1 1 2 TRANSCRIPT OF PROCEEDINGS 3 BEFORE THE 4 BINGO ADVISORY COMMITTEE 5 (TEXAS LOTTERY COMMISSION) 6 AUSTIN, TEXAS 7 8 MEETING OF THE BINGO § 9 ADVISORY COMMITTEE § WEDNESDAY, MARCH 9, 2011 § 10 11 12 13 COMMITTEE MEETING 14 WEDNESDAY, MARCH 9, 2011 15 16 17 18 BE IT REMEMBERED THAT on Wednesday, the 19 9th day of March 2011, the Bingo Advisory Committee 20 meeting was held from 10:00 a.m. to 11:44 a.m., at the 21 Offices of the Texas Lottery Commission, 611 East 6th 22 Street, Austin, Texas 78701, before KIMBERLY ROGERS, 23 Chair. The following proceedings were reported via 24 machine shorthand by Aloma J. Kennedy, Certified 25 Shorthand Reporter. 2 1 APPEARANCES 2 BINGO ADVISORY COMMITTEE MEMBERS PRESENT: 3 Ms. Kimberly Rogers, Chair 4 Mr. Earl Silver Mr. Francis M. Ciancarelli 5 Ms. Melissa Young Mr. Kenneth T. Messer 6 Mr. Thomas "Tom" Weekley 7 CHARITABLE BINGO OPERATIONS DIVISION DIRECTOR: 8 Mr. Phil Sanderson 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 3 1 TABLE OF CONTENTS 2 PAGE NO. 3 AGENDA ITEM NO. 1 - The Bingo Advisory Committee will call the meeting to order....... 5 4 AGENDA ITEM NO. 2 - Consideration of and 5 possible discussion and/or action on the minutes of the November 30, 2010 Bingo 6 Advisory Committee meeting..................... 5 7 AGENDA ITEM NO. 3 - Report, possible discussion and/or action on Calendar Year 8 2010 conductor information..................... 6 9 AGENDA ITEM NO. 4 - Report, possible discussion and/or action on the Charitable 10 Bingo Operation Division’s new email notification subscription service.............. 10 11 AGENDA ITEM NO. 5 - Report, possible 12 discussion and/or action on the 82nd Legislature.................................... 12 13 AGENDA ITEM NO. 6 - Report, possible 14 discussion and/or action on a license fee increase to cover the cost of redesigning 15 the Automated Charitable Bingo System.......... 15 16 AGENDA ITEM NO. 7 - Report and possible discussion and/or action on nominations for 17 Bingo Advisory Committee positions............. 23 18 AGENDA ITEM NO. 8 - Report and possible discussion and/or action on the 2010 Bingo 19 Advisory Committee Annual Report............... 24 20 AGENDA ITEM NO. 9 - Report and possible discussion and/or action on new Rule 16 21 TAC §402.105 Sale of Bingo Products to a Bingo Player................................... 25 22 AGENDA ITEM NO. 10 - Report and possible 23 discussion and/or action on new Rule 16 TAC §402.512 Bingo Occasion Records 24 Requirement.................................... 34 25 4 1 TABLE OF CONTENTS 2 PAGE NO. 3 AGENDA ITEM NO. 11 - Report and possible 4 discussion and/or action on new rule 16 TAC §402.211 Game of Chance.................... 54 5 AGENDA ITEM NO. 12 - Public comment............ 81 6 AGENDA ITEM NO. 13 - Consideration of and 7 possible action on future Bingo Advisory Committee meeting dates and/or items to be 8 considered for future meetings................. 81 9 AGENDA ITEM NO. 14 - Adjournment............... 84 10 REPORTER'S CERTIFICATE......................... 86 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 5 1 P R O C E E D I N G S 2 WEDNESDAY, MARCH 9, 2011 3 (10:00 a.m.) 4 AGENDA ITEM NO. 1 5 MS. ROGERS: Good morning, ladies and 6 gentlemen. It is now 10:00 a.m. We will call this 7 meeting to order. We do have a quorum. We are missing, 8 two members, two BAC members, and that would be Markey 9 Beilué and Mr. Emile Bourgoyne. All of the members are 10 in attendance. 11 AGENDA ITEM NO. 2 12 MS. ROGERS: Moving to Item No. 2, 13 consideration of and possible discussion and/or action 14 on the minutes of the November 30, 2010, Bingo Advisory 15 Committee meeting. I briefly looked over these and 16 didn't find anything that needs to be changed. 17 Members, did y'all find anything? 18 Okay. This vote will be to accept these 19 minutes as they appear on-line. Do I hear a motion to 20 accept these minutes? 21 MS. YOUNG: Yes. 22 MS. ROGERS: Thank you, Melissa. 23 Do I have a second? 24 MR. CIANCARELLI: I second. 25 MS. ROGERS: Thank you, Francis. 6 1 All those in favor? 2 FROM THE COMMITTEE: Aye. 3 MS. ROGERS: All those opposed? 4 (No response) 5 MS. ROGERS: We have a unanimous vote to 6 accept the minutes as they are posted on-line. 7 AGENDA ITEM NO. 3 8 MS. ROGERS: Item No. 3, report, possible 9 discussion and/or action on Calendar Year 2010 conductor 10 information. 11 Mr. Bruce Miner. 12 MR. MINER: Good morning, Madam Chair, 13 committee members. For the record, my name is Bruce 14 Miner, Manager of the Taxpayer Services Department. And 15 I'm here to present to you the overview of the 2010 16 information as reported by our licensed authorized 17 organizations, as well as some information on the 18 activities within the Bingo Division. 19 Let me begin by pointing out that in 2010, 20 charitable bingo in Texas was the highest grossing it 21 has been since the games were legalized in 1981. For 22 Calendar Year 2010, total receipts surpassed 23 $698 million. Players won a record $516 million in 24 prizes. And charitable distributions were just under 25 $34 million. 7 1 This slide shows the comparison of gross 2 receipts for each year from 2007 through 2010. As you 3 can see, the gross receipts for instant bingo sales have 4 increased each year since 2007, from $273 million to 5 $326.9 million, for 19.8 percent increase, while at the 6 same time gross receipts for regular bingo card sales 7 dropped from $385.2 million in 2007 to $371.8 million in 8 2010, for a decrease of three and a half percent. The 9 overall total gross receipts for 2010 are approximately 10 6 percent greater than they were four years ago. 11 This next slide shows a comparison of net 12 receipts for the Calendar Years 2007 through 2010. And 13 this slide captures the trend of net receipts, which are 14 gross receipts minus prizes. Total net receipts shown 15 in green has dropped slightly, to approximately what it 16 was in 2008. 17 This chart shows the year-by-year 18 comparison for disbursements. These disbursements do 19 not include prize payouts. Salaries account for over 20 28 percent of total disbursements, while rent payments 21 account for just over 22 percent and charitable 22 distributions were around 19 percent. 23 These next slides will overlay the 24 comparison between the required distribution, the net 25 proceeds and the actual reported distributions. First 8 1 we have the required distributions, using the 35 percent 2 calculation prior to October 1, 2009 and the net 3 proceeds calculation for 2010. This shows that the 4 required distributions dropped from around $10 million 5 for 2007, 2008 and 2009, to $8.4 million for 2010. 6 We can now compare that to the net 7 proceeds as defined in the revised Bingo Enabling Act 8 from House Bill 1474. This is gross receipts minus 9 prizes and expenses, and this is their bottom line. And 10 it has dropped from a high of $36.4 million in 2008 to 11 the present amount of $28.3 million for 2010. 12 This slide overlays the actual reported 13 charitable distributions shown here by the blue line, 14 and it shows you how the reported distributions compares 15 the amount required to be distributed and the net 16 proceeds. Organizations continue to distribute more 17 than required for their charitable purposes. 18 Now for some general information about our 19 licensees. And this slide reflects the decline of 20 licensed charities from 1,312 to 1,254 and licensed 21 lessors from 432 to 418 over the last four years. 22 This slide shows licensed organizations by 23 organization type. Fraternal continues to maintain its 24 level, while all other organization types show a 25 continuing decline. 9 1 This slide is a snapshot of the number of 2 bingo playing locations as of the last day of each 3 calendar year. The number of locations has declined 4 14 percent in the last four years. 5 These next three slides will show the 6 activity of the Bingo Division. This chart shows a 7 significant jump in applications processed and licenses 8 issued from 2009 to 2010. Applications processed 9 include the number of licenses issued, applications 10 denied, discontinued or withdrawn. And this next slide 11 shows the main reason for this. A majority of increase, 12 if not all, can be attributed to the increase in the 13 number of temporary licenses an organization may 14 receive, from 12 to 24 as a result of House Bill 1474. 15 That was an increase of 36 percent over last year. 16 And this slide shows audit activities for 17 Calendar Years 2007 through 2010. The Commission 18 conducts compliance audits and reviews to determine if 19 the records and accounts of the organization accurately 20 reflect financial and fiscal operations. It determines 21 whether effective accounting and internal controls are 22 maintained and to determine if funds are received and 23 used for purposes authorized by the Act and the rules. 24 The Commission also conducts game inspections and 25 investigates complaints. 10 1 That concludes my briefing. Are there any 2 questions? 3 MS. ROGERS: Thank you for that. It was 4 very informative. 5 Members, do you have any questions? 6 No? 7 Okay. Thank you, Mr. Miner. 8 MR. MINER: Yes. 9 AGENDA ITEM NO. 4 10 MS. ROGERS: Moving to Item No. 4, report, 11 possible discussion and/or action on the Division's new 12 email notification subscription service. 13 Mr. Phil Sanderson. 14 MR. SANDERSON: Good morning, members. I 15 just wanted to bring everyone up to date on the new 16 service that we've added to our website. It's an email 17 subscription service. You can go to our website and 18 right here in the center there is a little link to sign 19 up. You can sign up for either an email or text 20 messaging. 21 And then once you put in your email 22 address and you submit, you get to choose what topics of 23 interest that you're interested in. There's five 24 topics. One is Commission activities, one is bingo 25 advisory opinions, one is Bingo Bulletins, one is the 11 1 press releases, general news and then the training 2 opportunities. And if you select all of them, then 3 you'll receive any email notification that we send out. 4 If you selected, just say, the Bingo Bulletin, then the 5 only time you'll receive the email is when we send out 6 notification that the Bingo Bulletin is now on the 7 website. 8 And I just wanted to bring this to the 9 Advisory Committee's attention and any other members in 10 the audience And encourage those to sign up so they can 11 receive the notifications. We send out draft rules, 12 proposed rules, meeting notices, the Bingo Bulletin, any 13 press releases that the Commission issues. So I think 14 it's a very good service. Right now we have 87 people 15 signed up for it. So if you haven't signed up, I 16 encourage you to go out and sign up for that. 17 MS. ROGERS: I will definitely sign up. 18 That's awesome. 19 Any questions, members? I think we have 20 some public comment. 21 MR. CIANCARELLI: I do, Madam Chair. 22 MS. ROGERS: Okay. 23 MR. CIANCARELLI: I signed up as soon as I 24 noticed it, and it is very informative, and I feel like 25 it gets the information out. So I also would encourage 12 1 all people interested in bingo to sign up. 2 MS. ROGERS: Thank you. 3 AGENDA ITEM NO. 5 4 MS. ROGERS: Okay. Moving to Item No. 5, 5 report, possible discussion and/or action on the 82nd 6 Legislature. It was going to be Ms. Nelda Trevino, but 7 it will be? 8 MR. HAZA: Morning, Madam Chairman and 9 members. 10 MS. ROGERS: Morning. 11 MR. HAZA: I'm Colin Haza from the 12 Governmental Affairs staff, and I'm substituting for 13 Nelda Trevino this morning. 14 As of about an hour ago, there had been a 15 total of 4,148 bills filed in this session of the 16 Legislature. The agency is tracking 139 of those bills. 17 Behind Tab 5 in your briefing books is a bill tracking 18 report that we provided to you a week or so ago. But I 19 put at each of your places this morning an updated 20 report dated today, March 9th, and it's that report to 21 which I'll be referring this morning. 22 On the front page of the report -- what 23 I've done is take these bills that the agency is paying 24 particularly close attention to, and I've highlighted 25 the five or six that I think will be of most interest to 13 1 members of this committee. 2 On the front page, you'll see one 3 highlighted bill is House Bill 700 by Chairman Harvey 4 Hilderbran. This bill would consolidate the functions 5 of the Texas Racing Commission, the Texas Lottery 6 Commission, and the Texas Alcoholic Beverage Commission 7 into a new agency to be known as -- I think it was the 8 Texas Alcoholic Beverage and Gaming Commission. The 9 bill was just filed, as you can see, the first of this 10 month and has not yet been referred to committee. 11 On the second page of this morning's 12 handout, House Bill 2424 is highlighted. This is by 13 Chairman Senfronia Thompson, and this bill relates to 14 the operation of video lottery gaming by authorized 15 organizations and commercial operators that are licensed 16 to conduct bingo or lease bingo premises. 17 Turning to the third page, House Joint 18 Resolution 119, also by Chairman Thompson, is the joint 19 resolution that would have to be passed and then placed 20 on the ballot and voted on by the electorate of the 21 State of Texas in order to enable the Legislature to 22 implement the provisions of House Bill 2424. So it has 23 to go through the House and Senate. HJR 119 has to be 24 passed by a two-thirds vote in each house, and then it 25 goes on the ballot. 14 1 At the bottom of the page, you'll see a 2 companion bill, Senate Bill 1212. This is identical. 3 This is the Senate version of Chairman Thompson's bill. 4 This is filed by Chairman Leticia Van de Putte. 5 And on the last page is also a companion, 6 an identical companion bill filed by Senator Van de 7 Putte, SJR 35, and this is the constitutional amendment 8 language. 9 Those are the bills I've chosen to 10 highlight for you. I'll be happy to try to answer any 11 questions you may have about these bills or any of the 12 others that you see that pique your interest. 13 MS. ROGERS: Thank you, sir. I appreciate 14 the way you have separated this out and where they've 15 gone and things of that nature. 16 Members, do you have any questions? 17 Comments? 18 Yes, sir. 19 MR. CIANCARELLI: Yes. Francis 20 Ciancarelli. On house Bill 700, is that sort of like 21 we're coming full circle, because the TABC handed us off 22 at one time? 23 MR. HAZA: Well, I guess in some respects. 24 At least some parts of the agency could consider it that 25 way. The state lottery, of course, was never under the 15 1 TACB, although charitable bingo was. And the Racing 2 Commission wasn't -- 3 MR. CIANCARELLI: Okay. Thank you. 4 MR. HAZA: -- it was never part of it. 5 MR. CIANCARELLI: All right. Thank you. 6 MR. HAZA: Yes. 7 Other questions? 8 MS. ROGERS: Any other? 9 Thank you, sir -- 10 MR. HAZA: Thank you. 11 MS. ROGERS: -- very much for your report. 12 MR. HAZA: Thank you. Thank you, members. 13 MS. ROGERS: Thank you. 14 AGENDA ITEM NO. 6 15 MS. ROGERS: Moving on to Item 6, report, 16 possible discussion and/or action on a license fee 17 increase to cover the cost of redesigning the automated 18 charitable bingo system. 19 Mr. Phil Sanderson. 20 MR. SANDERSON: Members, I've placed this 21 item on the agenda just to bring you up to date and 22 brief you where we are in the budget process. As some 23 of you are aware, if not most of you, the state has 24 requested that agencies reduce their budget by five 25 percent. 16 1 Our budget is comprised of approximately 2 85 percent of a pass-through amount which is the prize 3 fee allocation of about $12.3 million annually. And 4 they would not let us reduce that amount, because it's a 5 statutory required fee that is paid back to the local 6 jurisdictions. 7 So in order to meet a five percent budget 8 reduction, we had to cut our administrative portion of 9 our budget by 23 percent. That's the equivalent of 10 about 12 FTEs. So the reduction in the FTEs in that 11 budget amount is going to significantly impact the time 12 it takes to process applications and issue licenses as 13 well as hinder some conducting audits and 14 investigations. 15 So we're working closely internally to try 16 to streamline our operation. And one of the keys is the 17 automated charitable bingo system which we asked for 18 funding at the last legislative session, but they 19 decided to postpone it till this session. So now we're 20 here back asking for it again. And the only way that we 21 could ask for it would be with a contingency rider that 22 we would increase license fees with sufficient funding 23 to cover the cost of the redesign of the new system. 24 The system is currently written in an Oracle tools -- 25 Oracle forms and report tool set which will become out 17 1 of warranty in 2013. After 2013, if there's any bugs or 2 problems with the program, Oracle will not support it, 3 and so it could affect operations. 4 So we're looking at redesigning the 5 system. The estimated cost is $2.5 million. And if we 6 increase the license fees, we'll have to increase 7 license fees to cover that $2.5 million. And to see the 8 impact of that, the active licensees as of yesterday 9 that we had, both conductors and lessors, because those 10 are the only ones that we can increase the license fees 11 on, by rule, their combined license fee payments for 12 last year were just over $2.6 million. 13 So in order to have a $2.5 million 14 increase, you're looking at almost a 50 percent increase 15 for license fees for the next two years. It would be 16 similar to the fee increase we had in '99 for the 17 current system. It would be a one-time increase for the 18 two-year period. The rule that we would adopt would 19 expire on August 31st of 2013. 20 So I just wanted to bring that to your 21 attention so that we could start discussion and get some 22 input on how to best go about the increases. There's, 23 you know, different thoughts that the higher class, 24 potentially higher class licensees, conductors and 25 lessors hold a little bit higher percentage of the 18 1 increase than the A, B, C's and D's license class. This 2 system will be designed that will hopefully make your 3 life easier. We're looking at on-line reporting, 4 on-line payment, on-line filing of applications, on-line 5 issuing of licenses. 6 If everything goes smooth in a good world, 7 you could actually log in, request a temporary license. 8 And if all the checks and balances are in place, it can 9 be issued and you can have a temporary license and you 10 won't have to worry about sending in applications and 11 cashier's checks and regular checks and faxing 12 information in. So that's one of the things that we're 13 looking at that will hopefully reduce that burden for 14 the organizations as well as on-line reporting that 15 allows you to actually just log in, enter your 16 information, and the report is filed and you pay the 17 check, similar to electronic filing with the IRS. 18 So if anyone has any questions, I'll be 19 glad to answer any questions. 20 MS. ROGERS: Boy, that's amazing, and I 21 know I would surely appreciate that. 22 So what you're saying, it would only go 23 for two years. Right now you can renew a license for 24 two years. So if they renewed in September of 2011, 25 they would miss the increase -- 19 1 MR. SANDERSON: I believe -- 2 MS. ROGERS: -- or would y'all be prepared 3 for that? 4 MR. SANDERSON: We would be prepared for 5 that. Theoretically, anyone that has a license on 6 September 1st will be assessed a license fee amount. 7 MS. ROGERS: Okay. 8 MR. SANDERSON: -- whatever the percent is 9 equal to, and they can pay it over the two-year period. 10 For example, if you have a Class J license, if we 11 increase the license fees 50 percent each year, then 12 that would be $1,250 each year, and they would be 13 required to pay $2,500. They could do it once or pay it 14 over two years. 15 MS. ROGERS: As long as it was fair. My 16 point to that question was, as long as it's fair across 17 the board for everybody; you know, someone doesn't get 18 to sneak under there. 19 Mr. Silver? 20 MR. SILVER: Well, I think any 21 enhancements of the commuter system is going to work. 22 I've been cruising through the Lottery's website, and 23 there's some tabs that don't work and stuff like that. 24 And just to make it easier for the charities, I'll go 25 back to my comment I made last meeting. Why do fees 20 1 have to be increased to fund this? Why can't bingo fund 2 itself for the upgrades? 3 You probably won't be able to answer this, 4 but bingo should be able to funds itself, of the 20 or 5 $22 million that go to the general fund, which that was 6 never the legislative intent for bingo. Why can't that 7 money be taken from bingo itself to be able to help 8 y'all? 9 MR. SANDERSON: In our meetings with the 10 Senate Finance and the House Appropriations Committees, 11 we've indicated to them how much revenue is generated by 12 bingo and how much the appropriation is. And even 13 including the prize fee allocations, the revenue 14 generation is around 30 -- a little over $30 million a 15 year, and the annual appropriation is roughly 16 $15 million. 17 So there is a $15 million excess deposit 18 in the general revenue from bingo over what our 19 appropriation is, but that's not how the appropriation, 20 LBB and the Governor's office, look at general revenue 21 funding. 22 MR. SILVER: I understand that. I wasn't 23 in bingo in the eighties when the Bingo Enabling Act was 24 passed, but I just don't think that was the intent, is 25 to be able to put money into the general fund. The 21 1 intent probably was to be able to help charities make 2 money and support their charitable purposes. 3 MR. SANDERSON: And it was never set up as 4 a dedicated account. For example, the lottery is a 5 dedicated account so, you know, the money that they 6 generate goes into that account. Bingo is like other -- 7 several other fees that goes straight to their -- 8 they're dedicated to a program, but they're not 9 dedicated to a special account so it just goes in their 10 general revenue. 11 And if you go back and look at some of the 12 hearings on the -- I want to say on the Senate side, the 13 Department of Motor Vehicles, Texas Department of Motor 14 Vehicles, I believe, they've got a program that they're 15 cutting completely out but it's funded by a one dollar 16 fee that you pay for car insurance. And because it goes 17 to general revenue and it's not dedicated, they don't 18 have the funds to make that payment. 19 You know, I don't know how to second-guess 20 the legislators. They give me my direction on how to 21 operate, and we perform and they expect performance from 22 us. And if they ask a question, I inform them how our 23 performance will be based on the current economic 24 conditions. 25 MR. SILVER: I understand. I just don't 22 1 like fee increase. Even though it could be temporary 2 for two years, but just fee increases kind of perturb 3 me. 4 MS. ROGERS: You said before y'all have 5 asked for it to come out of that fund over the -- the 6 $15 million over, or no? 7 MR. SANDERSON: We have not asked this 8 session for that. Last session we asked for it to be 9 funded, and they said no. 10 MS. ROGERS: And it got pushed off? 11 MR. SANDERSON: And it got pushed off to 12 another year. 13 MS. ROGERS: But this session you're 14 asking just for it to be funded by the increase, we're 15 not asking for it to be funded by the $15 million over? 16 MR. SANDERSON: We were highly recommended 17 not to request it that way. We were to request it as a 18 contingency item with the license fee increase being the 19 one to pay for it. 20 MS. ROGERS: Well, if I was getting 21 $15 million, I wouldn't want you to ask me for it 22 either. 23 Members, any other comment? 24 Yes? 25 MR. CIANCARELLI: Mr. Sanderson, is the 23 1 development on the new system complete already? 2 MR. SANDERSON: It has not even started 3 yet. Once we get the -- once the House bill is 4 approved, the appropriation is approved, then we'll 5 start working on the business analysis aspect of it. 6 MR. CIANCARELLI: Is any consideration 7 being given to including BAC members or some of the 8 people from the industry to be sounding boards so that 9 we roll out a good system? 10 MR. SANDERSON: I certainly don't see 11 anything wrong with that. 12 MR. CIANCARELLI: Okay. Thank you. 13 MS. ROGERS: Members, any other comment? 14 No? 15 Thank you, Mr. Sanderson. 16 AGENDA ITEM NO. 7 17 MS. ROGERS: Item No. 7, report, possible 18 discussion and/or action on nominations for Bingo 19 Advisory Committee positions. 20 Ms. Melissa Young. 21 MS. YOUNG: Melissa Young, for the record. 22 At this point we haven't done anything. 23 But as per the minutes from the last meeting, we're 24 going to start that process in March, this month. So 25 nothing further to report on that. 24 1 MR. SANDERSON: I'll just provide an 2 update of where we're at. The nominations period 3 started March 1st, goes through April 30th. I think we 4 have received one nomination form as of today. 5 There are three positions whose terms 6 expire on August of 2011, and those positions currently 7 are held by Francis Ciancarelli, Tom Weekley and Markey 8 Beilué. Additionally, we've had a member, Joe Williams, 9 submit his registration, so we'll be seeking a 10 nomination for that unexpired term which expires August 11 of 2012. 12 MS. ROGERS: Okay. So, members, if you're 13 going to renew your commitment to the BAC, we would like 14 for y'all to get that in. 15 And, ladies and gentlemen out there, we 16 look to you for your assistance, so please submit your 17 nomination forms. 18 Thank you, Melissa. 19 AGENDA ITEM NO. 8 20 MS. ROGERS: Moving to No. 8, report and 21 possible discussion and/or action on the 2010 Bingo 22 Advisory Committee Annual Report. 23 Mr. Earl Silver. 24 MR. SILVER: I have nothing to report just 25 yet. I guess I'm waiting on the numbers, the final 25 1 numbers to come in. 2 MR. SANDERSON: We just finalized the 3 numbers for 2010. And I'll get you the information of 4 the individual to contact, and you can work with her on 5 obtaining what document -- information you need for your 6 report so that you can work on it over the next couple 7 of months. 8 MR. SILVER: Thank you, Phil. 9 MS. ROGERS: Members, any comment? 10 Okay. 11 AGENDA ITEM NO. 9 12 MS. ROGERS: Moving to Item No. 9, report 13 and possible discussion and/or action on the new Rule 16 14 TAC 402.105, sales of bingo products to a bingo player. 15 Mr. Emile Bourgoyne is not here, so I 16 will -- or Phil, would you like to handle this matter? 17 MR. SANDERSON: I'll go and try to take a 18 stab at it. This is a rule that was developed to 19 indicate what is permissible exchange for the sale of 20 bingo products to a bingo player. The draft rule was 21 sent out in the middle of January. I believe Emile only 22 received one comment -- and that's as noted in the 23 notebook -- the question of whether or not a debit made 24 through a financial institution debit card is the same 25 as a credit card, and it is not. 26 1 This rule would lay out that the 2 organization may not sell bingo products other than for 3 payment as follows: United States currency, a check, 4 debit card, gift certificate or a winning pull-tab bingo 5 ticket. So that's that draft rule. And, as I 6 mentioned, that's the only comment that was received 7 during the informal comment period. 8 MS. ROGERS: Okay. Thank you. 9 Members, do you have any comment or 10 questions on this item? 11 No? 12 We'll take public comment. First we'll 13 have Ms. Sharon Ives. 14 MS. IVES: Good morning. My name is 15 Sharon Ives, with Fort Worth Bookkeeping. My office 16 handles 18 unit halls and approximately 88 non-profit 17 organizations. 18 On this rule, I was just curious to see 19 how -- if this would include bingo, you know, the 20 birthday sets that a lot of the halls offer to their 21 customers. You know, once your birthday is verified, 22 you know, they may charge a penny for a birthday set. 23 So basically that's the only comment I had 24 on this particular rule. 25 MS. ROGERS: They are charging a penny, 27 1 though. If it's your birthday, you pay one penny? 2 MS. IVES: Correct. 3 MS. ROGERS: So that would be considered 4 currency? 5 MR. SANDERSON: U.S. currency. 6 MS. ROGERS: So, therefore, you -- 7 MS. IVES: Remain the same? 8 MS. ROGERS: Yes; yes, ma'am. 9 MS. IVES: Thank you. 10 MS. ROGERS: Thank you. 11 Next we have Mr. Stephen Fenoglio. 12 MR. FENOGLIO: Good morning. For the 13 record, my name is Stephen Fenoglio. I'm an attorney in 14 Austin, and I filed an appearances slip on behalf of a 15 number of charitable organizations. 16 On 402.105 -- and I've circulated a draft 17 which would add, in Subparagraph (a)(5) after the word 18 "ticket," "or other bingo products." Currently there 19 are a number of halls in Texas that award as a game 20 prize additional plays on bingo, as opposed to a cash 21 prize. And the way the rule is drafted, as we 22 understand it, is that that practice would have to stop. 23 Let me give you an example. 24 In a charity hall in Cleburne, Texas, 25 where Tuesday is a bad day, and so either their early 28 1 bird games or particular games, instead of awarding a 2 typical -- a traditional cash prize, they'll award, 3 "Congratulations, your prize is $100 in bingo play, good 4 on Thursdays," if they're trying to drive people to come 5 on a Thursday. 6 Under (a) it says only the following 7 payment for the product. And when they come back in on 8 Thursday to redeem it, they've got their winning prize 9 instead of cash, of a form of award where they can play 10 for bingo product. And so as we understand it, that 11 would be prohibited. This type of practice goes on 12 pretty well all over the state and up to, I'm told, 13 about 20 bingo halls. 14 MR. SANDERSON: Mr. Fenoglio -- 15 MR. FENOGLIO: Yes, sir. 16 MR. SANDERSON: -- could they not award a 17 gift certificate as that bingo prize? 18 MR. FENOGLIO: They could. The problem 19 with the bingo gift certificate rule -- and it's one of 20 my comments in one of the following rules, the bingo 21 gift certificate rule -- is we believe very paper- 22 intensive, and there's a reason why halls aren't using 23 that, is because of the cost involved to print the bingo 24 gift certificates and to keep track of them. 25 So, yes, they could, but the cost involved 29 1 is pretty significant. And my clients would like to 2 have a subsequent visit on the bingo gift certificate 3 rule with the BAC. And I'll be happy to serve on the 4 committee. 5 But, yes, under Subparagraph (4), Phil, 6 they could do that. No one does it today. And we 7 recognize that if -- again, this is a current 8 practice -- that the charity has to be able to properly 9 document and attract or account their revenues and 10 expenses with this award, which we believe is going on 11 today. And I'm told there have been -- some of these 12 halls have been audited by your auditors and they've not 13 had a problem accounting for this type of practice. 14 I would be happy to answer any other 15 questions. 16 Thank you. 17 MS. ROGERS: Okay. Thank you, sir. 18 Next will be Rex Stark. Would you like to 19 comment, sir? 20 MR. STARK: Junior. No comment. 21 MS. ROGERS: Mr. Stark has no comment? 22 MR. STARK: No comment. 23 MS. ROGERS: Oh, okay. I'm sorry. Thank 24 you. 25 Charles Hutchings? 30 1 MR. HUTCHINGS: Charles Hutchings, Amvets 2 Post 52, Dallas. I want to ditto what has been said 3 before about this bill. And my comment to it, it just 4 limits bingo. It limits our ability to generate funds 5 for the charities. 6 Thank you. 7 MS. ROGERS: Thank you, sir. Thank you. 8 Mark Clark? 9 MS. CLARK: I concur with all speaking out 10 against it, as Mr. Hutchings just said. 11 MS. ROGERS: Thank you, sir. Thank you. 12 Cynthia West? 13 MS. WEST: No comment. 14 MS. ROGERS: Okay. Thank you. 15 Mark McCafferty? 16 MR. McCAFFERTY: I concur with Ms. Ives 17 and Mr. Fenoglio and Mr. Hutchings. 18 MS. ROGERS: Thank you, sir. 19 William Smith? 20 MR. SMITH: Thank you. 21 MR. SANDERSON: Excuse me just a minute. 22 If you've signed or filled out a form for testimony, 23 you'll need to come up to the podium and state your name 24 for the record as well as your comments. If you just 25 want to sign the form as agree or disagree or neutral 31 1 with no comment, then that's fine. Your name will be 2 read into the record as such. 3 MS. ROGERS: Do you have any additional 4 comment, sir? 5 MR. SMITH: I'm William Smith. No 6 additional comments. 7 MR. CLARK: Mark Clark. I just concur 8 with those that are speaking out against it. 9 MS. ROGERS: Thank you, sir. 10 Mr. Pruitt -- you just signed against it, 11 Mr. Pruitt? 12 MR. PRUITT: Yes. 13 MS. ROGERS: Okay. Thank you. 14 MR. PRUITT: I want to speak. 15 MS. ROGERS: Okay. Please. We welcome 16 you to speak. 17 MR. PRUITT: J. D. Pruitt, representing 18 Youth Benefit Incorporated. 19 We have a reward card system that we use 20 in our bingo halls. And the customers, every time they 21 swipe their card, they get 100 points. When they build 22 up to 2000 points, they get a five dollar off 23 certificate. It's a form of a door prize. But they use 24 that, along with cash, to buy their products. Is that 25 eliminated? 32 1 MR. SANDERSON: If it's a gift 2 certificate, it wouldn't be. 3 MR. PRUITT: Not a gift certificate. We 4 also -- and we've done it for years, no problems -- we 5 account for it. It's all there. It's just y'all come 6 up with rules sometimes without even knowing what's 7 going on in the field. 8 We also do a thing, if somebody comes in 9 and writes a check or uses a debit card in excess of 10 what they're purchasing at that time, they want extra 11 money to buy event tabs, pull-tabs, whatever, we do not 12 give them cash. We don't want them sucking the 13 operating capital out of our bingo halls. We issue them 14 a five dollar voucher for all that's in excess, because 15 if they get our money, we want it all back. Are those 16 eliminated? 17 MR. SANDERSON: Without saying what the 18 vouchers look like, I couldn't answer that question. 19 MR. PRUITT: Well, it's a laminated card 20 that says it's good for a five dollar purchase or five 21 dollars toward their purchase. 22 MR. WEEKLEY: It sounds like a gift 23 certificate. 24 MR. PRUITT: You ought to come see what's 25 going on before you start writing rules. 33 1 MS. ROGERS: Thank you, sir. And please 2 believe us, we do agree with you. We have -- some of us 3 on the board -- myself -- I feel, you know, we have our 4 act and we have our rules, and our books are getting a 5 little bit -- one is getting a lot larger than the 6 other. 7 MR. SANDERSON: That other book contains 8 lottery rules as well. 9 MS. ROGERS: Well, you still compare them. 10 They are getting to be too many rules. We're not doing 11 things that are helping the bingo sometimes. And even 12 on a pull-tab, if you read it, you can give merchandise 13 as that. And if someone gives merchandise as a card 14 that they can come back and play on Fabulous Tuesdays or 15 something, or Fabulous Fridays, then this rule would 16 snag them on that, but the pull-tab said they could get 17 merchandise. So I agree with everyone here. We're 18 putting restrictions on things that I don't think need 19 restrictions on them sometimes. 20 MR. SANDERSON: Well, I guess one thing 21 that concerns me is, you know, the rules were sent to 22 the BAC on January the 14th -- 23 MS. ROGERS: Yes. 24 MR. SANDERSON: -- as well as other 25 industry representatives that had notices. They were 34 1 placed on our website shortly thereafter for informal 2 comment. And the whole purpose of that informal comment 3 period is to receive these type of comments and not wait 4 until the last minute, at a BAC meeting, to start 5 bringing those comments up. 6 The whole purpose of informal comment is 7 to obtain that comment so that we can look at it. I 8 believe -- you know, I asked the BAC members to have 9 their comments that they received back to me by February 10 the 19th or the 20th so that we could research those and 11 see if there needed to be any changes or modifications 12 to the rules. 13 So I can't comment on, you know, what's 14 being stated here today, because I have not researched 15 it completely. 16 MS. ROGERS: All right. Thank you. 17 Any other comments, members? 18 AGENDA ITEM NO. X 19 MS. ROGERS: Okay. Moving on to Item No. 20 10, report and possible discussion and/or action on new 21 Rule 16 TAC 402.512, bingo occasion record requirement. 22 Mr. Kenneth Messer. 23 MR. MESSER: Okay. This rule was to 24 change some of the requirements for recordkeeping for 25 each session. I received about five people's comments. 35 1 Most of those comments were related to the storage of 2 the new requirement to maintain game cards or the 3 printouts from the card-minding devices. That was the 4 gist of the comments that I received back. 5 There were a couple of comments about 6 having to kept the records in ink versus pen. I 7 personally didn't have a preference for that. 8 That was it. 9 MS. ROGERS: Thank you, sir. 10 Members, any other comments on this, 11 anyone? 12 MR. SILVER: Just on the non-erasable ink. 13 I mean, I know the lottery doesn't want to see anybody 14 erasing or anything. It's like golf, you never have an 15 eraser on a pencil. But I know a lot of people make 16 mistakes, because I've looked at just some of the 17 paperwork in passing, just keeping track of pull-tab 18 sales and stuff like that, and I see all kinds of 19 erasing, because people still don't know how to use a 20 10-key calculator and stuff like that. 21 And I think non-erasable ink could be just 22 inviting yourself to have scratches and white-out and 23 all kinds of stuff all over paperwork. So, I mean, it's 24 six of one, half a dozen of the other. But it's easier 25 just to erase it with a pencil than go find white-out 36 1 and buy white-out and have somebody use it. I just 2 think erasable ink would be a little -- or non-erasable 3 ink would be just a little bit excessive. But that's 4 just a minor comment. 5 MR. SANDERSON: And we've looked at that, 6 and we're internally discussing that option. 7 MR. SILVER: Okay. 8 MS. ROGERS: And in one of the comments 9 someone put in there, Mr. Pruitt I think wrote, "Even if 10 they are done in pencil, they must match the deposit 11 slips from the bank, disposable card sales, journals, 12 et cetera." So whether it's in pencil or pen, it has to 13 balance out. So I agree. 14 Any other comments, members? 15 No? 16 Sharon Ives? 17 MS. IVES: Good morning. I'm still Sharon 18 Ives. First of all, I don't like this rule at all. I 19 also agree with the non-erasable ink. Are the bingo 20 auditors required to complete and submit all their forms 21 in non-erasable ink? That was one of my questions. 22 Also I want to make note, there was no 23 mention of attaching a copy of the deposit slip with the 24 occasion's cash summary. On the proposed 25 requirements as -- sorry. This microphone. 37 1 The proposed requirements as outlined in 2 Paragraph (e), (1) through (7) and (h)(10), this would 3 create a financial strain on the organizations regarding 4 the storage of the documents. An example is a paper- 5 only bingo hall in Fort Worth. First session they play 6 17 games total. That's their early birds and the 7 regular session games. That resulted in 23 winners. 8 The second session was nine games, which 9 resulted in 13 winners. That's a total of 26 games for 10 that day and 36 winners. The amount of paper per 11 session is approximately 11 pages of the required forms, 12 the register Z tape, the game program, plus 23 winning 13 bingo papers, for a total of 34 pieces of paper for that 14 session. 15 Another example of a paper-only hall in 16 Dallas: First session, 23 games, which resulted in 30 17 winners. Second session was 28 games, which is 34 18 winners. So the amount of papers per session is 13 19 pages of your regular forms, your Z tape, your game 20 program and then the 30 winning bingo papers, for a 21 total of 43 pieces of paper just for one day. That's a 22 lot of paperwork. 23 Also I wanted to make note, what happened 24 to the Paperwork Reduction Act of 1980? And is all of 25 this absolutely necessary and to save a tree? 38 1 We're talking about a total of all these 2 additional pieces of paper. That's 4,368 pieces per 3 year, which is equivalent to nine reams of paper. Also 4 additional storage boxes. Those storage boxes are $2.75 5 apiece. Also the reams of paper is $3.80 per ream of 6 paper and the storage boxes, and then not to mention the 7 storage facility that each bingo hall location would 8 have to rent. 9 On Paragraph (E), No. (7), the occasion 10 bingo ball call sheet, this would cause an unintended 11 financial hardship on all paper-only bingo halls. Each 12 bingo hall location would need to hire an additional 13 employee in order to comply with this requirement. That 14 is, if you can find someone that would work for, say, 15 $20 a session, 14 sessions per week, because that would 16 be a full-time hall. 17 At 52 weeks, that's $14,560, plus the 18 employer -- you know, the organization or the unit -- 19 would have to, of course, pay the matching taxes. 20 That's $1,113.84, plus the federal unemployment tax of 21 $56, plus the state unemployment tax of $393.12. So 22 that would be an additional cost for each bingo hall, 23 and it's going to be out of pocket $16,000. 24 And I did receive the most recent Bingo 25 Bulletin a couple weeks back. And on the very front 39 1 page of the Bingo Bulletin, it stated that the 2 charitable bingo distributions were down compared to 3 2009. So what would all these added expenses do to the 4 distributions should this rule go forward? 5 Paragraph (n). Why set the selling price 6 in advance before that actual inventory is ever sold? 7 And also what is the time frame for the Commission to 8 approve any changes to those pre-set prices? This would 9 be a waste of money if a particular bingo hall has to 10 change the game schedule around for whatever reason. 11 Should a bingo hall wish to offer some kind of special, 12 even though that particular inventory price were already 13 pre-set, would this fall under Paragraph (l)? There are 14 so many different variables that would and could 15 constitute a bingo hall to change pricing if just to 16 survivor or to remain compatible. 17 Thank you 18 MS. ROGERS: Thank you, Ms. Ives. 19 Members, any questions? 20 MS. IVES: Thanks. 21 MS. ROGERS: No? 22 Phil, I would ask one question. Where 23 does the No. (10) keeping this for -- it doesn't say how 24 long. I believe right now you have to keep the winning 25 faces of cards for 30 minutes? 40 1 MR. SANDERSON: Which No. 10? 2 MS. ROGERS: Computer printout of winning, 3 4 of 6 page. 4 MR. SANDERSON: As part of the daily 5 occasion packet? 6 MS. ROGERS: Yes, right there 7 (indicating). 8 MR. SANDERSON: Oh, computer printout of 9 the winning card face or the actual winning card face 10 for every winner of every regular game, that would be 11 part of documentations for the session, so it would be 12 required to be kept for four years, yes. 13 MS. ROGERS: Could I ask, where did this 14 come from? Why? Do you know? 15 MR. SANDERSON: There are standards that 16 have been developed by the North American Gaming 17 Regulators Association. And all of these, if not -- and 18 they've got more in their standards that we don't 19 include in here. It's a standard bookkeeping and 20 recordkeeping that they're setting for gaming regulators 21 to lay out for their organizations that they regulate. 22 It helps in investigating any kind of complaints. 23 We've looked at potentially changing that 24 to where you just log the serial number and the face 25 number of the winning cards instead of maintaining the 41 1 actual card face. We have got some, you know, documents 2 of, you know, like here is a one session of the winning 3 cards. I know it is paper-intensive, but all these 4 other forms are also on-line on our automated Bingo 5 Forms Manual, and you can fill it in on-line and it 6 populates all the reports for you, so there wouldn't be 7 any paper waste in that regard. 8 MS. ROGERS: True. And I agree with that. 9 But we also have to remember about those tiny little 10 halls that maybe don't have a computer, that don't have 11 the access, well, then they've got to now, like Ms. Ives 12 just pointed out to us, go through all the paper and the 13 printing and things of that nature. 14 And I appreciate Ms. Ives bringing that, 15 because I did not read that in Line 12, "The selling 16 price for each type of disposable bingo paper must be 17 determined upon receipt of the inventory..." I 18 appreciate you bringing that to our attention, because I 19 didn't catch that, and I don't know how -- I don't know 20 how on earth that would be done. That's a paper-buyer's 21 nightmare. 22 Okay. Mr. Stephen Fenoglio, would you 23 like to comment, sir? 24 MR. FENOGLIO: Stephen Fenoglio, for the 25 record. I'll echo what Ms. Ives said and only highlight 42 1 Subparagraphs (l) and (n) for the same reason. 2 I know of no other business -- and I 3 represent convenience stores, bars, restaurants, a 4 number of entrepreneurial clients -- and none of them 5 are required to, in advance, when they clock in 6 inventory, to decide in advance what that price will be 7 and never change without the government's approval, so 8 it seems a little harsh to do so. 9 There may be an audit issue that's of a 10 concern. And if there is, maybe we ought to make sure 11 we understand the problem before we buy in -- every pun 12 intended -- on the solution. This, in effect, amounts 13 to a form of price-fixing by the Commission. And by 14 saying, you know, the agency -- the charity has to 15 decide when that inventory comes in, what's our price 16 going to be, and we can only change it with the approval 17 of the Commission. 18 The other issue is, you're setting 19 charities up for failure, because most charities that I 20 know of regularly offer discounts for birthday. If a 21 customer comes in, "It's my birthday," they show them an 22 ID, they get a reduced price package. So (l) suggests 23 that you can document the specials but (n) says you 24 would have to get the approval of the Commission before 25 you could do that, and that's an overly harsh result. 43 1 Be happy to answer any questions. 2 MS. ROGERS: Thank you, sir. 3 Members, any questions? 4 And once again, Phil, just because of what 5 Mr. Fenoglio said, prior approval to the Commission, 6 would this be something like you would pick up the phone 7 and call one of the licensing agencies? Would you 8 call -- 9 MR. SANDERSON: We could certainly change 10 that to just notifying the Commission. The majority of 11 the information in this rule is to assist us in 12 monitoring the bingo halls and their gaming activities, 13 without spending an abundant amount of time doing 14 on-site audits. There is mechanisms in place that if 15 the requirements and these recordkeeping requirements 16 are maintained, and along with the information that we 17 get from manufacturers and distributors, and we can 18 effectively monitor the bingo activities at each 19 location without having to send auditors out there. 20 Currently an audit is taking upward to 21 almost 600 to 700 hours, and the average cost for an 22 audit is a little over $20,000. And so, you know, this 23 is something that we're looking at in trying to -- you 24 know, without increasing -- once again, increasing 25 license fees and increase FTEs to help us monitor, 44 1 financial monitoring, which was a recommendation from 2 the State Auditor's office last year. 3 MS. ROGERS: Well, and I by no means say 4 that an audit is not expensive and time-consuming and 5 everything on everyone's part, but maybe this just isn't 6 the right way to go about it, because could you imagine 7 all the phone calls, "Hey, I'm changing my price to 8 $3.00," or faxes, and then the license agents have to 9 take care of that? So that's more hours also. 10 MR. SILVER: That could be a little bit 11 more labor-intensive on the lottery side, because you 12 would have to have somebody available all the time to be 13 able to field the phone call, notify the lottery or 14 something like that, the way it's written, notification 15 of the lottery, just to be able to change the price on 16 the fly if something happened. 17 And Ms. Ives pointed that out. If 18 somebody came in for a birthday, do we have to call you 19 and ask, "Can we change the price for this person?" 20 Just an observation. It could be a little bit more 21 labor-intensive. 22 All that information, isn't that in the 23 daily cash reports and stuff like that? 24 MS. ROGERS: You are supposed to have it 25 documented, what you sell -- 45 1 MR. SILVER: Yes. 2 MS. ROGERS: -- each one down for so, you 3 know -- 4 MR. SILVER: It could almost be redundant. 5 MS. ROGERS: Exactly. Thank you. 6 Mr. Rex Stark? 7 MR. STARK: Rex Stark, Jr., representing 8 Amvets. I do agree with the previous commentators 9 against this bill. 10 MS. ROGERS: Thank you, sir. 11 Mr. Charles Hutchings? 12 MR. HUTCHINGS: Charles Hutchings. I 13 would like to agree with the commentators -- the 14 commentation that's been made. 15 MS. ROGERS: Thank you, sir. 16 Mark Clark? 17 MS. CLARK: Mark Clark. And I would like 18 to agree with Ms. Ives and Mr. Fenoglio's prior 19 statements. 20 MS. ROGERS: Thank you, sir. 21 Cynthia West? 22 MS. WEST: No comment. 23 MR. SILVER: She doesn't have any 24 additional comments. 25 MS. ROGERS: She has no additional 46 1 comment -- oh, I'm sorry. She does have marked that she 2 is against it, so I'm sorry. My apologizes; my mistake. 3 Okay. Anyone else have any additional 4 comments? 5 Yes, sir? 6 MR. SMITH: My name is William Smith. I 7 wrote on the sheet up there I was going to comment on 8 it. I don't know if I didn't mark it right or what. 9 MS. ROGERS: That's fine. 10 MR. SMITH: I just want to add a couple of 11 things. I do agree with Mr. Fenoglio and Ms. Ives. 12 The deal about the non-erasable ink, 13 that's kind of a self-explanatory thing. 14 On (e)(1), they're asking for a copy of 15 the game program for the occasion. A lot of times in 16 smaller halls, they make changes on the fly. You know, 17 we have to adapt our game to handicap it where the 18 charity makes money that day. So we don't always know 19 ahead of time what our game program is going to be that 20 day. 21 On (e)(5), the occasion schedule of 22 prizes, that's a record of each prize offered and 23 awarded. I'm not real clear on that. I'm guessing that 24 if you offer a jackpot prize and they don't win it, 25 you're still supposed to report what you offered. Is 47 1 that correct? 2 MS. ROGERS: Right here. (e)(5)? 3 MR. SMITH: (e)(5). 4 MR. SANDERSON: I think you would have to 5 show what the prize was offered and then you would have 6 to show what you actually awarded, yes. 7 MR. SMITH: Okay. All right. 8 On No. (7), the occasion bingo ball call 9 sheet, we don't have a lot of storage in a lot of our 10 facilities, not to mention Ms. Ives said that we would 11 have to hire somebody to do this. What if there is a 12 mistake made on that? It is human, people actually 13 writing that down. And I know from experience, after 14 you see so many numbers called, they start to run 15 together. I think we've been through this before a 16 while back, and we decided that was not the best thing 17 for the charities to be spending their money on. 18 MR. SANDERSON: The ball call sheet is 19 only for a bingo game where the winner is determined by 20 the number of balls that are called. 21 MR. SMITH: Right. 22 MR. SANDERSON: So, I mean, if the prize 23 is based on 50 numbers being called or 55 numbers being 24 called, then that would be required. If it's just a 25 regular bingo game, then there's no requirement to have 48 1 the ball call sheet here. 2 MR. SMITH: I know a lot of the smaller 3 halls do that. That's the way they operate a lot of the 4 VFWs and Amvets and stuff like that. They offer a $50 5 jackpot with a $25 prize. So that can get labor- 6 intensive very, very quickly. 7 On (f)(3), the types of packages and 8 selling prices for sales using card-minder devices. In 9 the programs for the card-minders, all the packages are 10 listed in there. If you start having to write out every 11 package that you offer, that's going to get labor- 12 intensive also, and that's going to compound the 13 paperwork that we have to store and maintain, because at 14 the end of the day, Z tape actually shows what you 15 actually sold. If you need to go in there and look at 16 all the different packages, that's not something that we 17 as an operator can go in and change or anything like 18 that. That has to be done through the distributor of 19 the equipment. 20 Let me skip over to -- let's see. It 21 would be -- I'm not sure of the number here -- it would 22 be (h)(9), "an explanation of any deviation from the 23 prize amount offered and the prize amount awarded." I 24 guess that would go back to the jackpot games. If they 25 didn't win the jackpot game. Sometimes we might play 49 1 anywhere from 15 to 40 games in a session that are small 2 amount games that have to deal with the jackpot game. 3 If you bingo in so many numbers, you get the jackpot. 4 Am I reading that to understand if they didn't win the 5 jackpot, we would have to make a notation on the 6 paperwork, they didn't win the jackpot because they 7 didn't hit it in the proper amount of numbers? 8 MR. SANDERSON: I would guess that your 9 game program schedule will say that. 10 MR. SMITH: Okay. On the (i) stated 11 payout for (i)(3) on the information on the pull-tab 12 game, the stated payout for each deal, I think it's 13 already printed on the tab and y'all approved it, I 14 mean, and we have to list the four number anyway. 15 I guess I want to go down to the 16 inventory. "The selling price for each type of 17 disposable bingo paper product must be determined upon 18 the receipt of the inventory, written on the invoice and 19 may not be changed once the price determination has been 20 set without prior approval of the commission." 21 We're on a two-week ordering rotation, as 22 most people in the industry are. It's a lot easier for 23 the distributors and the manufacturers to judge how much 24 paper they need in their warehouses. We don't generally 25 determine how much our prices are two weeks ahead of 50 1 time, especially in an area where you have competition. 2 A lot of times it's two days or one day before you play 3 that session. You're not going to be able to tell how 4 much you're going to sell your cards for when you get 5 your inventory in. You're not going to know two weeks 6 out what you're going to do it for, not to mention if 7 you do do that, the amount of inventory that you're 8 going to have to maintain by the charities. 9 It's going to be cumbersome, and it's 10 going to be -- wow! -- I know how much inventory we have 11 to order on a two-week basis now, and we barely have 12 room for it. So if you have to order -- if you know 13 like at the end of the month, "Well, we might be running 14 a special midweek; we might not," and you have to do 15 that ahead of time, then you've got to order double, 16 triple, maybe even quadruple the amount of inventory to 17 be able to sell your paper on time and not wait to wait 18 for Commission approval. 19 Thank you. 20 MS. ROGERS: Thank you, sir. Thank you. 21 Mr. Pruitt, do you have any further 22 comment? 23 MR. PRUITT: Just want to touch on a 24 couple of things. 25 MS. ROGERS: Okay. Thank you, sir. 51 1 MR. PRUITT: On this pre-determining the 2 selling price when the inventory comes in, y'all are 3 micro-managing us right out of business, because I may 4 be in the middle of a session with a bad crowd and I 5 may, on the spur of the moment, decide that on half-pay 6 jackpot cards, instead of selling them two for a dollar, 7 I'm going to offer them four for a dollar. That does 8 two things. It puts twice as many half pays out there, 9 which increases the odds of me not doing a full payout, 10 and I've also created a little enthusiasm in the bingo 11 hall. So if I don't have the ability to do that -- I 12 mean, if y'all are going to micro-manage this thing 13 right down to what we do every day, you know, we have no 14 incentive to try to make it work. 15 On the ink thing, I have been in this 30 16 years, and I don't think I have ever had a daily cash 17 report that didn't have at least one correction on it. 18 I guess when we get it like we want it, we can run a 19 Xerox copy and throw the original away and give you a 20 Xerox copy. 21 This one on setting that price ahead of 22 time needs to be taken completely out. It's totally not 23 needed. You've covered it up here in the documentation 24 of any special discounts, you're changing the prices. 25 It's reflected on the daily cash report; it's reflected 52 1 in the disposable card sale summary, all of which is 2 required. You don't need to try to tie things down. 3 We also do a thing with our reward card 4 system that we issue at least one one-dollar electronic 5 pack and one one-dollar paper pack. All right? Am I 6 going to have to call you twice a day and tell you which 7 pack number and serial number, I gave them for a dollar 8 instead of five dollars? I mean, there's just not a lot 9 of thought in this. 10 And this thing here, after 48 hours, I 11 don't know what it says, and your auditor darn sure 12 isn't. And when you come out with a complaint from a 13 customer, which is when this would be good, the last 14 four or five of those I've had come up has been six 15 months since the date it occurred. Six months down the 16 road, nobody knows what happened, and this (indicating) 17 is not going to tell you. 18 MR. SILVER: Mr. Pruitt, what was that in 19 your hard, for the record, that you're -- 20 MS. ROGERS: Referring to. 21 MR. SILVER: -- what you were referring 22 to? 23 MR. PRUITT: It's that printout that -- 24 just a ball call record and also indicates the winning 25 cards, what number they were and game number and -- 53 1 MR. SILVER: Okay. Thank you. 2 MS. ROGERS: Thank you. 3 MR. PRUITT: I'll even give you one. 4 MR. SILVER: No. 5 (Laughter) 6 MS. ROGERS: And those are great if you 7 have -- if your system can do that. But going back onto 8 this comment, every bingo ball called if the winning is 9 determined by number of balls called. So a small hall 10 that still uses the round machine will have to call the 11 ball before and then write down before? I mean, if 12 everyone doesn't use -- not everyone uses automated, you 13 know, air-blowing machine. Correct? There are still 14 some halls, are there? 15 MR. SANDERSON: There may be a few. I 16 don't know. 17 MS. ROGERS: A few. But, I mean those, 18 few and far between, we can't exclude them. I mean, to 19 make their life so difficult. I think what I get from 20 the general consensus of everyone, and myself, too, 21 there are a couple of things in this that needs to be 22 really looked at that puts such hard restraints. Bingo 23 is not like -- lottery tickets all sell for $10 or this 24 sells for this. Bingo is spur-of-the-moment. You have 25 to do what you have to do to suit your customers. And 54 1 customers in San Antonio are different than Austin, 2 different than Dallas, different than Houston. And 3 having to do what (n) is asking us to do would be 4 horrible. It would be hard on us. It would be very 5 difficult. 6 So, members, do you have some commence on 7 what everyone has spoken on here today? Do y'all have 8 any comments? 9 Okay. 10 AGENDA ITEM NO. 11 11 MS. ROGERS: Item 11, report and possible 12 discussion and/or action on new Rule 16 TAC 402.211, 13 game of chance. 14 Mr. Earl Silver. 15 MR. SILVER: In your notebooks -- I did 16 receive some additional comments from Mr. Hieronymus 17 that's in your notebook. And -- let's see. Where did 18 this come from? 19 Oh, Mr. David Heinlein and Kevin Fontenot. 20 I did receive two more comments later than what was 21 going to make it in your notebook. I passed out the 22 handouts there. 23 Phil, do you want me to read these? I 24 gave them to the court reporter. 25 MR. SANDERSON: You can summarize them if 55 1 you like. 2 MR. SILVER: Kevin Fontenot of Tejas Bingo 3 is pretty much against the rule as it is written. He's 4 stating that the charities benefit from the play of 5 these machines, because the majority of winners on these 6 machines were deemed in-house for bingo products, which 7 is more profit and it's good for the charities and the 8 state and also attracts some customers that come to play 9 who might otherwise would never have come in, in the 10 first place, and that's good for the charities. 11 Let's see. He also mentions that -- talks 12 about the lottery scratch-off terminals and actually 13 8-liners at convenience stores, how they can -- it looks 14 like how they can win red tickets from there and redeem 15 them for lottery tickets. 16 That's a basic summary. "Once again, I 17 urge the Texas Lottery Commission to reconsider and stop 18 this proposed rule from being considered the way it is 19 written. It does nothing but hurt the very people that 20 it is here to support. The Charities in this state will 21 be most appreciative and their budgets will be stretched 22 further." 23 And then Ms. Tammy Neuman of Humble Bingo. 24 "It has come to my attention that the Texas Lottery does 25 not think 8-liners are in the best interest of the 56 1 charities playing in Texas Bingo Halls. I feel that 2 this assumption is totally incorrect. The 8-liners have 3 justified their existence time and time again. This 4 past week alone, our...hall has collected over $6000 in 5 receipts from tickets from 8-liners. At the end of each 6 session each day, the tickets we receive for Bingo 7 supplies are purchased by the amusement machine operator 8 and thus we make our cash bank deposits daily." 9 She has an example. And "As a side note, 10 the other day I stopped at my neighborhood gas station/ 11 convenience store. I noticed four 8-liners sitting off 12 to the side with a gentleman sitting at one. I politely 13 asked the man what he got if he won on this machine. He 14 replied, 'This store pays you cash.' I thought 15 'really,' so I put $5 in and played a while and took out 16 $20. I took my receipt to the clerk and he offered me 17 cash. I asked if I could buy lottery tickets and he 18 said 'sure.' I purchased $20 worth the lottery tickets 19 from my 8-liner winnings. 20 "My question is, Why is it OK to purchase 21 lottery tickets from 8-liners illegally paying cash and 22 not be able to use 8-liner tickets from a Bingo Hall 23 that does 'NOT PAY CASH' to buy bingo supplies? There 24 is obviously a double standard with the Lottery 25 Commission. 57 1 "Please allow us to keep 8-liners. Our 2 existence in part depends on these machines and the 3 revenue our charities receive. 4 "Sincerely, Tammy Neuman." 5 I kind of have two questions. I 6 understand where the gaming coupon came from, where that 7 all is originating from. Is this a complaint-driven 8 rule or a clarification rule? 9 MR. SANDERSON: Well, first off, it's 10 probably more of a clarification rule. We had started 11 working on this rule, you know, several years ago and 12 then we came up to the point to where we requested an AG 13 opinion. Once the AG issued his opinion, we took the 14 rule back, looked at it. We harmonized it with the AG 15 opinion. The lottery does not have any pro or con, you 16 know, stance on 8-liners. This rule strictly deals with 17 other games of chance and what constitute an other game 18 of change. 19 Some of the comments about the door prize, 20 we are changing that to allow that a door prize may not 21 exceed $250. We're not saying you can't have one or 10. 22 The number of door prize size will, you know, indicate 23 that. 24 Another comment that was received was to 25 provide a definition of a sweepstakes machine. We feel 58 1 like sweepstakes are already defined. Sweepstakes is a 2 game of chance by definition; and, thus, we didn't want 3 to cloudy up this rule with what the definition of a 4 sweepstakes. It's either -- you know, it is or it 5 isn't. And any complaint that we get on sweepstakes we 6 would investigate fully. 7 Lastly, the comments that you received 8 from Tammy Neuman, I'm going to refer that to the 9 Lottery Enforcement Division, because it is a violation 10 of the Lottery Act to purchase lottery tickets with 11 8-liner coupons. So we'll refer that to the Enforcement 12 Division. 13 MR. SILVER: Excellent. So this is 14 based -- a clarification based on the AG opinion that 15 recently came out as far as the red ticket gaming 16 coupon? 17 MR. SANDERSON: This is a Section 18 2001.416, discusses other games of chance that are 19 allowed during a bingo occasion, one of which is a 20 raffle conducted in accordance with the Raffle Act, and 21 the other is an amusement device, bona fide amusement 22 device as defined in the Penal Code. 23 And based on that definition and the AG 24 opinion indicating that, you know, coupon exchanged for 25 bingo product is not considered a non-cash merchandise, 59 1 that's where this rule has been developed from. 2 MR. SILVER: As far as the AG opinion, I 3 mean, I realize it's just an opinion and that some AG 4 opinions are wrong -- can be wrong. They're just 5 opinions from an attorney. Is it possible that to get 6 better clarification before this rule goes into effect, 7 how fast would it be to litigate something like that so 8 where it creates undue pressure, duress or harm on the 9 charity, because, I mean, there's some opinions out 10 there that the AG opinion could be wrong. 11 MR. SANDERSON: All I can say to that is 12 that this agency has always given deference to AG 13 opinions. 14 MR. SILVER: Definitely. 15 MR. SANDERSON: And if a member of the 16 Legislature or whoever else has the authority to request 17 an opinion, wants to re-request, that would be, you 18 know, up to them. I don't think it would be in our best 19 interest to request an opinion on the opinion that we 20 just requested. 21 MR. SILVER: Correct; correct. Well, I do 22 appreciate you taking out the door prize part, because 23 that was one of my main things, because I just thought 24 that shouldn't even be in there, because that's just 25 restating the statute. Actually, that could be almost 60 1 rewriting the statute. So I appreciate you looking at 2 that and possibly taking that part out. 3 That's my only comments. 4 MS. ROGERS: I think we all concur and 5 thank you for taking that out. 6 Members, any comments? 7 No? 8 Okay. Public comment. Ms. Sharon Ives. 9 She already had to leave? 10 MR. FENOGLIO: I was asking to read her 11 comment. 12 MS. ROGERS: Yes, sir. Mr. Fenoglio. 13 MR. FENOGLIO: For the record, my name is 14 Stephen Fenoglio, and I was asked to read into the 15 record Sharon's comments. She had to get back for some 16 business in Fort Worth, so I'll just read her comments 17 on 402.211, game of chance. 18 "This rule needs to be trashed. Under 19 Subparagraph (c), accountability, shouldn't that 20 sentence continue to state, 'upon impletion of 21 investigation or a hearing or as finally determined to 22 have committed a violation'? 23 "Subparagraph (d), gaming coupons, did 24 this apply to discounts that are advertised in order to 25 increase revenue on certain days of the week or specials 61 1 advertised on holidays, you know, 'Bring this coupon or 2 newspaper clipping in in order to receive a 10 or 20 3 percent discount' kind of thing. 4 "Under Subparagraph (f), door prize 5 drawing, change the word 'must' to 'may.'" 6 And then she had the same comment about 7 the value of a door prize being prohibited, the 8 cumulative total being limited to $250, which I 9 understand staff has agreed to. 10 Those are her comments. 11 MS. ROGERS: Thank you, sir. And you are 12 next on the list, so if you would like to continue 13 standing up. 14 Members, do you have any comments on 15 those, on Ms. Ives' comments? 16 No? Okay. 17 MR. FENOGLIO: Okay. For the record, my 18 name is Steve Fenoglio, and I'm now commenting on -- I 19 filed an appearance slip. And I'm circulating my 20 written comments. 21 I have been at the heart of a lot of 22 litigation on 8-liners since the law was passed and 23 immediately started litigating back in the '95 time 24 frame. And it goes without saying that we disagree, my 25 clients and I disagree with the opinion of the Attorney 62 1 General. And I would urge Mr. Silver's comments about 2 before the agency -- well, let me back up. I don't 3 think anyone seriously questions that properly 4 configured 8-liners run in conjunction with charitable 5 operations where bingo product is being awarded benefits 6 charities. 7 David Heinlein provided extensive 8 comments -- and I understand he may make some more 9 comments about that -- from what his own -- the halls 10 that he does bookkeeping for have reflected. I filed a 11 comment with the BAC about nine months ago where we 12 examined halls in Austin, Texas, and the revenue 13 enhancement of that is dramatic. 14 In some halls, it can approach 40 percent 15 of the product being purchased and sold, is through 16 8-liner awards or awards from successful plays of 17 8-liners. We also know -- we're not in a vacuum. In 18 Travis County today at River City Bingo at I-35 and 19 Braker, four doors down is a knock-knock game room. And 20 while law enforcement have come in repeatedly -- and 21 they're awarding cash, because our customers go down and 22 play that game at that location and get cash. 23 And it's a knock-knock game room. I can't 24 get in. You have to know someone to get in, and law 25 enforcement has been trying to get in to make those 63 1 calls. And by last count, there were about eight 2 different operators that have been in and out of that 3 strip center operating the game rooms, paying cash. 4 That adversely affects charitable bingo, without 5 question. And there have been a number of busts all 6 over the state with cash-paying game rooms. 7 And so charitable bingo has to compete in 8 some fashion. So the premise is, without question, 9 properly run, they enhance charity revenue bottom line. 10 So that being said, before we go off and adopt something 11 like the agency did after Dan Morales issued DM-466 12 Attorney General opinion that we wrote, in effect, 13 Section 47.01(4)(B). 14 And I'm looking at Kim Kiplin, because she 15 and I had a number of discussions about that. 16 Nonetheless, Mr. Morales, after I think 18 days, issued 17 an opinion that rewrote 47.01(4)(B) to effectively 18 outlaw all 8-liners. It looks the industry about two 19 years to get a court to rule on that face up, and I won 20 the case in Amarillo Court of Appeals where the Amarillo 21 Court of Appeals, hardly a bastion of liberal 22 conservatism -- they were all Democratic judges -- said 23 the Attorney General doesn't have the right to rewrite 24 the statute; the Attorney General is wrong. 25 What that means today is, if the Attorney 64 1 General is wrong, it's adversely affecting charities' 2 bottom lines, and we ought to be able to get into court 3 as quickly as possible and make that determination. And 4 hopefully we could get into court without adversely 5 impacting a charity. 6 I think there are good arguments on both 7 sides. I brought with me today one of the AG opinions, 8 talks about the coupons being a medium of exchange. 9 Well, here is a Dave and Buster's power card. Dave and 10 Buster's is in about six cities across the state. They 11 have machines that are legal, but that's a medium of 12 exchange by which they track your points and then you 13 get merchandise items on premises only, just like the 14 bingo product. So having said that, we think the AG 15 opinion is wrong. 16 Now, I've got written comments, if you 17 don't like my first argument and we can't figure out a 18 way to get into court. And my comments are in a form of 19 what we lawyers call redlining, where I'm striking 20 through and making changes, striking through, obviously, 21 and then underlining changes. And then when I have a 22 signal, I put it in all caps and bold. 23 And my first comment on Page 1, Line 12, 24 we're defining a gaming coupon, and I just observe that 25 that would also include a bingo gift certificate. And 65 1 from my perspective, the rule is a little bit overly 2 written with not a lot of precision, because what it's 3 saying is, a gaming coupon -- and it defines what the 4 gaming coupon is -- and it says later on it's going to 5 be prohibited to receive a gaming coupon. Well, that's 6 what a bingo gift certificate is. And I know Phil has 7 said repeatedly, "Well, a bingo gift certificate under 8 the bingo gift certificate rule is going to be 9 permissible." But it's defining that as a bingo gift 10 certificate, so it needs to be clarified. 11 The other thing I observe -- and this came 12 up with a client this morning -- under Subparagraph (2), 13 Page 1, Line 7, you're defining what a game of chance 14 is. One charity offers, or a charity hall in Texarkana, 15 as a part of their bingo prize that you win, instead of 16 a $500 or $200 cash prize, you win the opportunity to 17 play the game Deal/No Deal where there's some envelopes, 18 and you get to choose the envelope you want. Maybe you 19 can continue to choose until you made a bad deal. 20 That's a game of chance. 21 So what it's saying here is that that 22 charity could not award as a prize the Deal/No Deal or 23 the balloon pop. And I've seen balloon pops in a number 24 of places where, instead of a $200 prize -- and Kimberly 25 is shaking her head -- they get to go up and pop a 66 1 balloon. And whatever is in the balloon, they could win 2 that prize. Well, that's a form of a game of chance, if 3 you will. We don't want to prohibit that. 4 At the bottom of Line 19 -- or I'm 5 sorry -- 18, I've got some specific language to clarify. 6 And what the staff is trying to do is give effect to 7 2001.416 of the Bingo Enabling Act. If you read it 8 literally, the result is very harsh, because it's not 9 talking about a specific bingo occasion, it just says in 10 general, a game of chance other than a bingo raffle 11 conducted under Chapter 2002 may not be conducted or 12 allowed during a bingo occasion. 13 Well, if you think about all the bingo 14 occasions all over the State of Texas, you couldn't 15 operate much of anything. So what I tried to clarify is 16 what I think is during a specific bingo occasion on the 17 bingo premises where the game is located. And then I 18 will observe again, is a door prize a game of chance? 19 And I think it is. It's not charged, but presumably you 20 couldn't award the door prize. 21 Under Subparagraph (b)(1)(A), I tried to 22 rewrite what I think was an incredibly long sentence. 23 And my high school English teacher said periodically use 24 a period or a semicolon or a colon to break up lengthy 25 sentences. So while I disagree again with the AG 67 1 opinion, I think the way I wrote it makes it a lot 2 clearer. 3 And then the other thing I did strike 4 through is the words "cash equivalent including," under 5 Page 2, Line 3, because of the non-cash prize has to 6 have a value in cash to be legal under 47.01(4)(B). You 7 have that ten times or five dollars. So if you say 8 can't have a cash equivalent -- okay, it can't -- well, 9 then, how do you prove your game is otherwise compliant 10 or the award being made is compliant with the no greater 11 than ten times the cost of a single play of the game or 12 device sponsored, five dollars, whichever is less. 13 That's what 47.01(4)(B) says. 14 Under Subparagraph (c), accountability, I 15 get the Subparagraph (1)(A), where who is accountable if 16 you're in violation means the licensed authorized 17 organization, the commercial lessor and the operator on 18 duty. Again, not that I agree with the AG opinion. But 19 for clarity purposes, I get that. 20 Then it's introduced in Subparagraph 21 (B)(i), "Any person," and that raises concern: Well, 22 where is the agency trying to stop if the machine 23 operator that provides the game at the 8-liner location 24 is the agency now taking the position that they can -- 25 they're not on the bingo registry, they're an unrelated 68 1 third party that provides machines that are being used? 2 Maybe the machines or the prizes being awarded are in 3 violation. Is the agency saying that they can go after 4 that person? I don't think the agency wants to reach 5 out beyond what its statutory mandate is. And so I 6 would suggest that the use of the word "person" is too 7 broad for the jurisdiction this agency has. 8 And then finally under the door prize 9 drawing under Subparagraph (f)(3) -- or I'm sorry -- 10 (f)(2) first. "The door prize must be paid for from the 11 organization's bingo funds" -- okay. I get that -- 12 and/or it can be a donation. Well, why couldn't the 13 organization use its general funds if it wants to do so? 14 There is no prohibition in the Bingo Enabling Act or any 15 general statutory prohibition that if a charity wants to 16 use general funds unrelated to bingo to enhance a fund- 17 raising activity, it ought to be able to do so. And 18 charities all the time use, quote, seed money to do 19 charitable fund-raising, and that seed money is from 20 their general fund. 21 Under (f)(3), it states, "A licensed 22 authorized organization may not award bingo paper or 23 other bingo products as a door prize." And my question 24 is, "Well, why not?" That's the cheapest item they can, 25 you know, have to award as a door prize. Now, if they 69 1 were to do that, obviously, they've got to have the 2 accounting behind it to show if there is an audit, it's 3 proved that they're treating their bingo revenues and 4 expenses appropriately. 5 And then finally in (f)(4), again, it's 6 the bingo gift certificate I think is what you're 7 talking about, awarded as a door prize, is subject to 8 the bingo gift certificate rule. What I don't want to 9 prohibit is a local merchant awarding or giving to the 10 charity a certificate, a gift certificate. 11 Most large companies now only go to gift 12 cards, but small town or small town merchants, or just 13 smaller sized revenue merchants, are not going to have 14 necessarily gift cards, but they will in many instances 15 say, "Well, sure, VFW Post 12, we'll give you a $25 gift 16 certificate to Sue's Flowers," or what have you. So I 17 don't want to prohibit that. 18 And then I gather we've beat the horse on 19 the single prize. I just observe that originally the 20 Bingo Enabling Act was written that it prohibited all 21 door prizes. The old article 179(d)(11), Subparagraph 22 Q, and then it morphed into in I guess it was ninety 23 something where the door prize was a $250 limit. 24 I would be happy to answer any questions. 25 MS. ROGERS: Thank you, Mr. Fenoglio. 70 1 Phil, at this time can you answer why they 2 can't give away -- why that was put in there, why they 3 can't give away at the door? 4 MR. SANDERSON: Give away bingo paper or 5 products? 6 MS. ROGERS: Yes. 7 MR. SANDERSON: Well, I guess one thought 8 is that the door prize, in order to be a door prize, it 9 has to be something where an individual participates 10 without paying anything directly or indirectly; and, 11 thus, it would provide an individual the opportunity to 12 play bingo for free if they won in a door prize drawing, 13 a card-minding device or paper product, because they 14 didn't have to pay to get it. 15 MS. ROGERS: They don't have to pay to get 16 a TV either, Phil. 17 MR. SANDERSON: But there is no statutory 18 provision prohibiting TVs from being free. There is a 19 statutory provision for someone allowed to play bingo 20 for free. 21 MS. ROGERS: What if the charity purchased 22 the package? 23 MR. SANDERSON: Why not give them a gift 24 certificate? It's the same thing; it's all paper. 25 MS. ROGERS: So if a charity was wanting 71 1 to do this and the door prize was a gift certificate for 2 $10 toward a package and the charity put that money in 3 from their bingo funds, then there is perfectly fine? 4 MR. SANDERSON: They would put it in from 5 non-bingo funds. 6 MS. ROGERS: Door prizes -- 7 MS. ROGERS: No, never mind. You're 8 right. You're correct; you're correct. 9 MS. ROGERS: Okay. Gotcha! 10 MR. FENOGLIO: And I wanted to follow up 11 on, revisit the bingo gift certificate rule for the same 12 reason. I don't think you need to have just the bingo 13 gift certificate to do that. But the bingo gift 14 certificate rule, I'm told by a lot of licensed 15 authorized organizations, is overly restrictive and 16 cumbersome for them. 17 MS. ROGERS: Thank you, sir. 18 Members, do you have any further questions 19 on this? 20 No? 21 Okay. Mr. Rex Stark, Jr., do you have any 22 further comments, sir? 23 No, sir? 24 MR. STARK: No ma'am. 25 MS. ROGERS: He's marked against, so I'm 72 1 just asking if they have further comment. 2 Charles Hutchings, do you have any further 3 comments, sir? 4 MR. HUTCHINGS: No, ma'am. 5 MS. ROGERS: Thank you. 6 Mark Clark, do you have any further 7 comment? 8 MS. CLARK: Other than what I wrote down. 9 MS. ROGERS: Thank you. 10 Cynthia West, any further. 11 MS. WEST: No. 12 MS. ROGERS: Thank you. 13 Mark McCafferty, any further comment? 14 MR. FENOGLIO: He left with Ms. Ives. 15 MS. ROGERS: Okay. Thank you. 16 William Smith, do you have any further 17 comment? 18 MR. SMITH: Yes, ma'am. 19 MS. ROGERS: Yes, sir. Please. 20 MR. SMITH: Very briefly I just want to 21 echo what Steve said about the redemption machines being 22 able to be redeemed for bingo product. When the AG's 23 opinion came out, we were currently doing that. We are 24 no longer doing that because we don't want to do 25 something that's going to get us in trouble. We have 73 1 noticed a significant drop in not only our attendance 2 but also our revenue in each charitable organization, 3 due to that. 4 Another thing I want to say was, I think 5 we're going about all of this the wrong way. I think 6 we're regulating ourselves out of competition with the 7 illegal forms of entertainment. The local law 8 enforcement agencies, they're under-staffed and over 9 budget, and they don't have time to mess with the 10 illegal card games, the illegal knock-knock rooms that 11 are on every corner in pretty much every city in the 12 State of Texas. 13 I think we need to regulate ourselves to a 14 point of advantage. Give us the advantage. We're the 15 ones working, paying license fees, coming down here 16 spending our time volunteering to do what we think is 17 right and doing it the right way. I think we need to 18 regulate ourselves into a position where we can give our 19 customers, the bingo base, a better advantage to where 20 they won't want to go to these illegal places. But as 21 it is now, we're making it so dull and mundane that we 22 don't have the opportunity to compete for the 23 competitive dollar. 24 Thank you. 25 MS. ROGERS: Thank you, sir. And I will 74 1 say that I do agree with you. 2 I think that's it. 3 Mr. Pruitt, do you have any further 4 comment? 5 MR. PRUITT: Yes, I would like to touch on 6 something. 7 MS. ROGERS: Yes, sir. 8 MR. PRUITT: I don't have a problem with 9 using gift certificates as such, except the gift 10 certificate rule is totally prohibitive. We have eight 11 bingo halls within 10 miles of each other that basically 12 use the same gift certificates. All right. I've got to 13 list the name of eight bingo halls and 40 charities on 14 that gift certificate. What difference does it make as 15 to where -- I mean, I have no problem with listing the 16 bingo halls. That's good advertisement. But I don't 17 need to list 40 organizations. 18 For them to have sequential numbers and 19 all for the tracking purposes, I have to go to a printer 20 to get these printed. Well, the more you get, the 21 cheaper they are. If I have one organization that pulls 22 out, I've got to throw that $1,000 worth of gift 23 certificates away and start over from scratch with the 24 correct names. And you say you got to list them all. 25 And you say, "Well, you've got to have that because 75 1 maybe all of them don't." Well, in our bingo halls, 2 they all do. So that gift certificate rule really needs 3 to be looked at, because it is almost prohibitive on us 4 issuing gift certificates. 5 MS. ROGERS: Thank you, sir. 6 That's in Act. Yes? No? Okay. 7 That was a game of chance. Does it have a 8 workgroup that works with it? Are you going to want one 9 to go back over this and look at these items and -- 10 MR. SANDERSON: Well, we'll definitely 11 take all the comments that came in today. I don't 12 know -- after reviewing the comments and the transcript 13 from today's meeting, then I'll see if we need to look 14 at forming an individual workgroup to further discuss 15 this. 16 MS. ROGERS: Okay. 17 Yes, sir? Mr. David Heinlein. Took me by 18 surprise. Welcome. 19 MR. HEINLEIN: David Heinlein representing 20 charities. I provided all of my written comments, but I 21 thought I would just throw this out. It's a 22 (inaudible), the severity of this rule. 23 I'm seeing halls averaging about $500,000 24 a year in revenue from these tickets from a legal 25 machine that's operated in a separate space from the 76 1 bingo hall itself, which is not a part of their lease, 2 it's not a part of their activity. But they are able to 3 get the receipts from that activity and put it into 4 their revenue account. 5 And if that hall didn't have the 8-liners 6 in a separate area of that bingo hall, the players very 7 likely wouldn't come to play bingo, because the illegal 8 operators are all over in every corner, and the 9 customers want to play those 8-liner machines. So if 10 you don't have them in your bingo hall, they will just 11 stay over at the 8-liners' illegal game rooms. 12 So we bring them into the bingo hall with 13 the 8-liners that they can play there, and then they can 14 take those tickets that are legal and exchange them 15 for -- obtain bingo products. A half a million dollars 16 a year in revenue is a very significant number in any 17 bingo hall. 18 And even more importantly, if Bruce Miner 19 was here, I was going to have him look at -- when he 20 gave his report, the net proceeds is going down. And if 21 you look at the prize payout for regular bingo, it's 22 continuing to go up every year. And I'm seeing halls 23 now with 85 and 90 percent prize payout. That would 24 exceed 100 percent if we didn't have the money coming in 25 from those game room tickets to buy bingo products 77 1 that's played with regular bingo, not just the 2 pull-tabs, but I'm seeing a significant amount of that 3 money being on the regular bingo part. 4 So the $2,500 prize payout, we're not 5 going to be able to take enough money in to even pay the 6 prize payout, plus if they've got electronics, they've 7 got an electronics cost. So it's already a negative 8 revenue source as it is. 9 So we've got this prize management board 10 workgroup even, and there seems to be no way to keep 11 from giving away $2,500 in an area where everybody is 12 giving it away. Either they give away the $2,500 or 13 they don't come. So this rule would really crucify a 14 legal bingo operation, an operator trying to do 15 everything that's right and make money for the 16 charities. It's going to hurt the bottom line, just 17 completely wipe out their ability to make a profit, so I 18 think it needs to be just reexamined. 19 Thank you. 20 MS. ROGERS: Thank you, sir. Thank you. 21 And I happen to agree with you. 22 You'll take this back and look over it and 23 then bring it back to us on that? 24 MR. SANDERSON: Yes, ma'am. And, you 25 know, just an initial thought process is that I very 78 1 seriously doubt that the current set of Commissioners 2 would propose a rule that was in conflict with the AG 3 opinion. So I think it would be very difficult to 4 propose a rule that indicates that that activity is 5 permissible when the AG has indicated that it is not. 6 MS. ROGERS: Okay. 7 MR. SANDERSON: So I just wanted to say 8 that. 9 MS. ROGERS: Okay. Thank you. 10 We have one more public comment. Matthew 11 Daily. Yes, sir. 12 MR. DAILY: How you doing, Mr. Phil? 13 I represent Big Tex Bingo, north side of 14 Harris County, Texas. Harris County has been into my 15 bingo hall and seen exactly what I do with the tickets, 16 and they said they don't have a problem with it. They 17 really don't want me paying any cash. They said, "The 18 cash is what gets you put in handcuffs." So I said, 19 "Well, you see what we do?" And they pretty much gave 20 me, you know, the thumbs up, so I really don't know 21 exactly where that takes us. 22 I mean, we have about 15 illegal game 23 rooms on Veterans Memorial where the hall is located. 24 They bust them, they come right back, illegal card rooms 25 all over the place, gas stations redeeming for lottery 79 1 ticket everywhere. So, you know, I mean I'm in the 2 mess. You know, out there in rural areas where law 3 enforcement has a good, you know, tackle on a lot of 4 illegal activities, in Harris County, they just -- they 5 don't have the resources. 6 So we're sitting, you know, like what to 7 do. If we take out the machines, then the customers are 8 definitely going to want to keep playing these 8-liners. 9 So, you know, I lose probably about 15 customers at half 10 time that, if they win, they're headed to the game room. 11 I mean, they're offering $1,000 payouts and, you know, 12 doing 55-inch flat screen TV drawings during my bingo 13 session, you know, 7:30 to 10:00. And they are, "Come 14 and win you a 55-inch flat screen TV." With a $250 door 15 prize rule, you know, I can't do it. You know, I can't 16 give away a 55-inch flat screen TV. 17 So, you know, without being, you know, 18 real crazy about it and speaking, I really believe that 19 if y'all do this to us, you're going to put a lot of the 20 halls just under. I mean, you're going to give the 21 illegal people in the state, you know, the ammunition 22 they need to put, you know, a nail in the coffin of 23 charitable bingo. 24 And I'll leave it at that. 25 MS. ROGERS: Thank you, sir. 80 1 I have one more question for you, Phil. 2 It kind of touches back on what Earl asked: Does this 3 rule have to go forward right this moment because the AG 4 made an opinion or is there a possibility for it to 5 wait, maybe the AG is wrong? 6 MR. SANDERSON: Well, there's always both 7 those possibilities. 8 MS. ROGERS: Okay. 9 MR. SANDERSON: I will say this, that the 10 Commission has directed me to pursue any licensed bingo 11 hall that have the devices that are giving out the 12 gaming coupons, to investigate those. And so the rule 13 is primarily to put everyone on notice that what we 14 expect as it relates to Section 2001.416. 15 MS. ROGERS: Members, any further comment? 16 MR. CIANCARELLI: Yes. 17 MS. ROGERS: Yes, sir. 18 MR. CIANCARELLI: I'm not sure of protocol 19 here. But during the meeting, I received a comment from 20 someone. And what I would like to do and suggest -- and 21 correct me if I can't do this -- is just bring reference 22 to these two items and maybe for consideration for the 23 next meeting agenda. 24 Okay. One is a concern I guess about the 25 State of Texas is moving forward on banning smoking in 81 1 many establishments and talking about an exclusion for 2 bingo halls who have spent a lot of money -- 3 MS. ROGERS: Francis, we'll have to hold 4 that for just a moment, hold that thought. We're still 5 on 402.211. 6 MR. CIANCARELLI: Oh, I'm sorry. 7 MS. ROGERS: Once we close that and we 8 have the next meeting, then we can go from that. 9 MR. CIANCARELLI: Okay. 10 MS. ROGERS: Yes, sir. 11 Are there any more comments on 402.211? 12 No? Okay. 13 AGENDA ITEM NO. 12 14 MS. ROGERS: Then we'll go to Item No. 12, 15 public comment. Is there anyone else who would like to 16 make a comment at this time? 17 (No response) 18 AGENDA ITEM NO. 13 19 MS. ROGERS: Okay. Next would be Item 13, 20 consideration of and possible action on future Bingo 21 Advisory Committee meeting dates and/or items to be 22 considered for future meetings. 23 Francis, if you would like to speak about 24 those items, now I believe would be the time. 25 MR. CIANCARELLI: Okay. Again to 82 1 summarize it, there was concern issued about the State 2 of Texas banning smoking in many establishments, 3 allowing some exclusions for like cigar bars and a 4 couple of other things. So the concern and the question 5 is, can bingo be excluded, since many places have the 6 non-smoking rooms that have separate entrances in some 7 cases and bathrooms and so forth? 8 And the second comment that was sent to me 9 was I guess looking for an explanation why you can go 10 into a retailer, a gas station or whatever and buy a 11 lottery ticket and win up to $500 and not have to pay 12 tax and win $500 when you're playing bingo, you've got 13 to pay the five percent? Actually, I think it's up to 14 $599. 15 But, anyway, those I would like to enter 16 as a possible topic for the next meeting. 17 MS. ROGERS: Smoking, I know that you will 18 find a tremendous amount of information in our past 19 meetings. When Suzanne was here, they had a horrible 20 time in Corpus and they debated it. But, really, the 21 lottery has no say over the smoking, I think is what it 22 boiled down to. And things of that nature, it's more 23 your area, your county, your city. 24 And the other one is about paying tax, not 25 paying -- do they not pay tax on lottery tickets? 83 1 MR. SANDERSON: There is not a five 2 percent prize fee on lottery tickets, no, but they do 3 withhold income tax over a certain amount. 4 MR. CIANCARELLI: Over $600 or more I 5 think it is. 6 MS. ROGERS: Okay. I don't know how we 7 would . . . 8 (Off-the-record discussion between 9 Ms. Kiplin and Mr. Sanderson) 10 MS. ROGERS: Very good. So we will look 11 at adding the smoking and the five percent on bingo and 12 not lottery. 13 MR. CIANCARELLI: Thank you. 14 MS. ROGERS: Okay. Any other items? 15 Would this be the time that I would ask 16 you, Phil, on 402.512, do you want a workgroup on that 17 one formed before next time, occasion record 18 requirements? 19 MR. SANDERSON: Let me go through the 20 comments that we received today, and I'll get back with 21 you. 22 MS. ROGERS: Okay. Yes, sir. 23 Members, any other items that you would 24 like to add? 25 Okay. Our next meeting will just be at 84 1 the call of Mr. Sanderson when these two rules are 2 looked at and if we have anything further that comes up, 3 and the two items that have been brought to our 4 attention? 5 MR. SANDERSON: Yes, that's a possibility. 6 And of course, also depending on what legislation may or 7 may not transpire, so we'll start putting together a 8 couple of dates potentially in either May or June, 9 depending on what's transpiring at the Legislature. 10 MS. ROGERS: The next meeting we will have 11 I'm hoping maybe some nominations to discuss. So if we 12 have any of that, so nominations will be on there. 13 MR. SANDERSON: Yes, nominations, also 14 approval of your annual report to be presented to the 15 Commission. 16 MS. ROGERS: Okay. Any other items that 17 anyone can think of at this time? 18 Okay, members. 19 MR. SANDERSON: If you think of anything 20 else, email Kimberly or myself. 21 AGENDA ITEM NO. XIV 22 MS. ROGERS: Yes, please. That will bring 23 our meeting to a close. Do I have a motion to adjourn 24 this meeting? It is now -- I can't see the clock -- it 25 is now 11:44. 85 1 MR. CIANCARELLI: I make a motion. 2 MS. ROGERS: I have a second. All those 3 in favor? 4 FROM THE COMMITTEE: Aye. 5 MS. ROGERS: All those opposed? 6 (No response) 7 MS. ROGERS: Unanimous vote. Meeting is 8 adjourned at 11:44. Thank you. 9 (Bingo Advisory Committee meeting 10 adjourned at 11:44 a.m.) 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 86 1 C E R T I F I C A T E 2 STATE OF TEXAS ) 3 COUNTY OF TRAVIS ) 4 I, Aloma J. Kennedy, a Certified Shorthand 5 Reporter in and for the State of Texas, do hereby 6 certify that the above-mentioned matter occurred as 7 hereinbefore set out. 8 I FURTHER CERTIFY THAT the proceedings of 9 such were reported by me or under my supervision, later 10 reduced to typewritten form under my supervision and 11 control and that the foregoing pages are a full, true 12 and correct transcription of the original notes. 13 IN WITNESS WHEREOF, I have hereunto set my 14 hand and seal this 18th day of March 2011. 15 16 17 ________________________________ 18 Aloma J. Kennedy Certified Shorthand Reporter 19 CSR No. 494 - Expires 12/31/12 20 Firm Registration No. 276 Kennedy Reporting Service, Inc. 21 8140 North Mo-Pac Expressway Suite II-120 22 Austin, Texas 78759 23 24 25