0001 1 2 3 4 5 * * * * * * * * * * * * * * * * * * * * * * * * * * * * 6 7 BINGO ADVISORY COMMITTEE 8 MEETING 9 10 MARCH 30, 2005 11 12 * * * * * * * * * * * * * * * * * * * * * * * * * * * * 13 14 15 16 17 BE IT REMEMBERED that the BINGO ADVISORY 18 COMMITTEE meeting was held on the 30th day of March, 19 2005, from 10:00 a.m. to 1:20 p.m., before David 20 Bateman, RPR, Certified Shorthand Reporter in and for 21 the State of Texas, reported by machine shorthand, at 22 the Offices of the Texas Lottery Commission, 611 East 23 6th Street, Austin, Texas 78701, whereupon the 24 following proceedings were had: 25 0002 1 A P P E A R A N C E S 2 3 Chairman: 4 Ms. Suzanne Taylor - Corpus Christi, Texas 5 6 7 Committee Members: 8 Mr. Pete Pavlovsky - Rosenberg, Texas 9 Mr. Thomas "Tom" Weekley - McAllen, Texas 10 Mr. Larry Whittington - Dallas, Texas 11 Mr. Daniel Moore - Houston, Texas 12 Ms. Kimberly Rogers - San Antonio, Texas 13 Mr. Mario Manio - Garland, Texas 14 Mr. John "Jack" Dougherty - Austin, Texas 15 16 17 Charitable Bingo Operations Director: 18 Mr. Billy Atkins 19 20 21 22 23 24 25 0003 1 I N D E X 2 PAGE 3 Appearances.................................... 2 4 5 AGENDA ITEMS 6 1.............................................. 5 7 Meeting called to order 8 2.............................................. 5 Consideration of and possible action 9 including approval, on the minutes of the January 26, 2005 BAC meeting 10 3.............................................. 6 11 Report and possible discussion on the 79th Legislature 12 4.............................................. 18 13 Consideration of and possible discussion and/or recommendation to the Texas Lottery 14 Commission on the vacant charity representative and commercial lessor position 15 on the BAC 16 5.............................................. 26 Report and possible discussion and/or action 17 on two new draft rules regarding standard penalty guidelines and expedited administrative 18 penalty guidelines 19 6.............................................. 85 Report, possible discussion and/or action 20 relating to the work group assigned to develop recommendations relating to the BAC 21 annual report and recommendations to the Texas Lottery Commission relating to the 2005 22 BAC work plan 23 7.............................................. 101 Report and possible discussion on 4th 24 quarter 2004 and calendar year 2004 financial information and statistics 25 0004 1 I N D E X 2 PAGE 3 8.............................................. 141 4 Report and possible discussion on the quarterly report revision, implementation 5 and notification 6 9.............................................. 145 Report and possible discussion on the 7 reorganization of the Charitable Bingo Operations Division administrative rules 8 10............................................. 149 9 Report on the activities of the Charitable Bingo Operations Division 10 11............................................. 164 11 Public comment 12 12............................................. 167 Consideration of and possible action 13 on future BAC meeting dates and/or items to be considered for future meetings 14 13............................................. 175 15 Adjournment 16 17 Reporter's Certificate......................... 176 18 19 20 21 22 23 24 25 0005 1 AGENDA ITEM NO. 1 2 CHAIR TAYLOR: It's 10 o'clock, and we do 3 have a quorum. So I'd like to call the meeting to 4 order. 5 AGENDA ITEM NO. 2 6 CHAIR TAYLOR: The second item on the 7 agenda is consideration of and possible action, 8 including approval, on the minutes of the January 26th, 9 2005 Bingo Advisory Committee meeting. 10 Do I hear a motion to approve? 11 MR. DOUGHERTY: I'll make that motion. 12 MR. MANIO: I -- 13 MR. PAVLOVSKY: I'll second the motion. 14 MR. MANIO: I second the motion. 15 CHAIR TAYLOR: Any discussion? 16 All in favor? 17 MR. PAVLOVSKY: Aye. 18 MR. WEEKLEY: Aye. 19 MR. WHITTINGTON: Aye. 20 CHAIR TAYLOR: Aye. 21 MR. MOORE: Aye. 22 MS. ROGERS: Aye. 23 MR. MANIO: Aye. 24 MR. DOUGHERTY: Aye. 25 CHAIR TAYLOR: Then it's approved. 0006 1 AGENDA ITEM NO. 3 2 CHAIR TAYLOR: Item number three, report 3 and possible discussion on the 79th Legislature, Nelda 4 Trevino. 5 MS. TREVINO: Good morning, Madame Chair 6 and members. For the record, I'm Nelda Trevino, the 7 director of Governmental Affairs here at the agency. 8 And as I reported at your last meeting, I 9 appreciate having the opportunity to provide you some 10 reports and updates at your meetings related to the 11 legislative session. And consistent with our past 12 practices, we will provide you a comprehensive 13 end-of-session report at the end of the legislative 14 session. 15 There are a couple of dates of interest 16 that I'd like to bring to your attention. March 11th 17 was the deadline for filing bills, and the last day of 18 this regular session will be May 30th, 2005. 19 I mention the bill filing deadline date, 20 but please understand that amendments can certainly be 21 added to bills that have been filed and are being 22 considered by the House and the Senate. 23 Included in your meeting notebook are two 24 legislative tracking reports. The first report 25 includes bills that relate to charitable bingo, and the 0007 1 second report includes bills and resolutions related to 2 the State Lottery Act, the Charitable Raffle Act, and 3 other gaming activities. 4 There are a few bills that I would like 5 to highlight for you today that are included in the 6 first report, and those include: 7 House Bill 1138 by Representative Kino 8 Flores relating to the operation and regulation of 9 charitable bingo. The bill includes recommendations 10 from the House Licensing and Administrative Procedures 11 Interim Committee report. The bill has been voted 12 favorably as substituted from the House committee, and 13 we anticipate this bill to be scheduled on the House 14 floor for the House to consider in the near future. 15 House Bill 2715 by Representative Jose 16 Menendez related to authorizing licensed bingo 17 organizations to conduct charitable poker games. It is 18 our understanding this bill is going to be scheduled 19 for a hearing before a subcommittee of the House 20 Licensing and Administrative Procedures Committee 21 sometime next week. 22 House Bill 2797 by Representative Norma 23 Chavez would authorize federally-recognized Indian 24 tribes along the Texas/Mexico border to engage in bingo 25 without state licensing. It is our understanding this 0008 1 bill is also going to be scheduled for a hearing before 2 a subcommittee of the House Licensing and 3 Administrative Procedures Committee sometime next week. 4 The agency Sunset Bill, Senate Bill 405 5 by Senator Mike Jackson, was scheduled for hearing 6 before the Senate Government Organization Committee on 7 March the 14th, but the bill was postponed for future 8 consideration. It's our understanding the bill will be 9 considered by the Senate committee on Monday, April the 10 4th. 11 While we certainly make every effort to 12 try to keep you informed during this legislative 13 session, I want to remind you and encourage you that 14 there are several Web sites that you might want to 15 visit for current and up-to-date information. And 16 these Web sites include the following: 17 www.capitol.state.tx.us, and the House 18 Web site, which is www.house.state.tx.us and the Senate 19 Web site, which is www.senate.state.tx.us. 20 This concludes my report. And I'll be 21 happy to try to answer any questions that you might 22 have. 23 MR. MANIO: I'm looking at the first 24 report. 25 MS. TREVINO: Uh-huh. 0009 1 MR. MANIO: And there are three bills, 2 118, 1112 and 1434, that you did not pay too much 3 attention on. Can we presume that those bills are 4 probably not going to be considered in this session? 5 MS. TREVINO: House Bill 1112 by 6 Representative Kino Flores, it's our understanding from 7 the bill author's office, that House Bill 1138, which 8 is also by Representative Kino Flores, is the bill 9 that's going to be utilized as -- as a vehicle for 10 making some changes to the Bingo Enabling Act. 11 As far as House Bill 1434 by 12 Representative Peggy Hamric, that's the companion bill 13 to the agency Sunset Bill, Senate Bill 405. And it 14 appears at this point that it's the senate bill that's 15 going to be the one that moves forward. 16 MR. MANIO: Okay. What about 118? 17 MS. TREVINO: That's a bill by 18 Representative Yvonne Davis. And that does repeal 19 certain tax exemptions. And it includes the exemption 20 on the bingo equipment. There hasn't been any movement 21 on that bill. 22 It was referred to the House Ways and 23 Means Committee on January the 31st. It certainly 24 could potentially be scheduled for a hearing. We 25 haven't had any indication one way or the other. 0010 1 MR. MOORE: Hey Nelda? 2 MS. TREVINO: Yes, sir. 3 MR. MOORE: House Bill 2715, would that 4 require a constitutional amendment? Does anybody -- 5 has anybody looked into that? It seems like an 6 expansion of gambling to me. 7 MS. TREVINO: That's certainly a very 8 good question, Danny. And in discussions and questions 9 that have been asked by the bill author representative, 10 Jose Menendez, and some of the information that we've 11 provided, we have raised the issue in regards to the 12 constitutionality issue. 13 You know, we're not in a position -- the 14 agency's not in a position to say it does or does not 15 require a constitutional amendment. But we raised the 16 issue to the bill author's attention in -- you know, in 17 hopes that it's an issue that they're taking a look at. 18 MR. PAVLOVSKY: In reference to 2797, how 19 many -- how many Indian tribes are there along the 20 Texas/Mexico border? Any idea? 21 MS. TREVINO: I believe there is one 22 tribe, and that would be the Isleta tribe in El Paso, 23 commonly known as the Tigua tribe. 24 MR. PAVLOVSKY: This -- this would 25 only -- well, it wouldn't include the -- the 0011 1 reservation up around Woodville north of Houston? 2 MS. TREVINO: I believe you're talking 3 about the Alabama Coushattas -- 4 MR. PAVLOVSKY: Yes. 5 MS. TREVINO: -- in Livingston. No, 6 that's not on the Texas/Mexico border. 7 MR. PAVLOVSKY: Yeah. 8 MS. TREVINO: And the other recognized 9 tribe in Texas is the Alabama Coushattas -- excuse me 10 -- the Kikapoos, and they're located in Eagle Pass. 11 MR. PAVLOVSKY: So those -- those two 12 would have -- would be able to engage in bingo, where 13 the other tribe would not? 14 MS. TREVINO: That's my understanding. 15 MR. PAVLOVSKY: Okay. I'm missing 16 something there, but that's okay. Thank you. 17 MS. TREVINO: You bet. 18 MR. ATKINS: Pete, let me try and answer 19 part of that. Nelda referenced the three tribes 20 located in Texas: the Tigua in El Paso, the Kikapoo in 21 Eagle Pass, and the Alabama Coushatta in Livingston. 22 My understanding not being an expert in, 23 you know, Indian gaming, etcetera, just, you know, from 24 hearing talk, the Tigua in El Paso and the Alabama 25 Coushatta in Livingston are either recognized or 0012 1 authorized by Congress in a way that's different from 2 how the Kikapoo in Eagle Pass are. 3 MR. PAVLOVSKY: Okay. 4 MR. ATKINS: So there's some difference. 5 I think it may be a finite difference. But it's our 6 understanding that this bill, House Bill 2797, will 7 actually only affect the tribe in El Paso. 8 MR. PAVLOVSKY: Thank you. 9 MS. TREVINO: Any other questions? 10 MR. MANIO: Yes. In the second report, 11 House Bill No. 9, that's probably something that's very 12 close to our hearts in here, the video lottery 13 terminals. Any updates on that? Where -- where is -- 14 where is that bill at right now? 15 MS. TREVINO: That bill has been referred 16 to the House Committee on Ways and Means. It has not 17 been scheduled for a committee hearing. And, in 18 addition to authorizing video lottery, it -- this 19 bill -- it's my recollection, Mario, that it also 20 authorizes some casino sites in specific areas of the 21 state. 22 It also would create a gaming and -- 23 Gaming and Boxing Commission, where the Lottery 24 Commission would be abolished, the Racing Commission 25 would be abolished, and those entities would be 0013 1 consolidated into this Gaming and Boxing Commission 2 with additional duties -- video lottery, boxing -- also 3 included under the purview of that commission. 4 MR. MANIO: Thank you. 5 MS. TREVINO: You bet. Any other 6 questions? Thank you. 7 CHAIR TAYLOR: Thanks, Nelda. 8 Comments? Do we have your form? 9 MR. HEINLEIN: David Heinlein with Jetta 10 Services, and I represent about 34 charities. 11 My question was for the staff here, to 12 ask if you had been asked to do a -- an impact study on 13 charitable bingo on any of these gaming bills that have 14 been proposed. So it seems that they would have a very 15 negative affect to charitable bingo. 16 I'm concerned about their impact, and I 17 wonder if you're in the process of doing an impact 18 study or have you been asked to do that or if you're on 19 your own, maybe, doing that. 20 MR. ATKINS: Yes. The staff is asked to 21 provide fiscal notes on certain bills, not necessarily 22 all the bills. And we do provide a response on what 23 our estimate is to a specific bill, given the 24 particulars that it contains. 25 On some of them, it's easier than others. 0014 1 For example, on the bills, you know, we've previously 2 done estimates and provided it to the Legislative 3 Budget Board or the comptroller's office where we had 4 estimated that the authorization of video lottery 5 terminals at licensed racetracks and tribal gaming 6 locations could impact, could reduce bingo gross 7 receipts, etcetera, statewide by as much as 50 percent. 8 MR. SANDERSON: 43. 9 MR. ATKINS: 43 percent. So we supply 10 that information. If it gets used, we have no control 11 over it. 12 MR. HEINLEIN: But it is being supplied? 13 MR. ATKINS: It is being supplied. 14 MS. TREVINO: If I could -- again, this 15 is Nelda Trevino, for the record. 16 Just to add to the comment that Billy 17 made, in addition to providing fiscal note responses to 18 the Legislative Budget Board when the agency gets 19 requested, we also provide that information to the bill 20 author. 21 So, again, we respond to the Legislative 22 Budget Board. But we at the same time provide 23 information directly to the bill author. And, as Billy 24 said, whether it gets utilized or not, that -- that's 25 certainly, you know, not in our control. 0015 1 But we do like to at least share the 2 information with the bill author, also. 3 MR. PAVLOVSKY: Ma'am, I have one 4 question, one more about House Bill 175 relating to 5 charitable raffle. I thought raffles were legal in 6 Texas already. 7 MS. TREVINO: And Pete, that -- there's 8 actually a companion bill to that bill. It's Senate 9 Bill 766 by Senator Wentworth. It's on the third page 10 of that report. 11 And that seems to be the bill that's 12 actually moving. And you can see that it referenced 13 the companion bill to House Bill 175. And I have to 14 apologize. I don't remember the specifics of this 15 bill. 16 And Billy, I don't know if you do. And 17 I'll be happy -- if Billy doesn't have the answer, I'll 18 be happy to go check the specifics on that. 19 MR. ATKINS: Pete, my recollection is 20 raffles are authorized. What this does is it expands 21 the types of organizations authorized to conduct a 22 raffle. 23 MR. PAVLOVSKY: Thank you. Thank you, 24 ma'am. 25 MR. DOUGHERTY: I have a question for 0016 1 Nelda. 2 MS. TREVINO: Okay. 3 MR. DOUGHERTY: General question. Can 4 you explain why there are like 16 bills relating to 5 video lottery terminals and six of them have the exact 6 same title? 7 Now those six, what's the difference 8 between them? They say authorizing the operation of 9 video lottery games. They don't give any difference. 10 Is there some difference in all these six bills? 11 MS. TREVINO: There is. And, again, 12 I'm -- I'm going to have to preface all this by saying 13 without having the bills in front of me, it's going to 14 be real hard for me to give you some real specifics on 15 the differences. 16 But some of these bills strictly just 17 authorize video lottery terminals at racetracks and at 18 Indian tribes. 19 MR. DOUGHERTY: Okay. 20 MS. TREVINO: Some of them, in addition 21 to authorizing video lottery terminals, also authorize 22 casino type gaming. There's also a difference in some 23 of these bills regarding the split of what the State 24 would receive and what the venues would receive. And 25 then some of these, obviously, also are constitutional 0017 1 amendments that would have to go before the voters. 2 So, again, without having the bill 3 specifically in front of me -- but it's typically the 4 type of venues that are being authorized and the split 5 in the revenue. 6 MR. DOUGHERTY: Well, that makes sense. 7 I just wondered what the difference -- if you don't 8 know, then maybe later on we can -- 9 MS. TREVINO: And a lot -- 10 MR. DOUGHERTY: -- find out. 11 MS. TREVINO: -- of times, like you say, 12 the caption of the bill is going to be very similar. 13 It's going to be the details in the bill that -- that 14 are going to give you the differences. 15 MR. DOUGHERTY: Thank you. 16 CHAIR TAYLOR: Any other discussion on 17 this topic? Any other public comment on this topic? 18 Then we'll move onto the next item. 19 But first, I wanted to -- I've been 20 negligent in welcoming Tom Weekley to the BAC. We 21 appreciate you being here, and we know you're going to 22 be an important part of the BAC. 23 MR. WEEKLEY: Thank you. 24 MR. ATKINS: Also, if I could, Suzanne, 25 just real quickly stress the regrets for Commissioners 0018 1 Clowe and Cox. They had both originally planned on 2 being here for this meeting. 3 But this is the first, and they both 4 wound up having personal issues come up that they had 5 to attend today. So they do send their regrets. 6 AGENDA ITEM NO. 4 7 CHAIR TAYLOR: Okay. Item number four, 8 consideration of and public (sic) discussion and/or 9 recommendation to the Texas Lottery Commission on the 10 vacant charity representative and commercial lessor 11 position on the Bingo Advisory Committee, Kimberly. 12 MS. ROGERS: Okay. Thank you, Suzanne. 13 The work group got together a couple of times and spoke 14 with all the nominees. And Billy, I'm to say who we 15 recommend, correct? 16 MR. ATKINS: Yes. 17 MS. ROGERS: Okay. At this time, we'd 18 like to recommend for the charity representative 19 position Rosalie Lopez. She's very, very familiar with 20 bingo. She has a long background in bingo. And she 21 seems very anxious to come and help out with the work 22 groups and things of that nature. 23 At this time, we do not have someone to 24 recommend for the commercial lessor position. I would 25 like to ask that -- if we could run it again on the -- 0019 1 the Web site. I apologize to Mario. Bear with us, if 2 you can. Send out the handouts again to the commercial 3 lessors, if that's what you would go along with doing. 4 And then I also have a question in 5 reference to we -- there used to be a position on the 6 BAC board for service provider, correct? 7 MR. ATKINS: Uh-huh. 8 MS. ROGERS: And -- 9 MR. ATKINS: There still is. 10 MS. ROGERS: Okay. There still is? 11 MR. ATKINS: Correct. 12 MS. ROGERS: Is it -- how would we go 13 about -- would it be something we would need to discuss 14 to change that to have another charity representative 15 sit there? Can we do that? No? 16 MR. ATKINS: No. That's required by 17 statute. 18 MS. ROGERS: Okay. Because we had a lot 19 of individuals who applied that were charity 20 representatives that were really all very good and very 21 qualified to select. 22 MR. ATKINS: Well, there is a proposal in 23 Senate Bill 405, the agency Sunset -- agency Sunset 24 Bill, to eliminate the statutory requirement that there 25 be a SSP position on the Bingo Advisory Committee. 0020 1 But barring the elimination of that 2 language, I don't think that we have the opportunity to 3 fill that position otherwise. So it's a little bit of 4 a conundrum we have a requirement to fill the position 5 or we have a requirement for that position but we don't 6 have anybody licensed in that category. 7 MS. ROGERS: Okay. So we couldn't change 8 the name of that position? 9 MR. ATKINS: We can't change statute. 10 MS. ROGERS: Okay. So I don't know what 11 you would want to do in reference to the commercial 12 lessor position. 13 MR. ATKINS: Let me -- let me go back a 14 little bit. 15 MS. ROGERS: Okay. 16 MR. ATKINS: It would be appropriate, 17 assuming Senate Bill 405 -- 18 MS. ROGERS: Uh-huh. 19 MR. ATKINS: -- is passed and adopted, 20 then we would bring back to the advisory committee -- 21 sounds like your recommendation would be to increase 22 the number of charity representatives. And so that 23 could be done through rule. 24 In terms of continuing to advertise the 25 lessor position, we can do that. It's probably 0021 1 something, I think, that I'd like for staff to get 2 together with the work group -- 3 MS. ROGERS: Okay. 4 MR. ATKINS: -- and discuss -- 5 MS. ROGERS: Okay. 6 MR. ATKINS: -- and come up with a plan 7 to address that. 8 MS. ROGERS: Okay. That sounds good. 9 MR. ATKINS: Assuming if there are any 10 specific recommendations from any of the BAC. 11 MR. DOUGHERTY: Kimberly? 12 MS. ROGERS: Yes. 13 MR. DOUGHERTY: This is a matter of 14 clarification -- 15 MS. ROGERS: Yes. 16 MR. DOUGHERTY: -- on the Mary Needler, 17 the last one in the tab. 18 MS. ROGERS: Let me turn to that page. 19 MR. DOUGHERTY: It says organization 20 type, the general public. But yet, down in the 21 description, she is filling the position of charity 22 conductor. 23 So could you clarify that for me, please? 24 Is she for a conductor? 25 MS. ROGERS: No. She was actually for 0022 1 general public, but we called everyone because, I 2 think, a lot of times we get people who will submit 3 their nominee forms, nomination forms, or they're 4 submitted for them, and they're not specific as -- they 5 don't -- we have a charity position. 6 We might get a lessor or we might get a 7 general public that also applies. So that was just 8 a -- 9 MR. DOUGHERTY: Thank you. 10 MS. ROGERS: She is for general public, 11 though. 12 MR. DOUGHERTY: It is for general public? 13 MS. ROGERS: She was, yes. Okay. So 14 we'll put it back on the e-mail, correct, and they'll 15 get with us? Staff will get with us? 16 MR. ATKINS: If you would follow up with, 17 I think, Terry Shankle -- 18 MS. ROGERS: Okay. 19 MR. ATKINS: -- to schedule a meeting, 20 and we'll discuss what we can do to further advertise 21 on that. 22 MS. ROGERS: Okay. 23 CHAIR TAYLOR: So are you making the 24 motion at this time? 25 MS. ROGERS: Yes, ma'am. I'm making a 0023 1 motion for Rosalie Lopez to sit for the charity 2 representative position. 3 CHAIR TAYLOR: Is there a second? 4 MR. PAVLOVSKY: I'll second that. 5 MR. MOORE: I second that motion. 6 MR. PAVLOVSKY: Second. 7 CHAIR TAYLOR: All in favor of 8 recommending Rosalie Lopez to the commissioners? 9 MR. PAVLOVSKY: Aye. 10 MR. WEEKLEY: Aye. 11 MR. WHITTINGTON: Aye. 12 CHAIR TAYLOR: Aye. 13 MR. MOORE: Aye. 14 MS. ROGERS: Aye. 15 MR. MANIO: Aye. 16 MR. DOUGHERTY: Aye. 17 CHAIR TAYLOR: Okay. That was a 18 unanimous vote. 19 Are you also going to make a 20 recommendation or make a motion that we continue to 21 accept applications? Do we need to make a motion to do 22 that? 23 MS. ROGERS: For the commercial lessor 24 position? 25 CHAIR TAYLOR: For the commercial lessor. 0024 1 MS. ROGERS: We probably should, I guess. 2 MR. ATKINS: Okay. 3 CHAIR TAYLOR: Yes. 4 MR. ATKINS: It probably won't hurt, 5 yeah. 6 MS. ROGERS: Okay. I'm making a motion 7 to continue to accept applications for the commercial 8 lessor position. 9 MR. PAVLOVSKY: Second. 10 MR. MANIO: Second the motion. 11 CHAIR TAYLOR: All in favor? 12 MR. PAVLOVSKY: Aye. 13 MR. WEEKLEY: Aye. 14 MR. WHITTINGTON: Aye. 15 CHAIR TAYLOR: Aye. 16 MR. MOORE: Aye. 17 MS. ROGERS: Aye. 18 MR. MANIO: Aye. 19 MR. DOUGHERTY: Aye. 20 CHAIR TAYLOR: That is another unanimous 21 vote. 22 Any comment? Any public comment on this 23 item? Any other comment from the BAC? 24 MR. ATKINS: Just for process-wise, I 25 don't know if we will have the opportunity to get the 0025 1 information on Ms. Lopez into the commission notebook 2 for the April 6th meeting. 3 But it is on the agenda. So what we will 4 do is supply the information to the commissioners 5 subsequent to the notebook for their consideration. 6 And, again, I think as you-all know, they meet 7 individually with the nominee. 8 And so I wouldn't expect at the meeting 9 on the 6th that they would take action, but a 10 subsequent meeting. 11 CHAIR TAYLOR: Any other discussion? 12 MR. PAVLOVSKY: You're not through with 13 that item yet. That was the commercial lessor. It's 14 also for charity. 15 CHAIR TAYLOR: We -- we already had a 16 motion. You seconded it, to accept Rosalie Lopez as 17 the charity. 18 MR. PAVLOVSKY: That was commercial 19 lessor, wasn't it? 20 CHAIR TAYLOR: No. That was the vacant 21 charity representative position. 22 MR. PAVLOVSKY: Okay. 23 CHAIR TAYLOR: Okay. Any other 24 discussion? 25 MR. PAVLOVSKY: Moving right along. 0026 1 AGENDA ITEM NO. 5 2 CHAIR TAYLOR: Okay. Item number five, 3 report and possible discussion and/or action on two new 4 draft rules regarding standard penalty guidelines and 5 expedited administrative penalty guidelines, Danny 6 Moore. 7 MR. MOORE: Thanks, Suzanne. We've had 8 two meetings since our last BAC meeting, and there's 9 been some changes to this rule. Marshall's going to 10 probably talk about those. 11 The most significant, they removed the -- 12 the gross receipts, which has to do with the tiered 13 licenses which defines what we all assess the same for 14 all charities. I'm going to let Marshall probably walk 15 through some of these things. 16 At this point, I'm not sure if we have a 17 finished product. But he can expand on that, also. 18 Marshall? 19 MR. McDADE: Good morning. I'm Marshall 20 McDade, senior audit manager. What you have in your 21 packet is just a summary memo of what the work group 22 has done over the last couple of -- couple of meetings 23 and the resulting administrative penalty guidelines, 24 both the standard guideline, as well as the expedited 25 guideline. 0027 1 Just kind of as a -- as a -- some 2 background information, we sort of started this process 3 back in March of last year and with staff working 4 with -- internally to begin development of these -- of 5 these rules. 6 We've done a lot of good work. And I 7 think the product that you have in front of you really 8 kind of captures all the different ideas and concepts 9 that were brought up throughout this whole year -- 10 almost year process of developing the rules. 11 Why develop the administrative penalty 12 guidelines? First of all, it helps us provide a 13 consistent and -- process for administering or 14 assessing sanctions for violations of the Bingo 15 Enabling Act and the rules. 16 It helps us inform licensees of the 17 compliance requirements, as well as the sanctions that 18 are applicable to those violations. And in the 2002 19 Sunset report for the 2003 Legislature, one of the 20 recommendations that they provided to us was that we 21 need to have a more -- a rule related to -- relating to 22 sanctions and enforcement so that we could be more 23 consistent in our processes of assessing those 24 sanctions, along with some other rules related to the 25 audit process. 0028 1 Some of those rules include developing a 2 general audit rule, the books and records inspection 3 rule, tax review -- tax review inspection, the location 4 and verification inspection rule, as well as the 5 compliance review rule. 6 So this is the -- probably the next step 7 in that process of trying to implement some of those 8 things that Sunset recognized back in 2002. Some of 9 the benefits that we think we're going to receive from 10 this --from these rules include: 11 They're going to help us, again, provide 12 a structure that helps the commission apply 13 administrative sanctions in a fair and consistent 14 manner; gain informed licensees of the potential 15 sanctions that can be applied for violations of the act 16 and rule; encourage compliance with the act and rule; 17 deter noncompliance; maintain and increase the 18 integrity of the -- of charitable bingo; hopefully 19 increase or maximize the charitable distributions made 20 by charities that operate bingo; encourage 21 organizations to take an increased role in management 22 of bingo operations; increase the percentage of 23 licensees with no recent violations; streamline the 24 processes that the commission goes through, as far as 25 dealing with administrative actions against licensees. 0029 1 And so those -- those are the -- the 2 major benefits that we're going to receive from -- with 3 these rules. So, as Danny mentioned, in the memo, it 4 kind of gives you some information about the issues 5 discussed at our last two work group meetings. 6 One of those things we dealt with were 7 concerns about bullet number two, which dealt with 8 gross receipts as a mitigating factor or something that 9 we would consider. There was concern that, because 10 organizations are different and a better -- may not be 11 a fair way to look at organizations, as far as 12 assessing sanctions why we just -- but just looking at 13 gross receipts when you have to deal with all the 14 costs, prizes, and those things that are -- they also 15 go on. 16 We talked about the look-back period, as 17 far as looking at the history of the organization, 18 previous violations in the 48-month period. And we 19 really left the 48-month period there because that's 20 the same sort of time frame that we utilize for our 21 record retention. And in other rules, we use the same 22 48-month time frame. 23 What -- what we've tried to include in 24 the violation charts, probably more so the standard 25 guideline, are the violations that typically occur 0030 1 frequently, those violations that are significant. 2 They may not occur as often, but they're major items. 3 Selling unapproved bingo products is 4 something that people need to be aware of, but it 5 doesn't necessarily happen 300 times a year or 200 6 times a year. So -- as well as we've included 7 violations that result from the latest legislation, 8 House Bill 2519. 9 There are new things that we need to make 10 sure everyone is aware of and know what potential 11 sanctions are for noncompliance with those issues, as 12 well. So you have things like unit accounting, unit -- 13 unit manager, worker registry, inventory, and gift 14 certificates are some of those issues that are part of 15 House Bill 2519 that have guidelines here in the chart. 16 One area that was removed was pull-tab 17 dispensers, any violation linked to pull-tab 18 dispensers, because there are very -- very few, maybe 19 two or three in the state. Those were removed, because 20 we haven't had any issues related to pull-tab 21 dispensers. So those were removed. 22 One -- another issue, bullet number four, 23 that we've dealt with quite extensively is the size of 24 the penalty amounts. One -- one concern that we -- 25 that comes to mind is, is it -- is it too much or is it 0031 1 too little and kind of have to make a balance there 2 between what does -- what does it take to help deter 3 noncompliance but also we're not intending to put 4 organizations out of business with our penalties. 5 So we kind of have to find a good balance 6 there. And I think the penalty amounts that we come up 7 with provide -- provide -- provide that balance. 8 Within the chart on the standard penalty, 9 we've tried to address some concerns related to -- also 10 to the size of the penalties. Initially, it just said 11 what the maximum penalty was. For instance, in 12 category one, it said a thousand dollars. 13 So to provide some flexibility or show 14 that we were going to provide some flexibility, we 15 added that zero warning to that amount so that, if 16 there are mitigating circumstances, it gives us that 17 framework to work within. And that zero warning to 18 whatever the maximum amount was added in all the 19 categories. 20 That really kind of deals with the 21 standard guidelines, as far as the memo is concerned. 22 I don't -- do you guys want me to go through the 23 details of this memo or just kind of leave it open for 24 questions or... 25 MR. MOORE: I would say finish -- I would 0032 1 finish up on it. 2 MR. McDADE: Okay. 3 MR. MOORE: Then we can go back and see 4 if anybody has questions. 5 MR. McDADE: At the back of this section, 6 you'll find what we're calling the expedited 7 administrative penalty guideline. This is a guideline 8 that's designed to help, I guess, streamline the 9 administrative action process for certain types of 10 violations. 11 There are typically violations that are 12 observable by both an auditor and a organization 13 representative. We're typically out there doing what 14 we call an assistance and assessment inspection, and 15 there are things that we just see. 16 And it's there or it's not there and does 17 not really require a lot of detailed review of records 18 and research and those -- those kind of things. So 19 that's sort of what we -- what this rule deals with, 20 trying to help streamline that process of taking 21 administrative actions in these cases. 22 One issue that came up related to 23 paragraph E, which talks about the 20 days receipt, 24 within 20 days of receipt of the NAVSA, that Notice and 25 Violation of Settlement Agreement, that the 0033 1 organization has to return that within 20 days. 2 There was concern that that was too short 3 of a period. Unfortunately, that's the time frame that 4 we have in our statute. So we're not able to move that 5 time frame around. 6 A major change to this particular rule 7 deals with the penalty amounts. We've tied specific 8 penalty amounts to each violation. Rather than 9 creating categories like we did in the standard rule, 10 there are specific penalty amounts for first, second, 11 third and succeeding occurrences within that four-year 12 time frame. 13 And the penalty amounts are typically -- 14 are all less than what would happen if it -- in the 15 standard chart. So the violation you see on the 16 expedited chart are also in the standard chart. But to 17 encourage quick resolution, we've tried to reduce that 18 penalty amount. And this is -- the penalty amounts are 19 the same, regardless of the size of the organization. 20 Sort of related to both guidelines, some 21 of the issues, a couple of the issues related to 22 imposing penalties relating to violations that are 23 related to each other and making sure that a 24 organization doesn't get just -- we use the word 25 "hammered" with a lot of penalties just because 0034 1 create -- one violation automatically results in a 2 second violation. 3 For instance, an organization has 4 unnecessary and unreasonable expenses. Well, in some 5 instances, that causes a violation related to not 6 meeting the 35-percent minimum distribution 7 requirement. So we're trying to make sure that those 8 things don't happen. 9 And also, we talked about how we're going 10 to communicate the guidelines to everyone out there, 11 all the organizations. 12 And that's -- that's pretty much the 13 memo, so... 14 MR. MOORE: Thank you, Marshall. 15 Marshall, we talked the other day. Didn't -- didn't 16 you and Phil go back and try to apply the penalty 17 guidelines to last year's offenses or the most -- the 18 ones that occur the most frequently, something about a 19 dollar amount that that would have been, the fines 20 would have amounted to? 21 MR. McDADE: On a real rough basis. 22 MR. MOORE: Right. 23 MR. McDADE: I looked at the agreed 24 orders that were signed by the commissioners last year. 25 First, I looked at it from a perspective of this -- 0035 1 this is what the administrative penalty that was 2 assessed in those signed agreed orders and compared 3 that to if I applied the maximum penalty for the first 4 offense with no -- I couldn't consider any mitigating 5 circumstances. 6 Just sort of looking at it, we assessed 7 penalties of $882.26. That's what's in the agreed 8 orders that were signed last year, last calendar year. 9 And assessed with the proposed guidelines, that penalty 10 amount would have been about 98 hundred dollars, so... 11 MR. ATKINS: Are you saying it would have 12 been 98 hundred dollars applying the maximum amount 13 without any -- 14 MR. McDADE: Right. 15 MR. ATKINS: -- mitigating circumstances? 16 MR. McDADE: Correct. 17 MR. ATKINS: Okay. 18 MR. MOORE: We had -- we had -- 19 MR. McDADE: We also looked at the top 20 violations where there were at least 10 instances of a 21 violation -- 22 MR. MOORE: Right. 23 MR. McDADE: -- during the year, just 24 without regard to what the organization did. We 25 assessed the penalty for all those violations, what the 0036 1 potential penalty amount could have been. And it was 2 approximately 260, 270 thousand dollars in 3 administrative penalties. 4 But, again, that's not considering any 5 mitigating or -- circumstance. That's just looking at 6 first offense and -- so there is some impact. But 7 over -- on a -- on, I guess, a broad scale, it's not 8 going to be a -- I don't think it's going to be a 9 significant impact, as far as dramatically reducing 10 charitable contributions. 11 MR. MOORE: Right. 12 MR. McDADE: As far as the 13 organizations -- 14 MR. MOORE: Steve suggested that he was 15 offering three different audits that had been done in 16 the past and possibly asking you to try to apply what 17 we have here now that you put together. And I don't -- 18 where did that go? 19 I -- I dropped off the phone call, by the 20 way. And I didn't -- I thought it was a good idea, 21 just to kind of get a feel for what was going to happen 22 to a charity in this audit situation here. 23 I'm not privy to audits. I don't know 24 how many penalties a charity has on an audit, but it's 25 -- I would think that there's probably -- if anybody 0037 1 wants to speak up that's been through an audit here at 2 the table, I'd like to know what kind of penalties or 3 infractions are occurring. 4 You know, I'm concerned that this 5 monetary amount could be a lot of money to charities. 6 So I'm just speaking from really lack of experience in 7 that area, so... 8 MS. ROGERS: They do snowball. You have 9 one, you know, in that aspect. 10 CHAIR TAYLOR: I would like to ask you 11 one question. The 984 dollars that was -- or the 12 $882.26 with the agreed order, is that paid out of the 13 bingo account or is that paid out of the general 14 account, the 882 dollars? 15 MR. McDADE: It was required to be paid 16 with non-bingo funds. 17 CHAIR TAYLOR: Okay. And when you were 18 saying that the first -- this would be a first offense. 19 And if we did it under the administrative penalties 20 without the circumstances, it would be nine thousand 21 dollars that would come from the general account, also? 22 MR. McDADE: That's one of the things 23 that we're going to have to flush out right now, I 24 guess at some point in time, is: Where can the 25 penalties come from? 0038 1 CHAIR TAYLOR: When a charity pays or 2 sends in their quarterly report late or -- the charity, 3 and they are sent a penalty for sending it in late or 4 having it postmarked a day late, where does that come 5 from? 6 MR. McDADE: I'm going -- since I don't 7 deal with the prize fee and penalty, I'm going to have 8 to refer to -- 9 MS. SHANKLE: It comes out of the bingo 10 bank account. 11 MR. McDADE: Terry says it comes from the 12 bingo bank account. 13 CHAIR TAYLOR: Okay. It confuses me 14 that, if that's a penalty that's one of these things 15 for filing your report late, why would it come from the 16 bingo account and, yet, other violations, you know, 17 that happen during bingo sessions or during the audit 18 would come out of the general account? 19 It confuses me as to why those would come 20 from two different places. 21 MR. McDADE: Actually, historically, from 22 the audit side, we've always -- we've also requested 23 that -- try to use non-bingo funds to pay for 24 administrative -- any administrative penalties that 25 were assessed. 0039 1 MR. ATKINS: Let me try and give some 2 back -- some additional background to what Marshall was 3 saying. This is the result of evolution of an 4 unfortunate process. 5 And what the -- what this agency's 6 practice has been in the past, what previous agencies 7 practices have been in the past is, when violations 8 occur, the practice has been to revoke or deny the 9 license. 10 So taking a little more enlightened 11 approach, one of the things that we've done over the 12 years with statutory authority, but without an 13 administrative rule, is look to applying administrative 14 penalties. 15 And so one of the things that we've heard 16 back from some licensees is that but if I pay you with 17 bingo money, then I can't distribute that money for 18 charitable purposes. 19 So that's part of where the development 20 came up over the years. Okay. Then you can pay the 21 administrative penalty from your general fund. 22 CHAIR TAYLOR: You can pay it or you must 23 pay it? 24 MR. ATKINS: The orders that we've 25 entered into so far have stipulated that they have to 0040 1 come from the general fund, I believe. 2 MR. McDADE: Or just non-bingo sources. 3 CHAIR TAYLOR: Okay. Okay. I mean, I 4 just -- I wondered that, as I was reading through here, 5 because I'm aware of charities that have sent them 6 late. And I always wonder why that's coming out of 7 their bingo funds with -- as a -- as a legitimate 8 expense when a NAVSA check's not legitimate. 9 So -- the other thing I wanted to ask you 10 that -- as you were talking about some of the benefits 11 that this could provide, you said it would maximize 12 charitable distribution. 13 MR. McDADE: I think that's really more 14 of a longer-term goal. If we're not having -- if we're 15 encouraging -- not -- encouraging compliance with our 16 rules, we're going to have less violations that deal 17 with dollars and unnecessary and -- organizations are 18 going to have more -- be more vigilant in their 19 responsibilities relating to managing their bingo and 20 managing the use of their resources and use of the 21 funds. 22 And that's where the opportunity for 23 maximizing bingo proceeds really comes from is, if 24 you're -- if you're actually managing your processes 25 to -- to prevent abuse, waste, then you should have 0041 1 more money for your charitable purposes. That's the -- 2 that's the intuitive approach. 3 CHAIR TAYLOR: Okay. Are there any other 4 questions from the committee? Comments from the 5 committee, or do you want to hold on to those until you 6 hear all of the other comments? 7 MR. DOUGHERTY: Well, I don't know when 8 that's going to occur. But I do have -- just for my 9 own clarification, you have -- most of these penalties 10 deal with documented audits and paperwork and all that 11 sort of thing. 12 You have a number of penalties relating 13 to what goes on in a bingo hall. I'm just curious who 14 monitors or polices those. Are they self-reported 15 violations? Say they run 30 minutes over their time, 16 those little things y'all are talking about, that 17 aren't written down. 18 MR. McDADE: Typically, those -- we -- 19 our audit staff members are located all across the 20 state. And we do make visits. 21 MR. DOUGHERTY: That's how they find out? 22 All right. 23 MR. McDADE: To bingo halls and 24 conductors while they're playing. So a lot of those 25 instances are noted -- noticed there. That's where the 0042 1 violations come from. 2 MR. DOUGHERTY: Well then, Marshall, are 3 they informed of this arrival or is this a shock 4 treatment to the bingo hall? 5 MR. McDADE: Most -- 6 MR. DOUGHERTY: Unannounced, you know 7 what I'm... 8 MR. McDADE: Most of our inspections and 9 assignments are noticed. We send out an engagement or 10 we -- 11 MR. DOUGHERTY: Okay. 12 MR. McDADE: -- call somebody ahead of 13 time. As far as our assessment and assistance 14 inspections, we show up without notice. It's a spot 15 check. 16 MS. ROGERS: Spot check. 17 MR. DOUGHERTY: That would seem to be 18 more effective, if you just walked in. 19 MR. MANIO: Undercover. 20 MR. ATKINS: Well, and also -- 21 MS. ROGERS: They announce themselves. 22 They don't -- 23 CHAIR TAYLOR: When they have a bingo and 24 they don't yell "Bingo," you know it's somebody 25 checking you out. 0043 1 MR. ATKINS: Let me -- let me make sure 2 you understand. If -- if, you know, we have complaints 3 or any other reason to suspect that violations of the 4 act or rule are occurring, you know, we may appear at a 5 hall without notice. 6 So I don't want you or anyone else on the 7 committee to walk away with some kind of assumption 8 that a representative of the Lottery Commission, you 9 know, is always going to announce before they show up 10 at a location. 11 MS. ROGERS: They always perform regular 12 spot checks. 13 MR. DOUGHERTY: Well, that's pretty much 14 what I thought. I thought you may have some snitches 15 in there that might be watching these operators. And I 16 didn't know. 17 MR. ATKINS: Oh, sure. I mean, the -- 18 the overwhelming majority of the complaints that -- 19 that we receive come from players. 20 MR. DOUGHERTY: Somebody just report -- 21 didn't like it, so they report them? 22 MR. ATKINS: Right. Now I don't recall 23 us ever having a licensee calling us up and saying "We 24 played bingo last night without a license, just wanted 25 to make sure you knew." 0044 1 But we have had some situations where we 2 have had, you know, licensees call up and, in 3 discussions with an examiner, it's occurred that, you 4 know, they -- they have conducted bingo occasionally 5 without a license for whatever reason. 6 We have some, you know, organizations 7 that say, you know, "We did it, sorry, don't know -- 8 you know, it was a mistake, won't do it again." 9 You know, we have other organizations that all of a 10 sudden clam up. And, you know, that requires us to go 11 in and do a lot of investigating and ask a lot of 12 questions, etcetera. 13 MR. DOUGHERTY: Well, your example would 14 be pretty serious where you're operating without a 15 license. I was thinking more in terms of those subtle 16 things that are listed in the rules, little things like 17 running past the 30-minute. 18 You know, there's a lot of those small 19 penalties and those are the ones I was more interested 20 in. 21 MR. ATKINS: Well, we get complaints 22 covering just, you know, anything you can imagine, 23 including a lot of stuff we have no jurisdiction over. 24 MR. DOUGHERTY: That's fine. Thank you. 25 MS. ROGERS: I have just a curious 0045 1 question. All the money collected from the penalties, 2 is it just -- does it go to the state fund, also? 3 MR. McDADE: Yes. 4 MR. ATKINS: Yes. 5 CHAIR TAYLOR: One other question, back 6 to the -- the agreed order of 882 and the first offense 7 of 98 hundred. Is there a way that you could, like, 8 look at that? 9 I mean, back to the agreed order, I mean 10 with mitigating circumstances, and give us a more 11 realistic amount of what these penalties would be 12 instead of $9,800 that, you know, with mitigating 13 circumstances it would be closer to -- I mean, would it 14 be closer to this 882 or is this going to be -- you 15 know, with mitigating circumstances, it would have only 16 been five thousand dollars? 17 Is there a -- is there a way to do that, 18 or you can't go back and do -- you know, look through 19 the circumstances from the agreed order? 20 MR. McDADE: Now those -- I'll probably 21 have to go back and get the actual work papers. 22 CHAIR TAYLOR: I would like to know what 23 we're real -- what is really the difference going to 24 be. Is this going to be -- 25 MR. McDADE: This -- 0046 1 CHAIR TAYLOR: -- a twofold difference or 2 a -- 3 MR. McDADE: For instance -- 4 CHAIR TAYLOR: -- five-fold difference? 5 MR. McDADE: In this example, this is 6 14 -- a total of 14 agreed orders and -- 7 CHAIR TAYLOR: Okay. 8 MR. McDADE: On that -- 9 MR. ATKINS: So that 98 hundred dollars 10 would apply to 14 -- 11 MR. McDADE: Right, about 14. 12 MR. ATKINS: So it's not one we're going 13 to -- 14 CHAIR TAYLOR: So -- but before, it was 15 882 for all 14? 16 MR. ATKINS: Yeah. 17 MR. McDADE: Uh-huh. 18 CHAIR TAYLOR: And now it would have 19 been -- I just would like to see a comparison of -- of 20 what are we -- what are we, like, shaking our heads at 21 or saying we -- we agree or we don't agree to. 22 I mean, it scares me because I belong to 23 several really small organizations. And if you hit 24 them with a bill like this, they couldn't pay it and 25 they would be out of business. We -- they're -- 0047 1 they're very poor organizations, you know. 2 I mean, getting to bingo was a huge jump 3 for them, you know. And to get anything, I mean, 4 because of my stupidity or somebody else's stupidity -- 5 you know, for them to be hit with something like this 6 would put them out of business. 7 I mean, literally, it would take every 8 dime that they had and more. So that's why it -- it 9 worries me so much, because I have such poor 10 organizations that I deal with. 11 MR. ATKINS: Let me respond to that. I'm 12 not -- I'm not insensitive to your concerns. But I'm 13 not going to ask Marshall right now, like he says, to 14 go back and pull every work paper on 14 different 15 audits, because that's a -- 16 CHAIR TAYLOR: Can we do just one or two? 17 MR. ATKINS: That would be -- well, we'll 18 -- you know, we -- we've heard your concern. We'll -- 19 we'll consider that and we'll look at it, you know, as 20 we can. 21 But, again, I don't know just pulling at 22 random if we, you know, accidentally pull the two worst 23 audits. You know, I don't know how to give you an 24 even -- even, you know, picture of that. We'll look at 25 it and see what we can do. 0048 1 But, again, I'm a little reluctant to, 2 you know, have staff go back and review all that 3 paperwork. 4 MR. WHITTINGTON: Could I ask a question? 5 If y'all are conducting an audit and a charity -- you 6 go over one -- one month and they -- they do something 7 wrong and they get a penalty, of course, it's going to 8 continue because they're probably going to be doing the 9 same thing over and over and over. 10 Do they get a penalty each time you find 11 this particular thing? And they don't know. They're 12 still operating for six and seven months and then, all 13 of a sudden, you know, you-all come and do an audit and 14 they've been doing this from month one clean up to 15 month seven. 16 MR. McDADE: I guess, historically, we 17 have typically done that, as far as -- 18 MR. WHITTINGTON: Will you -- will you do 19 it now? 20 MR. McDADE: And I don't believe that we 21 will be in the future, unless -- I'm going to preface 22 that by saying that, unless there's some -- something, 23 some aggravating event that says we need to assess a 24 higher penalty. And that -- it goes -- goes to intent. 25 MR. WHITTINGTON: It seems like 0049 1 everything written here -- it's a lot of stuff. And 2 believe me, it will take not only Billy Atkins and any 3 of the staff to get past all this in a regular audit, 4 because it's -- it's -- it's a lot. 5 If somebody's looking for something, they 6 can find something in all these different rules and 7 everything in some kind of way. There's going to be 8 something there they can find that this little ole mom 9 and pop don't know nothing about. 10 MR. ATKINS: Well, my response to that, 11 Larry, would be: We don't need this rule to do that. 12 That's -- that's -- that's not a correct statement you 13 made. We can do that under the statute. 14 And we can -- first thing out of the -- 15 out of the, you know, bat, my understanding is we can 16 start assessing an administrative penalty of a thousand 17 dollars every time, every day. So, you know, the fact 18 that the purpose of this rule is to nitpick at things 19 and to adversely affect organizations, I disagree with. 20 It's not the fact. It's been stated 21 repeatedly for about a year. The purpose of it is so 22 organizations will have a better idea. They'll know 23 for a fact that, you know, they shouldn't expect in 24 this situation a thousand-dollar fine. 25 They know that they should, you know, 0050 1 conceivably expect a fine between this certain range, 2 depending on a bunch of other factors. 3 MR. WHITTINGTON: Well, that's a 4 clarification, Billy. That's exactly what I was 5 asking. 6 MR. ATKINS: Well, you know, my 7 frustration, Larry, is: Like I say, I think it's been 8 said for about a year. 9 MR. WHITTINGTON: Well, it might have 10 been said continuous. A lot of people still don't 11 understand it, Billy. 12 MR. ATKINS: Well -- 13 MS. ROGERS: So I have a question. So 14 during an audit, the lottery two years ago could have 15 fined a charity is what you're saying. Right? 16 MR. ATKINS: Uh-huh. 17 MS. ROGERS: But they didn't. And this 18 all came about from the Sunset, which didn't pass. But 19 this is played down so we -- so charities will have a 20 better idea, if you do this, this is what's going to 21 happen. 22 MR. ATKINS: This is what could happen. 23 MS. ROGERS: This is what could happen. 24 MR. ATKINS: You know, there -- 25 MS. ROGERS: Well, the -- 0051 1 MR. ATKINS: I think -- I think there are 2 some provisions in here, you know, where it could range 3 from a warning letter to a -- 4 MS. ROGERS: Right. 5 MR. ATKINS: -- 50 -- 6 MS. ROGERS: But that could have happened 7 three years ago, right? 8 MR. ATKINS: Could have happened 10 years 9 ago. But I think in the past the most -- the most 10 common action was to move to, again, deny or revoke the 11 license. 12 MS. ROGERS: Right, if they didn't 13 correct the problem. 14 MR. ATKINS: Well, in some cases, even if 15 they did. In some cases, if you made a violation, you 16 know -- 17 MS. ROGERS: Yeah. 18 MR. ATKINS: We go to hearing. 19 MS. ROGERS: Okay. 20 CHAIR TAYLOR: Phil? 21 MR. SANDERSON: I'd like to offer a 22 comment -- Phil Sanderson, assistant director of the 23 Bingo Division. And I -- and as Billy had said before, 24 we've had the authority to do the penalties in the 25 past. 0052 1 And even previous to two years ago when 2 we started the administrative rule, there was 3 activities that the actual organization was being 4 revoked or denied their application. So that has a 5 larger financial impact on them than a -- than 6 administrative penalty. 7 Secondly, as far as the concerns of how 8 much administrative penalty could have been collected 9 last year based on the figures that Marshall looked at 10 for violations at the highest level of the penalty with 11 no mitigating factors taken into consideration, was 12 somewhere in the $200,000 range, I believe. 13 Last year, we had organizations pay a 14 penalty and interest of 75 thousand dollars just for 15 not filing on time. You know, they've got 20 days from 16 the end of the quarter to send in a report and they 17 couldn't even file on time and paid 75 thousand dollars 18 in penalties. 19 So first off, this administrative rule is 20 not to put anybody out of business. It's not to try to 21 collect money for the State. It's trying to put 22 organizations on notice that there are violations. We 23 provide training programs all throughout the year 24 across the state on how to keep your records, what 25 needs to be done, how to conduct your games, what, you 0053 1 know, is allowed and what is not allowed. 2 There's ample opportunity for 3 organizations to be in compliance. And alls we're 4 doing is trying to use this rule, in and of itself, to 5 let everybody know what the fines are, what the 6 penalties are, what they could be, and to take care of 7 their business and try to operate it as a business and 8 within the compliance of the law. 9 MR. PAVLOVSKY: Madame Chair, I'd like to 10 hear from the public members that were on this 11 committee. 12 CHAIR TAYLOR: Marshall, did you have 13 anything else? 14 MR. McDADE: No, ma'am. 15 CHAIR TAYLOR: Did anybody have any other 16 questions for Marshall before we let him go? Thanks, 17 Marshall. 18 Any public comment on the subject? 19 MR. FENOGLIO: Good morning. For the 20 record, my name -- good morning. For the record, my 21 name is Steven Fenoglio, and I filed an appearance 22 slip. 23 I also had a chance to visit with Mr. 24 Bresnen this morning on the way over because he 25 actually didn't receive the last rule until about six 0054 1 o'clock this morning. He's not here. And, as y'all 2 know, he's a full-time lobbyist and he's at the 3 Capitol. 4 I think that his client, the Bingo 5 Interest Group, will share the same concerns I'm going 6 to make. But I'm not here representing Mr. Bresnen or 7 the Bingo Interest Group. But he asked me to share 8 those concerns. 9 I guess I'm the guy that's participated 10 the most in the draft of this rule. And it first 11 surfaced in October of '04 with members of the 12 industry. 13 The first time I reviewed the draft of 14 the rule was in -- I believe it was early in November 15 of '04. So it's not been a year that this has been 16 discussed, although the administrative penalty 17 recommendation that's driving this from the Sunset 18 Advisory Commission has been around for about three 19 years. 20 I have filed exhaustive comments, and 21 I've shared those comments with the commission staff on 22 several occasions, including a -- about a four-hour 23 meeting with Phil Sanderson in -- on December 2nd of 24 last year after this initial draft was considered by 25 the BAC in late November of '04. 0055 1 And I gave him all of my written 2 comments. And the first comment that I -- we discussed 3 at length was, and it has to do with language which 4 really hasn't changed, in subparagraph J to history of 5 previous violations, which includes the number of 6 previous violations. 7 And my written comment and my discussion 8 with Mr. Sanderson, at length, was: So if a charity 9 had an audit in '02 with 12 violations, what is the 10 result if an audit in '05 shows these -- there are the 11 same violations? 12 I've been asking that question, Danny. 13 And you heard me ask it in our telephone conference 14 meeting two weeks ago with commission staff. And I 15 have yet to get an answer. And the first time I got a 16 hint of an answer was today. 17 And -- and, by the way, as y'all know, I 18 represent a number of charitable and business 19 organizations. I told them on Monday, since I had not 20 received any of these comments, any of the draft rule 21 until noon yesterday, that I didn't think it would be 22 advisable for them to come down because I didn't know 23 what the language was going to be. 24 So the comment earlier that this has been 25 kicked around a lot is partially true, since late 0056 1 November of '04, and that there have been members of 2 the industry who have been actively involved in this 3 trying to get answers, and we've not been laying behind 4 the log but we've not been given any meaningful 5 answers. 6 And I don't think you've got the 7 meaningful answers you need today. And -- and -- and 8 I -- and I appreciate the work that Phil Sanderson and 9 Marshall McDade have done. And two weeks ago, we had 10 another four-hour conversation where I raised these 11 same issues. 12 And I -- and at that point, they said: 13 Well, specifically, what are you talking about, a 14 charity that has had some violations and then there are 15 repeat violations? 16 And it came to me in that meeting, well, 17 why don't we just look at some previous audits, ones 18 that are recent in '04 and '05, one of which or two of 19 which have already been closed, and say, okay, if those 20 violations were occurring today with the new rule, what 21 would be the penalty result under the -- for the first 22 time, for the second, and for the third? 23 And the staff's response was: Well, 24 that's a good idea. And, oh, by the way, we think 25 you -- you know, you're -- you're well within your 0057 1 concern that one of the effects of this rule, when 2 fully implemented, is the industry is going to pay some 3 penalties and they may be significant. 4 And it would be, in the words of one of 5 the commission staff members, disingenuous, 6 quote/unquote, if we left you with any impression other 7 than that. 8 So I delivered over three audits. I was 9 careful. I -- I chose two that had already been 10 closed, because I didn't want to -- someone to suggest 11 that, well, you know, you're trying to get a bite at 12 the apple about a pending matter. 13 These two audits have already been 14 closed. About four o'clock yesterday afternoon, the 15 staff responded: We're not going to give you the 16 answer. It would -- it would take too much effort on 17 our part to go back and look and apply the rule. 18 Well, my result of that is or my analysis 19 of that is: I am now concerned, because I want to know 20 the car that I'm buying. I want to be able to test 21 ride it. I want to know what its performance standards 22 are. 23 What my granddaddy would say is "Never 24 buy a pig in a poke," a pig in a sack that you can't 25 even see if it's healthy or not. And I would suggest 0058 1 that that's where we are today. We don't know. 2 The range from 10 times what they had 3 done on 20-something settled cases to -- I guess my -- 4 you know, and I'm -- I'm math challenged. But going 5 from 800 and some-odd dollars to a potential, what I 6 heard Marshall say, of 250 or 275 thousand dollars, is 7 a huge range. 8 He said 260 thousand, I believe. And 9 that concerns me. I filed some additional language, 10 which I've never received a response to. When we 11 talked about the -- what we've called the cascading 12 effect of this language -- and I filed it on the 23rd. 13 I still don't know what the staff's 14 position is on that language. And what I mean by the 15 cascading language, if a charity in an audit is 16 determined to have used some bingo money for an 17 unapproved purpose, maybe it was 16 dollars, the 18 auditor then will recalculate that. 19 And let's say the 16 dollars was written 20 on the -- on the bingo account to a payee that really 21 should have been written by the general fund, and it 22 happens with some degree of repetitiveness, or you can 23 think of a number of examples if you keep books or 24 supervise the books of charities. They -- they messed 25 up. 0059 1 And it's not a big error. It was -- only 2 happened once or twice. Well, that then results in 3 three violations. First is the 16-dollar violation of 4 using a -- paying an expense that should have been paid 5 on the general fund, or maybe it was -- should have 6 been paid on a different charity's account. 7 If there are four or five charities 8 conducting at the hall and they get a vendor bill and 9 it should have been paid by charity A, but instead 10 charity B paid it. Okay. So we've now got that 11 violation. 12 We also have two separate violations, and 13 that's what I mean by the cascading effect. In the 14 separate -- the additional violations are that you now 15 have to redo your quarterly report because that was 16 wrong and you have a re-deposit. 17 So you've got three violations as opposed 18 to one. And what I heard staff saying repeatedly in 19 the discussion was: That's not our intent. Well, 20 good. Why don't we put that in the rule, if that's not 21 your intent to have a cascading effect violation. 22 Now it may be that they don't like my 23 language. I don't know. I don't have a -- a response 24 to decide whether that's good language or not. But it 25 concerns me, because if -- in -- under that scenario 0060 1 with the penalty matrix rule, you could take a 2 300-dollar violation and turn it into a 900-dollar 3 violation just by the cascading affect or, if it's up 4 to a thousand dollars, then it could be up to a 5 three-thousand-dollar violation. 6 And so the -- and I'll be happy to share 7 the specific language with you, if you want it. 8 The other concern that I had is -- within 9 this is a four-year time frame and, for example, if 10 this rule were in effect on July 1 of '05 and a charity 11 audited -- and as y'all probably know, the commission 12 is systematically going through and auditing all 13 licensees. 14 And I've heard reports they intend to 15 audit up to 500 charities every year. So it's going to 16 be likely that one charity that's in the -- that draws 17 the bean, so to speak, to be audited in August of '05 18 is going to be audited again, even if it's a relatively 19 clean audit, within that four-year period. 20 Well, if they had the same type of error 21 in '05, then it's a repeat violation. And my 22 suggestion to you is -- we know for a fact that there 23 are a number of charitable organizations that use 24 volunteers to do all of their business. They're not 25 paid. 0061 1 I -- I think it is extremely likely -- 2 and some of these volunteers come in and out of the 3 organization. They're active for, let's say, six 4 months out of the year then they -- they are no longer 5 active or they may be active in one year, they're not 6 active in the next. 7 You're going to have a lot of innocent 8 paperwork violations that -- that will repeat 9 themselves. I have personally reviewed over 300 audits 10 on behalf of charities since I've been doing this work 11 representing charitable and business organizations and 12 charity. 13 I can only think of two that there 14 full-blown audits where there were no violations 15 whatsoever, period, end of sentence, none. Every one 16 else has got at least a -- an innocent paperwork. 17 And I hear the staff saying that it's not 18 our intent to punish. But in the past, certainly with 19 the statute that gives the commission the authority to 20 assess a penalty, they've not done so. Their record 21 speaks for itself. They've not done so. 22 Under the new penalty matrix, is that 23 what they're going to do? I'm fearful. 24 Another concern I had, and I heard 25 Marshall for the first time answer, in part, this 0062 1 20-day response under the expedited penalty. And he 2 said, I believe -- he's in the room, so he can defend 3 himself if I misquoted him -- that the statute 4 precludes us from doing anything other than that. 5 Well, that's not true. Under Section 6 2001.604, which is the administrative penalty 7 provision, under subchapter M, it does say the 8 commission is required to give notice. And if it's -- 9 and if -- within that 20-day period, the licensee, 10 after receiving the notice, can either accept or make a 11 written request for a hearing, accept it and pay it or 12 make a written request for a hearing. 13 Well, so that doesn't preclude the -- the 14 licensee from saying, you know, we're not able to 15 decide here. And let me give you the fact scenario 16 that I raised with the staff. 17 The audit result comes back in late 18 November. Staff prepares a letter that said -- and -- 19 and they decide we want to process this under the 20 administrative penalty expedited provisions, send a 21 letter to the agency on December 8. 22 You got 20 days. How many charities are 23 going to be able to get their act together in that 24 20-day period? How many won't be? I can tell you a 25 bunch. 0063 1 I regularly consult with charitable 2 organizations, and most charities do not have board 3 meetings in December. Most charities are going to look 4 at something like this and say we would like to have -- 5 we think we know -- the primary operator thinks they 6 know what to do. 7 But they'd like to have board input if 8 they're going to settle a case and pay the 9 administrative penalty, not just because of the fact 10 that they're going to pay a penalty, but also, under 11 the second offense, if that happens again, it's 12 expedited. 13 They're not going to be able to do it. 14 And they certainly would not be able to do it, almost 15 every exception, if they chose we want to have a board 16 meeting. You can't organize the volunteers of those 17 nonprofit organizations that quickly. 18 The -- the way the rule is drafted today, 19 then it goes away. Well, that's not what the statute 20 says. The statute just says if, once you're given 21 that, you got 20 days to do one or the other, period, 22 end of sentence. 23 It doesn't say, oh, by the way, any offer 24 that's made under this expedited penalty automatically 25 goes away. But that's what you're left with under the 0064 1 rule. And I would suggest that that's not a good 2 result for the Bingo Division staff and for their 3 efficiencies or for the charities. 4 And while we were discussing this issue, 5 I said, you know, if there's a problem with the 6 language that's in the statute, if y'all would let us 7 know about it, we've got several vehicles in the 8 legislature today that, if we need more time to do 9 that, we would be happy to work with our legislative 10 friends in the Texas Legislature and see about those 11 changes. 12 And that offer still stands. But, again, 13 I don't think that's the real roadblock to that. 14 One final thing about -- and I've not had 15 a chance -- back in November, I gave Mr. Sanderson my 16 written comments exhaustive. We talked about them. 17 And then I did the same thing with Marshall McDade. 18 I have not had a chance -- since I only 19 got it at noon, I actually was not able to review it 20 until about eight o'clock last night or nine o'clock 21 last night when I got home. 22 So I'm sure I'll have other comments, but 23 these are what I've -- I've tried to hit the 24 highlights. 25 The final issue is an issue that Chairman 0065 1 Taylor raised about what do you use the bingo -- what 2 funds do you use, if you're going to pay a penalty. 3 In the previous circulation back in 4 November, the staff had included their draft settlement 5 letter, which is not in this version. And it made it 6 very clear that you will -- that a licensee can only 7 pay with non-bingo funds. 8 And I think that's unfair, especially in 9 light of what the statute says, Section 2001.458, which 10 says an item of expense may not be incurred or paid in 11 connection with the conduct of bingo except an expense 12 that is reasonable or necessary to conduct bingo 13 including in their 11 enumerated items. 14 So, clearly, this -- the issue arises 15 over the conduct of bingo. And if you can't use your 16 bingo funds, then it suggests that it's not a 17 reasonable and necessary expense. Well, if it's not a 18 reasonable and necessary expense, the penalty, why -- 19 why is the charity asked to pay it, anyhow? 20 I mean, it either is a reasonable and 21 necessary expense associated with the conduct of bingo, 22 someone made an error. Maybe it was a harmless error. 23 Maybe it was an intentional error. Maybe it's one of 24 those issues where the charity was -- or representative 25 of the charity was putting money in a pocket that the 0066 1 money didn't belong. 2 Well, I would suggest to you that the 3 commission staff, if that -- if they're convinced of 4 that, maybe they ought to talk about something other 5 than administrative penalties, monetary penalties. 6 But having said that, that's not what the 7 statute says. The statute says an item of expense 8 that's related to bingo has to be a reasonable and 9 necessary expense before you can pay it. 10 Well, if this isn't a reasonable and 11 necessary expense, why is the staff trying to impose 12 it? It seems to me it can't be both ways. And it 13 seems to me it's unnecessarily punitive, if it's a 14 bookkeeping, harmless error. 15 But the staff says, you know, this is the 16 second time this has happened. The first time we gave 17 you a warning letter. The second time, you know, we 18 want you -- we want to get your attention. Okay. You 19 got our attention. 20 And you got to use non-bingo monies to 21 pay for this when, by the staff's own admission, they 22 rarely allowed and historically allowed -- and I don't 23 think they're going to change that. 24 If you don't, for whatever reason, send 25 in your quarterly report with the prize fees on time, 0067 1 you can still pay those monies with bingo funds. Why 2 couldn't you pay other penalties with bingo funds? 3 So I think that was all I had at this 4 point. And a -- and, again, I -- and I would like 5 to -- and I will take the opportunity at a break or 6 whatever to talk to Marshall, because I still can't -- 7 I'm still not sure what -- how he calculated the 260 8 thousand. 9 I understand how he calculated the 882.26 10 to get to a penalty guideline, potentially, of 98 11 hundred. But I'm still not sure about that one. 12 And I'll be happy to respond to any 13 questions. 14 MR. ATKINS: Steve, could I -- just to 15 make sure that I got the concerns you pointed out, can 16 I go over them real quick and do that in reverse order? 17 I'm sorry. I think I might have missed one at the 18 first. 19 The first was only allowing non-bingo 20 funds for the payment of penalty? 21 MR. FENOGLIO: I think this -- the 22 settlement language that I've seen that I think y'all 23 are sticking with says yes, non-bingo funds only. 24 MR. ATKINS: Okay. And then you 25 referenced a -- I believe you were on the expedited 0068 1 rule where you referenced -- I believe it's in 2 subsection E, the 20-day period, to respond. 3 MR. FENOGLIO: Yes, it is -- 4 MR. ATKINS: Okay. 5 MR. FENOGLIO: -- under the latest 6 version 402.707, subparagraph E. 7 MR. ATKINS: Okay. You referenced the 8 four-year time period which, I believe, is in both 9 rules. 10 MR. FENOGLIO: It is under 407(G) and 11 40 -- I'm sorry -- 707(G) and 706(H). 12 MR. ATKINS: Great. And then you talked 13 about the -- I guess either the cascading effect or the 14 piling effect. Is that where you said you submitted 15 some language? 16 MR. FENOGLIO: Yes. 17 MR. ATKINS: And that was specific to 18 paragraph J in 706? 19 MR. FENOGLIO: I think it's 706(H). If 20 you'll give me just a moment... 21 MR. McDADE: H. 22 MR. ATKINS: H? 23 MR. FENOGLIO: Marshall -- Marshall says 24 H. I have my comment somewhere here in this -- yes, it 25 is H. 0069 1 MR. ATKINS: Was there anything else 2 prior to the discussion of the cascading effect? 3 MR. FENOGLIO: The process. 4 MR. ATKINS: The process? 5 MR. FENOGLIO: The process being -- you 6 had said we had been talking about this for over a 7 year. Technically, it's not a year. 8 MR. ATKINS: Okay. 9 MR. FENOGLIO: But, also, the fact that 10 I've made comments. I've asked for responses and I 11 still don't have an answer. 12 MR. ATKINS: Okay. Let me -- let me 13 address that. Let me refer you back to the April 29th, 14 2004 BAC meeting, the transcript. 15 MR. FENOGLIO: Okay. I don't have that 16 in front of me. 17 MR. ATKINS: I -- I know. But if you'll 18 just go back and look at it, there's a discussion there 19 that we're going to be working on the administrative 20 penalty rule. And it was at that time that the work 21 group was appointed with Suzanne, Mario, and Danny, I 22 guess. 23 The other item that I wanted to try and 24 address and make sure I have clear in my mind is that 25 there's a clear understanding of the intent behind the 0070 1 expedited penalty rule, because I might have 2 misunderstood you, what you said. 3 But you were referencing suppose some 4 audit's done and several months subsequent to that 5 there's an offer for an expedited? 6 MR. FENOGLIO: Yes. 7 MR. ATKINS: Okay. My understanding of 8 the purpose behind the expedited penalty rule -- and 9 I'll invite staff to correct me if I'm wrong -- is 10 that, in the case of the expedited penalty rule, that 11 would be utilized when the auditor's actually in the 12 hall. 13 It would consist, essentially, of a form. 14 And the auditor's there. And what the auditor noticed 15 is that there wasn't an operator on duty sign posted. 16 And the purpose -- my understanding behind the 17 expedited penalty rule is the auditor and the operator 18 would both look and they would agree that an operator 19 on duty sign, you know, isn't posted. 20 The form would be completed, given to the 21 operator and say, you know, if you just want to resolve 22 this this way, you know, sign this. And if applicable, 23 send in a check within 20 days. 24 MR. FENOGLIO: I've never heard -- I've 25 never heard that as an explanation. 0071 1 MR. ATKINS: Okay. Because I'm -- the 2 staff is shaking their head, so that is -- that's the 3 intent. The purpose of the expedited is for those 4 items that could be resolved then. 5 And the purpose of the 20 days was, if 6 necessary, to give that individual the opportunity to 7 go back and talk to whoever if we, you know, want to 8 move forward. 9 MR. FENOGLIO: Sure. Okay. That's 10 helpful to know. It's the first time I've heard it. I 11 still have the same concerns. 12 MR. ATKINS: With the 20-day period? 13 MR. FENOGLIO: Yeah, I do. 14 MR. ATKINS: Okay. 15 MS. ROGERS: I had a question on the 16 cascading that you talked about. 17 MR. FENOGLIO: Yes. 18 MS. ROGERS: It seems like we have a hard 19 time, which I totally understand. You go in and review 20 an audit and they find one violation which, in turn, 21 makes you have another violation and another violation 22 on top. 23 Is that not something that can be done? 24 Almost like in law, you have double jeopardy where you 25 only are penalized for the first one and the cascading 0072 1 or subsequent violations you're not penalized for. 2 You've -- you've -- 3 MR. FENOGLIO: Yes. 4 MS. ROGERS: -- come forward with that 5 and asked them? 6 MR. FENOGLIO: Yes. 7 MS. ROGERS: Asked the staff? And that's 8 not something that can -- I don't know if that's a good 9 thing or something we want to happen or... 10 MR. FENOGLIO: I think it's a good thing. 11 MS. ROGERS: I -- I do, too. 12 MR. FENOGLIO: And -- and -- 13 MS. ROGERS: I'm just -- I'm -- I don't 14 know the legal ramifications and parts of it, so... 15 MR. ATKINS: And I'm going to -- I'm 16 going to look to staff -- 17 MS. ROGERS: Okay. 18 MR. ATKINS: -- to respond to that. 19 MR. SANDERSON: I'll put my glasses on so 20 I can see. It -- we -- we did receive your language on 21 the cascading effect, when one violation leads to 22 another and leads to another. 23 The way it was worded -- and I don't know 24 if it's just -- happens to be the way it happened to be 25 worded -- would basically say that there would not be 0073 1 any subsequent violations noted for a violation that 2 occurred or, you know, that was related to the previous 3 violation. 4 MS. ROGERS: Okay. 5 MR. SANDERSON: In the memo that Marshall 6 and Danny had drafted, there is a statement in there 7 that -- under general to both guidelines, under the 8 second page of the memo, that there were concerns 9 raised regarding the potential for citing and applying 10 a separate monetary penalty amount for violations that 11 are caused by another violation. 12 And this issue will need to be addressed 13 on a case-by-case basis. And it is not the intent of 14 the Bingo Division to pile up monetary penalty amounts. 15 We felt like that the language was -- that Steve had 16 provided was maybe a little bit too stringent or 17 strict, that there may be certain cases where funds are 18 not used properly. 19 And there may be a reason that we need to 20 have a separate penalty for something else that 21 occurred. If they intentionally made a distribution 22 and you can prove intent, mitigating circumstances, 23 that was not a charitable activity, and they did it to 24 ensure that they met the 35-percent distribution 25 requirement, then, you know, there are areas that we 0074 1 may want to, you know, go after both of those cases 2 because they -- they were intentionally, you know, 3 trying to circumvent the 35-percent requirement. 4 I can't think of a case. But there 5 again, like I said, it's -- reviewing it is on a 6 case-by-case basis. And it's not our intent to stack 7 up violations. When you make one mistake, it affects 8 the recordkeeping. It affects something else. It -- 9 you know, the reports, on down the line. 10 So I just wanted to clarify that, that it 11 is not our intent to pile those up. 12 MR. ATKINS: Will someone be following up 13 with Steve on his language? 14 MR. SANDERSON: Yes. We'll get back to 15 him this afternoon, probably. 16 MR. FENOGLIO: Great. Well, I hear, on 17 one hand, it's not our intent. But we -- and we're 18 going -- but we're going to keep the language that says 19 each and every violation is a separate violation. 20 And I guess from a lawyer practicing law, 21 that's the best of both worlds for me to argue later. 22 And it may be in my best interest to shut up on this 23 issue. 24 But it seems to me there's -- there's 25 enough intellectual talent here that we could work out 0075 1 the language. I was not trying to tie commission's 2 decision that, if there's a really bad actor out there 3 who they believe is knowingly and intentionally and 4 with -- in a hundred-percent wrong mind, they're taking 5 from charity A and putting it in John Jones -- and I 6 don't know of a John Jones. 7 So I'm not trying to suggest anyone. But 8 they're putting that money, that bingo money in John 9 Jones's pocket and John Jones has nothing to do with 10 anything having to do with bingo, just, you know, John 11 Jones is there and we're going to give you a thousand 12 dollars or 10 thousand or a hundred thousand. 13 And we're doing it because John Jones 14 told us to do it. And so I'm not suggesting that. But 15 what I am suggesting is, you've got a divergence of 16 what you say in the -- what the language clearly says 17 and -- but the intent. 18 And I think that, in the long run, is not 19 the -- not the best result in -- in rulemaking 20 language. So -- and so -- and I understand that it is 21 my understanding that staff intends to take this to the 22 commission no matter how the vote is at the BAC. 23 But I don't think the rule is ready. And 24 I am speaking with at least some of the clients that 25 I've had the chance to talk with either last night or 0076 1 early this morning. They don't want to see it up for a 2 vote for publication for public comment now. 3 I find it a little surprising that, since 4 this issue has been around, I think, since July or 5 maybe it was April of '02 when the Sunset process 6 started, that we're -- still don't have a good handle 7 on, if this rule was in effect, what are the charities 8 going to pay the first time for, let's say, an average 9 of six violations. 10 In most of the audits that I see, they 11 usually have about six violations. And one of them all 12 -- and by the way, I may have misspoken earlier when I 13 said, if you've got a violation where you paid money 14 and it led to a cascading effect. It's actually the 15 35-percent distribution calculation is one. 16 And then the quarterly report is the -- 17 is the third. So I apologize for that. But the point 18 is that we've been talking about this quite a bit. 19 The first time I ever saw language was in 20 November of '04, specific language. It's all right to 21 talk about concepts of the administrative penalty rule, 22 but the more important issue is -- and as y'all know in 23 your business, the devil's in the details. 24 And the first time we had a chance to 25 look at the specific language and then see, okay, well, 0077 1 so what would this cost an average charity that has six 2 violations the first time, the second time, and the 3 third time. 4 I don't think you know that today. And I 5 would suggest to you it's not good policy to go forward 6 with a rule unless and until you know those answers. 7 Thank you. And I'll look forward to 8 working with Phil Sanderson some more. 9 MS. ROGERS: I have a quick question for 10 you on the -- 11 MR. FENOGLIO: Yes, ma'am. 12 MS. ROGERS: This one. You said that no 13 matter how we vote on this, it will go to the 14 commissioners. Is that correct? 15 MR. FENOGLIO: That's my understanding, 16 yes. 17 MR. ATKINS: That is our intent. 18 MS. ROGERS: Will they be aware of our 19 vote? 20 MR. ATKINS: Sure. Yeah. I -- I would 21 send that through the Chair's report. She would 22 include that. 23 And, you know, the staff's happy to 24 mention it, also. And it's ultimately the commission's 25 decision. 0078 1 MS. ROGERS: Right. 2 MR. ATKINS: The staff's recommendation 3 is going to be that they vote to publish it for public 4 comment. And it's also going to be the staff's intent 5 that a public hearing be held. Well, I don't know if 6 there's a date yet. I assume it would be sometime 7 later in April. 8 MS. JOSEPH: April 28th is the date. 9 MR. ATKINS: April 28th. 10 MR. FENOGLIO: And one of the problems 11 with that, Billy, just so you know -- and I notice 12 Nelda's no longer here. And I know why, because she's 13 over at the Capitol is -- and I'm hurriedly checking 14 the 28th. 15 It would be helpful if I get into April 16 and not February. That with the session going on, 17 yeah, the -- that's a Thursday. There -- as you know, 18 there are a whole host of issues over at the 19 Legislature that affect charitable bingo, including a 20 number of the issues that y'all talked about that 21 you're aware of now. 22 And, as you know from having worked on -- 23 at the legislature, that there are always the stuff 24 that comes out of the blue, if you will, that you don't 25 know about. And that's in crisis mode at the 0079 1 legislature, the last week of April through the -- from 2 my perspective, the third week of May, the last week of 3 May under the new rules since there's not a lot of new 4 stuff that comes flying out of the -- 5 MR. ATKINS: New stuff being the 6 operative word. 7 MR. FENOGLIO: Yes. Yeah. There's -- 8 there's -- there's stuff. 9 MR. ATKINS: Yeah. 10 MR. FENOGLIO: And so, you know, one of 11 the concerns is that, you know, if you do have it, then 12 it's in -- it's in crisis mode at the Capitol and there 13 may not be a lot of activity here because, to the 14 extent that charitable organizations have a focus, it's 15 going to be trying to get House Bill 1138 passed, which 16 is Kino Flores's bill that's kind of a follow-up on 17 House Bill 2519. 18 There's the Lottery Sunset Bill, which is 19 -- kind of been pushed back a little bit. And there 20 are, obviously, all these VLT issues and other bingo 21 proposals. 22 So that's another concern that I would 23 prefer that we -- if we have to have this discussion, 24 that we have it after the session as opposed to in 25 the -- I mean, it is a pitch battle by then. 0080 1 Thank you for your listening. And if 2 there are no other questions, I'm going to go sit down 3 and shut up. Thank you, Madame. 4 CHAIR TAYLOR: Thank you. Is there any 5 other comment by the committee? David, I'm sorry. I 6 didn't see you. Come on up. 7 MR. HEINLEIN: David Heinlein, just two 8 -- two comments. The first would be early -- in an 9 early meeting we had on this, we talked about some 10 language. I think Mr. Fenoglio was thinking about it 11 and the staff's attorney. 12 And that was difficult to define. But it 13 was, I think, still something that ought to be pursued. 14 And that would be some language in here that -- I've 15 heard the words mentioned today by Billy and both 16 Marshall McDade, and the word was "intent." 17 And somehow we had thought about some 18 sort of language in the preface of this is that the 19 intention, of course, is to be able to have a system 20 whereby some strong language says to the charitable 21 bingo conductor that there are rules that you have to 22 follow. 23 And if you don't, there -- you know, we 24 currently have a law that says that you can be fined a 25 thousand dollars. And when I first talk with a 0081 1 charity, I -- I go right to that rule. And I say, you 2 know, if you do something wrong, it's a thousand-dollar 3 fine. 4 I don't give them any option that there's 5 any latitude. And now we're being provided some 6 guidelines whereby you might be able to fairly 7 administer some provision to reduce that amount. 8 That's a good intent. 9 But along with the intention is the 10 intention to provide some guidelines to tell someone 11 who is knowingly continuing, historically, to commit 12 something that is a violation that is a serious 13 violation. You want to prevent that. 14 And you're trying to provide something 15 like that. And I've not read the whole thing that's 16 been presented here this morning, because I just looked 17 at it. And you may have already done this. But -- you 18 have? Well, good then. So we did get that? 19 That's what we were trying to say. A 20 clerical mistake that's just an obvious oversight and 21 something that you've corrected -- although, there's 22 one that does recur that continues to be a concern of 23 mine, because I see it all the time, and no matter how 24 much I preach to these charities be careful when you 25 conclude -- they'll be working late at night, maybe 10 0082 1 or 11 o'clock at night and they're counting the money 2 and closing the bag and filling out the deposit slip 3 and they pick up the wrong deposit slip and the money 4 goes to the right bank but gets deposited to the wrong 5 account. 6 Now that's a single error. But as I 7 pointed out in the previous BAC meeting, when you 8 cascade that and it doesn't get discovered until I get 9 the bank statement and if it was done early in the 10 month and I don't get it until the middle of the 11 following month, that is a long per-day penalty that 12 would be imposed. 13 And as I calculate it, that one deposit 14 error could be a penalty of 60 thousand dollars based 15 on the current rule of a thousand-dollars-per-day 16 penalty. So I would hope that somehow this, as we 17 continue to move forward on this and have public 18 comments, that we'll work on some language that 19 provides, first of all, the intent that clerical errors 20 have a different flavor than a knowing violation and 21 then a provision where a single deposit error like that 22 would be a single violation and not a 30-day, 45-day 23 continuing violation. 24 Because as soon as it's noticed, we 25 transfer the funds and get them back to the right 0083 1 account which, of course, produces another violation. 2 Thank you. 3 MR. ATKINS: David, I just ask you to 4 go -- you have a draft copy of the rule? 5 MR. HEINLEIN: Yes, sir. 6 MR. ATKINS: Look at 706(J)5B. 7 MR. HEINLEIN: (J)5B. 8 MR. MOORE: Does anybody else have any 9 comments? At this point, I got to be honest. I'm not 10 real comfortable. I still think there's some things 11 that are unanswered here. 12 And -- and I think we're moving in the 13 right direction, Marshall, really. There's just, you 14 know, a couple things, obviously, Steve brought up that 15 you still need to work on. 16 And that being said, I -- I would make a 17 motion that the BAC does not endorse the presentation 18 of the draft administration guidelines to the 19 commissioners. 20 MR. MANIO: I second that motion. 21 MR. MOORE: All in favor? 22 MR. PAVLOVSKY: Aye. 23 MR. WEEKLEY: Aye. 24 MR. WHITTINGTON: Aye. 25 CHAIR TAYLOR: Aye. 0084 1 MR. MOORE: Aye. 2 MS. ROGERS: Aye. 3 MR. MANIO: Aye. 4 MR. DOUGHERTY: Aye. 5 CHAIR TAYLOR: Are there any opposed? 6 That's a unanimous vote then. 7 Danny, could you repeat that motion one 8 more time? 9 MR. MOORE: Yeah. I'm not sure if I did 10 it right. 11 CHAIR TAYLOR: BAC not endorse the 12 present -- 13 MR. MOORE: That the BAC does not endorse 14 the presentation of the draft administration guidelines 15 rule to the commissioners. 16 MR. ATKINS: Well, let me -- 17 MR. MOORE: And I don't know if that's 18 the correct way to do that. 19 MR. ATKINS: Yeah. Let me -- let me 20 offer this. 21 MR. MOORE: Okay. 22 MR. ATKINS: The BAC would recommend that 23 the commission not vote to publish in the Texas 24 Register for public comment the draft administrative -- 25 they're going to the commission. 0085 1 MR. MOORE: No. 2 MR. ATKINS: I mean, so -- but so I -- I 3 think the will of the committee is that the commission 4 not vote to publish them for public comment. 5 MR. MOORE: Okay. 6 CHAIR TAYLOR: Do you amend your motion? 7 MR. MOORE: So my motion is that -- that 8 we ask the commissioners not to publish the draft 9 administrative guidelines in the Texas Register. 10 MS. ROGERS: I second the motion. 11 MR. MOORE: All in favor? 12 MR. PAVLOVSKY: Aye. 13 MR. WEEKLEY: Aye. 14 MR. WHITTINGTON: Aye. 15 CHAIR TAYLOR: Aye. 16 MR. MOORE: Aye. 17 MS. ROGERS: Aye. 18 MR. MANIO: Aye. 19 MR. DOUGHERTY: Aye. 20 MR. MOORE: Thank you, Billy. 21 CHAIR TAYLOR: Once again, that was a 22 unanimous vote. 23 Does our court reporter need a break yet? 24 Okay. He's good to go. 25 AGENDA ITEM NO. 6 0086 1 CHAIR TAYLOR: Okay. The next item on 2 our agenda is report, possible discussion and/or action 3 relating to the work group assigned to develop 4 recommendations relating to the Bingo Advisory 5 Committee annual report and recommendations to the 6 Texas Lottery Commission relating to the 2005 Bingo 7 Advisory Committee work plan. 8 This was not in your notebook. I gave 9 you-all a copy, since I did it last night, tried to put 10 together the discussion in some kind of a format. I 11 have a couple of copies here if anybody wants one. 12 I think that it pretty well represents 13 what our discussion was. Kim and Mario -- I mean, Kim, 14 Pete. You were there, Mario. I think it represents 15 what we discussed. I think it needs facts and figures, 16 though, which I don't have in there and I didn't put in 17 there. 18 But I thought that, perhaps, the full 19 committee -- I -- I feel that we need to meet again on 20 this particular thing and get our facts and figures in 21 there so that it's not just our opinion that, well, we 22 think they're -- they've improved because of -- we need 23 to say because of this much increase in this and this 24 much decrease in that, you know, and since bingo sales 25 have increased, you know, two million dollars. 0087 1 And that's, you know, a fact, not just 2 our opinion. So I'd like to actually get some -- some 3 -- some numbers in there, which I didn't have when we 4 had that meeting and didn't have time to put in here. 5 But I'd like to know if there's any 6 additional things that the full committee would like to 7 add in here that there's -- it's not in your book, 8 Mario. It was -- 9 MS. ROGERS: There are a lot of figures 10 in here. 11 CHAIR TAYLOR: Yeah. There -- there are 12 a lot in the book. 13 MS. ROGERS: Yeah. 14 CHAIR TAYLOR: So I thought maybe we 15 could put some of the figures into the report. But 16 there might be some other things some of the other 17 members, since we're here -- 18 MS. ROGERS: Right. 19 CHAIR TAYLOR: -- would like to add to 20 this -- to this report before we try and -- 21 MR. ATKINS: Could I just get a 22 clarification? Your -- you want the work group to have 23 another meeting to go over the facts and figures 24 specific to this? And at this meeting, you're asking 25 if other BAC members have additional items for the work 0088 1 group to address? 2 CHAIR TAYLOR: Absolutely. 3 MR. ATKINS: Thank you. 4 CHAIR TAYLOR: Absolutely, since we're 5 here. So I guess we'll just go down this one item at a 6 time. And if you have anything to add, we can add it 7 in and then we can work on incorporating that along 8 with any facts and figures we need for that when we 9 have our next work group meeting. 10 So gross receipts, we felt that the gross 11 receipts had been improved because of the increase in 12 instant bingo sales due to the event tickets. We -- 13 that's the only thing we put in there. 14 Is there something else the rest of you 15 feel needs to -- to go in there? That's the only 16 improvement we saw. Any other input? No? 17 We felt additional improvement could be 18 achieved by changing games to include progressive 19 bingo, linked or satellite bingo, instant bingo 20 cardminders. 21 And the group also felt that allowing 22 instant bingo sales only in halls conducting bingo 23 games would be best for bingo. 24 MR. WHITTINGTON: Yes. 25 CHAIR TAYLOR: Anything else that the 0089 1 rest of you that weren't on the work group would like 2 to add? 3 MR. ATKINS: Well, I was just curious as 4 to why the work group felt that allowing instant bingo 5 sales only in halls would be beneficial. How much 6 revenue is it that they're estimating that it's taking 7 away from halls now? 8 MS. ROGERS: I don't think we got that 9 estimated -- but my -- 10 MR. ATKINS: Is there an assumption that 11 it's taking -- 12 CHAIR TAYLOR: No. No. There was -- 13 there's a -- we felt that if -- I -- tell me if -- if I 14 don't get your feelings right here. I think during the 15 discussion it was felt that, if we had -- if -- if 16 instant bingo tickets were sold in bars -- 17 MR. ATKINS: Got it. 18 CHAIR TAYLOR: -- that that's going to 19 hurt the game of bingo in the bingo halls. 20 MR. ATKINS: I understand. 21 MS. ROGERS: Because, in order to play 22 instant bingo, they have to come to the bingo hall. 23 MR. ATKINS: I understand. 24 MS. ROGERS: So... 25 CHAIR TAYLOR: And right now a lot of our 0090 1 bingo games are being financed by instant bingo. 2 MR. ATKINS: Okay. My confusion was 3 there is a provision in administrative rule that will 4 allow an organization without an annual license to get 5 a temporary license, and they can only sell pull-tabs. 6 They don't have to conduct regular bingo. 7 I don't know that we've had any 8 organizations that we're aware of actually do that. 9 But the assumption was, say, if you have like a church 10 carnival that's going to be, you know, having a 11 six-hour carnival one Saturday afternoon, they may not 12 want to have a full-blown bingo game. But they could 13 set up a booth and sell pull-tabs 14 CHAIR TAYLOR: Yeah. I don't think 15 that's a concern to us, just the bars -- 16 MR. ATKINS: You're talking about -- 17 CHAIR TAYLOR: -- and taverns and... 18 MR. ATKINS: Okay. 19 CHAIR TAYLOR: Which that's why we -- we 20 kind of touched on this. 21 MR. ATKINS: Okay. 22 CHAIR TAYLOR: And that's why we -- it's 23 not complete. 24 MR. ATKINS: Thank you. 25 MS. ROGERS: We talked about a regular, 0091 1 everyday instance. 2 MR. ATKINS: Got it. 3 CHAIR TAYLOR: Setting them up in the 4 mall, you know. 5 MR. ATKINS: Yeah. Yeah. 6 CHAIR TAYLOR: Okay. The charitable 7 distributions, the work group said that we felt 8 charitable distributions were down caused by the 9 decrease in organizations operating bingo games, the 10 increased cost of instant bingo, increased payouts and 11 event tickets compared to instant tickets, and lower 12 attendance. 13 Were there any additional items that the 14 rest of y'all would like us to -- to look at to 15 possibly add to this? 16 And some of these assumptions, when we 17 actually look at the figures, could be wrong. I mean, 18 we could be changing some of these. One of the things 19 I noted was the cost of supplies. We thought that they 20 had gone up. 21 And when I looked at some of the numbers, 22 it looked like they hadn't. So that could be an 23 assumption that we make that's incorrect. 24 MR. WHITTINGTON: Nonsmoking ban. 25 CHAIR TAYLOR: But we're going to check 0092 1 out all of the assumptions. 2 We felt, once again, the recommendations 3 for improvement included increasing attendance, which 4 could be achieved by making bingo games more attractive 5 to the savvy customer by offering larger prizes through 6 progressive games, multihall bingo or linked satellite 7 bingo, and instant bingo cardminders. 8 Nothing more? Okay. 9 Expenses, we felt they were increased by 10 the increased cost of goods sold, payroll and increased 11 payouts which, if you look back, because of the fact 12 that we are making more payouts with our event tabs 13 than we did with the instant tabs, the instant tabs, 14 most of those -- I think they had about a 65-percent 15 payout and we're up closer to 75-percent payout with 16 our event tabs and more. 17 Recommendations for improvement include 18 costing the -- cutting the cost for licensing fees for 19 nonprofit organizations. We had done a little bit of 20 research and found that many, many of the states have 21 much lower licensing fees, like a hundred and 200 22 dollars a year compared to our 25 hundred a year. 23 Some of that stuff I think you sent me, 24 Mario. 25 MR. MANIO: Uh-huh. 0093 1 CHAIR TAYLOR: So cutting the cost for 2 the licensing fees, implementing unit accounting in 3 halls, and deleting sales tax on bingo goods for all 4 organizations conducting bingo games since, I guess, 5 the 501(C)6 -- and I don't know which other ones -- 6 still are paying sales tax. I know the C3s aren't, but 7 some of them are still paying sales tax. 8 Any other? That's it? 9 Attendance has continued to decrease, in 10 part, due to static bingo games offered, additional 11 gaming competition, i.e., the lottery, Internet gaming, 12 and gaming in other states, and from lack of 13 advertising for bingo in Texas. 14 Recommendations for improvement included 15 progressive bingo, linked bingo, increasing playing 16 times, and adding an appropriation for advertising to 17 the bingo budget. 18 Anything else? 19 There were no other areas requested by 20 the commissioners, so that ended that at that time. 21 MR. ATKINS: And I would -- I would just 22 think it would be appropriate, given the process that 23 you've laid out here for additional work by the work 24 group to do, when you make your report to the 25 commission, I think that that would be an opportune 0094 1 time to ask them if there are -- 2 CHAIR TAYLOR: Any additional items? 3 MR. ATKINS: Yeah. 4 CHAIR TAYLOR: I will do that. So if you 5 -- if the rest of you think of something that we've 6 forgotten or neglected to put in here, you know, get in 7 touch with any one of us. It's Kim, Mario, Pete and 8 myself. We'd be glad to add that, because we want it 9 to be as full and complete as we can. 10 MR. MANIO: Is there a deadline as to 11 when this would be submitted to the commissioners? 12 CHAIR TAYLOR: The next commission 13 meeting is... 14 MR. ATKINS: The 6th, April 6th, next 15 week. 16 CHAIR TAYLOR: Okay. It will be next 17 week. So next week I will ask them if there's any 18 additional items they would like us to include into the 19 report. Then we'd need to go ahead and have another 20 committee meeting -- I don't have a calendar with me. 21 I forgot it. 22 But the week after April 6th, maybe April 23 13th, is that a Thursday? 24 MR. MOORE: That's a Wednesday. 25 CHAIR TAYLOR: Wednesday? Okay. Well, 0095 1 April 13th if -- if that works with everybody and the 2 staff, then maybe perhaps we can go ahead and get our 3 more information together and have our next meeting on 4 April 13th and have this ready -- I mean, we'll send it 5 back out. 6 It will be -- I don't know if it needs to 7 go in the notebooks or if we could send this out for 8 comment by other committee members through e-mail. 9 MR. ATKINS: For work group members or 10 the entire committee? 11 CHAIR TAYLOR: We could send it -- can we 12 send it to the entire committee to see if anybody has 13 anything they would like us to add, or is that 14 circumventing? 15 MR. ATKINS: If there are items that they 16 would like you to add, I think it would be fine for 17 them to submit it to you. But to send the report out 18 to them and ask for them to comment back to you may be 19 circumventing the -- the Open Records Act, the Open 20 Meetings Act. 21 CHAIR TAYLOR: But for any additional 22 items, it would be okay to send it to them so that they 23 could read the draft and see if they would like us to 24 add anything more to that? 25 MR. ATKINS: More to this? 0096 1 CHAIR TAYLOR: More -- yeah, if there's 2 something that they come across. 3 MR. ATKINS: I don't -- I don't think 4 there's -- I don't think there's a problem. I keep 5 looking at the attorney, who's not responding. 6 So I'm assuming that means yes. If 7 the -- if the -- if individual members want to submit 8 items for the work group to consider, that would be 9 fine. But I don't think the work group can send out 10 drafts, copies to the entire BAC -- 11 CHAIR TAYLOR: Okay. 12 MR. ATKINS: -- soliciting comments on 13 it. 14 CHAIR TAYLOR: So if you come up with 15 anything you would like us to add, send it to us. This 16 is what we've got so far. 17 MR. WHITTINGTON: What's the difference 18 in adding a comment then and bringing it up later if we 19 have a comment later? 20 MR. ATKINS: Because all you're 21 submitting to them is you're submitting to the work 22 group: Would you please consider -- 23 MR. PAVLOVSKY: The smoking ban. 24 MR. ATKINS: -- this time -- a smoking 25 ban. 0097 1 MR. PAVLOVSKY: Yeah. 2 MR. ATKINS: You're not being involved in 3 a deliberation. You're not conducting business. 4 MR. WHITTINGTON: Oh, okay. 5 MR. ATKINS: You just sent something to 6 them. That work group will focus on it. And then that 7 work group will subsequently bring it back to the full 8 committee for consideration in front of all these 9 folks. 10 MR. WHITTINGTON: But we can't see what 11 they're discussing at that particular time in the work 12 group? 13 CHAIR TAYLOR: Unless you add something, 14 this is what we will be discussing. This is the draft 15 that we -- this is it. Unless something gets added by 16 the other members, this is what we're working off of. 17 MS. ROGERS: Suzanne, I have a question 18 for you. You said we'll -- we'll go back and put 19 figures to these to make sure. 20 Do we want to now or is it something we 21 wait and do after next week to write up these different 22 categories and take them and work on those or were you 23 going to do all that or... 24 CHAIR TAYLOR: No, you were. 25 MS. ROGERS: Oh, okay. 0098 1 CHAIR TAYLOR: No. I think at the next 2 meeting. 3 MS. ROGERS: Okay. 4 CHAIR TAYLOR: Let's just figure -- 5 MS. ROGERS: We'll kind of dole it out. 6 CHAIR TAYLOR: Because we need to also 7 see what the commission, if they ask for anything -- 8 MS. ROGERS: If they have anything. 9 CHAIR TAYLOR: Okay. 10 MR. PAVLOVSKY: Suzanne, what time are we 11 going to talk on the 13th? 12 MS. ROGERS: Yes. 13 MR. PAVLOVSKY: 10 a.m. 14 CHAIR TAYLOR: 10? That's fine. 15 MS. ROGERS: 10 or one? 16 CHAIR TAYLOR: 10 o'clock. 17 MS. ROGERS: Okay. 18 CHAIR TAYLOR: A lot of these figures, I 19 think we have. They just need to be -- 20 MS. ROGERS: Yeah. 21 CHAIR TAYLOR: -- incorporated into this 22 so that we're backing up our impressions of bingo with 23 facts and figures. 24 MS. ROGERS: Got you. 25 CHAIR TAYLOR: Also at this last work 0099 1 group meeting, we put together a draft work plan for 2 the next year. There were nine items on the work plan. 3 I don't know if this has to go through 4 legal. I don't know if we can just discuss it right 5 now and -- and adopt it, if there's no other changes to 6 it or additions. 7 MR. ATKINS: Well, this is done in 8 conjunction with the commission. This is your 9 recommendation -- 10 CHAIR TAYLOR: Okay. 11 MR. ATKINS: -- to the commission. 12 CHAIR TAYLOR: Okay. I'm not going to 13 read this whole thing. I'll just read the nine items 14 for those of you that didn't want a copy of it. 15 One was comment on improvement of the 16 status of the bingo industry; two, comment on proposed 17 rules; three, comment on effect of administrative rules 18 and regulations on bingo operations; four, review of 19 Bingo Bulletin, of Web site; five, study of alternative 20 styles of bingo games not currently available in Texas; 21 six, review of charitable bingo forms; seven, review of 22 new legislation, including utilization and impact 23 study; eight, revise -- review and/or revise an 24 operation manual; and nine was review specific 25 recommendations for improvement of bingo operations. 0100 1 Some of these items were items that are 2 in -- still in the works right now, which is why 3 they're going to continue on our work plan. Some are 4 some additional items that we added. 5 Are -- is there any -- any comment on the 6 proposed work plan? Any public comment on the proposed 7 work plan? 8 Then I would like to make a motion that 9 we present this to the commissioners for their 10 approval. Is that the correct way? 11 MS. ROGERS: I second the motion. 12 CHAIR TAYLOR: All in favor? 13 MR. PAVLOVSKY: Aye. 14 MR. WEEKLEY: Aye. 15 MR. WHITTINGTON: Aye. 16 CHAIR TAYLOR: Aye. 17 MR. MOORE: Aye. 18 MS. ROGERS: Aye. 19 MR. MANIO: Aye. 20 MR. DOUGHERTY: Aye. 21 CHAIR TAYLOR: Any opposed? 22 Unanimous. 23 It's 10 till 12. Do we want to take a 24 break or continue on? 25 MR. PAVLOVSKY: Get a couple more items. 0101 1 MR. ATKINS: I was -- I was just going to 2 suggest that the following items are essentially 3 reports. And it will just depend on the amount of 4 questions that the advisory committee has, but we're -- 5 you know, we're happy to -- to move forward. 6 CHAIR TAYLOR: I'm fine. Okay. 7 AGENDA ITEM NO. 7 8 CHAIR TAYLOR: Then we'll go ahead on. 9 Item number seven, report and possible discussion on 10 the fourth quarter 2004 and calendar year 2004 11 financial information and statistics. 12 MR. ATKINS: And I'll start this off, 13 members. You have several things in your notebook. 14 You have a cover memo on this item. And the first 15 information that's in there is the information that I 16 believe you're accustomed to receiving from staff. 17 It includes information comparing 18 calendar year 2003 to calendar year 2004, as well as 19 the fourth quarter of 2004 to the third quarter of 2004 20 and the fourth quarter of 2004 to the fourth quarter 21 of -- fourth quarter -- fourth quarter of 2003. 22 Then you have another page, which we call 23 a detailed report, which breaks down each quarter by 24 year for you to review. And this is the information, 25 again, that I think you're accustomed to seeing. This 0102 1 is information that comes straight off the quarterly 2 reports that organizations file with us. 3 As you can see, total gross receipts are 4 up about almost 30 million, 29 million dollars to just 5 over 604 million dollars for calendar year 2004, of 6 course, the big jump being in instant bingo pull-tab 7 sales, which is actually a -- that $173.5 million is a 8 tie with the highest that pull-tab sales have ever 9 been, which was in 1991. 10 In addition to giving this information to 11 you, we also give that same presentation to the 12 commissioners on a quarterly basis, as well as this 13 year-end summary like you've received. 14 And recently, the commissioners have 15 begun to ask for a little more detailed analysis of 16 some of the financial information that is submitted by 17 organizations. So as a result of that, we reached out 18 to our Financial Division here at the agency. 19 And they have begun a process of looking 20 at data that comes in for organizations conducting 21 charitable bingo. And with that, I'd like to introduce 22 to you -- I don't know if he's had the opportunity to 23 appear before the BAC before -- Lee Deviney, who is the 24 director of the Financial Administration Department, 25 Division. 0103 1 What is it? Financial -- I'm just going 2 to say Financial Administration. And he will go over a 3 presentation that his staff has started to put together 4 that they first gave to the commissioners at their 5 February 28th, 2005 meeting. 6 MR. DEVINEY: Good morning, committee 7 members. I am Lee Deviney. I'm the Financial 8 Administration director for the agency. I'd also like 9 to recognize two other people for the Financial 10 Administration staff. 11 Betty Kirkpatrick is our financial 12 operations manager, and she manages -- we have a 13 small -- a very good group of financial analysts, one 14 of whom is sitting behind you, Janet Malushcka. She's 15 actually going to be driving the Powerpoint 16 presentation and, in fact, did a lot of heavy lifting 17 on the analysis that we've done so far. 18 As I understand it, you've got a copy of 19 this presentation in your notebook, if you'd like to 20 refer to it. 21 And picking up on what Billy said, 22 several months ago Director Atkins had requested the 23 Financial Administration work with the Bingo Division 24 to analyze activity and trends in the bingo industry. 25 Then, at the November 16th Lottery Commission meeting, 0104 1 the commission requested that agency staff examine the 2 interaction between gross receipts and charitable 3 distributions. 4 The commission further requested that 5 staff analyze the relationship between total sales, 6 expenses, net revenue, and charitable distribution over 7 a three- to five-year period. And, finally, the 8 commission requested that staff look at the differences 9 between required distributions and distributions as 10 reported by bingo conductors. 11 So this morning what we're going to do is 12 provide you with some initial high-level observations 13 and to try to begin to answer some of the questions 14 that the Lottery Commission had and also to solicit 15 your -- your suggestions, as Bingo Advisory Committee 16 members, as to what agency staff might look at going 17 forward. 18 In -- in the lottery -- on the lottery 19 side, the commission frequently asks, "How are we 20 doing?" Well, the agency administers the lottery 21 games. And I think the question here is how are you 22 doing, you being the industry since, you know, we -- 23 the agency has a regulatory function. 24 So we're going to try to do that. The 25 Financial Administration Division is not the -- the 0105 1 wealth of knowledge on -- on -- on bingo. That really 2 resides with the -- with the -- with the Bingo 3 Division. 4 So this is a matter of us working 5 together. We happen to have some additional tools and, 6 particularly, in terms of human resources that we can 7 dedicate to -- to looking at what's going on in the 8 bingo industry. And this is relatively new for us. 9 The financial analysis function at the 10 Lottery Commission is really less than two years old in 11 its current incarnation within the Financial 12 Administration Division. So this is -- we're not going 13 to take you to a destination today. Really this is 14 just the beginning of a journey as we do this analysis. 15 So let's go ahead and start with the 16 slides. Janet, you want to go ahead and flip to the 17 first one. Okay. Today we're going to discuss: 18 Data acquisition, evaluation and 19 aggregation; second, charitable bingo trends; and 20 third, opportunities for future analysis. 21 To give you some background -- go ahead. 22 To give you some background, source data for this 23 analysis is collected quarterly from bingo licensees or 24 bingo conductors. The Charitable Bingo Operations 25 Division presents quarterly reports to the commission, 0106 1 as you know. 2 And -- and let me digress for a second. 3 You -- you know this -- a lot of this you know, but 4 this was originally, you know, prepared for the Lottery 5 Commission. So if it's redundant, I -- you know, 6 second nature to you, I apologize for that. But, 7 again, it was -- we also had another audience in mind 8 as we developed this. 9 Financial information is stored in the 10 Automated Charitable Bingo System, which we call the 11 ACBS. And the Bingo Division and Financial 12 Administration are working together to develop new 13 reporting tools and presentations, of which this is the 14 first. 15 And the Bingo Division and the 16 Information Resources staff are assisting Financial 17 Administration analysts and mining data from the bingo 18 system and defining the data that will be analyzed now 19 and in the future. 20 The first graph that we're going to 21 present to you illustrates the history of gross 22 receipts since the beginning of, I guess, bingo in 23 Texas which, I believe, was 1982 when the first 24 licenses were reported. 25 And the figures are a little bit hard to 0107 1 read. I've got pretty good eyesight, but it -- the 2 gross receipts in '82 were about 66 million. And at 3 the end -- and through two -- at the end of 2004, we 4 were at 603 million. And the high point was back in 5 the early '90s just before, I guess, commencement of -- 6 of -- of the lottery. 7 In total, gross receipts have exceeded or 8 are just over 11 and a half billion dollars for, I 9 guess, the 22-year period. 10 Go on to the next slide. Thanks. 11 The next graph shows the history of bingo 12 prizes awarded and how they follow gross receipts. So 13 the trend line, the top line, that's the same 14 information you saw before. These are gross receipts, 15 how they've trended, and then bingo prizes that have 16 been paid. 17 Pretty much track the same. These lines 18 are pretty much parallel. Bingo prizes awarded in 19 total are at about 8.4 billion dollars. 20 In November 1980, Texas voters approved a 21 constitutional amendment authorizing charitable bingo 22 and requiring the proceeds to be spent for charitable 23 purposes. And these are the charitable distributions 24 that bingo conductors have reported over the years. 25 In total, it's about 774 million dollars. 0108 1 And we did graph that against -- at least at this 2 point, we're not graphing that against gross receipts. 3 Next slide, now we will narrow our 4 analysis to the last five years comparing total bingo 5 gross receipts and prizes. 6 In the past two years, total gross 7 receipts have increased. Total prizes have also 8 increased but, you'll note, at a higher payout 9 percentage. And this goes back to the discussion you 10 just had on the previous agenda item. 11 The payout percentage has increased, in 12 2000 from about 71 percent, up to almost 74 percent in 13 2004. 14 Now let's take a look at the instant 15 games only. The instant games only, gross receipts 16 have increased for instant bingo due to the 17 introduction, I guess, of 34 new pull-tab games in 18 2002. And instant bingo prize payout percentages have 19 also been increasing. 20 On the payouts on the instant games are a 21 little bit lower than what you saw on the previous 22 slide, maybe a half -- half a percent or one percent 23 lower on average. But what's interesting here is that 24 the prizes paid doubled for the instant games from 2000 25 to 2004. 0109 1 Even -- but there's not a direct 2 correlation to the prize and payout. Even though the 3 prize payouts have been increasing, the prize payouts 4 alone don't account for the doubling of the gross 5 receipts and the prizes paid. There just appear to be 6 very popular games. 7 Now on the next slide, let's take a look 8 at the regular bingo games and what's happening. 9 You're going to see -- and I guess you probably know 10 this. The trend is different here. Prize payout 11 percentages have also been increasing. 12 For regular bingo games, the payouts are 13 a little bit higher than they are for the instant 14 games. But, in contrast to the instant games where the 15 gross receipts have doubled over the last five years, 16 even with the higher payout percentages, regular bingo 17 has been -- gross receipts have declined not a lot, but 18 they have declined over the last five years. 19 So these games behave differently than 20 the instant games, as -- as you know. 21 MR. MOORE: Can we -- can we comment 22 during this or should we wait until he's done? 23 MR. DEVINEY: You can comment, ask 24 questions. 25 MR. MOORE: What do you relate this to? 0110 1 I -- I'm just asking if you maybe understand why that 2 happened. 3 MR. DEVINEY: I think that's the next 4 step in our analysis, you know, as I -- you know, in my 5 preface, I said this is just -- we're taking a 6 high-level look at what's occurred in the bingo 7 industry in the last five years. 8 And then what we want to do next is we 9 want to break this down. The question is -- you know, 10 we're trying to answer here is: How are you doing? 11 The next question is: Why are you 12 doing -- 13 MR. MOORE: Okay. 14 MR. DEVINEY: -- how you're doing? And 15 we're not there yet. 16 MR. ATKINS: I would -- I think that, 17 when we first saw this slide, I think that our initial 18 assumption was something that we talked about earlier, 19 and that's because people are giving out more than 20 they're taking in, in regular bingo. 21 And I know there's been a lot of 22 discussion about the only thing that can be done for 23 bingo is new games, etcetera, etcetera. But I think 24 that slide merits a lot of consideration. 25 And, you know, organizations need to 0111 1 start thinking about, if we're going to stay in 2 business, we might either want to look at either 3 reducing our prizes or giving out a percentage of our 4 prizes or whatever. 5 MR. MOORE: I think it's -- it's directly 6 related to the attendance decrease. And like you said, 7 they're not adjusting their payouts to this decline in 8 attendance. 9 MR. DEVINEY: Okay. Janet, we'll go 10 ahead to the next one. Okay. Now we're going to drill 11 down to a -- to a -- to -- to the next level by 12 illustrating what's the tracking between bingo gross 13 receipts, prizes and expenses. 14 The light blue line is our prizes paid 15 and the dark blue line is gross receipts and the green 16 line is total expenses. Now I may need Janet's help 17 explaining this slide. 18 What we're doing here is we're comparing 19 to a base year, okay? So 2000 is our base year. So 20 the percentages you see down here in the box in the 21 trend line are all what happened in this year compared 22 to this year, what happened in 2002 compared to 2000. 23 But the interesting thing is that you'll 24 note for the last -- starting in 2002, there has 25 been -- on a percentage basis, there has been an 0112 1 increase in gross receipts. There has been an increase 2 in prizes paid. 3 And also, if you'll look at your -- your 4 total expenses as -- as reported, total expenses have 5 not been increasing, you know, with your -- with gross 6 receipts and prizes paid. And, I guess -- you know, I 7 think in terms of cost of goods sold. And they seem to 8 remain -- it's remained constant, even though you've 9 had the behavior of the -- of the player activity has 10 gone up in the last two years. 11 Go ahead. And now I want to examine 12 sales, prizes, cost of goods sold, and -- and other 13 expenses. This is an interesting slide. 14 Again, going back -- starting in 2000, 15 net revenue reported appears to have responded in 2004 16 to increasing gross receipts. Charitable distributions 17 reported appear to be tracking net revenue. 18 And this is a very key point: Charitable 19 distributions have consistently exceeded required 20 distributions, and the required distributions are these 21 lower bars. And then the distributions reported are 22 these high bars. And I think that's a key question the 23 commission had some months ago. 24 MR. ATKINS: That's -- that's exactly 25 correct. It's been a consistent question from the 0113 1 commission because the reported distributions have not 2 necessarily tracked with total gross receipts. There 3 have been situations where there has been a reported 4 increase in total gross receipts, but reported 5 charitable distributions may have actually gone down. 6 And so I think it's been very difficult 7 for either the commissioners -- I know it's been 8 difficult for members of the legislature to understand 9 why that is. So this was very helpful because this 10 does help show that the required distribution, that is 11 the distribution that's required by the formula, does 12 more accurately track total gross receipts. 13 But what people have been seeing, you 14 know, for example, in 2004, required distributions were 15 8.9 million dollars. The -- at the time this was done, 16 the reported distributions were 29.8 million dollars. 17 That was reported distribution. 18 So, previously, what people had been 19 saying -- were seeing is: Well, wait a second. In 20 2003, reported distributions were 29.9 million dollars. 21 Total gross receipts went up in 2004 some -- what was 22 it -- 30, 20 whatever million dollars. But 23 distributions went down a hundred thousand. 24 MR. MOORE: Right. But they were 25 comparing it to the gross receipts, which this is net 0114 1 revenue here. Right? Is this after expenses and -- 2 what is the revenue? 3 MR. DEVINEY: That's -- that is net 4 revenue. 5 MR. ATKINS: Yeah. 6 MR. MOORE: Okay. I think -- 7 MR. ATKINS: This is comparing net 8 revenue, but I'm -- I'm -- 9 MR. MOORE: I know where you're going. 10 MR. ATKINS: Okay. Yeah. I -- I was 11 just saying, you know, that -- that people -- 12 MR. MOORE: I think -- 13 MR. ATKINS: -- didn't understand there 14 was a required distribution but organizations were 15 still giving away more. 16 MR. WHITTINGTON: Right. 17 MR. ATKINS: So it's kind of like, you 18 know, I have a contract with you for 10 widgets a month 19 and you, you know, consistently supply me with 30 for 20 the same price. 21 MR. MOORE: Right. I think this is a 22 very -- 23 MS. ROGERS: So this proves that -- 24 MR. MOORE: -- fair way to look at 25 things, yeah. 0115 1 MS. ROGERS: -- the charity is getting 2 more than what was actually required by the 35 percent. 3 MR. WHITTINGTON: That's right. 4 MR. ATKINS: Uh-huh. Uh-huh. 5 MS. ROGERS: Okay. 6 MR. ATKINS: Yeah. 7 MS. ROGERS: Yeah. 8 MR. MOORE: A picture. 9 MS. ROGERS: Yes. 10 MR. WHITTINGTON: Big picture. 11 MS. ROGERS: We're good with pictures. 12 MR. DEVINEY: Well, the next slide tries 13 to pull it all together. You just try -- you've seen 14 all this in previous slides. Okay. This graph 15 illustrates all the components together. 16 And what we're trying to show here is 17 that the rate of increase for prizes paid exceeds the 18 rate of increase for gross receipts, also that total 19 expenses remain fairly constant, and that net revenue 20 and charitable distributions declined for a period of 21 time until they appear to respond in 2004 to increasing 22 gross receipts. 23 So gross receipts -- this is gross 24 receipts, which we showed you before, prizes paid and, 25 again, prizes paid, the payout has been increasing. 0116 1 Total expenses have remained fairly constant. Required 2 distributions dropped off. 3 And then, as these lines go up, the 4 requirement for distribution started to increase. And 5 you'll see that the required distributions -- whoops, 6 there's required distributions -- again, are 7 exceeding -- hold on. Here's reported distributions. 8 Here's required charitable distributions. They'll 9 track with net revenue. 10 CHAIR TAYLOR: Where's -- which one is 11 the net revenue? 12 MS. ROGERS: Yeah. Where is it? 13 MR. DEVINEY: Net revenue is -- 14 MR. PAVLOVSKY: Red. 15 MS. ROGERS: That's the revenue right 16 there. 17 CHAIR TAYLOR: That's the revenue, right? 18 MR. ATKINS: That's net revenue. 19 MR. DEVINEY: Yeah. 20 MS. ROGERS: It goes -- yeah. 21 MR. DEVINEY: And there is -- there -- 22 you're going to have a little bit of a lag here on that 23 for gross receipts. 24 Janet, would you go ahead and flip? 25 Okay. 0117 1 So what we have is some preliminary 2 findings or observations. Gross receipts have been 3 increasing since 2002. And we believe that's due to 4 the introduction of the new instant pull-tab games. 5 Prizes have been increasing faster than 6 gross receipts because of prize payouts have increased 7 over the last five years. 8 Net revenue appears to be declining as a 9 result of increasing prize payout percentages. And we 10 started to see, if not a reversing of that trend, a 11 stabilization of that trend in 2004. 12 And total expenses have remained fairly 13 constant over the five-year period examined. 14 Charitable distributions reported appear 15 to have been following the decline in net revenue and 16 leveled off in 2004, but charitable distributions 17 reported have also consistently exceeded the required 18 distributions. 19 Now going forward -- and this is where 20 we'd like to have some feedback now or later, either. 21 And I guess if you want to go later, probably working 22 through Billy would be the -- the appropriate way to 23 go. 24 Some things we think we want to look at, 25 we'd like to monitor quarterly trends and seasonality 0118 1 in bingo play. We understand that there is a 2 seasonality. It's not a -- you know, your activity is 3 not constant through the year. 4 We'd also like to look at regional and 5 local trends. Regional may be a little bit too broad a 6 basis to look at that. But there may be areas where 7 there are competing gaming that may have an impact or 8 some other exogenous factor that may have an impact on 9 bingo activity in a particular location. 10 It's going to take some work to drill 11 down to that, but we think that that's something that 12 we need to do or should consider doing. 13 And then we also want to consider 14 population, again the impact of competing gaming, any 15 other outside influences or variables, some of which we 16 may not -- at least in Financial Administration, we -- 17 we wouldn't know to look for. 18 And that's where we get -- we'd like to 19 have some input on some things that we might look at 20 when we get together with the Bingo Division staff and 21 decide how -- how best to go about doing that. 22 And that's -- that would conclude my 23 presentation. If you've got any questions or 24 suggestions or comments, I'll try to answer them or 25 I'll try to draw on Betty or Janet to help me. 0119 1 MR. MANIO: I have a question. 2 MR. DEVINEY: Sure. 3 MR. MANIO: One thing that I noticed 4 that's missing in this presentation is attendance 5 numbers. 6 MR. DEVINEY: Attendance. 7 MR. MANIO: Right. And so I -- I'm 8 assuming that there was no attempt to correlate 9 attendance with, like for instance, bingo gross 10 receipts. 11 MR. DEVINEY: It is something that we, in 12 fact, have looked at. But we were not prepared at the 13 time. We did this presentation for the February 28th 14 Lottery Commission meeting. 15 At that time, we were not far enough 16 along or competent enough in what we were doing to go 17 ahead and build attendance into this. However, it is 18 something that, I think, we need to look at in going 19 forward. 20 MR. MANIO: Yes. And let me just offer 21 my rationale for bringing up attendance, because 22 attendance is our market share. We are -- as you know, 23 we are competing with other forms of entertainment and 24 gambling. 25 And our attendance has been declining 0120 1 since, what, 1999. It's been going down, so we are 2 losing market share. And I just thought that, if you 3 take that into consideration when you -- when you 4 perform your financial analysis, we might get a 5 different picture. 6 MR. DEVINEY: And then, to take it a step 7 further, we would be interested in knowing where 8 attendance is not declining and then why it's not 9 declining, if that's the case anywhere. 10 MR. MANIO: Sure. If that -- if that 11 data is available, we'd be happy -- be happy to know. 12 MR. DEVINEY: Well, one thing we -- we 13 have to do -- and, again, this is -- I'm speaking for 14 Financial Administration -- is we -- we have to do some 15 up-front work. 16 And we actually have done quite a bit of 17 up-front work in understanding the data, because it's 18 something, historically in our division, we've not 19 looked at. You know, Phil and Terry, they understand 20 and know the data. 21 But we -- we're having to learn it and 22 know what's in the system. And there's quite a bit of 23 information in the system. It does take a -- take a 24 little bit of up-front work to -- you know, to 25 understand it and also to go back and forth and talk to 0121 1 the Bingo Division and make sure that we -- we, in 2 fact, understand what we're looking at before we go on. 3 MR. MANIO: Right. And in one of your 4 bullets in -- on page 13, it says prizes have been 5 increasing faster than gross receipts due to increasing 6 prize payout percentages. Prize payout percentages 7 have been increasing because our market share has been 8 going down. 9 MS. KIRKPATRICK: Betty Kirkpatrick. We 10 have noted that attendance is declining, actually, in 11 all organizations and, actually, in all regions. We 12 just -- we're not sure why yet. And that's what we're 13 trying to determine is the why. 14 So if you can give us any indications of 15 the why... 16 MR. MANIO: Oh, absolutely. 17 MS. KIRKPATRICK: Okay. We would 18 appreciate knowing where to look and what to look for. 19 MR. MANIO: Well, you have to look at 20 Louisiana, Oklahoma, and New Mexico. That's where 21 we're losing our audience. 22 MS. KIRKPATRICK: Okay. 23 MR. DEVINEY: Border -- yeah, competing 24 gaming in border -- border areas, yeah. 25 MR. MANIO: Internet gaming. 0122 1 MS. KIRKPATRICK: Janet, are you taking 2 this down? 3 MS. ROGERS: I mean, it also has a lot to 4 do with -- I personally think, when you talk about 5 bingo, the -- going down, your actual game of bingo, is 6 because they've stayed -- they're stagnant, I think. 7 They've stayed the same. 8 Pull-tabs -- look at pull-tabs, instant, 9 I should say, so I get the terminology correct. They 10 changed, and look what happened. It became more 11 exciting. I don't know if that's something that you're 12 going to find on documentation somewhere on quarterly 13 reports. 14 But with the change, it became exciting. 15 People who play bingo want to have fun. They want to 16 be excited. You know, they want to win money. So... 17 MS. KIRKPATRICK: What about the speed 18 games? I heard something about the speed games in the 19 beginning of some of the sessions were -- 20 MR. MANIO: Speed games. 21 MS. KIRKPATRICK: -- really drawing -- 22 MS. ROGERS: Speed games in regular 23 bingo? 24 MS. KIRKPATRICK: Yeah, quick, 25 progressive, you know, B6, so forth. They do it really 0123 1 fast. They're selling a lot of cards. I have been 2 talking to Brazos County about that. 3 MR. MANIO: Right, but -- 4 MR. WHITTINGTON: But you got a cap on 5 bingo. You only -- you have so much. And you -- if 6 you've got a maxed bingo hall, which gives out 25 7 hundred per session, we can't have nothing else in 8 front of it. That's -- that's the big problem. 9 MS. ROGERS: Because you'll take away 10 from your regular -- 11 MR. WHITTINGTON: Yes. 12 MS. ROGERS: -- games, and you can't do 13 that. 14 MR. WHITTINGTON: You can't do that. 15 MS. ROGERS: And that's what we're 16 talking about needing some change. 17 CHAIR TAYLOR: There are halls -- in 18 fact, my hall runs several speed sessions. 19 MS. KIRKPATRICK: Okay. 20 CHAIR TAYLOR: But we do that because we 21 pay it out as a percentage game. And that keeps us in 22 business those nights. Speed sessions are exciting. 23 I've been to them. 24 And if I was ever going to play bingo, 25 that's why I would play bingo. If you haven't ever 0124 1 been to one, head to Waco or some of those other cities 2 and try a speed session. If you don't even like bingo, 3 it is -- it is exciting. It truly is. 4 MS. ROGERS: It is exciting. 5 CHAIR TAYLOR: However, I think until we 6 can have some games that can compete with the -- the 7 things they're seeing on TV and hearing on radio, you 8 know, win a hundred million dollars, and -- the -- the 9 numbers are so huge that, when you come back to a bingo 10 hall and tell them 750, 750 nowadays just doesn't -- 11 yeah. 12 It doesn't create very much excitement 13 anymore because of the competition in this state, you 14 know, that we have from the lottery and the multi -- 15 whatever that other lottery is, which I don't play 16 any -- any lottery. 17 I don't play bingo either, except to go 18 and try it out somewhere else. But the fact is, until 19 I think we have a progressive game that there can be a 20 higher prize they can win in a game of bingo or until 21 we have a multihall game where there's a higher prize, 22 I don't think that we're going to increase very much 23 enthusiasm for bingo. 24 MS. ROGERS: Well, it's a proven fact 25 with the lottery the higher the jackpots, the more 0125 1 tickets they sell. So the larger the games, you know, 2 prizes, the more people you're going to get in there. 3 But until we can change -- because we do 4 operate under a cap. 5 CHAIR TAYLOR: But as you can see from 6 our numbers, we can't afford -- most of us can't, 7 hall-wise -- to increase the payouts in our hall. I 8 mean, the 25 hundred a session is already, you know, 9 choking some of us. 10 So we need a game where we can have a 11 higher payout but it doesn't cost us more than that 25 12 hundred a session which, of course, comes right in with 13 that progressive or linked bingo. 14 MR. MANIO: And if you look -- 15 MR. ATKINS: I think -- 16 MR. MANIO: -- at 22 years of charitable 17 bingo, the -- really the first innovation in our 18 industry came in 2002. That's the event pull-tabs. 19 And look at what it did to bingo. 20 We need some -- we need something like 21 that again. And that's why a lot of people are working 22 so hard with the legislature in getting some 23 innovations in our industry. 24 MS. KIRKPATRICK: In getting more 25 creative. Okay. 0126 1 MR. WHITTINGTON: And I just think with 2 these event -- event tickets that we have that have 3 done so well -- as a matter of fact, some charities 4 need to come together and see if we can make at least 5 35 percent, the max. Maybe we can be up along with the 6 gross receipts with our -- with our net profit instead 7 of 25 percent. 8 MS. KIRKPATRICK: So do most of you have 9 a fixed prize payout, or is it based on percentages? I 10 understand that is -- 11 MR. MANIO: Fixed. 12 MS. KIRKPATRICK: -- a controversy. 13 MR. WHITTINGTON: Fixed. 14 MR. MANIO: They're fixed. 15 MS. KIRKPATRICK: They are fixed? 16 MR. MANIO: And that's why -- 17 MS. KIRKPATRICK: Well, we may want to 18 reconsider -- 19 MR. MANIO: And that's why your numbers 20 are showing it's -- the present is going -- going up, 21 because the payouts are fixed every night. 22 CHAIR TAYLOR: If every hall in town had 23 fixed payouts, what you say might be true. But I can 24 tell you, from experience, we have a lot of players 25 that will not come to the hall on our percentage 0127 1 nights. They go to the other halls in town. 2 MS. KIRKPATRICK: Really? 3 CHAIR TAYLOR: So to drive away some 4 players -- it's going to drive them away. It has. 5 MS. ROGERS: Right. And -- and I don't 6 know if you understand. You have 25 hundred dollars 7 that you can give away, no matter if one of them is a 8 -- well, it has to -- 750. 9 You know, we do a night we have four 10 games of 750. You understand? So it -- you can change 11 your prizes -- is that what I'm trying to say? Yeah, 12 you can change your prize amount, but you have that 13 cap -- 14 MS. KIRKPATRICK: Okay. 15 MS. ROGERS: -- that you have to stay 16 within. 17 MR. MANIO: Are these comments useful to 18 you? 19 MS. KIRKPATRICK: They certainly are. 20 And we're looking for other outside influences that may 21 be a factor and why we're declining on this, any of 22 these amounts, any outside influences, any particular 23 regions that are doing better than others. 24 That way we can concentrate on those 25 regions. Any other information would be helpful to us. 0128 1 CHAIR TAYLOR: Look and see if anybody's 2 doing advertising. Anybody that's doing better, see if 3 they're advertising. 4 MS. KIRKPATRICK: Okay. Okay. 5 MS. ROGERS: And where, how. 6 CHAIR TAYLOR: TV, newspaper, how are 7 they advertising, if they are. 8 MS. KIRKPATRICK: All right. 9 MR. PAVLOVSKY: Something along this same 10 line, every time you turn on the TV or open the 11 newspaper, there's advertising. Also, you're going to 12 -- you're going to see a different scratch-off game. 13 Seems like every week there's a new 14 scratch-off game. There's something new and different, 15 you know. With bingo, you just get a dobber and, you 16 know, that's it. 17 MS. KIRKPATRICK: Nothing changes. 18 MR. PAVLOVSKY: Nothing changes. 19 MS. KIRKPATRICK: Any age factors that 20 we're aware of? 21 MR. MANIO: No. We have -- 22 CHAIR TAYLOR: We have all ages. 23 MR. MANIO: We have the whole spectrum. 24 MS. ROGERS: Yeah. We have all ages. 25 MS. KIRKPATRICK: Keep us informed 0129 1 through Billy. 2 MR. ATKINS: Thank you. 3 MR. DEVINEY: And what we'll do, we'll 4 work with the Bingo Operation Division. If we -- if we 5 -- we get to a point where we think we've got some 6 more -- some good information to present to you, you 7 know, Billy would like for us to put together another 8 presentation and thinks -- thinks the time is right, 9 then we'll do that for you. 10 MS. ROGERS: Will this be going to the 11 commissioners, this presentation, or... 12 MR. ATKINS: The commissioners have 13 already seen it. 14 MS. ROGERS: They've already seen it? 15 Okay. 16 MR. ATKINS: And -- and that will lead 17 in -- I'm sorry. Did you have anything else, Lee? 18 MR. DEVINEY: No. 19 MR. ATKINS: I'm sorry. I had to step 20 out the first part. I didn't know if you had an 21 opportunity to introduce Betty -- 22 MR. DEVINEY: Yes. 23 MR. ATKINS: -- and Janet. 24 MR. DEVINEY: Uh-huh. 25 MR. ATKINS: And, as you can see, they 0130 1 did a phenomenal amount of work on that. And we -- we 2 appreciate their efforts and their openness to working 3 with us on -- on, you know, trying to learn more about 4 this. 5 As a result of this presentation that was 6 just given to the commission, there were some 7 additional questions that the commissioners asked. 8 Phil Sanderson went back and put some information 9 together for them. 10 And that's the second part of the 11 information that's contained in your notebook. It 12 starts with an outline of just the 35-percent 13 distribution formula. 14 MR. SANDERSON: Good morning, members. 15 For the record, I'm Phil Sanderson, assistant director 16 of the Charitable Bingo Operations Division. 17 Before I start with my presentation, I 18 just want to get something clear in my mind. I believe 19 it was Kim that mentioned you play four 750 games a 20 session? 21 MS. ROGERS: A night. 22 MR. SANDERSON: A night? 23 MS. ROGERS: Right. Yeah. Right? No. 24 I'm sorry. It was 250. Well, I was just -- 25 MR. WHITTINGTON: 250. 0131 1 MS. ROGERS: Yeah. 2 MR. SANDERSON: Okay. I just -- I wanted 3 to make sure, if somebody's reading the minutes over 4 the Internet, and your hall's playing four 750-games 5 that -- 6 MR. WHITTINGTON: She's playing four a 7 night, two -- 8 MR. SANDERSON: Two each -- two each 9 session, yeah. Okay. Two each -- two each. All 10 right. I just -- I just want to make -- get clear in 11 my mind that statement. 12 MS. ROGERS: Yeah. 13 MR. SANDERSON: At the commission meeting 14 that was held on February 28th, the commissioners had 15 some questions regarding charitable distributions and 16 whether or not there are organizations that are not 17 making distributions. 18 And, additionally, they had asked Mr. 19 Fenoglio if he'd be interested in presenting the 20 industry perspective on this issue. And Mr. Fenoglio 21 and myself have been working very closely together to 22 analyze the data that was pulled out of the system. 23 And the first thing I'd like to preface 24 my comments by are reminding you that the 35-percent 25 minimum distribution calculation can result in a zero 0132 1 amount of required distribution, as some of y'all are 2 probably familiar with. 3 We've looked at the returned filed 4 information that covers the period of 2002, 2003 and 5 2004 calendar years, and it's only for the 6 organizations that are currently active on some of the 7 reports that Mr. Fenoglio worked on. 8 The information that I provided are based 9 on every organization that reported gross receipts 10 during the quarter on that second page. Of course, the 11 first page is the 35-percent distribution formula. I 12 wanted to make sure the commissioners had that in their 13 packet to look at, as we discussed the -- the 14 calculation. 15 And then the next report is the number of 16 organizations that were not required to make a 17 distribution for a particular quarter and the number of 18 organizations that did make a distribution, even though 19 they were not required to. 20 As an example, in the first quarter of 21 2002, there were 1,542 organizations that reported 22 gross receipts during that quarter. 300 of -- 301 of 23 those, based on the formula, were not required to make 24 a distribution. 25 Of the 301, 195 of those did make a 0133 1 distribution, and the amount that they distributed was 2 572 thousand dollars. Overall, statewide for the 3 quarter, the required distribution was 3.2 million and 4 the actual reported distribution was 8.3 million. 5 So this is a quarter-by-quarter breakdown 6 for the 2002 through 2004 period. Additionally, at 7 that same meeting, there were some discussions with the 8 commissioners and staff on the -- how we report revenue 9 and gaming revenue and gross receipts. 10 So the other document that you have is 11 our first attempt to hopefully address the request by 12 the commissioners on how we report general -- report 13 revenue from the charitable bingo. 14 And if you notice what we've called hold 15 is actual gross receipts minus prizes. And then the 16 adjusted gross receipts, or adjusted gross, is as it is 17 in statute by definition, which is gross minus prizes 18 minus cost of goods sold and lease payments to 19 distributors. 20 Other income are those organizations that 21 also have a lessor license and have to report rental 22 income and also some interest income, as well as the 23 merchandise prizes that are donated for a bingo prize. 24 Other expenses is all other expenses, lease payments 25 for the location, mortgage payments, and operating 0134 1 expenses. 2 Then you have the net revenue, which is 3 basically the bottom line for that calendar year as 4 compared to the distribution for that calendar year, 5 what was reported. 6 So, as you can see, the -- the hold, the 7 first column, has remained fairly constant over the 8 last three years. During that same period of time, 9 we've seen gross receipts go up almost 50 -- 50 million 10 dollars. 11 So we're hoping that this will give a 12 better idea of the bingo activity in the state that 13 shows where they're at, as far as general operating 14 expenses and how they're comparing years to years and 15 whether or not the increase comes up or down. 16 CHAIR TAYLOR: I had one question. In 17 the other expenses, is the distribution that's 18 previously been given out included in this expenses, 19 also, or -- 20 MR. SANDERSON: No. That's the -- the 21 last column is what was reported as charitable 22 distributions. 23 CHAIR TAYLOR: I just didn't know if it 24 added up because I know, when I look at the reports, 25 you know, it shows as an expense then. So I just was 0135 1 wondering that. 2 MR. SANDERSON: And also, as most of you 3 know, we've redesigned the quarterly report, which will 4 -- Terry will get into. And our hope with that is it 5 will give us a little bit better idea of the -- the 6 activities and expenses that are associated with bingo. 7 And I'll be glad to answer any questions 8 if there are. 9 MR. MOORE: Phil, is the net revenue 10 everything taken out before you calculate the 35 11 percent? 12 MR. SANDERSON: The net revenue is -- has 13 nothing to do with the 35 percent. 14 MR. MOORE: Okay. 15 MR. SANDERSON: The net revenue is the 16 money that they actually -- just like your bottom line 17 in your business. 18 MR. MOORE: Right. 19 MR. SANDERSON: That's what -- that was 20 what your -- your net revenue -- 21 MR. MOORE: So -- 22 MR. SANDERSON: -- for that year was. 23 MR. MOORE: Prizes are taken out, cost of 24 goods, lease payments. 25 MR. SANDERSON: (Nodding) 0136 1 MR. MOORE: Okay. 2 MR. DOUGHERTY: You just said -- correct 3 me if I'm wrong -- a gross increase of 50 -- 50 4 thousand dollars. I couldn't find that here. Could 5 you re-explain that? 6 MR. SANDERSON: They -- well, it's not 7 exactly on this page. The gross receipts, if you look 8 back -- I don't know if it's -- if there's another 9 document in here -- probably the one -- the Powerpoint 10 presentation, the gross receipts in 2002 was around 553 11 million dollars, I believe. 12 And then the last year was 604, so -- 13 MR. DOUGHERTY: Okay. 14 MR. SANDERSON: So that's -- you know, so 15 gross receipts have increased 50 million over the same 16 period that we've looked at. And, if you look at just 17 the hold, which is gross minus prizes, which is what 18 the organizations actually have after they -- you know, 19 people come in to play bingo to win prizes. 20 So you've got to give them prizes back. 21 So you've got that expense, the other thing else you 22 can have some control over. And so, therefore, that 23 hold is what you have available to operate with. 24 And, as you can see, it -- it took a 25 slight dip in 2003 but then went back up in 2004. 0137 1 MR. DOUGHERTY: Thank you. That explains 2 it. 3 MR. SANDERSON: As a result of this 4 presentation, the commissioners have asked for us to 5 drill down a little bit more into the data, as far as 6 percentages, as it relates to revenue and expenses and 7 distributions. 8 And I'm in the process of going through 9 that data. And hopefully we'll make a presentation at 10 the commission meeting on April 6th. And that would, 11 of course, be available for y'all at your next meeting. 12 Thank you. 13 CHAIR TAYLOR: Are there any other 14 comments? Any public comment? David? 15 MR. HEINLEIN: David Heinlein. I'd like 16 to make a -- one question before everybody leaves. I 17 -- I -- I may have missed it, but I didn't hear you say 18 if there had been any change in undistributed proceeds 19 from 2003 to 2004. Did you... 20 MR. ATKINS: They didn't graph 21 undistributed proceeds. 22 MR. HEINLEIN: They did not? Okay. 23 Well, in any business, when we do our financial 24 information, we've got to start with beginning 25 inventory and ending inventory before we know what 0138 1 we've got. 2 And it's the same thing true with 3 undistributed proceeds. In order to know how -- what 4 our financial condition was comparing 2004 to 2003, we 5 need to know what the undistributed proceeds was at the 6 beginning of the year and what is it at the end of the 7 year, because I think what you're going to find is 8 there's an increase. 9 I hope that's what you find, because in 10 the ones that I've analyzed that we certainly have had 11 an increase, and the distribution has increased. But 12 in case -- the numbers you just looked at, the 13 distribution was the same almost for 2003 to 2004, even 14 though there was an increase in business. 15 And I think I have an answer for that is 16 that there was an increase in the undistributed 17 proceeds. What we have found in our halls is that -- 18 you looked at those charts. And in '97 and '98, it 19 seems to repeat. And then in '99, 2000, 2001, we 20 started a downhill climb going down. It was tragic. 21 And that's why all of us began to work 22 and Billy began to work and his staff came up with 23 these event tabs and gave us a new product. By October 24 2002, we began to start back up. 25 But we were in a spiral going down before 0139 1 we got that new product and it was headed for disaster. 2 In that period of time, our charities dug some deep 3 holes to survive. And so they cleaned out all surplus 4 capital and there was no undistributed proceeds left. 5 As we began to do better over these last 6 two or three years, two and a half years, two reported 7 years, we had to replace those operating capital funds 8 that had been missing. And so our distribution did not 9 increase as it could have because we needed to build 10 our capital base. 11 Now the 35-percent rule, with the new way 12 that we're conducting bingo with event tabs and instant 13 bingo, it changes the whole structure of that rule. 14 And that rule no longer is a valid way of requiring the 15 distribution method because your gross receipt has gone 16 up. Your prize paid out has gone up. 17 And the 35 percent that is left is a 18 number that's maybe greater now in total number. But 19 guess what. You deduct six percent of the gross 20 receipts as an authorized expense when, what you've 21 really done is negated the requirement. 22 I've seen -- and you've already 23 highlighted that, that there are many charities that 24 were not required to make any distribution at all. In 25 one case this particular quarter we had a charity that 0140 1 the 35-percent rule said they only had to distribute 2 five thousand dollars. 3 But their profits were great enough and 4 they had built up their capital over the last two 5 years. They distributed 25 thousand dollars. It was 6 possible to do that. 7 So as we continue growing in the current 8 atmosphere, barring new types of gaming activities, 9 we'll be able to continue to grow those capital 10 accounts so that you're going to see the distribution, 11 I would expect, in the year 2005 to go considerably 12 higher simply because they've been able to take care of 13 those past losses and get themselves back in a good 14 financial health. 15 There's a fear of distributing too much. 16 We have some who have pretty large bank accounts right 17 now because of those increases. And we're not wiping 18 them out. We could distribute a lot more than we're 19 doing, but we are afraid to go too far down because the 20 tide might turn. 21 And so you want to have a good capital 22 base. And so I think that's some of the explanations 23 for what you're doing. Thank you. 24 CHAIR TAYLOR: We need to know whether -- 25 do you want to take a break or do you want to keep on 0141 1 going through here? 2 MR. PAVLOVSKY: Let's go. 3 CHAIR TAYLOR: Okay. 4 AGENDA ITEM NO. 8 5 CHAIR TAYLOR: Eight, report and possible 6 discussion on quarterly report revision implementation 7 and notification. 8 MS. SHANKLE: Nearly a year ago, the BAC 9 forms were -- 10 CHAIR TAYLOR: Could you introduce 11 yourself, please. 12 MS. SHANKLE: I'm sorry. I'm Terry 13 Shankle, Accounting Services manager. 14 Nearly a year ago, the BAC forms work 15 group began revising the conductor quarterly report. 16 Let me take my glasses off. From that project came a 17 more detailed quarterly report that will more 18 accurately reflect the activity of bingo and how 19 charitable distributions are used. 20 The work group designed the form so that 21 a conductor who is also a licensed lessor would only 22 file one quarterly report instead of two. And that one 23 quarterly report could be used by a conductor or an 24 accounting unit. 25 I would like to thank the members of the 0142 1 forms work group -- Mario, Kimberly, Patricia and Tom 2 Leek -- for their significant contributions to the 3 revisions of the quarterly report and automated forms 4 manual. 5 I would like to conclude this project 6 with an update to the committee on the notification 7 that has been provided to our licensees regarding the 8 revisions to the quarterly report. 9 October 21st, 2004, the charitable bingo 10 Web site news alert section was updated to include 11 information regarding the revision of the quarterly 12 report. 13 November the 4th, 2004, the October, 14 November and December Bingo Bulletin was mailed to 15 licensees, which included an article giving notice to 16 licensees that the quarterly report was being revised 17 and the benefits of the revision. Also, the Bingo 18 Bulletin was put on our Web site. 19 November 24th, 2004, the operator 20 training program was updated to include this 21 information regarding the quarterly report and the 22 forms -- new automated forms manual, the unit member 23 quarterly report, and the new schedules. 24 December 23rd, 2004, a letter was mailed 25 to all conductors explaining the revisions to the 0143 1 quarterly report and forms manual and that all the 2 forms would be available on our Web site beginning 3 January 1st, 2005 in Adobe and Excel format. 4 December the 30th, 2004, the -- our Web 5 site was updated with all of this information. 6 On March the 4th, 2005, the January, 7 February and March Bingo Bulletin was mailed to 8 licensees with a lead article being -- that explained 9 the revised quarterly report and forms manual and the 10 new unit number for the report and schedules. And this 11 Bingo Bulletin is also on our Web site for someone to 12 review. 13 And then on March the 17th, the revised 14 quarterly reports were put in the mail along with a 15 stuffer explaining the changes and that they would be 16 due -- the first quarter 2005 information would be due 17 April the 25th, 2005. 18 And that concludes this project. Are 19 there any questions? 20 CHAIR TAYLOR: Any questions from the 21 committee? 22 MS. SHANKLE: Thank you again. 23 CHAIR TAYLOR: Any comments? 24 MR. ATKINS: I'd just also like to thank 25 Terry and her staff and the members of the work group 0144 1 for the work they did not just on the revision of the 2 form, but also the notification to licensees. 3 I understand since they've been out, 4 there have been some questions from licensees, but it 5 has been -- 6 MS. SHANKLE: A smooth transition, very 7 smooth. 8 MR. ATKINS: So we appreciate everyone 9 and all their work on that. 10 CHAIR TAYLOR: If there's nothing else, 11 then item number nine, report and possible discussion 12 on the reorganization -- 13 MR. HEINLEIN: Comment. 14 CHAIR TAYLOR: Comment? I'm sorry. I'm 15 sorry. I didn't see you, David. 16 MR. HEINLEIN: You had the lights off. 17 David Heinlein. I just want to thank the staff for 18 getting that on your Web site, because it allowed me to 19 early on start working on getting my accounts ready to 20 go for this next quarterly report, which I'm very 21 nervous about. 22 But being in the Excel format, I was able 23 to download that. And I've got -- I can build my 24 formulas. I can extract from other software into -- 25 import into that. 0145 1 And so it's really been helpful to have 2 that. In the past when we've had changes in the 3 quarterly report, I didn't have that availability. And 4 I'm computer illiterate, so I have to get my wife to do 5 it. 6 And she'll go and design the forms. It 7 will take her months to do it, you know. And I was 8 scared about that. I thought, oh, gee, I'll never get 9 her to do this for me. So I didn't have to this time. 10 I just downloaded it and it started. 11 Thank you very much. 12 AGENDA ITEM NO. 9 13 CHAIR TAYLOR: Okay. Then item number 14 nine, report and discussion on the reorganization of 15 the Charitable Bingo Operations Division administrative 16 rules. 17 MR. ATKINS: Very quickly, members, on 18 February 28th, the commission adopted the rule 19 reorganization of the charitable bingo administrative 20 rules. And we've given a presentation to both agency 21 and division staff earlier this month discussing 22 exactly what we did in the rule reorganization, 23 renaming the rules, reorganizing the rules into 24 subchapters, updating citations, as well as deleting 25 obsolete dates. 0146 1 As you'll recall previously, the rules 2 were just listed in one laundry list. It made it 3 difficult to find, to actually know which rules you 4 were looking for. The first thing we did was the 5 creation of subchapters and also the placement of rules 6 in specific subchapters. 7 This has been completed and can now be 8 accessed through the division's Web site. When it 9 comes up, you will be able to access the specific 10 subchapters. Next, Veronica. And the rules are 11 specific to a subchapter. 12 Another thing we did, of course, was the 13 renumbering of the rules. So given that current 14 format, any rule 402 100-something will be in 15 subchapter A, 402 200-something subchapter B, 16 subchapter C -- next, please -- D -- next, please -- E, 17 F -- next, please -- and then, finally, G. 18 Another thing we did, as you know and I 19 mentioned earlier, was updating legal citations, making 20 them consistent throughout the rules and also updating 21 any out-of-date dates that might have been included in 22 the rules. 23 Specifically, what I wanted to share with 24 you today was some of the actions that the staff has 25 been taking -- next, please -- since these rules have 0147 1 been adopted, in terms of notificating (sic) licensees 2 of the changes. 3 There is information, as I say, available 4 on the Web site. We're including information in the 5 Bingo Bulletin, as well as a letter that has been sent 6 to all licensees regarding the rule reorganization. 7 We've completed updating the citations to 8 all of our licensing, accounting and audit forms that 9 we're aware of. We've asked the staff. We would ask 10 you the same thing. If you come across a form with an 11 out-of-date citation, if you'd let us know, just 12 keeping a -- making sure it's not an old form. 13 But should you find anything on our Web 14 site, etcetera, with an out-of-date citation on it, we, 15 you know, appreciate knowing. We're updating citations 16 in our procedures again, as well as in all automated 17 and form letters that we have. 18 We'd make the same request. Should you 19 get an automated letter or one of our form letters with 20 an out-of-date citation, if you'll draw that to our 21 attention. 22 We're making, you know, internally 23 changes to our operating systems that need to be made 24 to reference the -- the updated rule numbers. And 25 we've also updated the operator training program, as 0148 1 well as the agency's Web site, with information on the 2 newly-organized administrative rules. 3 And, again, it just seems, you know, 4 particularly for me, when I went out to the Web site 5 the first time and they were up there in subchapters, 6 it just made it a whole lot easier to look for a 7 specific rule instead of having to thumb -- thumb down 8 through that laundry list. 9 So, again, we thank you for your 10 assistance on that. And I'll be happy to answer any 11 questions you may have. 12 CHAIR TAYLOR: Any comment from the BAC? 13 Questions? Anything from the public? David? 14 MR. HEINLEIN: Looking good, Billy. 15 MS. ROGERS: I have a question for Billy. 16 It doesn't have to do with rules, though. This is 17 referencing the Web site. 18 We had talked a meeting or so ago about 19 it was going to be where the charities were going to 20 have like the temporaries on there where they could go 21 on there and look at that. Is that still in the 22 working, still going to be happening, or no? 23 MR. ATKINS: It is something that's being 24 developed. I'm not sure exactly what agenda item we're 25 having this discussion under. 0149 1 MS. ROGERS: Okay. Maybe I shouldn't be 2 asking right now. 3 MR. ATKINS: Okay. Let me just say it 4 is. 5 MS. ROGERS: That's fine. 6 MR. ATKINS: Okay. 7 CHAIR TAYLOR: Anything else on this 8 topic? 9 AGENDA ITEM NO. 10 10 CHAIR TAYLOR: 10, report on the 11 activities of the Charitable Bingo Operations Division. 12 MR. ATKINS: Members, this is a new item 13 that I had added. And it stemmed from the joint 14 meeting that the BAC and the commission had. 15 One of the items that was discussed 16 was -- and I'm going kind of off memory now, but there 17 was at least, I think, a representation made by someone 18 on the advisory committee that there wasn't any real 19 understanding of a lot of what the division does and a 20 lot of what the division does just on behalf of bingo, 21 in general. 22 And so one of the goals that was 23 identified from that joint meeting was to provide more 24 information to the BAC on some of the activities that 25 the division engages in. 0150 1 So what I have included in your notebook 2 is something similar to what is provided to the 3 commissioners at their commission meetings. It's not 4 exactly the same, but it will give you some idea. 5 For example, I have listed and included 6 copies of four press releases that the agency has 7 issued relating to charitable bingo since the first 8 part of this year. Also, the Bingo Division -- some of 9 you may have attended -- routinely provides seminars to 10 organizations that ask -- this is different from the 11 operator training program. 12 This may be a session that's specific to 13 one of their conferences. They will ask for us to come 14 and give an update on charitable bingo, etcetera. 15 There have been two that the division has presented 16 since January. 17 I've listed those, as well as -- I think 18 if you go through, we conduct a summary or a survey at 19 the end of the seminars. And I have included the 20 survey results that we received back. 21 To give you an update on a couple of 22 things that we've continued to work on, the operations 23 manual, we've completed the review of the operations 24 manual in the Bingo Division and have also sent it not 25 just to the Legal Division, but also to the agency's 0151 1 publications group so that they can begin looking at it 2 and working on ways to actually format the document 3 for -- make it user-friendly, easily updatable, 4 etcetera. 5 Also, at a previous meeting, I believe 6 back in November, the staff had distributed to the 7 advisory committee a draft of what we referred to as a 8 media guide, a document that we had put together that 9 could be supplied to organizations with suggestions on 10 how they could more effectively get attention from 11 local media. We've not received any comment on that, 12 but we are still moving forward on having that 13 reviewed. 14 Another thing that I have listed there is 15 a table right behind my report. And it lists a number 16 of articles that the staff has come across, in some 17 cases globally, most often from other jurisdictions 18 outside of Texas, although we have included Texas 19 articles if we have found them, that may relate to 20 either bingo, charitable gaming, etcetera. 21 And behind that, there is a report that 22 is called bingo activity report. And what that will do 23 is give you a six-week snapshot of some of the key 24 factors that the staff has been engaged in for that 25 time period as it relates to audits, licensing 0152 1 activities, or activities conducted by Terry Shankle's 2 staff and the Accounting Services section. 3 So, again, I hope this helps to give you 4 kind of an idea of some of the activities -- I'm not 5 representing that this is all of the activities that 6 we're involved in, but some of the activities that the 7 staff routinely takes part in kind of during the 8 interim periods between BAC meetings and certainly hope 9 that this will help you, should anyone comment to you 10 that, you know, the Bingo Division or the Lottery 11 Commission isn't doing anything for us. 12 You'll be able -- you'll be able to say, 13 well, actually that's not entirely correct. There's a 14 number of things that are going on. 15 We have the same frustration that, I 16 think, anyone else will have that issues press 17 releases. The media doesn't always necessarily think 18 the information you put out is as important as you 19 think they should. 20 We will routinely -- in the case of the 21 press releases that we have listed here, we'll receive, 22 you know, two to three calls from local media that have 23 started to work on a story as a result of that. So 24 it's not always a broad statewide effect. 25 But I know that, as a result of some of 0153 1 these, we've had interest from the Lubbock newspaper. 2 I know there have been some small weekly newspapers 3 that have picked up on it and run on it. 4 The Austin paper has a weekly supplement 5 called Xlent and we've been working with a reporter 6 with that publication. And she's indicated that 7 they're currently considering publication of that 8 article sometime maybe in mid-April. 9 So, again, I hope this, you know, gives 10 you an idea of some of the things that we take part in. 11 And I'd be happy to answer any questions that you may 12 have about any of this information. 13 MR. DOUGHERTY: Billy? 14 MR. ATKINS: Uh-huh. 15 MR. DOUGHERTY: I assume the word 16 "allocations" means paid to the charities. 17 MR. ATKINS: No, sir. It doesn't. 18 MR. DOUGHERTY: What does that mean? 19 MR. ATKINS: We make regular quarterly 20 allocations back to local jurisdictions, cities or 21 counties, for a share of the prize fees that 22 organizations collect and remit back to us. 23 MR. DOUGHERTY: That's not profit to the 24 charities? 25 MR. ATKINS: The prize fees? 0154 1 MR. DOUGHERTY: To the -- 2 MR. ATKINS: No, it's not. 3 MR. DOUGHERTY: To the city and -- 4 MR. ATKINS: Allocations -- allocations 5 come from prize fees. If you win a bingo prize, say, 6 of a hundred dollars -- 7 MR. DOUGHERTY: Uh-huh. 8 MR. ATKINS: -- you're awarded 95 9 dollars. The organization retains five percent, the 10 five-percent prize fee. 11 MR. DOUGHERTY: Okay. 12 MR. ATKINS: At the end of the quarter, 13 they send all of that in to us. And the Bingo Enabling 14 Act allows that certain jurisdictions, local 15 jurisdictions, city or -- cities or counties, can 16 receive a portion of that back. 17 MR. DOUGHERTY: Oh, I understand. 18 MR. ATKINS: And the rest of it goes to 19 the State. 20 MR. DOUGHERTY: 50 percent or 25/25/50. 21 MR. ATKINS: Right. 22 MR. DOUGHERTY: All right. Then these 23 figures shows more activity to Fort Worth by 24 24 thousand dollars than it is to Dallas, Houston, on 25 down. I was just wondering if that's significant that 0155 1 Fort Worth is doing so well or what -- can we get some 2 analysis of these rankings? You know -- 3 MR. ATKINS: Well, I think the analysis 4 is going to show the amount of prizes awarded. 5 MR. DOUGHERTY: Uh-huh. 6 MR. ATKINS: It's based on prize fees. 7 MR. DOUGHERTY: Well, they're doing 8 better in Fort Worth than any other city in the state. 9 MR. ATKINS: That depends upon what you 10 are classifying as better. 11 MR. DOUGHERTY: Well, that's -- that's 12 what I was -- that allocation. 13 MR. ATKINS: You know, to -- to a city or 14 a county, yeah, better might be how big our allocation 15 is. To an organization, it may be how much our 16 charitable distribution is. 17 MR. DOUGHERTY: Okay. So there are 18 complications involved. 19 MR. ATKINS: Right. 20 MR. DOUGHERTY: I thought that was 21 interesting. You know, on the surface, Fort Worth is 22 doing very well and Dallas is lagging a little bit. 23 MS. ROGERS: San Antonio is -- 24 MR. DOUGHERTY: Larry may have something 25 to say about that. 0156 1 MR. WEEKLEY: If -- if a city is not 2 listed on here, is it because they have chosen not to 3 be, because I notice McAllen is not listed and we have 4 three bingo halls there in McAllen. 5 MR. ATKINS: If -- if it's not listed, 6 then it is most likely that, when bingo was legalized 7 in the city of McAllen or however it was legalized, 8 they opted not to receive a portion of the prize fees. 9 MR. WEEKLEY: Okay. 10 MR. ATKINS: Tom raises a very good 11 point. Every local jurisdiction where bingo is 12 conducted does not necessarily receive an allocation. 13 When they legalized bingo, they had to take the 14 affirmative step to also vote to receive or impose the 15 allocation locally. 16 MS. ROGERS: So that city's allocation 17 just stays in the state fund? 18 MR. ATKINS: That's correct. 19 MS. ROGERS: Doesn't go out. 20 MR. ATKINS: That's correct. 21 MR. WHITTINGTON: But it -- but it -- but 22 it's only the counties and cities that have the bingo 23 halls in that county, right? 24 MR. ATKINS: That's correct. 25 MR. WHITTINGTON: Okay. 0157 1 MR. ATKINS: Right. And the money that's 2 allocated back to the -- to the local jurisdictions 3 generally will go to that jurisdiction's general 4 account. There's no restriction on what they can do 5 with it, etcetera. 6 MR. PAVLOVSKY: Can that be reversed? 7 The fact that they're not getting any money now, can 8 that be reversed? 9 MR. ATKINS: It cannot under statute. It 10 would require a statutory change. 11 MR. PAVLOVSKY: Okay. 12 MR. ATKINS: For example, a -- you know, 13 a jurisdiction that, you know, up to this time hasn't 14 voted to authorize bingo, they could still hold the 15 election to authorize bingo. But they wouldn't be 16 eligible to receive an allocation. 17 MR. WEEKLEY: So it's just a missed 18 opportunity? 19 MR. ATKINS: (Nodding) 20 MR. WHITTINGTON: So if I understand 21 this, like -- like, say for instance, I'm trying to 22 come up with some true figures for talking about the 23 smoking ban, what in each county like Dallas gets from 24 taxes because of bingo, I can use this figure that you 25 got in the book for Dallas, Dallas itself? 0158 1 MR. ATKINS: On the allocations? 2 MR. WHITTINGTON: Yes. 3 MR. ATKINS: Sure. 4 MR. WHITTINGTON: Okay. 5 MR. ATKINS: And, you know, what I -- 6 what I might suggest, if you want to do something like 7 that as it relates to the smoking ban, you might want 8 to consider submitting an open records request to get 9 the allocations, you know, for that period of time so 10 you can compare it with before and after. 11 Phil Sanderson's come up. I don't know 12 if I misspoke or what. 13 MR. SANDERSON: Phil -- Phil Sanderson. 14 I just wanted to clarify and, I think, as Tom had a 15 question about McAllen. 16 MR. WEEKLEY: Yes. 17 MR. SANDERSON: I think McAllen is in 18 Hidalgo County. 19 MR. WEEKLEY: That's correct. 20 MR. SANDERSON: Is that correct? And if 21 the city was not opting to take the prize fee 22 allocation, then the county gets all -- gets the city's 23 share. 24 The only time that the state would keep 25 any portion of it would be if the city or county, city 0159 1 and county, did not participate in the -- in the 2 allocation. And what precipitates that is -- and I 3 don't know if Billy mentioned it -- historically, and 4 when bingo was authorized, they collected a local tax, 5 two percent of the gross. 6 And then the state added their 7 two-percent tax, went to five percent, which in 1991 8 was seven percent overall on gross receipts. They 9 authorized the three-percent prize fee and cut back on 10 the tax. 11 So if they were collecting the local tax 12 on January 1st, prior to January 1st of 1993, then they 13 were authorized to continue to receive their share of 14 the prize fee that was collected. So that's where that 15 came from. 16 And the reason being is because, when 17 they did away with the tax, the local jurisdictions 18 started complaining about their loss of revenue. And 19 so they said, well, if you're currently getting prize 20 fees, then you can continue to get them. 21 But, you know, if you don't get them now, 22 then you're not going to -- at this point by statute, 23 you won't get them again until the statute changes. 24 So I just wanted to make those two 25 clarifying points. The way it's worded is that half 0160 1 the prize fee goes to the state, half the prize fee 2 goes to local jurisdictions. 3 If both the city and county participate, 4 a bingo hall located in Dallas, Texas city proper, 5 Dallas would get half of their prize fee, the county 6 would get the other half or a quarter of the prize fee 7 and the county get a quarter. 8 If they conduct in the county, then the 9 county would get all 50 percent of the prize fee. In 10 Hidalgo and McAllen's case, whether or not they're in 11 the city of McAllen or the county of Hidalgo, the 12 county gets the full 50 percent of the prize fee. 13 MS. ROGERS: That's why Hidalgo's here. 14 MR. SANDERSON: At 82 -- at 82 -- 15 MS. ROGERS: 82 thousand dollars. 16 MR. SANDERSON: -- thousand dollars, yes. 17 MR. WEEKLEY: McAllen missed the boat. 18 CHAIR TAYLOR: Let me -- let me -- I was 19 looking at this report that -- charitable bingo 20 allocations to cities, counties, 2003. It's the one 21 that's four pages. 22 So if this has -- like the city in there, 23 does that mean the county is receiving the same portion 24 that the cities receive? 25 MR. SANDERSON: Not necessarily. If all 0161 1 the bingo halls are located in the city limits, then 2 chances are that's -- that is a correct statement. But 3 if there's a bingo hall outside the city limits, then 4 the city would not get any portion of that prize fee. 5 The county would get all 50 percent. 6 CHAIR TAYLOR: So this is saying that the 7 city gets 66 and, if all of the bingo halls are within 8 the city, then the county also receives 66? 9 MR. SANDERSON: If they both have the 10 authority to collect it, yes. 11 MR. WHITTINGTON: Take, for instance, two 12 bingo halls is in Dallas City, that that's -- bingo. 13 Dallas County controls the other two, which is 14 Richardson, Texas. So Dallas County -- the ones in 15 Richardson, Dallas County, will get all that? 16 MR. SANDERSON: Richardson may get part 17 of it. I don't know if Richardson is listed in here or 18 not. 19 MR. WHITTINGTON: Yeah, they're listed. 20 MR. SANDERSON: Now you also have to 21 realize -- 22 MR. WHITTINGTON: Yeah. They're listed. 23 MR. SANDERSON: And then there is part of 24 Dallas city limits that is in Collin County. 25 MR. WHITTINGTON: Right. 0162 1 MR. SANDERSON: So in that case, if the 2 bingo hall is located in Collin County, Dallas, Texas, 3 then Collin County would get that share. 4 MR. WHITTINGTON: Okay. 5 MR. SANDERSON: Instead of Dallas. 6 MR. WEEKLEY: Collin County is not 7 listed. 8 MR. SANDERSON: So Collin County -- 9 Collin County may not -- yeah. In that case, that 10 bingo hall, Dallas would get all 50 percent of the 11 revenue. 12 MR. WHITTINGTON: So is this based on one 13 year? 14 MR. SANDERSON: This is just the fourth 15 quarter, I believe. 16 MR. WHITTINGTON: Just the fourth 17 quarter? I needed that. Thank you. This is very 18 good. 19 MR. SANDERSON: Yes, this is just the 20 fourth quarter. 21 MR. WHITTINGTON: This is very good. I 22 got a fight with the city council come May, because 23 they got a new council -- smoking ban. Thank you. 24 MS. ROGERS: Billy, I have a question. 25 Is this something that's going to be in each one of 0163 1 our -- our reports or just this is a one-time thing or 2 once a year? 3 MR. ATKINS: Oh, no. We -- we hope at 4 each meeting to provide something. 5 MS. ROGERS: Oh, thank you. 6 CHAIR TAYLOR: I agree with you. And 7 this is really on the topic, because this is about the 8 allocations. But I think that that could make a big 9 difference in cities that are proposing smoking bans, 10 that it's going to affect their pocket because it's 11 going to hit them with some money, also. 12 MR. SANDERSON: For example, Harlingen. 13 CHAIR TAYLOR: For example, Corpus, we 14 came this close -- this close to that vote. And they 15 added us to the exemptions at the last minute and it 16 only passed by a vote. 17 But they're still pushing in Corpus to -- 18 to bring it back up and make it total nonsmoking. 19 MS. ROGERS: So this would be something 20 good to show them. 21 CHAIR TAYLOR: Yeah, very good. So these 22 are good figures. I like looking at them, too. 23 MR. WHITTINGTON: Yes. 24 MS. ROGERS: I do, too. 25 CHAIR TAYLOR: Is there any other comment 0164 1 on this topic? Any public comment? 2 MS. ROGERS: I have one more quick 3 question, also, before she goes. Can I do that, or 4 should I wait until after? 5 CHAIR TAYLOR: Why don't you wait. 6 MS. ROGERS: Okay. 7 AGENDA ITEM NO. 11 8 MS. LAUDER: We can do -- it's okay with 9 me. Hi. My name is Carol Lauder, and I'm a certified 10 professional facilitator. 11 And I had the privilege of facilitating a 12 joint meeting between the commissioners, industry and 13 the public, the BAC and bingo staff in December. And 14 in Jan -- and that meeting was to clarify roles and 15 goals for each of those stakeholders. 16 And we did a lot of great work. And I 17 can see and I congratulate Billy and the Bingo Division 18 on taking some of the suggestions that came up in that 19 meeting. I can see some of the results of that work 20 today and some of the information that was shared, as 21 well as by the BAC. 22 In January, the BAC asked me to provide 23 input on the effectiveness of your meetings, how you 24 might improve them, what's going well. And so I just 25 had a couple of comments. I hear everyone's stomach 0165 1 growling, so we'll try to get out of here as quick as 2 possible. 3 Overall, I see an increase in dynamic 4 discussion among BAC members on agenda items, and I 5 think that is really healthy for you to make good 6 decisions and vote well with a lot of informed -- a lot 7 of information that you need in order to make your 8 decisions. 9 I would encourage you to have even more 10 open discussion. Often times, an agenda item comes up 11 and one or two BAC members will actually express an 12 opinion, but then you don't hear from a number of the 13 others. 14 I think it would really help you improve 15 your decisions if you had the benefit of knowing what 16 Mario thinks on a particular issue, if he has an 17 opinion. Of course, he may not in some cases. But I 18 encourage you to continue that open discussion. 19 On the annual report, I would -- and this 20 is more a content suggestion, because I've heard 21 Commissioner Clowe talk about in August there will be a 22 decision whether the BAC will be continued as a 23 committee. 24 And my suggestion is -- I see that you're 25 process is allowing for you to respond to certain 0166 1 aspects, like the gross receipts, charitable 2 distribution, expenses, attendance, other things 3 requested by the commission. 4 I would encourage the BAC to do an 5 accomplishments list, because I can see that, as a 6 committee, you have done tremendous things over the 7 last year. And so I would encourage you to supplement 8 that report with what you've accomplished, as a 9 committee, over the last year and highlight the work 10 that's been accomplished. And I also -- 11 CHAIR TAYLOR: Carol, I -- Carol, I don't 12 mean to interrupt you, but -- 13 MS. LAUDER: Sure. 14 CHAIR TAYLOR: Are you speaking under 15 public comment at this time? 16 MS. LAUDER: Yes, I am. 17 CHAIR TAYLOR: Okay. This is item number 18 11, public comment. Thank you. 19 MS. LAUDER: You had asked for public 20 comment, I thought. Thank you. 21 CHAIR TAYLOR: I was actually asking for 22 public comment on the previous item. But now we know 23 where we are on the agenda. Okay. Thank you. 24 MS. LAUDER: All right. Sure. The other 25 suggestion I had for the annual report was for you to 0167 1 take full advantage of the statement specific 2 recommendations for improvement. 3 I don't know if you're planning to add 4 that to your annual report, but I didn't see any 5 specific recommendations for improvement and, yet, I've 6 heard you come up with some really terrific ideas of 7 how you think bingo and charitable bingo can be 8 improved overall. 9 And, lastly, I would encourage you to 10 consider revisiting the roles and the goals minutes 11 that were taken in December when you're developing your 12 work plan. 13 Are there any questions about meeting 14 processes that I can answer? Thank you. 15 CHAIR TAYLOR: Thank you, Carol. Is 16 there any other comment under item 11? 17 AGENDA ITEM NO. 12 18 CHAIR TAYLOR: Then we'll move on to 12, 19 consideration of and public (sic) action on future 20 Bingo Advisory Committee meeting dates and/or items to 21 be considered for future meetings. 22 Anything from the committee? Well, 23 obviously, one of the things that needs to be on the 24 next agenda item will be our work plan. And maybe it 25 will have been approved by then. 0168 1 And if so, will these items be on here? 2 If the work plan is approved, then the items on the 3 work plan, we would take items from the work plan to 4 add to the agenda. 5 MR. ATKINS: Sure. 6 CHAIR TAYLOR: We'll also have the annual 7 report on the agenda. 8 MR. ATKINS: We can go ahead and plan on 9 including on the next agenda an update on the 10 commercial lessor position. We'll regularly have the 11 update on the 79th Legislature. 12 CHAIR TAYLOR: Kim, did you want an 13 update on the Web site activity with that charity 14 information? 15 MS. ROGERS: Yes. 16 MR. ATKINS: Depending on when the next 17 meeting is, I don't know if we'll be ready for that, 18 so... 19 CHAIR TAYLOR: We can discuss it. If 20 it's ready, we can discuss it. If not, we won't. 21 MR. ATKINS: Yeah. 22 CHAIR TAYLOR: Okay. Any other items 23 that you can think of at this time? 24 MS. ROGERS: Will we need to discuss the 25 rules, how it went with the commissioners? Yes? No? 0169 1 CHAIR TAYLOR: Some of the items that we 2 had put on the work plan, the manual, maybe the manual 3 will be ready to be discussed. 4 MR. MANIO: The operations? 5 CHAIR TAYLOR: The operations manual. 6 MR. MANIO: Right now it's at legal. The 7 operations manual right now is at legal pending final 8 endorsement. 9 MR. WHITTINGTON: Up to date legislative 10 issues will be discussed, too, from the staff so we 11 know what's going on? 12 CHAIR TAYLOR: Right. Anything else from 13 the committee? 14 MR. DOUGHERTY: Madame Chairman, are you 15 finished with the agenda items? 16 CHAIR TAYLOR: We're on -- 17 MR. DOUGHERTY: You're still on them? 18 CHAIR TAYLOR: We're still on agenda item 19 number 12. 20 MR. DOUGHERTY: Yeah, for the next 21 meeting. 22 CHAIR TAYLOR: The next meeting. 23 MR. DOUGHERTY: I just wanted to comment 24 that we -- we went over that -- what do you call it 25 that Billy did so much work on gathering other state 0170 1 news items? We went over that so fast that you didn't 2 even talk about it. 3 And I thought it was extremely useful and 4 informative that they included so many other state 5 problems that seem to be very common with ours in 6 Texas. That was a -- that was a thread that seems to 7 weave through -- throughout the whole nation, that 8 bingo is somewhat down and for same reasons that we 9 have right here in Texas, outside gaming, surrounding 10 gaming, like in Foxboro and all that sort of thing. 11 And I didn't want Billy to think we 12 didn't see that unnoticed. So that was very good that 13 you have all these good states, and even went all the 14 way to England, for goodness sakes. 15 Okay. That's my comment. 16 MR. ATKINS: Well, I appreciate that, 17 Jack. And that's, you know, hopefully one of the 18 things that will come out of, you know, sharing this 19 information with the BAC is the fact that, you know, a 20 lot of times when we come up with something or say 21 something, you know, it's not because we're 22 hallucinating or whatever. 23 You know, there's actually experience 24 elsewhere. 25 MR. DOUGHERTY: Yes. 0171 1 MR. ATKINS: Just like you say, we have 2 been tracking very closely, you know, because of our 3 professional relationships, anyway, the status of 4 charitable bingo across all of North America, not just 5 the U.S., but in Canada, and the difficulties that it's 6 having and what some other jurisdictions are doing, 7 what some aren't. 8 We routinely get the stories about the 9 games in -- in the United Kingdom where they're 10 awarding bingo prizes of over a hundred thousand 11 pounds, which is, you know, about 150 thousand dollars. 12 Now I don't know if any of you think 13 that, you know, players might be interested in going to 14 your hall if they had the opportunity to win 150 15 thousand dollars. 16 But we routinely see, you know, these 17 types of news reports, etcetera, on just how successful 18 bingo in the United Kingdom is. 19 MR. DOUGHERTY: I think that's very 20 significant. 21 MR. ATKINS: You know, they don't have 22 linked, you know, bingo games where, you know, it's 23 just -- like in our case, it would be just Texas. They 24 have what they call the national game where halls all 25 across the United Kingdom play for these big jackpots. 0172 1 MR. DOUGHERTY: And that would be like 2 linked bingo or satellite bingo or whatever. 3 MR. ATKINS: That's correct. So -- 4 MR. DOUGHERTY: Very good. 5 MR. ATKINS: Again, you know, we'll 6 continue to collect these, as we come across them, and 7 include them in -- in future reports for you. 8 MR. DOUGHERTY: That's -- 9 MR. MOORE: Yeah. I -- I agree with 10 Jack. I -- I think this is one of the more informative 11 meetings, from the staff's standpoint. I was impressed 12 with the financial report that they put together for 13 the commissioners and more so for the legislators. 14 I think that there's been a perception 15 problem over there, as far as gross receipts versus the 16 distributions. And I think that really helps to 17 clarify things for somebody that doesn't understand the 18 whole package we have over here and how it works. And 19 I -- I think they did a real nice job with that. 20 MR. WHITTINGTON: Do we have some type of 21 legislation that's dealing with prize increase, I mean, 22 as far as payout? 23 MR. ATKINS: No. Not at this time, March 24 30th. 25 MR. DOUGHERTY: Larry, did you ask about 0173 1 prize increase? 2 MR. WHITTINGTON: Yeah. 3 MR. DOUGHERTY: Legislation? 4 MR. WHITTINGTON: Yeah. 5 MR. DOUGHERTY: There is -- there is a 6 bill in there that addresses prize increase. But 7 whether it's going anywhere or not, I don't know. But 8 it was in there. 9 MR. ATKINS: There's actually not a bill 10 in there. 11 MR. DOUGHERTY: I'll stand corrected. 12 I'm going to look. Go ahead. 13 CHAIR TAYLOR: Okay. We have items for 14 the agenda. If there's something else you think of 15 that you'd like on the agenda, please let myself or 16 Billy know. 17 Now I need a date. 18 MS. LAUDER: Do you want to see a 19 calendar? 20 CHAIR TAYLOR: Thank you. We would love 21 to see a calendar. Thank you. 22 Okay. We know that there could possibly 23 be a meeting on the rules on the 28th. That's correct, 24 right? 25 MR. ATKINS: There could conceivably, 0174 1 yes, be a public hearing. 2 CHAIR TAYLOR: Public hearing on the 3 28th, possibly. 4 MR. ATKINS: If the commissioners vote on 5 Wednesday to publish the meeting. 6 CHAIR TAYLOR: So what is the wishes of 7 the committee? 8 MR. ATKINS: If they stuck -- if you 9 stick with your natural pattern, it would be sometime 10 towards the end of May, the week of the 23rd or the 11 week of the 30th, the week of May 23rd or the week of 12 May 30th. 13 MR. WHITTINGTON: What is that Wednesday, 14 the 25th? 15 MR. ATKINS: 25th. 16 CHAIR TAYLOR: Okay. We've got the 25th. 17 MR. WHITTINGTON: 25th is good. 18 CHAIR TAYLOR: 25th? 19 MS. ROGERS: 25th. 20 CHAIR TAYLOR: 25th? 21 MR. MOORE: And it's right before the end 22 of the session. 23 MR. WHITTINGTON: 25th. 24 CHAIR TAYLOR: 25th, 10 in the morning. 25 MR. WEEKLEY: 10 o'clock? 0175 1 CHAIR TAYLOR: 10 o'clock. 2 MR. WEEKLEY: That means we're going to 3 have to get up early. 4 AGENDA ITEM NO. 13 5 CHAIR TAYLOR: Okay. If there's no other 6 items for this and we have our date, then this meeting 7 is adjourned. It's 1:20. 8 (Meeting adjourned at 1:20 p.m.) 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 0176 1 REPORTER'S CERTIFICATE 2 3 STATE OF TEXAS ) 4 COUNTY OF TRAVIS ) 5 6 I, DAVID BATEMAN, RPR, Certified Shorthand 7 Reporter in and for the State of Texas, do hereby 8 certify that the above-captioned matter came on for 9 hearing before the BINGO ADVISORY COMMITTEE as 10 hereinafter set out, that I did, in shorthand, report 11 said proceedings, and that the above and foregoing 12 typewritten pages contain a full, true, and correct 13 computer-aided transcription of my shorthand notes 14 taken on said occasion. 15 16 Witness my hand on this the 5th day of 17 April, 2005. 18 19 __________________________________ 20 David Bateman, RPR, Texas CSR 7578 Expiration Date: 12/31/05 21 Wright Watson STEN-TEL Firm Registration No. 225 22 1801 North Lamar Boulevard Mezzanine Level 23 Austin, Texas 78701 (512) 474-4363 24 25