88 separate drawings every 29 1 single week without fail, come hell or high water, as 2 well as frequent other drawings for retail incentives 3 and promotional second-chance drawings that have to take 4 place. 5 But his role doesn't end with just the 6 lottery games. He works closely with IGT, the lottery 7 operator. He ensures the successful management of our 8 agency's outsourced sales force, our retailer 9 recruitment efforts and outreach, and our draw and 10 scratch portfolios' strategic management as well as our 11 complex scratch game introduction and launch schedule. 12 It doesn't end there. He plays a key 13 role in our advertising efforts as well. He works very 14 closely with the advertising agency and makes sure that 15 we have the necessary marketing resources in place to 16 support all those products that he was talking about. 17 Beyond all the game introductions and the 18 products and the drawings, Robert has a great 19 understanding of the integrity and the security that's 20 required for any successful lottery to thrive. His draw 21 team runs one of the most respected drawings programs in 22 the United States, and that program has received 23 numerous accolades over the years. 24 Additionally, Robert has the agency's 25 Responsible Gaming Coordinator report directly to him; 30 1 and he and Teresa Edwards work very closely to ensure 2 that the principles of responsible gaming are brought 3 into all the aspects of everything we do with our 4 lottery games. He works closely with the National 5 Council on Problem Gambling, the World Lottery 6 Association, and the North American Association of State 7 and Provincial Lotteries, NASPL, as it's known. 8 In fact, in 2016, you might remember, the 9 World Lottery Association recognized the agency with the 10 Best Innovative Responsible Gaming Award, along with 11 Level 3 Certification, in large part due to the efforts 12 of Robert and Teresa. 13 He's also been a key contributor to the 14 broader lottery industry. He's served on many multi- 15 jurisdictional committees over the years; and routinely 16 Robert is asked to present at conferences all over the 17 country to share his expertise here in Texas with his 18 colleagues in other lotteries. 19 In summary, I think you're getting a good 20 feel for what an integral part of the lottery's success 21 that Robert has been. 22 And every year NASPL, the North American 23 Association of State and Provincial Lotteries, allows 24 lottery directors from around the country an opportunity 25 to nominate one staff member for consideration of what's 31 1 known as the Powers Award. Powers Awards are given in 2 recognition of the significant contributions that 3 lottery and vendor employees have made through their 4 exceptional job performance. These awards are named in 5 honor of Edward J. Powers, who is known as the father of 6 the modern lottery here in the U.S. Ed spent more than 7 25 years in the lottery industry, and he helped define 8 some of the organizational structures that have become 9 the blueprint for many North American lotteries today. 10 The drive and the commitment and the integrity that 11 Mr. Powers displayed during his career has really set 12 the standard of excellence of which all of our lotteries 13 and our vendors are all measured. 14 This year I nominated Robert for the 15 prestigious Powers Award based on those many 16 accomplishments that I've already spoken about. I'm 17 very pleased, very pleased to let the Commission know 18 that Robert was recognized as the winner of the Powers 19 Award. 20 (Standing ovation.) 21 MR. TIRLONI: Thank you, Gary, and 22 Commissioners. I was honored to be nominated, honored 23 to win; and this team did a really good job -- I'm not 24 surprised very easily. Nobody can usually ever surprise 25 me, maybe because I'm too nosey and I know everything 32 1 that's going on; but they kept a good secret. And I was 2 completely surprised when they read my name out at the 3 Nashville conference of NASPL. 4 So thank you for your kind words. I 5 really appreciate that. It's hard to believe I've been 6 here for 20 years, but I thank you and thank you for 7 recognizing me very much. 8 MR. GRIEF: Thank you, Mr. Chairman. 9 COMMISSIONER ARRIETA-CANDELARIA: Thank 10 you, Robert. 11 CHAIRMAN KRAUSE: Robert, you're an 12 example of the fine staff that we have; and we are 13 really pleased that you are serving in a leadership role 14 in this organization. We appreciate what you've been 15 doing, and we hope that you can continue to provide that 16 leadership as we go forward, you know, with the altered 17 circumstances we have to deal with. 18 Congratulations. We're proud of you. 19 Thank you for all the great work you've done over the 20 years. 21 MR. TIRLONI: Thank you, Mr. Chairman. I 22 really appreciate those words. Thank you. 23 AGENDA ITEM XII 24 MS. PYKA: So we'll move on to Tab XII, 25 which includes information on the agency's transfers to 33 1 the State and the agency's budget status. The report in 2 your notebook reflects accrued revenue transfers and 3 allocations to the Foundation School Fund and the Texas 4 Veterans Commission for the period ending June 30th, 5 2017. Our total accrued transfers to the State amounted 6 $1,050,000,000 for the first ten months of fiscal year 7 2017. Of the $1,050,000,000 transferred to the State, 8 984.6 million was transferred to the Foundation School 9 Fund, while 12.9 million was the amount transferred to 10 the Texas Veterans Commission and the balance of 11 52.9 million transferred from unclaimed prizes. This 12 brings our cumulative transfers to the Foundation School 13 Fund now to $20.7 billion. 14 The final item under this tab is the 15 agency's fiscal year 2017 Method of Finance Summary for 16 the third quarter ending May 31st, 2017. The 17 Commission's lottery account budget for fiscal year 2017 18 is $237.1 million; and of this amount, 89.7 percent was 19 encumbered and expended through the end of the third 20 quarter. The Bingo Operations budget, funded by general 21 revenue, is $15.4 million, with 82.4 percent expended 22 and encumbered through the end of the third quarter. 23 Commissioners, that concludes my 24 presentation. I'd be happy to answer any questions on 25 this item. 34 1 CHAIRMAN KRAUSE: Commissioners? 2 (No response.) 3 CHAIRMAN KRAUSE: Thank you, ma'am. 4 XIII. 5 AGENDA ITEM XIII 6 MS. PYKA: Commissioners, Tab XIII is an 7 update on the Commission's appropriation budget for 8 fiscal years 2018 and 2019. The chart that I've 9 included in your notebook includes our final 10 appropriation values; and following our last meeting, 11 one of our primary recruiting and retention tools for 12 retailers was vetoed by the Governor. The Commission's 13 annual retailer bonus budget of $4.2 million was zeroed 14 out in second year of the biennium. 15 The chart that I have before you includes 16 information on retailers who received the largest 17 retailer bonuses during the current and previous two 18 fiscal years. So as noted on the chart, looking at the 19 very top portion on our fiscal year 2017 bonuses through 20 the end of July, you'll note four lottery vendors who 21 received bonuses greater than $10,000, the city of the 22 retailer as well as the game that they received the 23 bonus for; and, of course, this same data is included 24 for fiscal year 2016 as well as 2015. I think that as 25 you look at the information on this chart, you can see 35 1 what an amazing recruitment and retention tool this has 2 been for Michael and his team in our efforts to -- for 3 retention of those retailers. 4 So with that, I would be happy to answer 5 any questions. 6 COMMISSIONER LOWE: What effect do you 7 think this will have? That's a Michael question, huh? 8 MS. PYKA: Michael. 9 COMMISSIONER ARRIETA-CANDELARIA: Kathy, 10 as he's coming up, a quick question: And when does this 11 take effect? 12 MS. PYKA: Currently. So we'll have the 13 4.2-million-dollar appropriation in the fiscal year '18 14 budget that begins September 1 of 2017. We'll have that 15 all the way through August 31 of 2018; but beginning the 16 next fiscal year, the appropriation is zeroed out. And 17 there's not a provision to allow us to carry forward any 18 unspent funds from the first year to the second. So 19 we'll definitely need to phase this program out at the 20 end of next fiscal year. 21 COMMISSIONER ARRIETA-CANDELARIA: Okay. 22 MR. ANGER: Commissioners, again, for the 23 record, my name is Michael Anger; and I'm the Lottery 24 Operations Director. 25 Commissioner Lowe, in response to your 36 1 question, there's really two areas where the bonus 2 program benefits the agency. As Kathy alluded to, it's 3 a strong recruitment tool for the agency. It is one of 4 the primary reasons that retailers become interested, 5 some of the larger chains become interested in selling 6 lottery; and as you'll see on the chart, there's a 7 number of large chains that have received bonuses over 8 the last several years. And so for those who are not 9 selling lottery, they see their competitors and they see 10 their performance and they see their opportunity through 11 seeing their competitors receive significant bonuses 12 from the agency. 13 The other area where this helps us is in 14 our the relationship with these retailers. So you see 15 up there HEB Grocery, for instance, Krogers. Those are 16 two chains who have grown to support the lottery 17 significantly, not only by making the decision to 18 license and sell the product and making them available 19 in their store, but in working closely with the lottery 20 to promote and sell lottery products in their stores. 21 So an example, HEB Grocery, on their own 22 at their own expense, has gone to including us in 23 advertising throughout their locations. So they include 24 us on their advertising circulars that go out to their 25 customers when they're promoting specials at their 37 1 stores. The locations that have gas pumps, they have 2 provided us with free advertising and promotion of our 3 products on the gas pumps, given us free advertising 4 space. So it enables growing that business relationship 5 with our retail partners who are out there selling these 6 products, and so this is one of those things that makes 7 them feel good about being lottery retailers, obviously. 8 And so as we move forward, we will have 9 to see how that affects those relationships and our 10 opportunity to recruit retailers because we won't be 11 able to share with them the opportunities for some of 12 these more significant bonuses. 13 CHAIRMAN KRAUSE: Well, I'm sorry that 14 happened; but it's something we have to deal with. 15 MR. ANGER: Yes, sir. 16 CHAIRMAN KRAUSE: Any other comments or 17 questions? 18 (No response.) 19 CHAIRMAN KRAUSE: All right. Well, thank 20 you for telling us about that. 21 MS. PYKA: Commissioners, I'll move on to 22 Tab XIV, which is the request for your approval of the 23 fiscal year 2018 operating budget in the amount of 24 $247,415,332 and 322 full-time equivalent positions. 25 The budget was developed in accordance with the 38 1 appropriated amounts outlined in Senate Bill 1, adjusted 2 for riders and Article 9 funding provisions. The 3 initial drafted budget was developed by the Office of 4 the Controller and delivered to division management for 5 their direct input. The final draft was developed after 6 receiving feedback from the division and reviewed by 7 executive management. 8 This concludes my presentation. I'd be 9 happy to answer any questions on the fiscal year 2018 10 operating budget. 11 CHAIRMAN KRAUSE: It doesn't appear that 12 we have any questions. 13 COMMISSIONER ARRIETA-CANDELARIA: I have 14 a question. 15 CHAIRMAN KRAUSE: Oh, yes. Please. 16 COMMISSIONER ARRIETA-CANDELARIA: And so 17 over the course of this next fiscal year, we are going 18 to expect that our -- reduced sales; that's what we're 19 projecting for the budget? 20 MS. PYKA: That is correct. 21 COMMISSIONER ARRIETA-CANDELARIA: And to 22 the extent -- what is that number of reduction to the 23 Foundation School Fund? 24 MS. PYKA: I'll include it from the 25 perspective of both sales and revenue; and so from the 39 1 advertising reduction, we're projecting just right at a 2 400-million-dollar decline as well as a-hundred-million- 3 dollar reduction and similar results for the reduced 4 printing budget authority we'll have for Scratch Ticket 5 printing. So we're looking at right around 400 million 6 per each and a hundred million for revenue for each. 7 COMMISSIONER ARRIETA-CANDELARIA: I 8 think -- you know, just a note, I think that we need to 9 look at this; and maybe when we approach it in future 10 years, we have to look at it from the economic 11 standpoint of what it's doing, not only just for the 12 Lottery's Foundation School Fund but also to our 13 retailers. I mean, there's a lot of impact, I think, in 14 this budget this Legislative year that impacted the 15 lottery. And I am disappointed in that outcome, and I 16 think impact to the lottery is significant. 17 I also want to say that, I mean, these 18 are really a lot of tough times for a lot of us, a lot 19 of entities. I work for a governmental agency, so I 20 understand. But I think that that does not discount the 21 good work of the staff, of Gary and his staff; and I 22 encourage you all to continue to do great work. Y'all 23 are -- I've been really happy being on the Commission 24 and getting to know all of you, and I just know that you 25 guys do some fantastic work despite these lows that come 40 1 at times that we might not necessarily be happy with; 2 but that does not discount that great work you-all do. 3 I'm very proud of the work that you, Gary, and your 4 staff is doing. Thank you so much. 5 MS. PYKA: Commissioners, I want to 6 clarify one point: The numbers I just provided were 7 biennial amounts. 8 CHAIRMAN KRAUSE: So it's 200 million per 9 year? 10 MS. PYKA: (Nodding head.) 11 CHAIRMAN KRAUSE: So we're going to adopt 12 the budget. Do we have a motion to adopt the budget? 13 COMMISSIONER ARRIETA-CANDELARIA: So 14 moved. 15 COMMISSIONER RIVERA: Second. 16 CHAIRMAN KRAUSE: All in favor say aye. 17 (Chorus of "ayes.") 18 CHAIRMAN KRAUSE: The budget is adopted. 19 MS. PYKA: Thank you, Commissioners. 20 CHAIRMAN KRAUSE: Darlene Brown. 21 AGENDA ITEM XV 22 MS. BROWN: Good morning, Commissioners, 23 I'm Darlene Brown, Internal Auditor. 24 I have two items for you today. The 25 first one is a status report. Since the last Commission 41 1 meeting, we have completed two more audits; and that's 2 the Time and Attendance and Second-Chance Drawing. 3 Those reports will be coming out to you shortly. 4 We've also started four audits. That's 5 Scratch Ticket Working Paper Workflow System, Jackpot 6 Estimation System, Crisis Management Plan, and the 7 Active Directory audit. We'll be wrapping up those four 8 audits at the end of this month and will have completed 9 our 2017 audit plan. We also anticipate coming in under 10 budget this year again. 11 And that's my status report. I'd be 12 happy to answer any questions. 13 CHAIRMAN KRAUSE: Commissioners? 14 (No response.) 15 MS. BROWN: The next item I have for you 16 is I'm requesting approval for the Retailer Management 17 audit report that we issued out a couple months ago. On 18 this audit report we reviewed all of the processes from 19 recruitment back to evaluation, monitoring, training, 20 and in any instances where there has to be a 21 termination. In looking at those processes, we noted no 22 observations where they were not in compliance with 23 internal policies. 24 I'm asking for your approval on that 25 report. 42 1 CHAIRMAN KRAUSE: I think that we're 2 going to have a motion to approve that report. 3 COMMISSIONER RIVERA: Move for approval. 4 CHAIRMAN KRAUSE: All right. Second? 5 COMMISSIONER ARRIETA-CANDELARIA: Second. 6 CHAIRMAN KRAUSE: All in favor say aye. 7 (Chorus of "ayes.") 8 CHAIRMAN KRAUSE: The report is approved. 9 MS. BROWN: Thank you. 10 CHAIRMAN KRAUSE: Thank you for coming in 11 under budget. 12 Alfonso. 13 AGENDA ITEM XVI 14 MR. ROYAL: Good morning, Commissioners. 15 I would just refer you to the information in your 16 briefing booklets. I have nothing additional. 17 CHAIRMAN KRAUSE: Gary. 18 AGENDA ITEM XVII 19 MR. GRIEF: I have nothing further, 20 Mr. Chairman. Thank you. 21 CHAIRMAN KRAUSE: Thank you. 22 Bob. 23 AGENDA ITEM XVIII 24 MR. BIARD: Good morning, Commissioners. 25 For the record, I'm Bob Biard, General 43 1 Counsel. 2 Tab 18 in your notebook contains 14 3 lottery and bingo enforcement cases, Tabs A through N. 4 These are cases where Commission staff found the 5 licensee violated a statute or rule or an applicant did 6 not qualify for a license; and in many cases either the 7 Respondent failed to appear at the hearing and it 8 proceeds by default or the staff and the Respondent 9 reached a settlement. 10 I'll briefly describe the cases and you 11 can take them up in single vote if you like. Tabs A 12 through D are non-sufficient fund lottery retailer 13 license revocations that are handled in a single order. 14 Each case was presented at the State Office of 15 Administrative Hearings for revocation of the retailer 16 license on the grounds that the licensee failed to have 17 sufficient funds in their bank account to cover 18 electronic fund transfers to the Lottery Commission 19 account. In each case the licensee failed to appear. 20 The Judge remanded the cases to the Commission to handle 21 as a default matter. Your notebook contains a single 22 order to revoke each of these licenses. 23 Next, Tabs E through G are Lottery Agreed 24 Orders. 25 Tab E is for Ruby's Food Mart Numbers 1, 44 1 3, 4, 5, and 6 in McClennon County. In this case 2 several people were involved in the violation; but the 3 main person responsible is the store owner, Gurnam 4 Sandhar, who arranged to purchase a 1,000-dollar winning 5 ticket from one of his employees for $700, which is a 6 violation. Instead of claiming the ticket, Sandhar, 7 through one of his store managers, asked the Lottery 8 Commission for a 1,000-dollar reimbursement, claiming 9 that a new clerk mistakenly paid a 1,000-dollar prize to 10 a customer, rather than referring the customer to the 11 claim center. As a reminder, lottery retailers can only 12 pay prizes up to $599. An investigation followed. 13 Sandhar initially lied to the Commission investigator 14 about his identity and falsely claimed he'd given the 15 winning ticket to his son to take to the claim center, 16 where it was denied because the signature was whited 17 out. 18 Ultimately, the Commission's investigator 19 determined that Gurnam Sandhar had purchased the ticket 20 from an employee. The agreed penalty in this case is a 21 30-day suspension for Ruby's Food Mart Number 1, plus, 22 Gurnam Sandhar will be prohibited from being an officer, 23 director, or owner of more than 10 percent in the Ruby's 24 Food Mart stores that are subject to this order and from 25 any involvement in handling lottery products. 45 1 Essentially, he'll be limited to the status of a passive 2 investor. 3 The store manager who assisted in asking 4 the Commission for the 1,000-dollar reimbursement will 5 be prohibited from further employment at any of the 6 Ruby's food stores covered by the order. 7 Tab F is for Highland Lakes Chevron 8 Quaano's Subs in Lewisville. In this case a retailer's 9 employee conditioned a customer's redemption of a 10 150-dollar lottery prize paid on the purchase of other 11 items, claiming the store did not have enough cash to 12 pay the prize. The employee paid the customer $90 in 13 cash, plus $60 in lottery tickets. The Commission's 14 undercover investigator tried to cash four tickets and 15 was told by the same employee that he had to purchase 16 other items. The investigator tried to take the tickets 17 back, but the employee told him it was too late because 18 she had already run the tickets through the terminal. 19 The agreed penalty is a ten-day suspension here. 20 Tab G is for Spencer Shell in Sugar Land. 21 In this case the retailer's employee tried to redeem a 22 torn winning ticket with a 1,000-dollar prize. The 23 person misrepresented to the Commission staff about 24 having purchased the ticket at a retail location. After 25 questioning, he admitted he purchased the ticket for 46 1 $500 from a customer. The agreed penalty is a 30-day 2 suspension, plus the offending employee is prohibited 3 from further employment at Spencer Shell. 4 Next, Tabs H through M are all bingo 5 agreed orders. 6 Tab H is for Berry Bingo in Fort Worth. 7 This is a new type of case for you, involving a bingo 8 commercial lessor, the entity who owns the bingo hall. 9 The allegation is that in mid-2015 the lessor refunded 10 $8,800 in rent checks to a bingo unit made up of 11 charitable organizations, only to re-invoice and collect 12 the rent in a subsequent quarter. The reason given for 13 the refund was so the bingo organizations would appear 14 to have generated positive net proceeds during the prior 15 quarter, rather than negative proceeds, which is a 16 requirement for charities under the Bingo Act. The 17 violation is, one, that the lessor improperly extended 18 credit to the organizations by refunding the rent 19 payment then later collecting back rent, and also that 20 rent was charged on the basis of a percentage of 21 receipts or net proceeds. The Bingo Act currently 22 contains an eligibility requirement that a commercial 23 lessor may not extend credit or loan money to a 24 charitable bingo operation. The agreed penalty here is 25 $500. And I want to note that the prohibition against 47 1 the lessor extending credit to a charity was repealed 2 this past legislative session, effective September 1st. 3 So after September 1st, it does not render a lessor 4 ineligible if they extend credit to a bingo charity but 5 it still renders them ineligible if they lend money to 6 charity. 7 COMMISSIONER LOWE: Before we go on, Bob, 8 I think I'd like to take a longer look at this, look at 9 exhibits because, essentially, what's going on here, 10 they're shifting their expenses between quarters so that 11 the bingo charity looks like they're making more money 12 when they're not; and if the SEC was looking at that, 13 they would say that was fraud, financial statement 14 fraud. So I want to look at the exhibits, and I want to 15 spend some more time looking at this. And even though 16 the legislation has been changed so that they can extend 17 credit, I still don't think you can collude with a 18 charity to trick our division into making it look like 19 they're making more money. So I want to stay on top of 20 this; and if y'all would allow me to take a look at the 21 exhibits that were looked at -- I guess Stephen's got 22 those. Stephen did this, right? 23 MR. WHITE: Yes, sir. I mean, there was 24 no hearing so there's no actual exhibits. There's an 25 investigative report that found this violation. 48 1 COMMISSIONER LOWE: So did we get 2 financial statements? 3 MR. BIARD: Steve, why don't you come up 4 to the desk for second. 5 MR. ROYAL: Commissioner, during the 6 course of the audit, we do have all of the financial 7 statements that they provided as well as a statement by 8 the bookkeeper that stated that that was the practice 9 they employed during that particular quarter's audit. 10 COMMISSIONER LOWE: I'm just like -- we 11 admit that we colluded. It's like, gosh dog. So there 12 are exhibits, right, that we can look at? 13 MR. WHITE: There's an audit report with 14 attachments to the audit report. I just wanted to 15 clarify there was no hearing, so there's no exhibits in 16 my sense. 17 COMMISSIONER LOWE: Well, I'm sorry, 18 whatever documentary evidence that we were able to -- 19 MR. BIARD: There was a record. 20 COMMISSIONER LOWE: With that, I'll shut 21 up; but if we could, allow us until the next Commission 22 meeting to look at those. 23 CHAIRMAN KRAUSE: What Item Number is 24 that? 25 COMMISSIONER LOWE: That is H. 49 1 MR. BIARD: Tab H. 2 CHAIRMAN KRAUSE: H. All right. We'll 3 approve all of them but H when we get to that part. And 4 so -- 5 MR. BIARD: I have a few more. Just to 6 move quickly, Tabs I through L are all negative net 7 proceeds bingo cases. These are similar to the net 8 proceeds agreed orders we've presented in prior meeting. 9 The Bingo Director initially denied the organization's 10 request for a waiver but now has agreed to give these 11 charities a second chance to generate positive net 12 proceeds for two consecutive quarters going forward. 13 Tab I is for Sacred Heart Church of 14 Mathis in San Patricio County. 15 Tab J is for Immaculate Conception Church 16 of Gregory, also in San Patricio County. 17 Tabs K and L are for Catholic War 18 Veterans Posts 1907 and LULAC Council 4483 of 19 San Antonio. And those are the net proceeds cases. 20 Next, Tab M is an agreed order allowing 21 Deborah Sellers to receive a restricted registration on 22 the bingo worker registry. In 2007 she received a 23 deferred adjudication for a felony conviction of 24 tampering with a government record, and this was for 25 making a false entry on an application for food stamp 50 1 eligibility to the Texas Department of Human Services. 2 Under the Agreed Order she would not be allowed to act 3 as a bingo chairperson, manager, operator, bookkeeper, 4 cashier, or designated agent for a licensed bingo 5 conductor for three years. 6 Finally, Tab N is a license revocation 7 case based on negative net proceeds. This is a negative 8 net proceeds case that did not settle. It did not 9 result in an Agreed Order. So it was scheduled for a 10 hearing. This organization had negative net proceeds of 11 $9,293 for the period from the third quarter of 2015 12 through the second quarter of 2016. The matter was 13 scheduled for a hearing on May 9th, and the Respondent 14 did not appear. So this case has been remanded back to 15 Commission to handle with a default order. 16 That concludes my presentation. You make 17 take the orders up in a single vote if you like, or we'd 18 be happy to answer any questions. 19 CHAIRMAN KRAUSE: I'd like to propose 20 somebody offer a motion to approve the Commission staff 21 recommendation A through G and I through N and then hold 22 on the Item H for next the meeting. 23 COMMISSIONER LOWE: So moved. 24 COMMISSIONER RIVERA: Second. 25 CHAIRMAN KRAUSE: All in favor say aye. 51 1 (Chorus of "ayes.") 2 CHAIRMAN KRAUSE: The staff 3 recommendation is adopted. 4 Did you want to say something? 5 COMMISSIONER ARRIETA-CANDELARIA: I just 6 wanted to talk a little bit about the Debra Sellers' 7 case if I can. 8 COMMISSIONER LOWE: Which number was 9 that? 10 COMMISSIONER ARRIETA-CANDELARIA: I'm 11 sorry. That was Item Number M. 12 So this individual is being removed from 13 the registry because... 14 COMMISSIONER LOWE: She pled guilty. She 15 got deferred adjudication. 16 MR. BIARD: She's being allowed to remain 17 on the registry. She can basically work as a floor 18 worker, but she can't be in a more responsible position 19 for three years. That's the restriction. 20 COMMISSIONER ARRIETA-CANDELARIA: For 21 three years. 22 MR. BIARD: Yes. 23 COMMISSIONER ARRIETA-CANDELARIA: Okay. 24 And how was this brought to light? 25 MR. ROYAL: Commissioner, this comes up 52 1 when they submit their worker registry and we run a 2 background check and we review the criminal history of 3 the individuals and this individual's records came up. 4 So because of the cash nature of bingo and the ability 5 for fraud to continue, we ask that they not work in 6 positions where they actually have reporting to the 7 Commission. 8 COMMISSIONER ARRIETA-CANDELARIA: I guess 9 my issue is that she went through that community 10 supervision program. She completed it. It was 11 dismissed. She hasn't been charged with any criminal 12 activity since that time period. I just think that she 13 went through the process. It just seems a little harsh. 14 MR. BIARD: I'll defer to Alfonso. I 15 think the fact that it was a felony probably is the 16 reason why. 17 MR. ROYAL: Because it was a felony and 18 because these are -- this action is consistent with all 19 the others who have similar backgrounds that have 20 basically committed the offense. They have -- yes, 21 they've completed their time. They have letters of 22 reference that people in the community, especially the 23 bingo hall, they want this individual to work in that 24 capacity. And so this gets them to continue employment 25 and puts the on a trial basis. 53 1 COMMISSIONER ARRIETA-CANDELARIA: For 2 three years? 3 MR. ROYAL: Yes. 4 COMMISSIONER ARRIETA-CANDELARIA: Okay. 5 Thank you. 6 CHAIRMAN KRAUSE: Yes, sir. 7 COMMISSIONER RIVERA: I wanted to talk 8 for a second and really ask a couple of questions 9 regarding not necessarily any individual items that 10 we're covering but just the overall topic of fraud or 11 just negative things that are happening to our players 12 by the retailers through no fault of the Commission. 13 Whenever individuals go to buy their tickets -- and 14 forgive me. If we have this; I'm just unaware of it -- 15 is there signage there at the checkout that notifies 16 players that if they suspect anything, or what the rules 17 are regarding payouts so that it's more clear so that if 18 someone tells an individual that "you must do X in order 19 to receive payout," that goes against what the rules 20 are? Do we have that in place, and then also is that 21 language on the tickets themselves? 22 MR. ANGER: Commissioners, again, for the 23 record, my name is Michael Anger; and I'm the Lottery 24 Operations Director. 25 Commissioner, we place information both 54 1 at retail and at bingo halls with regard to how they can 2 contact the agency with regard to any type of complaint 3 that they have, either related to lottery or bingo 4 activities. So we work with the halls to place those; 5 and then we place them at retail locations on our play 6 station, the piece of real estate, essentially, that we 7 control at retail, to make sure that that information is 8 available. We also place it on our website so players 9 know how to contact us. On the back of tickets we 10 provide information on how to contact the agency as 11 well. 12 With regard to payment of prizes, we do a 13 number of things to make sure that players know what 14 their ticket was validated for; and if they had a 15 winning prize, what that amount was to ensure that we 16 have a good, clean transaction between the retailer and 17 the player. Among those, we have the ESMM communication 18 displays at a number of our retailers around the state. 19 Over 15,000 of our 17,800 retailers have those 20 advertising communication displays; and as a part of 21 that, when a transaction is conducted on the terminal, 22 the wager amount associated with that and the prize 23 amount appears on that screen as well. We've set up the 24 terminals so that they generate two receipts associated 25 with any transaction that's conducted. One is a copy 55 1 for the retailer showing them the prize amount that it 2 was validated for on the ticket, and the second is the 3 player copy so that players can get a copy of that 4 associated with transaction as well. 5 COMMISSIONER RIVERA: Okay. Well, let me 6 be more specific. And I know we have the "You can 7 contact this phone number" and it's in this small, 8 little deal; but what I'm asking is: Is there large 9 signage or something, bullet points in bold, big that 10 people know that, Hey, this retailer is feeding me a 11 bunch of bull? That's what I'm asking because that 12 individual who is, you know, going to win, how 13 frequently or infrequently that is, he or she may not be 14 aware of how they can actually be paid in terms of, "Is 15 that retailer telling me the truth?" 16 So what I'm asking is: What can we do, 17 potentially, to better protect our players from retailer 18 fraud because, you know, if you have these kind of 19 things going on, then that could affect the amount of 20 individuals that feel comfortable or confident in 21 playing because they don't want to be taken advantage of 22 one way or another. And so I want to disassociate the 23 lottery from such nonsense. 24 MR. ANGER: Understood. That's 25 exactly -- you know, some of the things that I mentioned 56 1 are efforts exactly in that regard. We have a consumer 2 protection effort; and there's a number of things that 3 we've done, both with design of tickets and then also 4 the information that I talked about with regard to 5 communicating, to make sure that players are armed with 6 proper information about what their prizes are, making 7 sure that they get paid fair and appropriate amounts. 8 You know, other things we've done is 9 extending check-a-ticket functionality not only on 10 devices at retail but also to our mobile application 11 where players can check that. 12 COMMISSIONER RIVERA: But specifically, 13 over the couple of years now that I've been here, I'll 14 hear kind of a repetition of: You must buy additional 15 tickets or we are going to swap you out or you must make 16 an additional purchase, right? 17 MR. ANGER: Yes. 18 COMMISSIONER RIVERA: I hear that over 19 and over again. Can we not just put that out there that 20 that's not true? 21 MR. ANGER: We absolutely -- you know, I 22 think our best vehicle to have those types of 23 communications is via our website; and we do have a lot 24 of information via the website. The problem at retail 25 is that we only have a limited amount of space that we 57 1 can control with regard to what messaging we can put in 2 front of customer. So we're, at the point of purchase 3 where the sale take place, challenged on how much 4 information we can kind of put in the way of disclaimers 5 and warnings and those types of things right at that 6 moment where the transaction takes place; but we try to 7 do all the things that surround that transaction to 8 support it. 9 And one of the things that we have done, 10 talking to the issues that you've seen over time, 11 Commissioner Candelaria had made a recommendation to us 12 some time ago that when we do find these violations and 13 we take action against a retailer and we suspend their 14 license and we see sales at that location, that we have 15 them post information that a violation has occurred at 16 that location. And so that's one of the requirements 17 when we enter into these agreements with them for 18 suspensions at this time that they must publicly post 19 that, you know, "Due to a violation..." 20 COMMISSIONER RIVERA: Okay. What if we 21 had it, say, on the storefront of the glass, you know, 22 where they're trying to sell tobacco or beer or whatever 23 that they're trying to do, in and out, so that it's a 24 poster that's just there? I think that visible display 25 of what the rules are in terms of: This goes against 58 1 the law or goes against what we're trying to accomplish 2 so that the employees also see it. The owner sees it. 3 People see it, walking in and out, whether they're 4 buying or not. So it's almost like another subliminal 5 advertising about lotto or lottery but that it's a 6 requirement that they post it in order to sell, meaning 7 that's -- what I'm trying to ask is: Would we have that 8 leverage or that ability to require that as a 9 non-negotiable that if they have our product, this needs 10 to be in the storefront window permanently? 11 COMMISSIONER ARRIETA-CANDELARIA: If I 12 may for just a second, I think what the Commissioner is 13 saying that, you know, when you drive up to the window 14 at a drive-up; and they say, "This is how much your 15 price is," when you drive up to a window at a 16 drive-through restaurant. And they say -- you know, 17 this is how much they're asking. If they pay different 18 or -- if they're asking to pay something different, then 19 call this number, I would imagine that that's something 20 you want. I think he's referring to that, and I would 21 say maybe on the glass, you know, the glass right there, 22 underneath the glass where the tickets are displayed, 23 you can have a little display that you says that: If 24 you feel that you've been -- that there's something 25 wrong, that you can call this number. 59 1 MR. ANGER: What I might proposes would 2 be, because we point the players to the communication 3 display that I mentioned earlier with regard to 4 transactions at the counter because it populates the 5 information both with regard to a sale and then also 6 validation activity, that we might be able to do 7 something on that display to add that disclaimer and add 8 the contact information and make that a part of the 9 communication message on the device right there at that 10 point. 11 At the window at retail we sometimes run 12 into challenges in certain cities because we've tried to 13 work with retailers to place even advertising 14 communications and that type of thing. Some cities have 15 different ordinances with regard to what can appear in 16 the windows, what can appear in a display; and it has to 17 do with public safety and visibility of storefronts and 18 things like that. So in that type of an environment we 19 sometimes have limitations with regard to even what we 20 can compel of a licensee. But I think there is an 21 opportunity, though, possibly via the advertising 22 display, to move in that direction. 23 COMMISSIONER RIVERA: Or even -- and you 24 see -- and I hate to keep pushing this, but this is 25 important -- but even, like, a poster that you keep next 60 1 to the employment standards poster that you keep in the 2 break room of employees so that the employees are aware 3 that this is against the law. It breaks the rules. It 4 is unacceptable. And so they're aware. The employer 5 sees it as well. And let's say it's just exclusively in 6 the break room or bathroom or whatever. 7 MR. ANGER: And part of our training is 8 focused on just these types of issues; and obviously, if 9 we're licensing retailers to sell our products, they 10 need to understand what the rules and regulations are 11 and what the requirements are of being an licensee. And 12 so that's one of the vehicles we use, but we can talk 13 with legal counsel further and evaluate other 14 opportunities to get that message out there in a variety 15 of different ways. 16 MR. GRIEF: Commissioner, let me see if I 17 can help Michael out here. I hear what you're saying, 18 and appreciate that. I think we want to have some more 19 conversations with you offline and probably get a better 20 feel for exactly what it is you're thinking about, and 21 we will do our best to try to meet that request. 22 The problem that we have, whether it's 23 the lottery terminal or the monitors that are there, our 24 ESMM screens, or even the Scratch Ticket dispenser that 25 you see on the counter there, every other entity that 61 1 has product in these retailer stores that has space on 2 the counter, in the windows where you see our jackpot 3 signs, of course, they pay the stores for that space. I 4 mean, it's a monthly rental fee. We operate in those 5 stores just by the generosity of the retailer who's 6 chosen to do business with us. 7 And it's a testament to the hard work of 8 Joe Lapinski's IGT sales team that they go out and they 9 cajole and they lobby and work with the retailers to get 10 space on the counter for the terminals and space on the 11 counter for monitors and scratch tickets. And if you go 12 into convenience stores, you're going to see a 13 hodgepodge of where those items are. There's not a set 14 requirement for that. 15 So when you're talking about some pretty 16 valuable real estate, like the front window or in front 17 of the player there, the first thing we're going to get 18 from the retailer is, "How much are you going to pay 19 us?" And, of course, we don't pay anything for that; 20 but I think through some of the mechanisms, the levers 21 that we may can pull through our IGT sales reps, I think 22 we may be able to get maybe not all the way there but a 23 good part of the way there on what you're goal is in 24 that regard because I hear you. And that's important. 25 We do hear that, and I've heard those same types of 62 1 complaints for 25 years. That's just kind of part and 2 parcel when you have 17,000 locations of basically 3 convenience store environments. But we'll talk to you a 4 little more in detail and see what progress we can make. 5 COMMISSIONER RIVERA: I mean, ultimately, 6 not only are we protecting our players, but with that 7 confidence that the players in the state have in the 8 product, that sales should go up if they feel that 9 they're not going to be taken advantage of and those 10 types of things that are protected against and at least 11 trying to be addressed, I think it will help. 12 MR. GRIEF: It's a fine balance that we 13 have to manage because at some point we're probably the 14 least profitable item the retailer sells in their store, 15 we walk a fine line to try not to get them to push us 16 out and do what we have to do; but we're going to work 17 on that with you. We'll work together on that. 18 COMMISSIONER HEEG: One of the points I 19 heard Commission Rivera say and I think that's important 20 we get to all these enforcement cases and we should look 21 at them for trends. Are there repeat violations that 22 consumers are being defrauded over; and if so, those 23 should be our top priority to address. 24 MR. ANGER: And let me assure you that 25 they are. So one of the things that we do with our 63 1 compliance activity monitoring program, our complaint 2 program, if you will, is we do an annual trend analysis; 3 and we look for volatility rates of certain types of 4 violations and look for potential causes associated with 5 those. And some of the things that we put into our 6 consumer protection efforts over the years stem directly 7 from things that we've seen in the nature of these cases 8 or repetitive things that -- the player copies of 9 receipts for transactions, and embedding that 10 transaction information on communication displays, and 11 some of those things are all things that we've done in 12 the way of consumer protections. 13 But, absolutely, we're looking at that; 14 we're prioritizing those. And with regard to the cases 15 that you see, I want you to know, laid out in your 16 administrative rules and our standard penalty chart, we 17 pursue progressive discipline with regard to licensees 18 and their licenses; and so if we see repeat violations 19 at a location, we pursue more aggressive actions, up to 20 and including revocations. And we have done that in 21 cases where those have presented themselves. 22 COMMISSIONER HEEG: Maybe it makes sense 23 to have a report on what is being done. And what I hear 24 you more talking about protecting consumers, educating 25 the consumers so that they know on some of these repeat 64 1 issues that come up across multiple stores, that they 2 know it's not right; and they can push back. 3 MR. ANGER: And that has been the focus 4 of our effort independent of retail licensees. And let 5 me say: The great majority of our retail licensees are 6 good business partners that do the right things day in 7 and day out and support our customers well; and, yes, 8 there some bad actors. But our efforts have really been 9 focused on just what you said, and that is we focus on 10 educating the consumer, putting tools in their hands so 11 that independent of a retail transaction, they know 12 about these things. And, quite frankly, the great 13 majority of the cases you see come to us because players 14 do know. And so when something is amiss or they are 15 presented with something they know is not right with 16 regard to their transactions with the lottery, they 17 bring it to us; and we end up down this path. 18 COMMISSIONER RIVERA: Another concern is 19 the numbers that we're unaware, the individuals that are 20 uninformed and never step forward and they are just 21 taken advantage of, abused economically, and they just 22 continue on. And that's really who I really want to 23 also try to protect as best we can. 24 MR. ANGER: Absolutely. We want every 25 player to have a good and positive experience whether 65 1 they win or lose in playing the game. 2 CHAIRMAN KRAUSE: Well, I'm really glad 3 we got on record here that the Commissioners are 4 concerned about these things because, above all, what 5 the Commission wants to do is have fair games for the 6 Texas public to play and for raising money for the 7 Foundation School Fund. And so there's nothing more 8 important to us than integrity of the games; and so with 9 that, I'm going to encourage all Commissioners to 10 interact with staff during the interim before the next 11 meeting so that we can have reports or we can have 12 proposals for action and things like that. And so, 13 anyway, I'm really glad that we're doing that. 14 At this point, though, I'm going to move 15 that we go into Executive Session to deliberate 16 personnel matters and receive legal advice. 17 COMMISSIONER HEEG: Chairman Krause, 18 before we do that -- 19 CHAIRMAN KRAUSE: Yes, ma'am. 20 COMMISSIONER HEEG: -- we deferred 21 Item H. 22 CHAIRMAN KRAUSE: We did. 23 COMMISSIONER HEEG: And, presumably, it's 24 to consider if the penalty is appropriate or whether it 25 should be more. It may make sense for us to hear from 66 1 staff why that proposed penalty was recommended. 2 CHAIRMAN KRAUSE: Well, if we don't hear 3 about that in Executive Session, then, since it is being 4 held over, then we can look at it during the interim and 5 that kind of thing. 6 COMMISSIONER HEEG: Okay. 7 CHAIRMAN KRAUSE: So is there a second? 8 MR. GRIEF: Mr. Chairman? 9 CHAIRMAN KRAUSE: Yes. 10 MR. GRIEF: I'm sorry. Bob. 11 MR. BIARD: You'll have to pardon me. 12 Did you-all vote on those? 13 CHAIRMAN KRAUSE: Well, let me describe 14 the motion that I asked for; and that was that we 15 approved of -- 16 COMMISSIONER RIVERA: Yeah, we did. 17 MR. BIARD: I just wanted to verify. 18 CHAIRMAN KRAUSE: Okay. I'm going to 19 verify it right now; and that is that I asked for a 20 motion. I got it. The motion was to approve staff's 21 recommendation for Items A through G and for I through N 22 and that we be holding over H to the next meeting. We 23 got a motion and a second, and we did vote on it. I 24 know the record wasn't clear on that, but I'm happy to 25 help out with that right now. 67 1 MR. BIARD: Thank you, Chairman; and 2 we'll bring back Tab H at the next meeting, along with 3 some more information. 4 CHAIRMAN KRAUSE: Sure. So, anyway, at 5 this point we've got a second. Let's have a vote on 6 going into Executive Session all in favor say "aye." 7 (Chorus of "ayes.") 8 CHAIRMAN KRAUSE: We are going into 9 Executive Session right now. 10 MR. BIARD: And for the record it is 11 10:15. 12 (Off the record from 10:15 to 10:47 a.m.) 13 CHAIRMAN KRAUSE: The Lottery Commission 14 is out of Executive Session at 10:47, and we have one 15 item of business to take care of at this point. 16 COMMISSIONER ARRIETA-CANDELARIA: 17 Commissioner, I move that the Commission approve the 18 Executive Director's Employee Performance Evaluation. 19 COMMISSIONER RIVERA: Second. 20 CHAIRMAN KRAUSE: All in favor say aye. 21 (Chorus of "ayes.") 22 CHAIRMAN KRAUSE: It is approved. 23 On my own motion I move to adjourn. Is 24 there a second? 25 COMMISSIONER RIVERA: Second. 68 1 CHAIRMAN KRAUSE: All in favor say aye. 2 (Chorus of "ayes.") 3 CHAIRMAN KRAUSE: Done. 4 (Adjourned at concluded at 10:47 a.m.) 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 69 1 STATE OF TEXAS) 2 3 **************************** 4 REPORTER'S CERTIFICATE 5 **************************** 6 7 8 I, DEBBIE D. CUNNINGHAM, CSR, Certified 9 Shorthand Reporter in and for the State of Texas, do 10 hereby certify that the above and foregoing contains a 11 true and correct transcription of an excerpt of the 12 above-referenced meeting to be included in the 13 transcript of said meeting, and was reported by me to 14 the best of my ability. 15 16 SUBSCRIBED AND SWORN TO under my hand and 17 seal of office on this the 18th day of August, 2017. 18 19 ______________________________ 20 DEBBIE D. CUNNINGHAM, Texas CSR 2065 Expiration Date: 12/31/2018 21 Kim Tindall & Associates 16414 San Pedro Avenue, Suite #900 22 San Antonio, Texas 78232 (210) 697-3400 23 24 25