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 6              BINGO ADVISORY COMMITTEE MEETING
 7   
 8                        AUGUST 9, 2006
 9   
10   *  *  *  *  *  *  *  *  *  *  *  *  *  *  *  *  *
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15             BE IT REMEMBERED that the BINGO ADVISORY
16   COMMITTEE held a Bingo Advisory Committee Meeting on
17   the 9th day of August, 2006, at 10:00 a.m., before
18   Kimberlye A. Furr, RPR, CSR in and for the State of
19   Texas, reported by machine shorthand, at the offices of
20   the Texas Lottery Commission, 611 East 6th Street,
21   Auditorium, Austin, Texas, 78701, whereupon the
22   following proceedings were had:
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24   
25   
0002
 1   
 2                         APPEARANCES
 3   
 4   Chairman:
 5              Ms. Suzanne Taylor
 6   Charitable Bingo Operations Director:
 7             Mr. Billy Atkins
 8   Committee Members:
 9              Mr. Knowles Cornwell
10              Mr. Larry Whittington
11              Ms. Rosalie Lopez
12              Ms. Kimberly Rogers
13              Mr. John (Jack) Dougherty
14              Mr. Thomas Weekley
15              Ms. Markey Weaver
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0003
 1   
 2                          I N D E X
 3   
 4   Appearances................................        2
 5   
 6   Reporter's Certificate.....................      191
 7   
 8                            AGENDA
 9   
10   1     The Bingo Advisory Committee will
           call the meeting to order..............      6
11   
     2     Consideration of and possible
12         discussion and/or action on the
           minutes of the May 10, 2006
13         Bingo Advisory Committee meeting  .......    6
14   
     3     Recognition of new Bingo Advisory
15         Committee members and outgoing
           Bingo Advisory Committee members .......  6/28
16   
     4     Report and possible discussion
17         pertaining to the Price Fixing
           work group .............................     8
18   
     5     Report and possible discussion
19         pertaining to the Progressive
           Bingo/Alternative Styles of Play
20         Work group .............................    11
21   6     Report and possible discussion
           and/or action on proposed amendments
22         to Charitable Bingo Administrative
           Rule 402.102, Bingo Advisory
23         Committee ..............................    22
24   7     Report and possible discussion on a
           rule relating to the responsibilities
25         of conductors, lessors, manufacturers
0004
 1   8     Discussion on Charitable Bingo
           Administrative rule 402.300 Pull-tab
 2         Bingo (e) Sales and Redemption .........    64
 3   9     Discussion and possible creation of
           a work group on the impact of smoking
 4         ordinances and smoking bans on bingo
           halls ..................................    98
 5   
     10    Report and possible discussion on the
 6         79th Legislature .......................   117
 7   11    Report and possible discussion on
           public service announcements...........    120
 8   
     12    Report and possible discussion and/or
 9         action on the 2005 Bingo Advisory
           Committee Annual Report ...............    123
10   
11   13    Report and possible discussion on
           redesign of Charitable Bingo Operation
12         Division website ......................    137
13   14    Report on the implementation of the
           new administrative Penalty Guideline
14         rules .................................    144
15   15    Report and possible discussion on
           1st quarter 2006 bingo conductor
16         information ...........................    144
17   16    Report, possible discussion on the
           characteristics and/or profiles of
18         organizations conducting bingo  ........   147
19   17    Report and possible discussion on the
           status of nominations for filling
20         vacant Bingo Advisory committee
           positions ..............................   168
21   
     18    Report and possible discussion on
22         the activities of the Charitable
           Bingo Operations Division ..............   169
23   
     19    Public Comment .........................   175
24   
     20     Consideration of and possible action
25          on future Bingo Advisory Committee
0005
 1          considered for future meetings ........   188
 2   21     Adjournment ...........................   190
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0006
 1                  (AGENDA ITEM NUMBER ONE)
 2                  CHAIR TAYLOR:  It's 10:03, and we do
 3   have a quorum, we are going to call the meeting to
 4   order.
 5                  (AGENDA ITEM NUMBER TWO)
 6                  CHAIR TAYLOR:  Item No. 2 is,
 7   Consideration of and possible discussion and/or action
 8   on the minutes of the May 10, 2006 Bingo Advisory
 9   Committee meeting.
10                  These minutes were posted on line.  Are
11   there any changes or revisions?
12                  MR. ATKINS:  I have a change.  On space
13   15, line 13, it refers to the speaker as Colin Hosla,
14   H-o-s-l-a; that should read Colin Haza, H-a-z-a.
15                  CHAIR TAYLOR:  Are there any other
16   changes?  Do I hear a motion for approval of the
17   minutes as amended?
18                  MS. ROGERS:  I will.
19                  CHAIR TAYLOR:  Is there a second?
20                  MS. LOPEZ:  I'll second.
21                  JUDGE:  All in favor.  Opposed?  It's
22   unanimously past.
23                  (AGENDA ITEM NUMBER THREE)
24                  CHAIR TAYLOR:  And we are going to go
25   ahead and skip Item Number Three at this time and come
0007
 1   back to it.  On Item Number Three, we're going to skip
 2   the recognition of the old members and introduce the
 3   number members.
 4                  We'd like to welcome Markey Weaver;
 5   she's going to be taking Mario Manio's place on the
 6   committee.  And we would like to recognize Knowles; he
 7   will be taking Danny Moore's place on the committee
 8                  Would y'all like to tell us about
 9   yourself?  Markey?
10                  MS. WEAVER:  I'm Markey Weaver.  I
11   reside in Brian, Texas.  We have a very nice hall; you
12   should come see us.  We have four charities.  We have
13   St. Joseph's Church and then we have the Elks Lodge and
14   we have The Council of Alcohol Associates Abuse.  I
15   have two children, Stephanie, four, and Samantha
16   eleven.  I have two grandchildren, Dalton, four, and
17   Merit, two.  And I just recently got engaged to the
18   Texas A&M hockey coach, so y'all should come watch
19   hockey.
20                  MS. ROGERS:  If we need hockey tickets,
21   you're the one to come see.
22                  MS. WEAVER:  We played UT six times this
23   year.
24                  CHAIR TAYLOR:  And, Knowles, would you
25   like to tell us about yourself?
0008
 1                  MR. CORNWELL:  I'm Knowles Cornwell.
 2   I've been in this industry for about eleven years as a
 3   distributor.  I'm a licensed CPA.  I still hold my
 4   license; it's on administrative hold, though.  I'm
 5   looking forward to serving with this group of people.
 6   I'm really excited about what's in front of us.  I've
 7   got two kids and they're going to college on Thursday
 8   and I'm taking them to college, so it will be a nice
 9   quiet winter, I hope.  Thanks.
10                  CHAIR TAYLOR:  Thank you.  Welcome.
11                  We're going to skip the rest of Item
12   Three and come back to that item.
13                  (AGENDA ITEM NUMBER FOUR)
14                  CHAIR TAYLOR:  Item Number Four is,
15   report and possible discussion pertaining to the Price
16   Fixing worK group.
17                  MS. JOSEPH:  Good morning.  I'm Sandy
18   Joseph, assistant general counsel.  I have Items four,
19   five, and six to report to you on the progress on rule
20   making activities.  Item Four concerns the price fixing
21   work group.  The commission is continuing to gather
22   information related to the issues surrounding price
23   fixing and market conduct.  We've continued to review
24   comments received from the work group and we've been
25   drafting additional language.  Recently we obtained a
0009
 1   great deal of information from the Washington State
 2   Gambling Commission that we're studying.  Last year we
 3   learned that, after many years of their having rather
 4   extensive rules regarding pricing and reporting of
 5   pricing, they repealed almost all of their rules.  That
 6   kind of caused us to take note, and we want to study
 7   their experience and understand what they had, what
 8   they repealed, and why they decided to do that so that
 9   we won't travel down the same road unless we're sure we
10   want to, so we are currently reviewing that.  We do
11   expect to call on the work group for additional input
12   in September, if not sooner.
13                  CHAIR TAYLOR:  Any other comments or
14   questions?
15                  MS. ROGERS:  Do you have the list of
16   members, changed members?
17                  MS. JOSEPH:  I don't have the list with
18   me, I'm sorry.  I tried to get it up on the internet,
19   but, I'm sorry, I wasn't fast enough.
20                  MS. LOPEZ:  I have a question on the
21   alternative styles of bingo.  Has the work group done
22   anything further on that.
23                  MS. JOSEPH:  That is the next item.
24   Madam Chairman, would you like me to proceed?
25                  CHAIR TAYLOR:  Yeah, before we take that
0010
 1   item, I would like to recognize Commissioner Cox.  We
 2   appreciate you coming, and any time you have anything
 3   you'd like to say, please let us know.  We do have one
 4   witness affirmation for Stephen Fenoglio.
 5                  MR. FENOGLIO:  Madam Chair and members,
 6   my name is Stephen Fenoglio.  I'm an attorney in Austin
 7   and I have appeared before you before.  I believe I'm
 8   on the work group, I've asked to be on the work group,
 9   and, to my knowledge, we have not done anything, so if
10   the staff has Washington State data, we'd like to have
11   it in a timely basis.  I have asked, as you may recall,
12   for data from the staff before and I have not received
13   anything, so, to my knowledge, the work group hasn't
14   done anything.  My witness affirmation said it depends,
15   Madame chair, on all of these issues because I don't
16   know until we have action items whether I'm for them or
17   against them.
18                  CHAIR TAYLOR:  Okay.  You let me know by
19   standing up and we will know that you'd like us to call
20   on you.
21                  MR. FENOGLIO:  Thank you.
22                  MS. JOSEPH:  And Mr. Fenoglio is
23   correct, we haven't called on the work group members in
24   the last two or three months for any additional input.
25   Staff is doing some internal work and we will be
0011
 1   calling on them again.
 2                  (AGENDA ITEM NUMBER FIVE)
 3                  CHAIR TAYLOR:  All right.  Item Number
 4   Five, Report and possible discussion pertaining to the
 5   progressive bingo/alternative styles of play work
 6   group.
 7                  MS. JOSEPH:  Thank you.  Item Number
 8   Five does concern the work group on progressive bingo
 9   rule, alternative styles of play.  As you may recall,
10   the group is focussing first on coming up with draft
11   rules for progressive bingo, and at the same time, we
12   have been collecting information on other types of
13   games that we may want to look at after we work on our
14   progressive rule.  We have drafted a rule pertaining to
15   progressive bingo; that was circulated to the work
16   group on July 26th.  The work group is scheduled to
17   meet tomorrow, either in person or via telephone
18   conference, either way is acceptable, to discuss the
19   draft.  Of course, anyone who is not able to attend any
20   work group, members that are not able to attend, is
21   certainly welcome and we hope will contribute some
22   comments by e-mail or by calling myself or Phil
23   Sanderson.  Jack Dougherty has already submitted some
24   comments, and we appreciate that.  We will be reviewing
25   whatever input we get tomorrow and deciding where to go
0012
 1   from there.
 2                  MR. CORNWELL:  Sandy, can you help me,
 3   and my apologies, the first time I read the draft rule
 4   on progressive bingo was recently, and I've got a
 5   couple of questions.  Today there is a VFW that plays
 6   progressive; they play three or four progressive games
 7   under the current guideline 2500 through 750.  They
 8   also changed the patterns because, if you know
 9   anything about -- if you work with progressives, you
10   understand that a blackout, you always hold block out
11   with 48 numbers, nobody is going to play that backout
12   game because it's very difficult to reach a blackout in
13   48 numbers.  They also pay less than $100 in
14   consolation prizes on some of their games.  And I was
15   just wondering if you guys were aware that the state --
16   we already run progressives in the state.  It's still
17   an allowed game.  It's been around since the inception
18   of bingo.  I know that this rule would limit to one
19   progressive game; it would limit playing.  I mean, it
20   would say that the only progressive game you can play
21   is a coverall, not a coverall, probably with the letter
22   "X" at least you have 87 percent chance of producing a
23   single winner, which is a good progressive game to
24   play.  I was just curious if the committee -- after I
25   read it, I'm going to tell you, no, that rule does
0013
 1   not -- that's not a good rule and this is a change in
 2   legislation and a change in the way we play it.  It's
 3   not as -- it is a very limiting rule, Sandy, and I
 4   think we ought to quit working on it.
 5                  MS. JOSEPH:  And that's the kind of
 6   things that we want from you.  I'm not sure if you're
 7   going to be able to participate tomorrow?
 8                  MR. CORNWELL:  Well, I'm going to make a
 9   motion to put Darren Peters on there.  He knows; he's
10   very knowledgeable.
11                  MS. JOSEPH:  Billy, would you like to
12   comment?
13                  MR. ATKINS:  Yes, I do.  I want to
14   comment on one of your questions.  You asked me if
15   progressive bingo games are being worked.  We also know
16   that there are organizations out there who could be
17   conducting progressive bingo games who aren't aware of
18   them, so this is a means to address that.  And as Sandy
19   said, you know, you're comments are the type of
20   comments that we're seeking as we go through this
21   process.
22                  MR. CORNWELL:  Thank you and I
23   appreciate it, but, Billy, I think our efforts are
24   better spent than on this thing.  Again, I just think
25   we're going to have some upset people if we pass a
0014
 1   rule.  Now, if we want to get the information out
 2   there, let's post progressive legal on the website and
 3   just send it out in the next Bingo Bulletin.  People
 4   play.  And, Suzanne, I was going to ask you, have you
 5   ever played your -- have you ever used --
 6                  CHAIR TAYLOR:  Hard cards?
 7                  MR. CORNWELL:  No, not hard cards.  The
 8   Bonanza Bingo and you used the folded cards?
 9                  CHAIR TAYLOR:  Yes.
10                  MR. CORNWELL:  And so do you know that
11   can be played as progressive game?
12                  CHAIR TAYLOR:  Yes.  I want to add one
13   thing, I felt a lot like you when we first entered this
14   topic because I didn't like adding rules to something
15   that we're already doing and we're not having a problem
16   with, but what was explained to me that made really
17   good sense is that, if we had a progressive rule that
18   we could show the legislators that we already are
19   playing progressive bingo, we would like to just be
20   able to change it up some, and we've already got rules
21   for that, maybe it would be easier to get through the
22   legislator a true progressive game going from session
23   to session.
24                  MR. CORNWELL:  Then, in that case, we
25   just take out those limitations and pass the rule.
0015
 1                  CHAIR TAYLOR:  I absolutely agree.  And
 2   I notice that Billy has the work groups up here on his
 3   computer so he can give us the list of who is currently
 4   on that work group.
 5                  MR. ATKINS:  The BAC members are Danny
 6   Moore, Jack Dougherty, Mario Manio, and Rosie Lopez, so
 7   if the committee would like to --
 8                  MR. CORNWELL:  That's including the
 9   alternative play stops?
10                  MR. ATKINS:  Yes.
11                  MR. CORNWELL:  I thought we had Glenn
12   Goulet on there as far as --
13                  MR. ATKINS:  As a public member; I just
14   read the BAC members.
15                  MR. CORNWELL:  Oh, I'm sorry, I stand
16   corrected.
17                  CHAIR TAYLOR:  So we do need to replace
18   Danny Moore and Mario both on this committee, so you
19   need to stay.
20                  MR. DOUGHERTY:  You got me on that one.
21                  CHAIR TAYLOR:  Okay.  You are on that.
22   Are you willing to continue to serve on that work
23   group?
24                  MR. DOUGHERTY:  I guess so.
25                  CHAIR TAYLOR:  Rosie, are you willing to
0016
 1   continue on that work group?
 2                  MS. LOPEZ:  Yes.
 3                  CHAIR TAYLOR:  Okay.  Do we have anybody
 4   else that is interested in serving on that work group?
 5                  MR. CORNWELL:  I am very interested in
 6   that, Suzanne.
 7                  CHAIR TAYLOR:  Okay.  Is it a problem of
 8   having four BAC members on this work group?
 9                  MR. ATKINS:  No.
10                  CHAIR TAYLOR:  Is anybody else on the
11   BAC interested in serving on this work group at this
12   time?
13                  Okay.  So the work group BAC members
14   will now be Rosie, Jack, and Knowles.
15                  MR. CORNWELL:  Suzanne, at this time I'd
16   like to make a motion to add a public member and that
17   would be Darren Peters.
18                  CHAIR TAYLOR:  Okay.  I don't know if we
19   need to do this through a motion, but since he's made
20   one, somebody want to second it?
21                  MR. WEEKLEY:  Second.
22                  CHAIR TAYLOR:  Okay.  Second by Tom.
23   All in favor?  Okay.  We will add Darren Peters to the
24   work group.
25                  MS. ROGERS:  Do you have a list of the
0017
 1   other public members?
 2                  MR. ATKINS:  Sure.  That's Stephen
 3   Fenoglio, Shayne Woodard, Jamie McNally, Glenn Goulet,
 4   and Joe Garcia.
 5                  CHAIR TAYLOR:  Okay.  That's a pretty
 6   extensive work group, so I would imagine, by the next
 7   meeting, we're going to have a lot.
 8                  MR. CORNWELL:  I'd like to also make a
 9   motion, although there's a lot of quality people on
10   this board, and I'm excluding myself, I'd like to
11   nominate Phil Sherwood with Multimedia Games to also be
12   a public member.  He is a very qualified long-term
13   bingo guy that is now working for Multimedia.
14                  CHAIR TAYLOR:  Okay.  Is there any --
15                  MR. CORNWELL:  Stand up, Phil, so
16   everybody can see your face.
17                  CHAIR TAYLOR:  Is there anybody that
18   opposes adding another public member?  Okay.  And by
19   consent, we will add him also to the work group.
20                  Did you get that name, Bill?
21                  CHAIR TAYLOR:  Phil Sherwood.  If those
22   public members are here, if they can follow up with Ms.
23   Joseph and get her your conductor contact information.
24                  MR. DOUGHERTY:  What time is the meeting
25   and where?
0018
 1                  CHAIR TAYLOR:  Sandy, can you give us
 2   that information?
 3                  MS. JOSEPH:  Yes.  The meeting is
 4   tomorrow from 9:00 to 11:00, and if someone decides
 5   that they can't attend and they'd like to participate
 6   by phone, if they would just give me their phone number
 7   and we'll conference them in.  Okay.  In fact, it will
 8   be in the little conference room upstairs.  In fact,
 9   many of these work groups, most of the members do
10   participate by phone so no one should feel bad about
11   that.  You know, people have distances to travel and
12   can't always make it here.
13                  I believe Phil might have had a comment.
14                  MR. SANDERSON:  Phil Sanderson,
15   assistant director of the Charitable Bingo.  Division.
16   I'd like to answer one of Knowles' questions or
17   concerns.  There are -- from our research, there are
18   two types of games being conducted, one I'll call
19   progressive, which is based on how the rules developed,
20   the second one is, for lack of a better term at this
21   time, is a consolation game, and I think that's what
22   you're referring to is where if you can block out in 48
23   numbers, for example, you get $500, if it's after that,
24   it's $250.  You know, if the numbers don't change or
25   anything and the prizes don't get higher each game and
0019
 1   they stay in a pretty consistent pattern, this
 2   organization is playing that type of game.
 3                  Additionally, the rule -- this is just
 4   laid out; it's not -- we had to come up with a starting
 5   point, and so it's just laid out, and here, some
 6   numbers are thrown out there.  There's nobody, you
 7   know, set on $100, $500, 48 numbers; it's just
 8   placeholders, so to speak, so that's what the committee
 9   will discuss tomorrow.
10                  CHAIR TAYLOR:  Thank you.  Any other
11   comment from the committee?  Do we have some public
12   comment?
13                  MR. GARCIA:  Joe Garcia.  I just wanted
14   to reiterate, Ms. Taylor, what you said.  Part of the
15   reason that we'd like to get a rule into the -- into
16   the administrative rules is so that we can go back to
17   the legislature and say, this is a game that can
18   already be plaid.  Obviously, there are limitations
19   based on statute that are in place, and part of our
20   effort, for those of us that are interested in working
21   with the legislature, is to convey to them that, given
22   that we have a progressive rule in place, the game is
23   allowed, what would benefit the charities is an
24   increase in limitations.
25                  Now, I agree that, of the first round,
0020
 1   there's some comments that we're going to make tomorrow
 2   as in regards to what we think those changes ought to
 3   be, but, for the most part, I think the intent is to
 4   say that progressive games are allowed and we have a
 5   rule in place, but in order to allow more charities to
 6   participate in this progressive game, we're going to
 7   have to make some statutory changes that we're going to
 8   have to sell to the legislature.  So I just wanted to
 9   reiterate that.
10                  MR. CORNWELL:  One comment.  Joe, I
11   understand you're pretty tight over at the governor's
12   office, well, that's the rumor.  Joe, what's going to
13   make the -- the governor vetoed this the last time.  We
14   got it passed the legislature and he vetoed it the last
15   time.  What's the change in the governor's thinking now
16   that he will sign such a bill even if we were
17   successful in getting it through the legislature?
18                  MR. GARCIA:  Well, I think it was vetoed
19   because we hadn't done our job of educating members in
20   exactly what the progressive bingo is all about, and,
21   frankly, not everybody in the industry was together on
22   it.  I know that there was some folks that weren't
23   completely thrilled with the way the legislation was.
24   One of the objectives is, hopefully, that we can all
25   come together.  I mean, I think there's going to be a
0021
 1   variety of gaming options that are going to be
 2   addressed this issue and what form or format they'll
 3   come through.  I don't think anyone is really talking
 4   about bingo.  In terms of how it affects bingo, let's
 5   say if you get full-blown casinos in seven situated
 6   sites, well, what's the impact on bingo?  And so I
 7   think that we as an entry definitely need to start
 8   meeting now to determine how we're going to convey a
 9   message to the legislature that, depending on what you
10   do at the gaming site, is going to have a dramatic
11   impact on the Charitable Bingo site, and whether there
12   is an opportunity for bingo to participate as
13   charitable participation in the VLC system or
14   charitable participation in some kind of other gaming
15   system that may be available.
16                  obviously, I think, you know, in my
17   opinion, charitable bingo is needing to carefully watch
18   what the legislature is doing in terms of the whole
19   gaming word and how that impacts us because it will
20   have an effect.  How we mitigate that effect depends on
21   all of us to work together as one unified voice, be it
22   manufacturers, distributors, charitable groups, just
23   have one voice.  I think often we go in every direction
24   and no one really listens to us, so if we make our
25   efforts, I think, being Governor Perry has supported
0022
 1   other bingo bills in the past, I think it's just a
 2   matter of us educating the key leaders at the Capitol.
 3                  MR. CORNWELL:  Thank you for that very
 4   concise answer, Joe.
 5                  MR. GARCIA:  Thank you.
 6                  CHAIR TAYLOR:  Thank you.  Is there any
 7   other public comment?
 8                  (AGENDA ITEM NUMBER SIX)
 9                  CHAIR TAYLOR:  Then we'll go on to the
10   next item, Item Number Six, Report and possible
11   discussion and/or action on proposed amendments to
12   Charitable Bingo Administrative Rule 402.102, Bingo
13   Advisory Committee.
14                  Sandy.
15                  MS. JOSEPH:  Sandy Joseph, assistant
16   general counsel.  In your notebooks is a copy of what
17   is a draft notice of proposed rule making to amend Rule
18   102 pertaining to Bingo Advisory Committee.  This
19   proposed rule was prepared in response to the
20   commission's direction at their June 7th, 2006 meeting
21   to prepare for post amendments, to clarify certain
22   portions of the rule.  On August 2nd, last week, the
23   commission voted to publish this rule for public
24   comment.
25                  The proposed amendments to Subsections E
0023
 1   and K would clarify the Bingo Advisory Committee's
 2   responsibility to report to the commission and would
 3   also clarify the basis for removal as a member of the
 4   Bingo Advisory Committee.  More specifically, the
 5   amendment to Subsection E requires that the BAC
 6   annually report to the commission on the BAC's
 7   perspective on the state of Charitable Bingo in Texas
 8   with specific comments on certain items, including a
 9   new item to the list, net receipts.  Subsection E
10   currently provides that the BAC annually report to the
11   commission with specific recommendations for
12   improvement of the status of certain areas relating to
13   charitable bingo.  The proposed amendment would make it
14   clear that the commission is seeking the BAC's
15   perspective on these various areas related to the bingo
16   industry.
17                  The proposed amendment to Subsection K
18   specifies that a BAC member may be removed if
19   delinquent in payment of any prize fees or gross rental
20   taxes for which a final jeopardy determination has been
21   made by the commission.  This clarifies the existing
22   rule, which simply says that a BAC may be removed if
23   delinquent in any taxes of these or any liability to
24   the state.  This makes it clear that what we're
25   concerned about here is any delinquency in bingo fees
0024
 1   and taxes.
 2                  The proposed rule will be published in
 3   the August 18th issue of the Texas Register.  After
 4   that, there will be a comment period of at least 30
 5   days, so there will be comments both written and oral
 6   accepted until September 19th.  A public hearing will
 7   be held on this proposed rule on August 29th at 11:00
 8   in this room.
 9                  I'd be happy to answer any questions.
10                  CHAIR TAYLOR:  Sandy, when is the last
11   time this rule has actually been changed?  Was it two
12   years ago; do you remember?
13                  MS. JOSEPH:  Well, the rule was amended
14   just in the last month or so to extend the BAC for
15   another year, so that was the most recent amendment to
16   the rule.
17                  CHAIR TAYLOR:  And previous to that, how
18   long had it been?
19                  MS. JOSEPH:  The previous year, it was
20   also amended to extend --
21                  CHAIR TAYLOR:  Besides amendments
22   extending the life of the BAC, when has this rule
23   previously been amended?
24                  MS. JOSEPH:  I'm not certain about that.
25   I'm not aware of any amendments to it other than
0025
 1   extensions.  As far as I know, there have not been any.
 2                  CHAIR TAYLOR:  So, in essence, you're
 3   not actually changing the rule, you're just trying to
 4   make the rule clearer?
 5                  MS. JOSEPH:  Right.  I mean it's changed
 6   to the extent to clarify and also to really add in, you
 7   know, the fact that the commission would like
 8   information on the BAC's perspective on net receipts as
 9   well as gross receipts, and I think these are things at
10   least I believe Suzanne and Kimberly have heard the
11   commissioners talk about.  It's not meant to add any
12   burden, it's just meant to clarify, certainly.
13                  MS. ROGERS:  So the only difference is
14   the clarification that it's the taxes that involve
15   bingo?
16                  MS. JOSEPH:  That's right.
17                  MS. ROGERS:  Not just saying the taxes?
18                  MS. JOSEPH:  Yeah, that's correct.
19                  MS. ROGERS:  Okay.
20                  MS. JOSEPH:  So if any member would like
21   to offer comments on this, you can, you know, send it
22   in a letter form; you can come to the hearing if you
23   like.
24                  CHAIR TAYLOR:  Let me check these dates.
25   You said August 18th, it will be in The Register?
0026
 1                  MS. JOSEPH:  That's right.
 2                  CHAIR TAYLOR:  And the 29th is the
 3   public hearing?
 4                  MS. JOSEPH:  Correct.
 5                  CHAIR TAYLOR:  And September 19th is --
 6                  MS. JOSEPH:  The 30-day period will end.
 7   And we anticipate receiving comments through
 8   September 19th.
 9                  CHAIR TAYLOR:  And that will be the
10   close of the comment period?
11                  MS. JOSEPH:  Yes.
12                  MR. ATKINS:  There's also a -- this rule
13   is on the agency's website and there's also a means to
14   submit comments electronically through the web site and
15   those comments will go directly to Ms. Joseph.
16                  MS. JOSEPH:  Yes, thank you for adding
17   that.
18                  CHAIR TAYLOR:  Any other comment by the
19   BAC members?  Any questions?
20                  MS. JOSEPH:  Does anyone have any
21   concerns about it at this point?
22                  MR. WHITTINGTON:  I really don't
23   understand what you said.
24                  MS. JOSEPH:  Did you say you do have
25   concerns?
0027
 1                  MR. WHITTINGTON:  Well, not really.  I
 2   really don't understand what you just said about the
 3   BAC being removed.  I think you said removed if they're
 4   late on taxes or behind or whatever?
 5                  MS. JOSEPH:  The current rule says that
 6   a BAC member can be removed if they're delinquent in
 7   any liability to the state, so it's kind of a broad
 8   statement.  So, for instance, that could include if
 9   you're late on sales tax, anything to the state.  What
10   this amendment would do is say --
11                  MR. WHITTINGTON:  If they're one week
12   late?  One month late?
13                  MS. JOSEPH:  No.  It's not clear.  It's
14   not clear and so that's one reason why we're wanting to
15   clarify.
16                  MR. WHITTINGTON:  Right.  Y'all need to
17   have some type of limit for the time lines, I think,
18   put in place, if you're late 30 days or if you're late
19   60 days instead of not one day or two days, so that's
20   what I'm saying, we need to clarify on that point for
21   sure.
22                  MR. ATKINS:  And what it states is, when
23   a final jeopardy determination has become final.
24                  MS. JOSEPH:  If anybody would like to
25   discuss this further with me individually, I'd be happy
0028
 1   to do that.
 2                  CHAIR TAYLOR:  Thank you, Sandy.
 3                  (BACK TO AGENDA ITEM NUMBER THREE)
 4                  CHAIR TAYLOR:  All right.  At this time
 5   we'd like to go back to Item Number Three.  We'd like
 6   to recognize our outgoing Bingo Advisory Committee
 7   members, so if we could have Danny and Mario both come
 8   up.
 9                  MR. ATKINS:  Members, one of the things
10   that we've done in the past for outgoing members is
11   invited the remaining members to sign their name cards
12   and we give that to them as a token and then we also
13   have certificates.
14                  CHAIR TAYLOR:  You guys are looking
15   really good.
16                  Commissioner Cox, if you could come up,
17   please, right here in front.  It's picture time.  It's
18   my sad job to give you-all this piece of paper
19   recognizing you for your outstanding service to the
20   BAC, and, in this case, I truly have to say, I am very
21   glad for our new members and I am terribly sad to see
22   both of you-all leave.
23                  Can you join the picture, Billy?  You're
24   looking really spiffy today, too.  Thank you.  And,
25   seriously, I'm going to miss you guys.  Thank you.
0029
 1                  (AGENDA ITEM NUMBER SEVEN)
 2                  CHAIR TAYLOR:  Okay.  Back to our
 3   agenda.  We're down to Item Number Seven, Report and
 4   possible discussion on a rule relating to the
 5   responsibilities of conductors, lessors, manufacturers,
 6   and distributors.
 7                  Rosie.
 8                  MS. LOPEZ:  I asked for this particular
 9   agenda item as a request to allow the BAC members to
10   also comment as well as anyone in the audience.  I
11   believe that -- I know that everyone has obviously read
12   the Bingo Enabling Act, by which basically is our Bible
13   or guideline that we have to comply with in order to
14   stay in compliance with the type of business that we're
15   involved in.  Being a charity representative and being
16   involved with this industry on a daily basis, I'm
17   sometimes overwhelmed with the amount of responsibility
18   of what the bingo industry has for the charities.  As I
19   read through my rules, probably 3/4 of what this
20   industry is involved in is totally charity
21   responsibility and, with that being said, I guess, this
22   whole industry, basically, the purpose of charitable
23   bingo is for charities to obviously raise funds for our
24   organizations.  With that being said, the amount of
25   responsibility that it takes for our organizations to
0030
 1   raise money sometimes can be, like I said, overwhelming
 2   to a lot of charities.  I think that commercial lessors
 3   play a big role in the industry as well as the
 4   manufacturers, distributors, and then obviously we have
 5   the Texas Lottery Commission to whom we have to answer
 6   to for all of the rules and the regulations.
 7                  I think that it's been numerous years
 8   since the rules were written and revised in 2003, and I
 9   don't believe that I have yet to come across a rule in
10   this particular Bingo Enabling Act that gives precise,
11   definite language on what lessors' responsibilities or
12   activities are with the industry in a whole as far as
13   it relates to charities' involvement.  Now, charities
14   have a clear-cut outline of what our responsibilities
15   are and what happens if we don't meet those
16   responsibilities, and so, I guess, I'm asking for some
17   input today, some feedback, on what some of the BAC
18   members feel that this may be a proposed rule or an
19   additional amendment to the Enabling Act that will give
20   us precise language on what the definition is of
21   lessors' involvement with the day-to-day operations of
22   the bingo hall, what the charities' day-to-day rules or
23   guidelines are so that when charities get involved in
24   this industry, that they have a clear-cut picture of
25   what the responsibilities are.  Because, I'll be honest
0031
 1   with you, up until two years ago, I really had no clue
 2   what, really, the rules and regulations were, and it's
 3   not until you get involved in it in a more timely
 4   manner that you become more and more involved and you
 5   realize that there's more and more responsibilities
 6   that charities are involved with.
 7                  MS. ROGERS:  I would have a question or
 8   a comment, I don't know which one you'd like to say it
 9   is, I don't really quite understand, there's eight
10   members up here and we all belong in different aspects
11   of the bingo industry.  Okay?  We all come from
12   different bingo halls, different areas in the state,
13   and how a hall runs in South Texas is not going to be
14   the same as a hall runs in West Texas versus north and
15   east, so I think Pandora's box comes to mind.  If you
16   start saying that a lessor can only do this and a
17   charity can only do this, for a lot of people, some of
18   the charities that we may be involved with or
19   commercial lessors or distributors, that might be -- I
20   don't quite understand, is that what you're wanting?
21                  MS. LOPEZ:  I think there just needs to
22   be some precise language that identifies in a rule what
23   responsibilities a lessor has in day-to-day operations.
24                  MS. ROGERS:  To lease a building.
25   correct?
0032
 1                  MS. LOPEZ:  That's correct.  And what
 2   responsibilities obviously the charity has as far as --
 3   because, obviously, when it comes to the
 4   responsibility, it's still ultimately the charity that
 5   is responsible for everything that goes on in the
 6   day-to-day operation.
 7                  MS. ROGERS:  And that's what you're
 8   disagreeing with?
 9                  MS. LOPEZ:  No, I'm not disagreeing with
10   that.  What I would like to see is that there would be
11   more precise language on -- for example, if there is
12   lessor involvement with staff at a hall, is that
13   permissible?  Is there -- you know, is there definite
14   language that allows that type of activity?  Is
15   there --
16                  MS. ROGERS:  That's going to kind of --
17   I didn't mean to cut you off right there, but if you
18   said -- this may be where legal comes in, I don't know.
19   If you said that the lessor cannot walk in too and say
20   this person can work there, I mean, that's his word/her
21   word.  I mean, you can't regulate.  You understand what
22   I'm saying?
23                  CHAIR TAYLOR:  On that note, also, I'm
24   remembering at the last commission meeting the
25   commissioners were talking to Kim about how restaurants
0033
 1   are run.  Maybe you want to give that example; it's a
 2   great example.
 3                  MS. ROGERS:  Okay.  It was Commissioner
 4   Cox or -- yes, it was Commissioner Cox, I believe, and
 5   I were speaking about the different charities and how
 6   they've been successful and why these halls have been
 7   successful and why the comments that I felt was -- it's
 8   kind of like when you go to a restaurant, if the
 9   hostess is getting along with the waitress versus
10   getting along with the cook and also getting along with
11   the manager, if they're all working all together,
12   you're going to be more successful; the restaurant is
13   going to have more customers and it's going to run
14   better, and I believe, my opinion is, a bingo hall is
15   the same way.  If your distributor works with your
16   commercial lessor and your lessors works with your
17   charities, no matter which way it goes up and down, all
18   around, your chain every link, matters.  If you take
19   one link out -- like, if you start saying charity
20   lessors can only do this, commercial lessors can only
21   do this, and charities can only do this, then I think
22   you're going to -- we're not all the same and you're
23   going to affect a lot of people in the wrong way.
24                  I think, my personal opinion, is that
25   commercial lessors, charity lessors, charities,
0034
 1   distributors all have to work together and there's no
 2   way to say that that distributor can only do this with
 3   that commercial lessor and that commercial lessor
 4   cannot talk to the charity and tell him who is going to
 5   work in the bingo hall, because if you did that, you're
 6   breaking that chain.  You understand what I'm saying?
 7                  MS. LOPEZ:  Yes and no.  I think that
 8   goes --
 9                  Go ahead, Larry.  Sorry.
10                  MR. WHITTINGTON:  What we're talking
11   about here, guys, is basically the bingo operations in
12   Texas, everything that's included to make bingo run in
13   Texas that sets up separate guidelines for each one of
14   these manufacturers, lessors, distributors, and all the
15   charities.  As a matter of fact, they have it in there
16   certain positions to deal with the distributors and the
17   distributors to deal with the charities, so it's a
18   whole complete different, separate entity that we're
19   talking about, and it depends on the charity how
20   they're going to deal with the distributor for this
21   cost-wise.  That's all I'm concerned about, how much
22   are you going to charge me?
23                  MS. ROGERS:  And the charity has the
24   final -- if they don't want to deal with that
25   distributor, they don't have to, and that's well and
0035
 1   known, and that charity should know that.
 2                  MR. WHITTINGTON:  Yeah, the distributor
 3   deals with the manufacturer, that's what's set up.  I
 4   don't have to deal with the manufacturer so I could
 5   care less what they do with the distributor as long as
 6   the distributor is treating me right in my hall, so I'm
 7   dealing with the Texas Lottery Commission on the bingo
 8   rules.  How can you change the rules up?  The charities
 9   are making more money in Texas because the distributor
10   and the manufacturer and the lessor and the conductor
11   can't help you in that aspect.
12                  MS. ROGERS:  Right, but what I'm getting
13   here is that Rosie is asking to put a rule in place
14   that says you cannot talk to the distributor even if
15   you wanted to.  Am I --
16                  MS. LOPEZ:  And I'm not -- it's not just
17   that one particular aspect of the business.
18                  MS. ROGERS:  Well, a commercial lessor?
19                  MS. LOPEZ:  I'm thinking on the lines
20   here of, when it comes to the ultimate responsibility,
21   it's going to be the charity.  It's my name, the
22   charity's name, that's taking the hit.
23                  MS. ROGERS:  It's always been that way.
24                  MS. LOPEZ:  Yes, it is, that's what I'm
25   saying, but when it comes to decision making where
0036
 1   there's other people involved making decisions, it's
 2   still going to be the charity's name that is ultimately
 3   responsible for actions that take place, and so I guess
 4   my thought here behind this is, if this business is
 5   intended for charities to reap the benefits -- and I
 6   understand that lessors and charities and distributors
 7   and manufacturers all have to work together, I totally
 8   understand that, but I think what's happened in this
 9   industry is that it's become more of a private-sector
10   driven mentality than a charity-driven mentality, and
11   the bottom line is, the charities are always -- and we
12   talk about this all the time, but the charities are the
13   last man on the totem pole.  We're the ones that make
14   the least amount of money.  Yes, our expenses are high,
15   yes, we cut back on expenses, but ultimately we're the
16   last man on the totem pole, and the state takes their
17   five percent tax, their prize fee taxes, you know, they
18   get their funding.  We're actually working to generate
19   funds for the state, you know.  The lessor takes their
20   cut; the distributor takes their cut, and who is the
21   individual that ends up taking all of the
22   responsibility, doing all of the work, but reaping the
23   less?
24                  CHAIR TAYLOR:  I've got to take
25   exception with that, Rosie.  It's time to speak up
0037
 1   here, too.  You're saying the charity is the only one
 2   taking a risk and that, to me, is -- in my instance and
 3   in a major amount of instances across this state, the
 4   charities would not be in business if you did not have
 5   a commercial lessor willing to take the risk and sign
 6   the lease on a buildings and turn on the power and buy
 7   the tables and chairs and put in the TV sets.  I mean,
 8   without that, the charities would have nowhere to go,
 9   so, I mean, you're making it sound like -- and I'll
10   tell you, I'm on the bottom of the totem pole.  If you
11   come back and look at any records, you will see that
12   the charities in my hall have made 100 percent more
13   income than I have, so when you're saying that, I mean,
14   you're entirely wrong.  I mean, everybody in my hall,
15   go and look at what they've made over the last year and
16   then you look what our profit was; our profit was $600.
17   I think there's very many people that make less than
18   $600.  I mean, the only reason that I'm still in to
19   keeping the hall open is for those charities because
20   those are people that are near and dear to my heart.  I
21   sit on the boards of these people and I care how much
22   they make, and if you're in a hall where you feel like
23   you're being tread upon, you can get out of the hall,
24   leave.  I mean that's what charities -- you can go
25   anywhere you want to go; nobody is holding a gun to
0038
 1   your head that you've got to stay in that hall.  If
 2   your lessor is treating you wrong and you feel that
 3   they're interfering in things you do not want them
 4   interfering with, pick up your bingo paper and go
 5   somewhere else.  You don't --
 6                  MS. ROGERS:  Because a manufacturer
 7   cannot play bingo without you.
 8                  CHAIR TAYLOR:  They need you, and if
 9   they're not working with you, it's up to you to make
10   sure they do.  And a lessor can only be as involved in
11   your business as you let them, and if you let them in
12   business you don't want to, shame on you but not shame
13   on every commercial lessor in this state.
14                  MS. ROGERS:  And the last thing we need
15   are more rules saying, you can walk this way but not
16   this way and you can talk to him but you can't talk to
17   him.
18                  CHAIR TAYLOR:  You know, I feel that if
19   you've got a commercial lessor you feel is interfering
20   in business you don't want him to interfere in, tell
21   him to get out, and if he doesn't then you need to
22   leave, you know, find a place to play bingo.  There's
23   other charities.  I mean, ban together and start your
24   own hall; go find another commercial lessor.
25                  MS. LOPEZ:  This is something that I
0039
 1   think that a lot of charities face is the pressure of
 2   having to adhere and follow all the rules and the
 3   regulations and then also having to answer to the
 4   lessor and we're sandwiched in the middle, basically,
 5   is what I'm saying.  So far as maybe a rule or some
 6   kind of, again, precise language that helps charities
 7   understand before they get involved in this business or
 8   if they're already involved in this business, you know,
 9   there are some, I think, specifics that need to be
10   outlined so that, in the future, charities will know
11   exactly what they're getting into.  I mean that's
12   really where I'm coming from.
13                  And, you know, in the mandatory operator
14   training that the Lottery Commission conducts for us, I
15   think that's all great, but, you know what, most of
16   these people that attend these meetings don't really
17   pay attention.
18                  CHAIR TAYLOR:  How long since you've had
19   your license, Rosie?
20                  MS. LOPEZ:  Are you talking as far as
21   charity license?
22                  CHAIR TAYLOR:  Your charity license, how
23   long has your charity had a license?
24                  MS. LOPEZ:  About 20 or so.
25                  CHAIR TAYLOR:  Perhaps you're not aware
0040
 1   of, when a charity is putting in for a license, the
 2   Lottery Commission auditors go to their locations and
 3   meet with the head of the organization and go step by
 4   step what the responsibilities of that organization,
 5   what they need to be doing; I mean they go through the
 6   entire thing.  I mean, they have a checklist and they
 7   check off to make sure they've explained every single
 8   detail down the road to the charity and they tell
 9   them --
10                  MS. ROGERS:  And they specifically say,
11   you are responsible for this and the --
12                  CHAIR TAYLOR:  -- exactly what they're
13   responsible for.  So if it's been a long time, maybe
14   you should -- I mean, I've listened to them doing this
15   when I was trying to talk to somebody about unit
16   accounting with the charity, and I mean they were there
17   several hours with them explaining to a new charity
18   what their responsibilities were, exactly what they
19   were responsible for and what they needed to be doing,
20   so, I mean, I do think that that already is lined up.
21                  MS. ROGERS:  And as far as the bingo
22   operation training, I just went to one in Temple and
23   there was probably 75 people there, I guess, and every
24   person there came up and asked questions.  I mean, they
25   were very involved, so I think it's kind of changed a
0041
 1   little bit.  The auditors, they ask questions to
 2   people.  They got the people involved; they did a great
 3   job at discussing things with people, so, I mean, I'm
 4   just -- you know, we have enough rules and regulations
 5   to follow and I think you're crossing a line when you
 6   start saying that we need exact language to say that
 7   distributors can only speak to this person and they can
 8   only make deals with this person because it's not the
 9   same in every hall because some halls are small and
10   don't have 50 people.
11                  MS. LOPEZ:  Okay.  And I totally
12   understand that.
13                  MS. WEAVER:  Charities are different,
14   also.  We have four charities in the hall in Brian and
15   they like to get their money; that's what they want.
16   When we ask for volunteers, they're not always there.
17                  MS. LOPEZ:  I understand that.
18                  MS. WEAVER:  Our bingo hall manager is
19   the one who tends to all four of those charities.  It's
20   more his responsibility than theirs because they
21   relinquished it to him.
22                  MS. LOPEZ:  I understand that.
23                  MS. WEAVER:  And the lessor, we've
24   reduced our rent and reduced our rent and reduced our
25   rent trying to make sure the charities get all the
0042
 1   money they possibly can.
 2                  MS. LOPEZ:  I'm glad to hear that you
 3   guys are reducing rent.  I'm glad to hear that.
 4                  MS. WEAVER:  I mean, because a lot of
 5   lessors care about their charities.
 6                  MS. LOPEZ:  And I'm glad to hear that.
 7   I'm glad to hear that.  I think that --
 8                  Go ahead, Larry.
 9                  MR. WHITTINGTON:  You know, that's why
10   we sit here trying to make sure we come up with ideas
11   that will make bingo better and change the rules, and a
12   lot of stuff has been changed, has been modified, has
13   been chopped down into little pieces making it a lot
14   more clearer for the charities to run bingo, and that's
15   what we're here for, to work on the little things.  And
16   then as far as the charity-wise, yes, we are, that's
17   what we're here for.  Of course I want to see the
18   charities make as much money as they can, but in
19   today's time, the charities might not make the money.
20   The commercial lessor might not make the money.  That's
21   how tight it is now on the commercial lessors.  The
22   people who are making the money, they might not be
23   making money, but they got to be paid, their
24   distributors that are distributing the paper, the
25   computers and stuff, and they got to pay them every
0043
 1   day.  And those are the people who get money, not the
 2   commercial lessors.
 3                  MS. ROGERS:  And once the commercial
 4   lessor realizes that the charity is really the one who
 5   holds all the cards, the power, the majority of the
 6   power --
 7                  MS. LOPEZ:  Thank you for saying that.
 8                  MS. ROGERS:  -- but the charity -- and
 9   it's also -- it is the charity's responsibility to
10   educate themselves, you know, and --
11                  MS. LOPEZ:  Educate everyone who --
12                  MS. ROGERS:  -- everyone else, not --
13                  MS. LAUDER:  Excuse me.  We need to be
14   sure that one person is speaking at a time because we
15   are on record and I think that the court reporter is
16   having a hard time, so I'm going to ask that you speak
17   one at a time.
18                  MS. LOPEZ:  And I agree with you on that
19   because I think that that's where I think we're lacking
20   maybe some, some of the education that needs to be
21   instilled in some of these organizations, and I'm one
22   for agreeing that, you know what, we do have
23   dysfunctional nonprofit organizations that rely solely
24   on the commercial lessors to run their hall, and that's
25   okay, but we have seem very professionally run sound,
0044
 1   committed organizations throughout the state that can
 2   run their business, and that's where I guess I'm
 3   looking at this.
 4                  You know, I think that this is a very
 5   broad area because it's a statewide business, but at
 6   the same time, there has to be some consistency on how
 7   we do things, how we operate, and what works in South
 8   Texas doesn't work in West Texas or East Texas, I
 9   understand that.  We're way out there in West Texas,
10   and, guess what, there's not that many charities out in
11   West Texas as there are here in East Texas and South
12   Texas; I mean, those are challenges that we face as
13   well.  I mean those are the types of things that we
14   face.
15                  MR. WHITTINGTON:  There are certain
16   things that we can't do no matter how we do it and how
17   different we do it.  There's certain guidelines under
18   the Texas Lottery Commission for bingo, part of the
19   Texas Lottery Commission that we can't do; we got
20   certain rules.  If we do, we get in trouble.  Okay?  Of
21   course, you can operate under those guidelines, but
22   once you pass those guidelines, you can't do too much
23   if you pass those guidelines without getting a penalty
24   or a fine or something like that.
25                  CHAIR TAYLOR:  Tom, what did you want to
0045
 1   say?
 2                  MR. WEEKLEY:  Well, I'm curious about
 3   actually going into all this talk about the commercial
 4   lessor and, you know, giving them the charge, so to
 5   speak, as to what they're responsible for.  Is that
 6   written down anywhere?  Is there just a general outline
 7   or anything?  I think that would be interesting for the
 8   charity to know what the auditors are talking about
 9   with the various parts of the charitable bingo.  Is
10   there any -- perhaps Billy can answer that.
11                  MR. ATKINS:  Well, I think what you're
12   referring to, Tom, is what's called the pre-licensing
13   interview, and it's not that the auditor meets with the
14   lessor but the auditor meets with representatives of
15   the organization and goes over licensing requirements,
16   makes recommendations on recordkeeping, goes over
17   provisions of the statute, that occurs with
18   representatives of the organization and, you know --
19                  MR. WEEKLEY:  That's the charitable
20   organization?
21                  MR. ATKINS:  That's correct, yeah.
22                  MR. WEEKLEY:  But none of the other
23   entities are there?
24                  CHAIR TAYLOR:  Well, they could be,
25   they're not, you know, expressly prohibited from
0046
 1   attending, but the purpose of the pre-licensing
 2   interview is for the licensee itself.
 3                  MR. WEEKLEY:  Does that set forth the
 4   limits of what the charities are responsible for or
 5   does it take in all of other elements of the -- that
 6   would be involved in that hall?
 7                  MR. ATKINS:  I'm not sure I understand
 8   your question.
 9                  MR. WEEKLEY:  Well, each of the entities
10   has a certain job in a bingo hall and they have certain
11   responsibilities, and I guess what I'd be interested in
12   knowing is, what would those responsibilities be for
13   each of us?  I pretty well know what the charity is
14   responsible for, we are the entity of last resort.
15                  MR. ATKINS:  We don't -- okay.  I think
16   I understand your question.  We don't perform a similar
17   function for other licensees as we do for the conductor
18   organization and the pre-licensing interview.  I
19   might -- when Rosie asks to have this item on the
20   agenda, I might be able to provide some more
21   background.  Something that is not uncommon to occur
22   is, there have been any number of situations where that
23   agency has taken action against a licensee that has
24   resulted in a proposal for a decision to, you know,
25   revoke or deny an organization's license, and, as I
0047
 1   say, there have been a number of occasions where
 2   representatives of that organization have appeared
 3   before the commission and their testimony to the
 4   commission has essentially been that it was someone
 5   else that engaged in those activities that have, you
 6   know, brought them to this position, it wasn't the
 7   organization themselves, and has been discussed
 8   already, it's true, it is the organization that's
 9   ultimately responsible, and where I think there could
10   be, you know, benefit to this type of discussion is, if
11   there is a way to lay out clearly what some of those
12   responsibilities, and, you know, it, you know, provides
13   greater clarity, it gives an organization, you know, an
14   understanding from the very beginning as to what their
15   responsibilities are, and then someone -- Markey, it
16   might have been you -- mentioned, you know, there's
17   some organizations that all they want is, you know, to
18   receive their money and, you know, they don't appear to
19   be actively involved in this oversight and management
20   of the games.
21                  You know, one of the things that you can
22   consider is something that, you know, require the
23   organization to exert some oversight.  You know, it's
24   not uncommon, I think it's even a recommendation of the
25   Internal Revenue Service that, you know, governing
0048
 1   bodies of organizations involved in bingo, that they
 2   review the financial information associated with those
 3   groups, so, you know, something you can do that I think
 4   is a benefit, you know, to everybody is to lay that
 5   kind of information out, establish some kind of, you
 6   know, minimum internal control so that, you know, the
 7   organizations themselves should be able to have, you
 8   know, some feeling of confidence in what they're doing
 9   and it also helps to, you know, clarify those roles, as
10   Rosie is talking about.
11                  MS. ROGERS:  I just have a comment to
12   Tom, and I don't know if this will help.  The
13   licensing/pre-licensing that Billy is talking about, I
14   have sat through.  The auditors -- which I've only
15   dealt with San Antonio, so the auditors have done a
16   very good job at saying, this is your role and this is
17   what is required of the lessor and this is -- you know,
18   they do educate them and they do tell them.
19                  MR. ATKINS:  But it's not in a rule
20   format.
21                  MR. WEEKLEY:  Is it like a procedure of
22   the auditors?
23                  MR. ATKINS:  It is and they have a
24   checklist they follow.
25                  MR. WEEKLEY:  That's what I was talking
0049
 1   about, so everyone knows.
 2                  MS. ROGERS:  So each charity is given
 3   that information in the beginning before they enter
 4   into bingo completely that this is your responsibility
 5   and you are ultimately responsible for this, this, and
 6   this; the lessor is responsible for this, and they
 7   have, you know, always done that.
 8                  MR. WEEKLEY:  I think what Rosie is
 9   talking about is, the charities should be perhaps less
10   passive and more active.
11                  MS. LOPEZ:  Right, more active in the
12   business.
13                  MR. WEEKLEY:  Or allowed to be.  In our
14   case, I think we have a good relationship with our
15   lessor and when there is a problem, we have no problem
16   talking with that person because they understand and we
17   understand and we're both important to each other and
18   that it has to work as a unit otherwise it won't work
19   at all.
20                  MS. ROGERS:  I agree, and I hope that
21   the charities do realize that, but I think the last
22   thing that we need to another rule to say that.
23                  MR. CORNWELL:  Billy, can Tom and Rosie
24   still get an audit manual by filing an open request?
25                  MR. ATKINS:  Yes.
0050
 1                  MR. CORNWELL:  If y'all would file an
 2   open records request, Billy will forward that audit
 3   manual to you, and in there it contain a lot of this
 4   information you've been talking about, but you do have
 5   to file an open request.  It's no big deal.  Is the
 6   form not on the -- it's on the website?
 7                  MR. ATKINS:  It's on the website.  Also,
 8   a lot of this information is contained in the
 9   operation's manual and that's available on the website.
10                  CHAIR TAYLOR:  Any other comment from
11   the committee?  Public comment?
12                  Stephen Fenoglio.
13                  MR. FENOGLIO:  Again, for the record, my
14   name is Stephen Fenoglio.  I've already filed an
15   appearance slip.
16                  Rosie, I've listened to you and we've
17   actually talked not about this issue but other issues,
18   and I don't question that you have an ability to
19   advocate actively for your organization.  One of the
20   issues in discussing -- and I didn't know where the
21   committee was going to go on this, but one of the
22   issues that I had a concern about, Billy, has to do
23   with the audit report that was released, and I know
24   some of you members probably aren't aware of it, and my
25   purpose is not in speaking about the audit report
0051
 1   except as it relates to this topic, and the topic was
 2   in the end of the audit report where the auditor, the
 3   internal auditor of the Lottery Commission, is
 4   presenting to the commissioners in the Charitable Bingo
 5   Division an item for management's consideration and it
 6   has to do -- one of the specific issues the auditor
 7   mentioned was a statutory provision Section 2001.411,
 8   paren, D, paren close, "D" as in Delta, that states,
 9   the commission, without regard to a person's membership
10   status in a licensed authorized organization, by rule
11   may restrict involvement in the conduct, promotion, or
12   administration of bingo by, Subparagraph 1, a licensed
13   commercial lessor.  And it goes on.
14                  And I don't know what management's view
15   of that is, but it may be that this topic is a little
16   premature.  My sense is that the management is --
17   Commissioner Cox and Commissioner Clow, or Chairman
18   Clow, are going to address this.  I wasn't at the
19   Lottery Commission meeting where this issue was
20   addressed, but it may be that this is something the
21   committee will need to address in light of what
22   management's decisions is, and while the issue was
23   kindly, I wanted to raise that as an issue for possible
24   discussion if there is that decision made that that
25   issue could bubble up in time for the last BAC meeting
0052
 1   before the end of the year leading into another
 2   legislative session where legislative changes may or
 3   may not be made.
 4                  As y'all know, I wear several hats, the
 5   first hat in bingo is as a board member of the Ark of
 6   the Capitol Area.  Our organization, along with four
 7   others, runs a bingo hall; we are the commercial
 8   lessor.  It's a different model than what, Rosie, you
 9   conduct bingo in or Tom conducts bingo in.  Not to say,
10   the -- it's more like what Kim does, I believe, as a
11   conductor lessor, and there are probably several
12   different bingo models, this is one for them, that's
13   worked for us in Austin.  And I'm not saying it will
14   work everywhere; in fact, I know it won't because of
15   the risk involved and five charities getting together
16   to run their own business.  If you want to have that
17   side discussion, I'd be happy to, but there are some
18   significant risks the charity has if they want to run
19   their own show.  There are huge downsides, financial
20   financial risks that most charities, if they think
21   about it, won't want to go there and commit themselves,
22   for example, for a five-year long-term lease, including
23   perhaps board members signing guarantees for these
24   payments, and it's very difficult to get a board member
25   to do that.
0053
 1                  But the point is that one shoe won't fit
 2   everyone in the state and if there is a discussion
 3   about moving forward on this issue perhaps as a
 4   subcommittee topic, I would want to be involved in
 5   that.  And I'm not recommending, Madam Chair, that you
 6   do or don't appoint a subcommittee, but I would at some
 7   appropriate time ask that perhaps Commissioner Cox
 8   weigh in on this issue because it may be -- and I'm
 9   speaking for Commissioner Cox without his
10   authorization, public disclosure of that fact, but it
11   may be that the commissioners want some direct input
12   from the BAC on this issue in light of the internal
13   audit report, I don't know.
14                  With that, I'll be happy to answer any
15   questions I can.  And just so the record is clear, I do
16   represent distributors and manufacturers and commercial
17   lessors and charities, so I may be at some point
18   conflicted on this issue
19                  CHAIR TAYLOR:  Thank you.
20                  MS. ROGERS:  So you agree that
21   commercial lessors have a huge responsibility?
22                  MR. FENOGLIO:  Unquestionably.
23                  MS. ROGERS:  So they have a vested
24   interest as well as charities do?
25                  MR. FENOGLIO:  Yes.
0054
 1                  MS. ROGERS:  So everyone has a vested
 2   interest?
 3                  MR. FENOGLIO:  Yes.
 4                  CHAIR TAYLOR:  Thank you.  Is there any
 5   other discussion right now from the committee on this?
 6                  MR. CORNWELL:  Suzanne, I'd like
 7   to ask -- and this is an old issue that came up with
 8   Sunset; you actually discussed it.  What's the staff's
 9   feeling?
10                  MR. ATKINS:  I don't remember the
11   specific Sunset issue.
12                  MR. CORNWELL:  It dealt with this issue.
13                  MR. ATKINS:  Well, again, it goes back
14   to, Knowles, the conversation that, you know, Rosie and
15   I had.  You know, we do think it's a valid issue; we do
16   think there's benefit in providing that clearer
17   information to the organizations.  You know, I can't
18   tell you today exactly what that would look like or
19   what format; that would be in -- but I think that as
20   much as we can do to, you know, let organizations know
21   specifically what the expectations are.  And I'm
22   talking not just about the workers.  I know it puts
23   everybody in a better situation and in a better
24   position.
25                  MS. ROGERS:  So at this time it would
0055
 1   probably be a good thing that -- maybe it is a little
 2   premature, but after -- I know I will be at the
 3   commissioners' meeting, I'm sure Suzanne will also, to
 4   see what the commissioners would like to do.
 5                  CHAIR TAYLOR:  Is that what the rest of
 6   the committee would like to do, just go ahead and wait
 7   and see if the commissioners would like us to address
 8   the topic or --
 9                  MR. CORNWELL:  Excuse me, Suzanne, I
10   think we're going to be asked to address that issue
11   sometime in the near future.  You know, if you want to
12   discuss it today or assign a subcommittee, you know.
13                  MS. WEAVER:  May I ask Rosalie a
14   question?
15                  CHAIR TAYLOR:  Sure.
16                  MS. WEAVER:  As a commercial lessor, are
17   you wanting them to be more involved or less involved?
18   Are you saying that if a commercial lessor walks
19   through the hall and sees someone without their name
20   badge on that you don't want them to say --
21                  MS. LOPEZ:  Oh, no, I don't mean that at
22   all.  I think I am coming more from the perspective of
23   that there should -- the responsibility ultimately
24   relies on the charities, the charities should take a
25   more active role in their business, that is where I'm
0056
 1   coming from on this.  I think that at the statewide
 2   level, the charities should take more responsibility,
 3   period, in the day-to-day operations of the business.
 4                  MS. WEAVER:  Well, I think if all the
 5   charities ban together, we would have a lot larger,
 6   louder voice.
 7                  MS. LOPEZ:  And that's one of the
 8   reasons.  I mean, we've been through -- how many
 9   reports have we been given?  You know, charities are
10   fading away.  Do you know why?  There's many reasons
11   for that.  We've, you know, discussed the different
12   factors.  I think that one of the reasons is, again,
13   you know, the responsibilities that, if charities will
14   work together in a hall, it doesn't matter what hall,
15   wherever, in the State of Texas, if they will work
16   together as a unit, you know, there's power in numbers.
17   You know, that business belongs to the charities.  The
18   charities are the ones that are, you know, obviously
19   there to make the money for their organizations, and if
20   there will just be, I think, a stronger united effort
21   for charities to be more involved in their business, I
22   think that this business would work even better, so a
23   lessor won't have to worry about getting your rent paid
24   because the charities are taking care of their
25   business.
0057
 1                  MS. ROGERS:  What if it's the commercial
 2   lessor that rallying the charities to work together, is
 3   that wrong?
 4                  MS. LOPEZ:  No, I don't see that as
 5   being wrong.  Unique.
 6                  MS. ROGERS:  Maybe it's rather --
 7                  MS. WEAVER:  It's not unique at all
 8   actually; it's very common in our area.
 9                  MS. LOPEZ:  Every part of the state is
10   different.  Every part of the state is different.
11                  MS. ROGERS:  So if we put specific
12   language that said, that can't happen, what are you
13   doing to that hall?
14                  MS. LOPEZ:  I'm not saying that you use
15   specific language that the lessor, you know, can't
16   rally the charities; I didn't say that.  I didn't say
17   that at all.
18                  MS. WEAVER:  I mean, it has to be run
19   like a business.  I mean, it is a business.  I mean,
20   what we're doing for the charities, I mean, we are
21   collecting rent, that's true.  We'd like to have our
22   money.  I'd like to have that money back that I used to
23   get years ago but it's not happening, but eventually it
24   will.  But it has to be ran as a business.  Doing
25   accounting has been a great thing for our hall but it's
0058
 1   not for every hall, and there's -- you know, I don't
 2   want you to try -- or anybody to try to tie hands that
 3   are trying to feed those hands, because that's
 4   essentially what we're doing.  You know, there's some
 5   halls where lessors collect janitorial services or
 6   electric or whatever, you know, we can do that, but a
 7   lot of lessors don't do that; they just collect rent.
 8                  MS. LOPEZ:  Thank you for saying that.
 9                  CHAIR TAYLOR:  I know in your instance
10   that you're having a problem with your lessor and,
11   unfortunately, I'm just involved with one bingo hall so
12   we don't have the power of the dollar, but in a lot of
13   instances I see commercial lessors -- in Larry's case,
14   I mean, the halls are united.  I mean they've got Team
15   Dallas and if you're marketing as team Dallas and you
16   want to go to a distributor, I believe you're going to
17   get a lot better price on their product than I'm going
18   to because you're taking the power of numbers in there,
19   and so in a lot of instances, I mean some of the
20   halls -- and I'm not talking about your particular
21   circumstance necessarily, but some halls where
22   commercial the lessor has more than one hall, there is
23   power in numbers and I think they get a lot better
24   price than I'm getting.  So, in your instance, it might
25   not be a good thing, but I would hate to put a rule in
0059
 1   place where the commercial lessor, if they had more
 2   than one hall, couldn't, you know, work as the
 3   go-between between the halls and use that power.
 4                  MR. CORNWELL:  Suzanne, under the state
 5   law, as a distributor, I cannot offer for sale or
 6   distribute anything other than to the licensed
 7   organization.
 8                  CHAIR TAYLOR:  Absolutely right, but if
 9   you have five halls come to you together and say, what
10   price will you give us, I imagine that you can give
11   those five halls --
12                  MR. CORNWELL:  I would give those 20 or
13   30 charities --
14                  CHAIR TAYLOR:  A pretty good discount.
15                  MR. CORNWELL:  We'll talk.  Bring them
16   on.
17                  CHAIR TAYLOR:  So I think that in those
18   instances, I mean that particular -- it wouldn't affect
19   me but I think it could affect other organizations.
20   And, historically, there's been a problem in the state
21   of charities being active and proactive in the
22   legislation and a lot of the other issues that are
23   happening, and it's those underlying people, the
24   commercial lessors in a lot of instances, are the ones
25   that out there fighting tooth and nail to try and keep
0060
 1   bingo in this state.  And, yes, we do have a very
 2   vested interest.  You know, I've got the lease signed
 3   on that hall and I've got to make sure that those
 4   charities -- whether I make a dime or not, I just need
 5   enough money to pay the rent on that hall because I've
 6   got that five-year lease hanging over your head and
 7   I've got a vested interest that everybody makes money,
 8   you know, and whereas you're feeling that you're the
 9   bottom line, I know ultimately that I'm the bottom line
10   because I can't ask for more than they can give, and I
11   think that is happening with a lot of places.
12                  I mean, when we get this annual report,
13   the rent in 2005, the rent collected, was just almost
14   $1,000 more than 2004, that's it.  I mean that is not
15   the cruncher.  The rent has stayed pretty constant, if
16   anything, it has decreased over the years because
17   commercial lessors I believe are working with their
18   organizations.  And I just am scared of a rule going
19   into place that limits the help that they can be to the
20   organizations.  I started out with an organization and
21   then became the commercial lessor, so my heart is with
22   these guys.  I've been with them for years and years
23   and, I mean, I want them to do well.  The small
24   charities in this state, especially the small ones that
25   don't have a lot of funds, are the ones that bingo is
0061
 1   so good for because they don't -- they're never going
 2   to be provided by a bingo hall or sign the lease.  I
 3   mean, they can't hardly get the bingo license by
 4   putting up the bond.  I mean that's become a big
 5   problem just getting the license, forget going any
 6   further than that because they don't have the money,
 7   and bingo halls have become a place that a lot of the
 8   small organizations can go to, you know.  I mean,
 9   that's a place for them to go.  They're not VFW's, they
10   have their own facilities.  So that worries me and I
11   think we need to be very careful while we go through
12   this because we could make the water muddy real quick.
13                  MR. ATKINS:  If I could maybe wrap up,
14   if I could touch on one thing that I think Markey was
15   talking about.  I think that the members of the Lottery
16   Commission have been pretty clear in that they see a
17   value that commercial lessors provide to the bingo
18   industry, like you say, whether it's through their
19   business experience or the capital that they bring to
20   the developing and establishing halls, so I think the
21   commission has recognized that on several different
22   occasions.  I think part of what we may be struggling
23   with is the fact that there are discussions going on
24   regarding what I think a lot of people around this
25   table in this room may consider to be commonsense
0062
 1   business practices, but, as we've also discussed, there
 2   are charitable organizations in the state that don't
 3   necessarily have that business experience and business
 4   knowledge and so they find themselves getting
 5   themselves into problems.  One of the ways I think they
 6   can be helped by laying that out in terms of what some
 7   of the requirements are and the expectations.
 8                  MS. LOPEZ:  I agree.
 9                  MS. WEAVER:  Another way is get more
10   commercial license in to help people.
11                  MR. ATKINS:  Now, you're talking about
12   legislation.  What we can address is through rule, and,
13   you know, that's where I think it can be a benefit,
14   again, to everyone.
15                  CHAIR TAYLOR:  And, you know, Rosie,
16   it's been twenty years since your organizations have
17   received their license, and maybe it's time that,
18   instead of just the operator training, that some of
19   these older licensees need to go back one on one with
20   the commission.
21                  MS. LOPEZ:  There's a lot of -- and I'm
22   not just talking West Texas, I mean there's a lot of
23   organizations that, because they've been in the
24   business for so long, a lot of these things that are
25   the day-to-day operations are kind of just, you know,
0063
 1   normal things.  I mean, there's been so many rules and
 2   so many changes that have come along, penalty matrix
 3   and all these kinds of things, that some of these
 4   organizations are not aware of.  I mean not that the
 5   Lottery Commission has -- I think it's just not -- it
 6   doesn't grasp.  I'm telling you, I've been to like nine
 7   operator training meetings and it wasn't until the last
 8   two where it's finally sinking in.  Because why?  It's
 9   not until you get involved in the business and you
10   learn the day-to-day operations of it that you actually
11   really understand all of the responsibilities, and so I
12   think that the more that the organizations can be
13   educated and made aware of, I think that the industry
14   has a better chance of continuing to prosper and
15   continuing to be successful, successful for the
16   commercial lessor, you know, continuation of, you know,
17   knowing that your charities are doing well and that
18   you're going to, you know, actually get your rent check
19   in every two weeks, I mean those kinds of things, the
20   distributor, you know, getting their money every 30
21   days, you know, so those are -- those are the kind of
22   things that I think are very important.
23                  And, again, not every commercial lessor
24   is a bad lessor; that's not what I'm trying to say
25   today.  I'm not even saying that any commercial lessor
0064
 1   is bad.  I think that there just needs to be, again,
 2   some more precise language identifying some of those
 3   things that I talked about earlier.
 4                  MS. ROGERS:  Well, your charity is
 5   doing -- it's been there for 20 years so they must be
 6   doing something right.  There's a lot of charities that
 7   haven't even lasted twenty years.
 8                  MS. LOPEZ:  Yeah, you're right about
 9   that, but, again, you're looking stable,
10   community-supported organizations.
11                  CHAIR TAYLOR:  At this time we're going
12   to leave this and wait and see what happens at the
13   commission meeting and --
14                  MS. LOPEZ:  When is the commission
15   meeting?
16                  MR. ATKINS:  September 6th.
17                  CHAIR TAYLOR:  And we'll have this item
18   on the agenda for next time for an update.
19                  (AGENDA ITEM NUMBER EIGHT)
20                  CHAIR TAYLOR:  Moving on to Item Number
21   Eight:  Discussion on Charitable Bingo Administrative
22   rule 402.300 Pull-tab Bingo (e) Sales and Redemption.
23                  Larry.
24                  MR. WHITTINGTON:  First, my first
25   question is, can this rule be changed?  Can it be
0065
 1   revised?
 2                  CHAIR TAYLOR:  Larry, can you hang on
 3   just one second.  Let's take a 15-minute break.
 4                  (A short break was taken.)
 5                  CHAIR TAYLOR:  And I'd like to call the
 6   meeting back to order.
 7                  Okay.  We are on Item Number Eight and
 8   Larry had the floor
 9                  MR. WHITTINGTON:  Like I was saying, can
10   this rule be changed or revised?  That's the first
11   question I have.  Billy?
12                  MR. ATKINS:  And I guess if your
13   question is to me, my answer is yes.  As we've
14   discussed, you know, I can't believe how many times in
15   these meetings, there is a process to follow to propose
16   new rules or amendments to existing rules.
17                  MR. WHITTINGTON:  The way I look at this
18   firsthand, we got visited by the Texas Lottery
19   Commission on the Bingo Division three times in our
20   halls, and this came up as a violation, if we don't
21   close the box on the unit accounting, which the
22   charities buy together and split the profit together,
23   but they can't play these pull tabs together for both
24   sessions, depending on the time they're playing them.
25   That bothered me because I said, well, maybe something
0066
 1   has been changed, so I went back and found out this was
 2   an age-old rule that's been in affect for a long time;
 3   it really hasn't changed.  So, it's very important, I
 4   think, for the charity, if they're playing bingo,
 5   definitely if they're selling one box and they bought
 6   this box together for them to keep selling this box
 7   clean up to past the second session, and we wasn't told
 8   that, we was told we got to close that box up
 9   completely and reopen it again for the second session.
10   That didn't make no sense to me because I thought we
11   was doing right.  Unit accounting, we bought five boxes
12   together and we sold them together, but we've been told
13   on three occasions now that we can't do that, and I
14   don't know why.
15                  I don't know why we even have to talk
16   about this because the Texas Lottery Commission in the
17   Bingo division is with us on this as far as
18   charity-wise, they should have adopted this rule or
19   changed this rule a long time ago because it's easy to
20   see it don't fit under the unit accounting, it's easy
21   to see that, and I don't understand why we got to even
22   talk about this to much because it's hurting us on the
23   unit accounting trying to close the box.  That's
24   valuable selling time as well as it's a lot that goes
25   into a pull tab box.  I mean, when the winners are hit
0067
 1   and when the winners are not hit, you got to keep
 2   selling the box, really, to make a profit on any
 3   particular day.  In today's time in bingo, pull tabs is
 4   not the only thing that we can make extra money on, and
 5   that's where that issue might be coming from, that's
 6   what keeps bingo alive is the pull tabs, so it's very
 7   important for us to change this rule.  If you got unit
 8   accounting or if the charity is paying a temporary
 9   session back to back, why do the same charities have to
10   close the same box that they're going to play on the
11   same license day on a temporary license?  So, it's kind
12   of confusing to me.
13                  But they're very strict when they come
14   in.  Like I told the young lady in Dallas, most
15   charities are afraid of the Texas Lottery Commission
16   when they come in.  What are we doing?  Are we doing
17   something wrong?  And most of the time they're going to
18   find something.  They're going to find some type of
19   violation to write, whether you don't have your rules
20   in the book, the current rules, which is coming from an
21   old 2003 rule book.  Okay?  Well, we got to have the
22   current rules in the book, and we got a violation for
23   that, too.  So there's a lot of violations going around
24   and they don't mind writing them.
25                  CHAIR TAYLOR:  Back to the instant
0068
 1   bingo, let me make sure, you're specifically speaking
 2   to instant bingo tabs not in the event tabs?
 3                  MR. WHITTINGTON:  Event tabs, too.
 4                  CHAIR TAYLOR:  Okay.  So on your instant
 5   tabs, what you're saying is, instead of having to close
 6   the tabs and put those figures onto the first session
 7   paperwork, turn around and reopen the boxes again using
 8   exactly the same tabs and putting them in a second
 9   session?
10                  MR. WHITTINGTON:  Yes.
11                  CHAIR TAYLOR:  You would like to
12   decrease the paperwork by just being allowed to show
13   the sell of those tabs on the second session paperwork?
14                  MR. WHITTINGTON:  Yes, they are a unit.
15                  CHAIR TAYLOR:  And then your event tabs,
16   you're saying that you want to be able to continue to
17   sell, to not have to actually stop selling during the
18   period of time between sessions --
19                  MR. WHITTINGTON:  Of course.
20                  CHAIR TAYLOR:  -- since they're a new
21   unit?
22                  MR. WHITTINGTON:  Yes.
23                  CHAIR TAYLOR:  Okay.  I just wanted to
24   make sure that we understand.
25                  MR. WHITTINGTON:  The charities will
0069
 1   agree, not only does those two charities that are
 2   playing that day fall into pull tabs, all five of them
 3   are pull tabs, and they're playing all week and they're
 4   sharing the same profit and buying these tabs with the
 5   same money.  Okay?
 6                  CHAIR TAYLOR:  So you're looking to
 7   change the rule to allow that for units or if it's the
 8   same organization playing back-to-back sessions?
 9                  MR. WHITTINGTON:  Yes.
10                  MR. CORNWELL:  Larry, let me ask you a
11   question, are you selling both sessions of paper when
12   somebody walks into your hall?  Do you sell both
13   sessions at the same time?
14                  MR. WHITTINGTON:  Yes.
15                  MR. CORNWELL:  Are you selling two
16   sessions for your electronics at that time?
17                  MR. WHITTINGTON:  Yes.
18                  MR. CORNWELL:  Okay.  Billy, help me,
19   would you, please?  Is there a reason we ended up
20   putting this in?  This is contrary to paper sales and
21   it's contrary to electronic sales.  Is there a specific
22   regulatory reason why there would be an objection to
23   changing the rule?
24                  MR. ATKINS:  Well, without, you know,
25   Knowles, seeing any specific language, you know, right
0070
 1   now, it's kind of unfair to ask me to comment.  You
 2   know, in general to the concept, I think it's something
 3   that we would be happy to look at.  As Larry mentioned,
 4   you know, this is one of the items that I think was
 5   always in the rule before the event tabs were ever
 6   authorized or before unit accounting was authorized and
 7   was specific to, I think, an accountability issue and
 8   accounting for the sale and redemption of pull tabs
 9   appropriately for the appropriate organization, and
10   that is going to be, you know, regardless of
11   whatever -- you know, any recommended language is going
12   to be our primary concern no matter what in that the
13   sales and redemption are appropriately reported and
14   accounted for.
15                  MR. WHITTINGTON:  I'm looking under the
16   Section E -- that's where it falls under this rule --
17   that basically authorized licensed organizations, which
18   is one charity which this rule was written for
19   because --
20                  CHAIR TAYLOR:  Page six of eight, Larry?
21                  MR. WHITTINGTON:  Yeah.  It was written,
22   and I can understand when a single charity is playing
23   the four hours of session time, or whatever, that they
24   wouldn't want another charity interfering with their
25   sales, that makes sense, the age-old way, but unit
0071
 1   accounting is completely different and it helps so much
 2   for these charities, and I hate to see this pull tab
 3   issue be a hindrance when it come to unit accounting.
 4   And it has been an hindrance because, like I said, most
 5   of them want to do things right; they want to abide by
 6   the rules and regulations, and which they do, but to
 7   put out something where the charities lose money
 8   instead of making money in a day's time when they're
 9   struggling just to pay the rent, not make money, just
10   pay the rent, if we could change that, I think it
11   should have been changed, especially when it came to
12   pull tabs under unit accounting.
13                  It wasn't thought about; it wasn't
14   looked at at the time, but it's evident that the Texas
15   Lottery Commission, when they come out to visit a hall
16   that's the first thing they look at, that's the first
17   thing they go by.  They say, "You can't do this.  You
18   have to close that box," even though I do have a $500
19   winner out that somebody hit and I got another $500
20   laying at the bottom of that box I can't sell, I got to
21   close that box and open it back up later, and all of a
22   sudden, somebody comes up with $500, the box is dead.
23                  MR. CORNWELL:  Larry, can I interrupt
24   for a second?  Are you in compliance with what the
25   Lottery Commission is asking you to do today?  Are you
0072
 1   closing the boxes up and reporting them?  Are you doing
 2   that?
 3                  MR. WHITTINGTON:  Well, we wasn't at
 4   first until we found out that that's what we got to do,
 5   which is six months ago.  When unit accounting first
 6   came in, no, I thought we could sell and keep selling,
 7   but when he came and told us we can't do that, we
 8   stopped at that point.
 9                  MR. CORNWELL:  Larry, is this something
10   that is affecting your sales today?
11                  MR. WHITTINGTON:  Yes.
12                  MR. CORNWELL:  Can I make a motion to
13   the Chair?
14                  CHAIR TAYLOR:  Yes, you may.
15                  MR. CORNWELL:  I'd like to form a
16   subcommittee of five members to this group, okay, with
17   the charge --
18                  CHAIR TAYLOR:  A work group?
19                  MR. ATKINS:  What we -- and, Knowles,
20   being a new member, there's, you know, some orientation
21   I need to give you about the way the BAC -- well, the
22   way the BAC functions in these terms is through work
23   groups and they need to be composed of less than a
24   majority of the members so that it doesn't constitute a
25   quorum, so that would be four members.
0073
 1                  MR. CORNWELL:  Well, I think it's
 2   imperative that a subgroup --
 3                  CHAIR TAYLOR:  A work group.
 4                  MR. CORNWELL:  A work group, excuse me.
 5   I'll get the terms.  Give me about two years, I'll
 6   learn the terms.  Anyway, I'd like to propose a work
 7   group, okay, that can go to this rule, write a rule,
 8   have that work group report to the BAC on a special
 9   meeting so that you, Madame Chairman, can go and
10   petition for a rule change to the Lottery Commission so
11   we can get this done in 90 days.  I would like -- if it
12   could be with notice, I would like for this group to
13   meet, and if it has to be with notice because we have
14   five members on it, then can we not do that, Billy?
15                  MR. ATKINS:  No, not if it's a majority
16   of the members on the committee.
17                  CHAIR TAYLOR:  Knowles, it's also my
18   understanding that we can make recommendations to the
19   commission, but if you're proposing -- because we are
20   an advisory committee only and we can make
21   recommendations, I don't believe that we can petition
22   the commission that that would fall within the scope of
23   what we're allowed to do.
24                  Sandy, did you want to answer that
25   question?
0074
 1                  MS. JOSEPH:  Well, I just wanted to
 2   clarify as far as if there's a majority of members here
 3   or more than half the members here.  The committee
 4   could meet but it would require a time to meet that we
 5   do on open meetings notice, so to be a subgroup, so to
 6   speak, that kind of implies you would have less than
 7   what would constitute a full meeting of the committee.
 8   But I just did want to clarify, it's possible, it would
 9   be like having another meeting, essentially, and there
10   would have to be notice for that.
11                  MR. CORNWELL:  And I understand that the
12   five members would create the notice and I want to make
13   sure that's not a problem, but I'd like to fast-track
14   this.  Is it true that this work group that's going to
15   report -- a five member work group, okay, is it
16   possible that they can be charged with the
17   responsibility of reporting back to the BAC as full BAC
18   and report to the Texas Lottery Commission a
19   recommendation for a -- or a petition for a rule
20   change?
21                  MS. JOSEPH:  I believe the work group
22   would report to the full BAC.
23                  MR. CORNWELL:  And they couldn't take a
24   charge to also report to the Lottery?
25                  MS. JOSEPH:  Well, I guess, in a sense,
0075
 1   if it's a five member group, it would constitute the
 2   full BAC.  The BAC as a whole has the responsibility to
 3   report to the commission, not work groups, per se.
 4                  MR. CORNWELL:  We can't charge them to
 5   do that?  We could not ask -- as the BAC we cannot ask
 6   this committee to report their petition to the Lottery
 7   Commission?  Because I'd like to get -- this is
 8   something that's really important.
 9                  MS. JOSEPH:  Suzanne generally attends
10   the commission meetings, I think, certainly she could
11   report to the commission.  I'm not saying that your
12   suggestion is not possible.  It hasn't been done that
13   way in the past and I'm not sure what -- you know, we
14   need to think through the most orderly way and
15   efficient way to handle these things, but --
16                  MR. CORNWELL:  Billy, we'd like to get
17   something done amongst everybody.
18                  MR. ATKINS:  I mean, this may help get
19   you there, Knowles, because Suzanne, in her capacity as
20   Chair, will make a report to the Lottery Commission
21   probably at the September 6th meeting and I mean she
22   can go ahead and report at that time the, you know,
23   importance, or whatever, that the BAC expressed today.
24   Now, she may not have the specific language at that
25   time but she can -- you know, she can convey the sense
0076
 1   of this discussion at that meeting.
 2                  MR. CORNWELL:  Let me go back, then, and
 3   just ask it this way, if we were to try to put this
 4   rule change on the fast-track and get this done and we
 5   all get happy as regulators and operators, what's the
 6   fastest way to get the rule change done?  I mean, I
 7   understand all notice requirements, but --
 8                  MR. ATKINS:  Yeah.  You have to take it
 9   before the commission; they have to vote to publish it
10   for public comment, that's generally a 30-day period;
11   then it would come back; it would be brought for
12   adoption by the commission after that 30-day period,
13   so, you know, one of the things that you have to take
14   into consideration is the scheduling issue in terms of
15   when commission meetings are.
16                  MS. ROGERS:  But today we put a work
17   group together and they met prior to the September
18   meeting and you had some type of legal terminology to
19   give to give to them, to give to Suzanne, I should say,
20   for her to present would really be helpful.
21                  MR. WHITTINGTON:  Let me ask -- I'm
22   sorry, hold on.  I really, as I sit here and listen to
23   this on this issue, guys, I'm talking about the Lottery
24   Commission Bingo Division, we need help on this rule
25   and I don't know why we got to do this and do that.
0077
 1   How come the Bingo Division of the Lottery Commission
 2   can't go to the commission and say, this is what we
 3   need to do in this pull tab situation?  Because it's an
 4   age-old rule; it wasn't changed when unit accounting
 5   came along.  Why do we have to go through all these
 6   steps?  This is very important.  This is very important
 7   for bingo.
 8                  CHAIR TAYLOR:  Okay.  Larry, there was a
 9   motion on the floor.
10                  And you've taken your motion back?
11                  MR. CORNWELL:  Obviously, I'm
12   withdrawing my motion.
13                  CHAIR TAYLOR:  Okay.  You're withdrawing
14   your motion.
15                  Larry, I understand exactly what you're
16   saying.  I think we do need to put a work group
17   together and I'm as anxious and you and everybody else
18   to rush through this, but we can't rush through it to
19   the detriment of things that we're not aware of.
20                  And I'll call for a public comment from
21   Stephen Fenoglio.
22                  MR. FENOGLIO:  Thank you, Madame Chair,
23   committee members, you've got my notice list.
24                  Larry, I'm going to take some blame on
25   this rule.  I helped along with Phil Sanderson and
0078
 1   Billy Atkins and Knowles and some others in drafting
 2   this rule when we wrote it back in about a six-month
 3   period in 2002, I believe.  We couldn't anticipate
 4   every event -- every pun intended -- that would occur
 5   with event tickets, and I don't recall -- and I have a
 6   notebook that's about three inches thick of different
 7   versions of rules that we went through, and I haven't
 8   had a chance to go through that notebook yet, but I
 9   don't recall this issue being discussed at any length
10   at that time, and Billy was very proactive in wanting
11   comments.  Knowles and I came up several times and
12   said -- because he wanted to know what type of tickets
13   are out there in other states and I'd like to have the
14   consideration of every -- of a rule that may be able to
15   capture every different event ticket or every instant
16   ticket that's out there under the sun and the moon and
17   the stars and whatever, and so we brought a lot of
18   stuff to Billy, and it was an open door in that regard.
19   And there was give and take within the industry, within
20   segments of the industry.  We talked with manufacturers
21   as well as distributors and charities and the whole
22   gamut, and so we came up with a rule.
23                  I started hearing about this challenge
24   at the beginning of this year and was generally aware
25   that there was a challenge in the industry.  It was
0079
 1   only in the last twenty days that it came up on my
 2   radar screen that now I understand the issues and now I
 3   understand why this is -- the language that the
 4   commission has adopted is an impediment to aggressive
 5   sales of event -- of certain event tickets that
 6   ultimately directly go to the charity's bottom line in
 7   a good way, and so to the extent that I didn't
 8   anticipate this issue -- and, again, I don't recall.  I
 9   was aware, that with or without units, that charities
10   were selling paper products, paper bingo products, and
11   electronics at the beginning of the day including sales
12   for a different charitable organization that conducted
13   later in that day, but this specific language I don't
14   think -- it was a part of the old pull tab rule, as I
15   recollect, and I don't recall there being any
16   meaningful discussion about, do we need to change this.
17   We were so focussed on some other provisions in the
18   rule.  And I'm happy to say that most of that, Billy,
19   we got right and now we know there's an area that we
20   got wrong that wasn't an area of concern at the time we
21   were drafting and modifying the rule.
22                  Going back to knowles' issue, if the
23   committee's intent is to move this on a fast-track
24   basis, there is a way to do it on a fast-track basis,
25   and having a super work group of five members is one
0080
 1   way.  It does raise the impediment of, and it's not a
 2   huge impediment, but you would have to give timely
 3   notice under the Open Meetings Act of that active, you
 4   know, so there's a fast-tack way.  In some of these
 5   subcommittees, there are rules, and Billy and I have
 6   worked on them and they have taken six months or a
 7   year, and my sense is -- again, this has come up on my
 8   radar screen in a very short period of time, and my
 9   sense is that this is involved, and y'all want it done
10   quickly because it does adversely affect the charity's
11   line the way the rule is drafted today.  I can see
12   Billy's concern and the staff's concern, are there --
13   and Billy and I have had this discussion a lot, are
14   there unintended consequences to what we're doing today
15   that we're not going to know about for six months and
16   maybe we ought to look it over closely, turn the rock
17   over and look at it from a variety of directions in
18   order to hopefully anticipate unintended consequences
19   and avoid some of those.  One of the issues of the law
20   of unintended consequences is, does this affect in any
21   way unit liability unrelated to business income tax?  I
22   don't know the answer to that.  There's a gentleman
23   here in the room who has some knowledge of that, a CPA
24   who I've worked with, and there are other CPA's who are
25   equally talented and tax attorneys who are also.
0081
 1                  I mean, there could be some unit -- as
 2   you know, pull tab revenues are considered non-bingo
 3   for purposes of Internal Revenue Service and charities
 4   are subject to a unit liability.  It seems to me that
 5   an event ticket is more like -- certainly the way most
 6   event tickets are plaid, they're more like traditional
 7   bingo in that they're plaid not instantly but in front
 8   of all the customers in bingo halls and tied to you
 9   typically from dropping the balls, the bingo balls,
10   which would fall within the IRS definition of bingo,
11   and so there may be something out there that's going to
12   help.  If we can measure it and look at it carefully,
13   that will avoid a charity getting off in the breach
14   like some charities did in the late '80's, early '90's,
15   where they got a notice from the IRS, they owe $15,000
16   in unit liability and they don't have the money to pay,
17   and there may be some other federal law issues that
18   address this, but I think the subcommittee can address
19   this in a very time sensitive quick basis.
20                  I'll be happy to answer any questions or
21   comments.
22                  MR. WHITTINGTON:  I just want to say
23   this gracefully, you said you was working on this with
24   Billy and it took six months?
25                  MR. FENOGLIO:  Yes, sir.
0082
 1                  MR. WHITTINGTON:  How could you let this
 2   happen, Steve?
 3                  MR. FENOGLIO:  It was back when I had a
 4   lot more hair and then I lost the hair and I lost some
 5   of that intelligence, I guess.
 6                  MR. WHITTINGTON:  Let me ask you another
 7   question, then, whether it's unit accounting or
 8   charities playing back to back on a temporary license,
 9   what's wrong with two charities agreeing that we can
10   split our pull tab profits on bingo?
11                  MR. FENOGLIO:  Well, if it's within the
12   unit --
13                  MR. WHITTINGTON:  Unit or not.  Unit or
14   not.
15                  MR. FENOGLIO:  You know, I'm not ready
16   to answer that question because if Charity A and B if
17   they're not part of the unit because that does raise
18   some IRS issues that we ought to look at before we make
19   that conclusion, because, again, there are a lot of
20   unit issues that's been out there for me, and I think
21   it's over eighty years old in IRS law, charities and
22   the women in Motion Pictures Industry Association case
23   that came up, most charities weren't aware of it until
24   late '80'S, early '90's, when a lot of charities in
25   Texas got audited and got hit big time by that issue,
0083
 1   so --
 2                  MR. WHITTINGTON:  That's why I wanted to
 3   say that before --
 4                  MR. FENOGLIO:  There's no -- there's
 5   certainly nothing in common law that prohibits two
 6   organizations, be it nonprofit or for profit, from
 7   reaching an agreement to distribute and share revenues
 8   and expenses.  Normally that's considered a partnership
 9   but it's not necessarily.  There's a provision in the
10   Bingo Enabling Act that says every charity has to keep
11   track of its moneys.  There's also a provision in the
12   Bingo Enabling Act that says the 35 percent
13   distribution rule has to be met.  I don't know if that
14   agreement of sharing revenues would adversely impact,
15   for example, 35 percent distribution rule liability if
16   charity A and B shared this revenue and expense
17   associated with the event such that maybe charity A is
18   still okay on 35 percent distribution and charity B
19   isn't, that's, I think, one of the concerns Billy has
20   about the law of unintended consequences.
21                  Let's look at it because there may be
22   some other impact.  You know, if we run off and do this
23   the way we think we do and then two years from now
24   charity B gets a notice from Terry Shankle, I guess it
25   would be, saying you owe some money, and charity B
0084
 1   says, what do you mean I owe money, we've been doing it
 2   pursuant to this agreement and no one told us
 3   otherwise.  Well, we're telling you now.  So I'm not
 4   saying -- I'm not putting up a roadblock, Larry, I want
 5   to do what's best for the charities, but we need to
 6   kick those issues around a bit.
 7                  MR. WHITTINGTON:  Well, I understand
 8   that and that's why I want to get it at least clarified
 9   that the charity can't come later and say, hey, we
10   agree so and so did not play with the unit and plaid
11   them back to back, the same charity, that they really
12   can't do this, so I want to clarify that and get it out
13   so we know where we are instead of coming back later
14   and saying you can't do this stuff just because of the
15   unit accounting or a charity playing a temporary
16   license back to back, so I mean, they can't do it, so
17   that's why I'm trying to clarify that at the same time,
18   that's why I said that.
19                  MR. FENOGLIO:  And, again, I think if
20   there's a will within the committee and, you know,
21   Billy can be very responsive, the staff have to be
22   involved in this give and take, but I think you could
23   do this, and, you know, I think Knowles mentioned 90
24   days, and I think you guys could actually do it quicker
25   than that.  As far as getting the, quote, act together
0085
 1   to get something in front of the commissioners, then,
 2   you know, obviously the commissioners are going to do
 3   what they're going to do in light of their job duties
 4   and responsibilities.
 5                  CHAIR TAYLOR:  So the first thing it
 6   sounds like we need to do is we need to put together a
 7   work group.
 8                  MR. FENOGLIO:  Thank you, Madam Chair.
 9                  CHAIR TAYLOR:  And you are going to
10   serve on the work group.  Is that correct?
11                  MR. FENOGLIO:  Yes, ma'am.
12                  CHAIR TAYLOR:  The work group consists
13   of Larry, Kim, Knowles, Steve Fenoglio, and then David
14   Heimline.  Or did you just want to speak?
15                  MR. HEIM:  I want to serve.
16                  CHAIR TAYLOR:  Okay.  And are there any
17   other public members that would like to serve on this
18   work group at this time?  And this work group is going
19   to -- Knowles, you are going to be in charge of the
20   work group.  Is that correct?
21                  MR. CORNWELL:  I guess.
22                  CHAIR TAYLOR:  Okay.
23                  MR. CORNWELL:  The question still
24   remains, if the work group does its work and the charge
25   of the work group is to --
0086
 1                  CHAIR TAYLOR:  The commission meets
 2   twice a month now, but they didn't say necessarily
 3   everything would be bingo or everything would be
 4   lottery, so it seems that if the work group got
 5   together -- and I will be reporting to the commission
 6   on the sixth that the work group is preparing
 7   something.  The commission also meets later on in the
 8   month.  Is there any reason why that second commission
 9   meeting of the month that we couldn't talk to them then
10   about what the work group has proposed?
11                  MR. ATKINS:  It's not appropriate for me
12   to speculate.  That's the commission's meeting and
13   it's, you know, the chairman's call.  They have
14   expressed a desire to, you know, our best ability that
15   we keep, you know, bingo related items to the first
16   meeting of the month and for lottery related items to
17   the second meeting of the month.
18                  CHAIR TAYLOR:  Okay.  In that case, if
19   we're keeping bingo to the first -- okay.  So let's
20   give it a month; I mean we're already in the middle of
21   this month.  Is there a reason that the full committee
22   could not get back together again before the next
23   commission meeting, which would be the first week in
24   October, so that we could actually vote on this and
25   take it forward as the recommendation of the BAC?
0087
 1   Could we call another meeting?
 2                  MR. ATKINS:  Sure, you can call another
 3   meeting.
 4                  CHAIR TAYLOR:  Is everybody in this
 5   group able to come to another meeting next month?  That
 6   will give the work group a chance to get together and
 7   come back to the group in full with this item and
 8   recommendation.
 9                  MR. WEEKLEY:  What day of the week?
10                  CHAIR TAYLOR:  First we're just finding
11   out if everybody is willing to come back again next
12   month.  Okay?  Then we will need to find out when the
13   room will be available and the staff available for us
14   to have the meeting.
15                  MS. ROGERS:  Do we not need someone from
16   the staff?
17                  CHAIR TAYLOR:  I'm sure that we will
18   have a member or members of staff that will help us on
19   the work group.
20                  MR. WHITTINGTON:  I want Billy on this.
21   Billy, I'm counting on you, baby.
22                  CHAIR TAYLOR:  So when would be a good
23   time?  I mean, the work group has got to get together.
24   This is going to be a pretty good charge y'all are
25   doing and pull it together, it can't take two years, so
0088
 1   if we're having a meeting, we need this to be finished
 2   and at the meeting.  So when is --
 3                  MR. ATKINS:  September 20th is
 4   tentatively scheduled as a commission meeting.  It
 5   looks like September 13th.
 6                  CHAIR TAYLOR:  Can you pull it together?
 7                  MR. DOUGHERTY:  I can't be there, but no
 8   big deal, but --
 9                  MR. CORNWELL:  September 13th for the
10   BAC formalized BAC meeting?  Sure.
11                  CHAIR TAYLOR:  Before we schedule this,
12   we need to be sure that everybody is going to be here.
13                  MR. CORNWELL:  We need a quorum.
14                  MR. DOUGHERTY:  I'm going on a trip so I
15   can't be here.
16                  CHAIR TAYLOR:  Okay.  We'll give you a
17   note, but everybody else, you guarantee you're going to
18   be here?  And the work group has got to have this rule
19   to us completed and ready for the BAC to look at by
20   September 13th.
21                  MS. ROGERS:  I would really like to hear
22   from Sandy or others that are going to help us with the
23   legal part, because we're putting you under a lot of
24   pressure also aside from ourselves.
25                  MS. JOSEPH:  Yes, I'm not really, at
0089
 1   this point -- I wasn't here when the pull tab rule was
 2   adopted and I'm not really sure what portion of it
 3   needs to be adopted.  I'm cautioned by what Billy and
 4   Stephen Fenoglio said, they are a lot more
 5   knowledgeable on this particular subject.  I don't
 6   know, it just depends.  I don't know if we can do it
 7   that quickly or not.
 8                  Let me just add this, too, I am a little
 9   bit -- I'm a little bit confused about the process that
10   we're following because we had, in recent times, been
11   having work groups led by the commission and it seems
12   like, in this case, y'all are, you know, taking on a
13   work group of your own, so I'm a little bit confused
14   about if we're creating a new process or what or if
15   y'all are going to get out there on your own and come
16   up with something or if you want our involvement.  I
17   think perhaps the staff needs a little more time to
18   kind of digest this.  Not to say we want to slow it
19   down, but I'm not sure, so I'm not sure at this point
20   either what other question I can answer for you.  Is it
21   on timing, how long it will take to do this?
22                  MS. ROGERS:  The question is, if we form
23   a work group, are you saying that we have to have the
24   commissioners call a work group?  I don't understand
25   that part.
0090
 1                  MS. JOSEPH:  Well, as I understand it,
 2   the role of the advisory commission is to advise the
 3   commission and advise the staff, and I understand
 4   what's happening right now is a member has raised an
 5   issue that you're all anxious to work on, so it seems
 6   to me you say to the staff, you know, we would really
 7   like to work on this, and then the staff responds, yes,
 8   we can work on that right away or we have a lot of
 9   other things on our plate right now and we need to take
10   a look and see where this fits in.  I mean, there are a
11   lot of responses that would be possible, so it's a
12   little bit concerning to me.  I'm just --
13                  MR. ATKINS:  And, Sandy, it may be
14   appropriate, as I mentioned earlier, for the Chair to
15   bring this to the commission in her report and make
16   sure that this is consistent with what the commission
17   seeks the BAC to be working on.  I don't think that
18   there's anything in the, you know, interim to stop the
19   BAC from forming a work group and, you know, starting
20   the consideration on the topic.
21                  MS. WEAVER:  They meet on September 6th
22   and then we could go ahead and meet on the 13th if she
23   gets positive results.
24                  MR. ATKINS:  And if we're able to get a
25   product by that time.  It seems to me that's a very
0091
 1   aggressive schedule.
 2                  MS. ROGERS:  And I think it would be
 3   helpful if someone -- so what you're saying is hold off
 4   on forming a work group right now?
 5                  MR. ATKINS:  No, I think we can go ahead
 6   and form the work group.
 7                  MS. ROGERS:  Okay.  Well, I was just
 8   going to say, on the September 6th meeting, if someone
 9   who has knowledge in this can bring this and tell the
10   commissioners, also.
11                  CHAIR TAYLOR:  Sandy, as an answer to
12   your question, no, we do want the staff involvement in
13   it.  And the reason that I'm specifically saying these
14   things is because I understand that we need to be
15   aggressive and we need to get this going as quickly as
16   we can, but I'm worried too that there's not going to
17   be anything ready for the meeting on the 13th so that
18   we can try and get this to the commission, that's my
19   worry.
20                  MS. JOSEPH:  And you are correct on that
21   because to have language actually ready, we have to
22   have things ready for the commissioners' notebooks
23   about ten days in advance, and so that moves it back to
24   where we're really only talking about a couple of
25   weeks.
0092
 1                  MR. ATKINS:  I just don't think it would
 2   be appropriate, you know, to set the date until the
 3   work group at least has had the opportunity to get
 4   together and discuss the issue and then I think
 5   afterwards, you know, through communications with the
 6   chairman, that that date can be scheduled.
 7                  CHAIR TAYLOR:  So instead of tentatively
 8   scheduling a meeting at this time, the work group has
 9   been appointed and we would like the staff's
10   involvement with the work group.  We would also like
11   the work group to meet and then, depending upon when
12   they come up with something, then we could schedule our
13   next meeting.  I'm not adverse, and I don't think this
14   committee is adverse, to meeting an extra time during
15   the quarter because, I mean, it is important; I realize
16   that.  I deal with this every day myself, but I hate to
17   put the cart before the horse, and I do think that we
18   need to get the rule before we schedule our next
19   meeting and that way it works with everybody's
20   schedules, and we'll work with that, and if it's not
21   September -- I mean, the commission is meeting, you
22   know, much more often than they were.  I mean, we've
23   got the first Wednesday of every month and we can get
24   there the following month.  I would rather go with
25   something in hand and know that we've got this right
0093
 1   than to have everything upset and try and go to a
 2   commission meeting with nothing.
 3                  MS. JOSEPH:  I'll work with Knowles to
 4   schedule the first quarter meeting.
 5                  MS. ROGERS:  So if the work group does
 6   have something prepared and ready, it's not -- we can
 7   call a meeting.  We don't have to be here, in other
 8   words, to call the next meeting.
 9                  MR. ATKINS:  That's correct.
10                  MR. CORNWELL:  Can I ask one other
11   question?
12                  CHAIR TAYLOR:  Sure.
13                  MR. CORNWELL:  Because I'm the rookie
14   here.
15                  Billy, is it not appropriate for the BAC
16   to petition for a rule change?
17                  MS. JOSEPH:  It's -- I don't believe
18   that's an absolute no, no, but the BAC's role is to
19   advise the commission on rule making, and, you know,
20   each individual member, of course, has the ability to
21   petition for rule making, so certainly the group could
22   come to a conclusion that they wanted to advise the
23   commission that they should consider rule making.  I
24   don't know that the committee itself -- I'd have to
25   review the statute, and maybe Stephen Fenoglio might
0094
 1   have an opinion, too, can petition for rule making.  I
 2   think it would be even more a suggestion to the
 3   commission, but an individual could petition for rule
 4   making, so the role of the BAC is advisory.
 5                  MR. CORNWELL:  I understand, but a
 6   petition could be considered an advisory or a request?
 7                  MS. JOSEPH:  There is a procedure set
 8   out in the government code for petitioning for rule
 9   making, and so that term has a specific meaning under
10   the Administrative Procedures Act, and you may be
11   thinking of it not exactly in those terms, but, in
12   other words, seeking, not formally.  There is a
13   procedure for formally petitioning the agency for rule
14   making.
15                  MR. CORNWELL:  Maybe we can get together
16   and do some clarification --
17                  MS. JOSEPH:  That would be good, I'd be
18   happy to do that.
19                  MR. FENOGLIO:  The statute of the BAC,
20   it seems to me, does participate in the committee,
21   quote, advising -- or the committee may advise the
22   commission on the needs and problems of the state of
23   the bingo industry and comment on rules involved in
24   bingo during their development and before final
25   adoption unless an emergency requires immediate action
0095
 1   by the commission and then they perform other duties as
 2   determined by the commission.  I don't recall a rule
 3   restricting that anyway.  There is a BAC rule I have in
 4   front of me, but certainly the statute anticipates
 5   advising and commenting and I think that would be
 6   within the gamut.
 7                  CHAIR TAYLOR:  David, did you want to
 8   say something?
 9                  MR. HEINLINE:  David Heimline, Judge
10   Service, representing 30-plus charities.  Since I'm
11   going to serve on this work group, I want to be sure
12   that I understand what it is that we're going to do,
13   because, as I see this agenda item, this has to do with
14   402.300 pull tab bingo (e) sales and redemption.  Is it
15   confined to just that?  The door has been opened by Mr.
16   Fenoglio to expand it just a little bit.  If you go
17   down to H-6, you have the event ticket as well as a
18   part of that, and I think it will be important to
19   include that.  We're talking about both the event and
20   the instant ticket causing us some administrative
21   problems to not be able to carry the sales activity all
22   the way to the end of the two session event in back to
23   back situations.
24                  As we first began to sell these event
25   tabs, we sold lots more than we ever thought we could,
0096
 1   and when we got into unit accounting, it seemed
 2   appropriate to report all of the sales of those instant
 3   sales at this second session and it made it easy to do
 4   an account for it until recently it came to our
 5   attention that you can't do it that way, you got to
 6   report it at the first session and the second session,
 7   and so, like Larry, we began to change doing that and
 8   it's created a tremendous hardship.  So I'm all for
 9   being on this work group and doing this work.  Under
10   the unintended consequences, you know, Billy has warned
11   us about that before, you know, and when we got into
12   unit accounting and we had to do some things that we
13   didn't know for sure how to go about and that was how
14   it affected our role with the Internal Revenue Service.
15   And, as you know, we filed a private letter request, I
16   think, years ago to get a clear picture on unit
17   accounting and we still don't have that.
18                  I brought Mr. Ness here today because I
19   know you heard me talk about him a lot.  He really does
20   exist and he really did file a prior letter ruling and
21   we still don't have it, but this is in the area, too,
22   of some Internal Revenue concerns that I think needs to
23   be a part of this work group and I wanted to just
24   clarify, will this work group include looking at the
25   language here in H-6 that might have effects on the
0097
 1   group?
 2                  CHAIR TAYLOR:  David, I think in
 3   response to that, the work group I would like them just
 4   to look at 402.300.
 5                  MR. HEINLINE:  Okay.  The whole -- okay,
 6   good.  Because then I think that we can cover the
 7   possible consequence of all these events as it may
 8   relate to the unrelated business income tax.  I think
 9   that's an important issue for the whole industry and I
10   wanted to be sure we could include that.
11                  Any questions, I'd be glad to try to
12   answer?
13                  MR. CORNWELL:  Expanding that role and
14   looking at the entire rule could slow down the process
15   and I just want everybody to be aware of that.
16                  MR. ATKINS:  Knowles, you can do it or
17   you can do it right.
18                  MR. CORNWELL:  I'm going to do it right,
19   but I was going to do sales and redemption, is what I
20   was under the impression.
21                  MR. ATKINS:  I think both David and
22   Steve have, you know, raised some points that merit
23   serious consideration.
24                  CHAIR TAYLOR:  Thank you, David.  Okay,
25   we have the work group.  You'll get a call.  You're
0098
 1   chairing it, Knowles.  You're going to --
 2                  MR. CONR:  Who's in the work group?
 3                  CHAIR TAYLOR:  That would be Larry, Kim,
 4   David Heimline, Steven Fenoglio, and a member of the
 5   staff, I would hope.
 6                  MR. ATKINS:  You can coordinate those
 7   meetings through Sandy Joseph for the staff.
 8                  CHAIR TAYLOR:  Okay.  If there's no
 9   further discussion on this topic -- first of all, I
10   wanted to get the consensus of the committee, I think
11   that we've been through most of the items that are
12   going to be taking longer.  I know some of you drive
13   long distance to get home after these meetings.  Do you
14   want to take a lunch break or do you want to just go
15   ahead and work on through and get this finished?
16                  (AGENDA ITEM NUMBER NINE)
17                  CHAIR TAYLOR:  Okay.  Then we're going
18   to continue on and if you'll let me know if you need
19   another break.
20                  Item Number Nine, Discussion and
21   possible creation of a work group on the impact of
22   smoking ordinances and smoking bans on bingo halls.
23                  This item I think came about because I
24   was talking to Stephen Fenoglio.  Now, Corpus Christi
25   put a smoking ban in effect, as Dallas has.  They left
0099
 1   bingo halls as one of the exemptions, but the no smoke
 2   group has come back and decided that they need to go
 3   after the whole kitten caboodle and get rid of smoking
 4   totally, and this is coming around and a lot of cities
 5   are having this problem, and Stephen asked if I could
 6   have this item placed on the agenda and he would come
 7   here and give us some information on what smoking bans
 8   has done to bingo in Texas
 9                  MR. FENOGLIO:  For the record, I'm
10   Stephen Fenoglio.  Did you say that the City of Corpus
11   Christi did pass an ordinance?
12                  CHAIR TAYLOR:  It exempted bingo halls,
13   bowling alleys, and bars.
14                  MR. FENOGLIO:  I brought with me several
15   handouts.  And this issue kind of got T'd up with the
16   City of Dallas passing a very stringent nonsmoking
17   ordinance in March of 2003 and Larry, among others, can
18   talk about the adverse consequences of that ordinance.
19   And I've brought with me copies of both the City of
20   Dallas ordinance and the City of Austin ordinance and
21   I'm handing those out, and I know there are plenty, and
22   I'm not suggesting for the purposes of the meeting that
23   you review those at this moment, but the City of Dallas
24   represents one end where basically anywhere in a public
25   facility, with very narrow exceptions, there's no
0100
 1   smoking, and there are exceptions that would be, for
 2   example, a particular hotel room.  Hotels can determine
 3   that so many hotel rooms will always be nonsmoking and
 4   some will be designated as smoking, but, anyway, bingo
 5   halls were not included in any sort of exemption.  The
 6   City of Austin ordinance that I had a hand in
 7   helping -- well, I had input with the other end where
 8   separate smoking and nonsmoking facilities are made
 9   available within the hall with separate mechanical AC,
10   heat ventilation, and it's worked well in the City of
11   Austin.
12                  I also had an opportunity to discuss
13   this issue with Billy Atkins and he reminded me of the
14   fact that I had forgotten -- and he provided me through
15   an Open Records Act request of about 800 pages of
16   documents.  Thanks, Billy, for that -- that the staff
17   had actually done quite a bit of analysis and review of
18   different ordinances around this country and I wasn't
19   even aware it was happening.  That country of Scotland
20   has past an ordinance on smoking.  There was a work
21   group formed back in 2003 that Larry was a member of,
22   and basically there was no conclusion reached -- and
23   I'm paraphrasing a little bit -- and I believe the
24   reason there was no conclusion reached is they had done
25   enough analysis.  This was before the City of Dallas
0101
 1   passed their ordinance, in the mean time, Dallas passed
 2   its ordinance.
 3                  What I did in looking at -- and there
 4   was some discussion within the subcommittee work group,
 5   and I don't remember which staff person on the
 6   charitable bingo staff was appointed to it, but they
 7   said, you know, one of the things to look at is what
 8   happened before and what happened after an ordinance
 9   was passed.  The staff has done a good job, and if
10   y'all haven't reviewed recently the stuff or data
11   that's on the commission's website on charitable
12   organizations that conduct bingo, what I was able to
13   do -- or actually my assistant was able to do -- is
14   pull up the hard data of bingo halls within the City of
15   Dallas in calendar year 2002 versus calendar year 2003,
16   and then you could do the same thing with statewide and
17   you could make some conclusions.
18                  And so the next handout I'm handing out
19   are those two reports in summary form.  And, again,
20   they're both one page documents.  The first is entitled
21   City of Dallas Charitable Bingo Statistics and Impact
22   of Strict Nonsmoking Ordinance and the second document
23   is Statewide Charitable Statistics and Impact of Strict
24   Nonsmoking Ordinance.  That's a little misleading, that
25   second one, because we don't have a statewide
0102
 1   nonsmoking, but -- and I'll let y'all circulate those
 2   around because, again, I think they're fairly
 3   instructive about what happened in calendar year 2002
 4   in the City of Dallas and statewide and calendar year
 5   2003 in the City of Dallas and statewide, and then
 6   superimposed on that, Billy, we had also, in this
 7   process, adopted this new event tab -- I'm sorry -- new
 8   instant bingo rule and all of a sudden, there were new
 9   products flooding the market.
10                  And what is striking to me -- in the two
11   handouts, to me what was striking in this was, look
12   what happened in the City of Dallas, and it doesn't
13   surprise Larry Whittington at all, but in the City of
14   Dallas, as a result of that ordinance, the bottom line
15   charitable distributions went down 38 percent.
16   Attendance you can see the occasions when the
17   attendance went down 14.5 percent and 21.4 percent
18   respectively.  Gross receipts down, total prizes down,
19   and the prize fees that are paid to the State and the
20   City of Dallas went down 12.8 percent.  Let's look at
21   statewide what happened, and look at what happened,
22   they're still down with one exception, but they're not
23   down nearly the amount as a percentage of what happened
24   in the City of Dallas.  You can reach your own
25   conclusions there.
0103
 1                  And, to me, that's -- and I'm also
 2   looking at some other data and trying to pull some data
 3   together from some other states to see if this
 4   hypothesis holds.  I'm not nearly as familiar with
 5   other state's collection of data.  I'm fairly familiar,
 6   having visited with Phil and Billy at length through
 7   the last couple of years, about the collection of data.
 8   I'm fairly comfortable with this data that's being
 9   reported.  And so what you're showing is, which you all
10   know if you've been in bingo, is bingo has been on a
11   steady decline overall, but look at what happened in
12   the City of Dallas and it just fell apart.  The curious
13   thing is, on the statewide impact, prize fees went up
14   3.2 percent increase, and some would look at that and
15   say it's counterintuitive, and it's really not, and
16   Madame Chair and I have had that discussion, because
17   that's the pull tab instant bingo issue where all of a
18   sudden sales went through the roof because of a change
19   in the rule and, consequently, those pull tabs are
20   paying out -- quote/unquote, paying out at a high
21   percentage of prizes, which means they're paying more
22   in prize fees.  If you go down and look at the gross
23   receipts of pull tabs versus other bingo, you'll see
24   other bingo going down and pull tabs just coming up
25   like a jet, and so, consequently, since they have a
0104
 1   higher percentage of prizes being paid, that's why the
 2   prize fee number is going up.  And if you look at 2004
 3   and 2005, you would see similar increases coming up.
 4                  MS. ROGERS:  I have a question for you,
 5   Stephen, just real quick.
 6                  CHAIR TAYLOR:  Are you ready for
 7   questions yet?
 8                  MR. FENOGLIO:  Yes.
 9                  CHAIR TAYLOR:  Okay.
10                  MS. ROGERS:  Am I correct in thinking
11   where Dallas sits, you have different counties all
12   right there.  Correct?
13                  MR. CORNWELL:  Different cities within
14   different suburbs within the same county.
15                  MS. ROGERS:  Okay.  This is city wide?
16                  MR. FENOGLIO:  This is only city wide.
17   And, by the way, the follow on to that is what has
18   happened in Dallas County.
19                  MS. ROGERS:  That's what I was waiting
20   for because my hall is right close to them.
21                  MR. FENOGLIO:  Well, that's the next
22   level of drilling that my friend Steve Bresnan always
23   likes to talk about.  It started being done this
24   beginning of last week, and because of my travel
25   schedule, I couldn't finalize it and confirm that, in
0105
 1   fact, the numbers are correct from the commission's
 2   website.  The other thing I want to do is, also, you
 3   can selectively -- because of the unique nature of how
 4   Phil and Billy created this website, you can look at
 5   particular cities.  And so, for example, there may be
 6   an adjacent county to Dallas County -- Arlington is
 7   one -- that may overlap.  You may want to throw
 8   Arlington into that mix and look and compare.  I mean,
 9   there's a lot of comparison that can be done.  My sense
10   is, and it's only anecdotal, is that Dallas County went
11   up while the City of Dallas was going down because --
12   and I do know this for a fact, they chased a lot of
13   bingo hall customers out of the City of Dallas over to
14   Garland, Irving, et cetera, within the city of --
15   within Dallas County, a 15-minute drive.
16                  MS. ROGERS:  So those bingo players,
17   where did they go?
18                  MR. WHITTINGTON:  Kim, in the two halls
19   in 2003 versus 2002, just two halls in Dallas we lost
20   $364,000, versus the year before, for the charities, so
21   they didn't make a dime.
22                  MS. ROGERS:  That would be something
23   interesting to see what city or suburb, I don't know
24   how it is in Dallas, if it is right next to this to see
25   what theirs did.  Do they not have a smoking ban?
0106
 1                  MR. WHITTINGTON:  Not now, no.
 2                  MS. ROGERS:  Okay.  See, if this was
 3   done in Bexar County, Bexar County encompasses all
 4   of -- a lot, I should say, of large halls.
 5                  MR. WHITTINGTON:  There's a lot in the
 6   City of Dallas, Dallas City, Texas, not Richardson, not
 7   Garland, and it's never more than 15 minutes.
 8                  MS. LOPEZ:  My question is, these bingo
 9   halls that you're talking about, were they just
10   strictly smoking halls or smoking/nonsmoking?
11                  MR. WHITTINGTON:  Smoking/nonsmoking.
12                  MS. LOPEZ:  So in order for you to
13   become a smoking/nonsmoking establishment, in order to
14   be compliant with the city ordinance, there had to be
15   some modification to the building, right, to be able to
16   be in compliance with those or.
17                  MR. WHITTINGTON:  No, there were no
18   modifications.
19                  MS. LOPEZ:  Oh, just totally no smoking?
20                  MR. WHITTINGTON:  Yeah, no smoking
21   period.
22                  MR. FENOGLIO:  Dallas ordinance had an
23   ordinance where you could have separate ventilation for
24   smoking/nonsmoking and Dallas changed that to no
25   smoking, no exceptions whatsoever.
0107
 1                  MR. WHITTINGTON:  You get a ticket; you
 2   would have gotten a ticket.  Our customers maybe got
 3   25, 40 tickets in the last six months or whatever, and
 4   they don't care.  They're taking a chance.  It's not on
 5   the bingo hall, okay, it's on the customer if the
 6   customer gets caught.
 7                  CHAIR TAYLOR:  What is the fee for that
 8   ticket?
 9                  MR. WHITTINGTON:  Anything from $50 to
10   $1,000, most of them $200, so we're talking around two
11   hundred bucks.  But they're taking a chance.  We tell
12   them and they say, well, we want to play.
13                  MS. ROGERS:  Does the City of Dallas
14   reap benefits from bingo?
15                  MR. FENOGLIO:  Yes.
16                  MS. ROGERS:  Has it been presented to
17   them the difference -- I mean, I'm sure there's a drop.
18                  MR. FENOGLIO:  There is a drop in their
19   revenues.
20                  MR. WHITTINGTON:  You're talking to
21   somebody that don't want to hear about no smoking.
22                  CHAIR TAYLOR:  Let me go back to
23   explain, the reason that this item is on the agenda is
24   because more cities are -- not just Corpus Christi,
25   there's a lot of cities that are going in this
0108
 1   direction and instead of being reactive, we would like
 2   to be proactive and have numbers that anybody can go
 3   from any charity in any city, take some of the work
 4   that we're doing here to their city councils to let
 5   them know, you know, what this would do to bingo, so
 6   this is a proactive approach to this problem.  Because
 7   we know -- I mean, we can't afford to lose anymore
 8   bingo customers and we all know that.  We also know,
 9   anybody that's in the industry, that the smokers are
10   our biggest spenders, and if we drive them away, we're
11   really shooting ourselves in the foot.
12                  MS. WEAVER:  Did you look in our area?
13                  MR. FENOGLIO:  No.
14                  MS. WEAVER:  We've had two halls pass a
15   no smoking ban.
16                  MR. FENOGLIO:  In Brian?
17                  MS. WEAVER:  Brian/College Station, yes,
18   sir.
19                  MR. FENOGLIO:  I wasn't aware of that.
20                  MS. WEAVER:  We had a choice to -- our
21   establishment was already with different ventilation
22   systems.  Even though our city did not ask us to do
23   that, we had a nonsmoking area with separate
24   ventilation than smoking.  The city gave us the
25   exemption even though we had that, but we had to say
0109
 1   that 18-year-old and older can come in even though we
 2   kept our nonsmoking room and our smoking room for our
 3   players for their comfort instead of making us totally
 4   no smoking, but now we can't have kids in 18 and under.
 5   Well, as you know, we have Texas A&M University and a
 6   lot of those young adults are not 18 that are attending
 7   school and we can't let them in.  We grandfathered the
 8   workers already working there as long as their parents
 9   would sign a letter saying that they could continue to
10   work there, but that would be in the restaurant area
11   not in the bingo area.  The two establishments that
12   chose to go totally no smoking and allow children to
13   come in have since closed.
14                  CHAIR TAYLOR:  So your children could
15   not come in even if they were only in the no smoking
16   area?
17                  MS. WEAVER:  Right.
18                  CHAIR TAYLOR:  You have separate, like,
19   glass in your area of your smokers?
20                  MS. WEAVER:  And did before the smoking
21   ban came in.
22                  CHAIR TAYLOR:  And you couldn't let them
23   in the door?
24                  MS. WEAVER:  Can't let them in.  So what
25   we have done, for our family, grandparents and people
0110
 1   that play, on the first Monday of every month, we get a
 2   special license and have a family day where the
 3   building is totally no smoking just that one day a
 4   month for our --
 5                  CHAIR TAYLOR:  What is your attendance
 6   like?
 7                  MS. WEAVER:  Twice, double what we play
 8   on a night.  We average $270 to $450 on that first
 9   Monday of the month.
10                  MS. ROGERS:  You know, I have a legal
11   question for you.  Texas is not one of the last
12   remaining states that says a parent may take a child
13   into any establishment that they so wish whether it be
14   smoking or nonsmoking?
15                  MS. WEAVER:  Yeah, Texas does have that
16   rule.  It is the establishment's right, prerogative, to
17   bar children even though you have a smoking ban or not;
18   it overrules the city.  We have -- I don't smoke, but I
19   still get out there and petition because our customers,
20   you know, and I had to fight for their rights because,
21   I mean, that's what -- that's who was paying us the
22   money.
23                  MS. ROGERS:  And I only say this because
24   they came into our hall and said that we could no
25   longer allow children to be in the smoking area, which
0111
 1   I went back -- and I don't know where I found it, but
 2   Texas is one of the last states that states a parent
 3   has the right to take any child -- and the Bingo
 4   Enabling Act states that if a child is playing bingo,
 5   they must be with a parent or a guardian, so they are
 6   technically allowed to go into the smoking area.
 7                  MS. WEAVER:  Our police have challenged
 8   that when they came in to give a ticket, but they've
 9   only given warnings; we've never had any citations
10   there.
11                  MS. LOPEZ:  We have had citations at our
12   hall with our smoking/nonsmoking ordinance because
13   we're also a nonsmoking ordinance city, became
14   effective in 2001, I believe, in Odessa.  We have had
15   the fire marshal come into our hall; I mean, they
16   surprise visit us.  One evening, basically just because
17   we did not have a nonsmoking sign at the front entrance
18   of our door to the nonsmoking section of the hall, we
19   were told we would have to close our doors for that
20   evening until they could come back, so, yes, it's a
21   very, very, you know, touchy, serious issue.  We had to
22   spend a few -- a couple thousand dollars on special
23   smokers' outlet-type devices, several specific type
24   trash cans inside the hall specifically for smokers or
25   for cigarettes.  I mean, so the charities came out -- I
0112
 1   mean, you ended up spending money because of a smoking
 2   nonsmoke ordinance not only to mention the fact that
 3   you do lose customers if you become a totally
 4   nonsmoking city, which is not good for our business.
 5                  CHAIR TAYLOR:  Moving on, I think we're
 6   all in agreement that this is an issue that we need to
 7   be proactive about, so I'd like us to set up a work
 8   group, and on that work group we have Stephen Fenoglio,
 9   Larry, Rosie, and Markey.  See, you're names are
10   already written down.
11                  MS. JOSEPH:  I just need to raise a
12   question for the advisory committee to see how this
13   fits within the scope of your duties.  I think that
14   should be clarified for the record.
15                  CHAIR TAYLOR:  Okay.  What we'd like to
16   do with this work group is to show that this is
17   affecting gross receipts and gross receipts is part of
18   what we're talking to the commissioners the state of
19   bingo in Texas and this affects attendance and gross
20   receipts, so that would fall within the scope.
21                  I would hope this work group can put
22   together some statistics -- Stephen's notes are very
23   interesting -- and put together more numbers.  We need
24   numbers coming out from all the different cities that
25   have already enacted this and the cities that haven't.
0113
 1   Show me what effect this has not only on the charities,
 2   on the charitable distribution but on the proceeds that
 3   are directly going to the individual cities.  Because I
 4   think if we can show how it will affect their own
 5   pockets and the pockets of the organizations playing
 6   bingo in their cities that that can make a difference
 7   and help us.
 8                  So does that fit within our scope?
 9                  MR. DOUGHERTY:  How many cities have
10   this ordinance in effect now?
11                  CHAIR TAYLOR:  We don't know; that's
12   what the work group is going to be working on.  We need
13   the numbers; we need to show how it's affecting
14   attendance, because we don't know; we don't know any of
15   this information.  How does it affect attendance?  How
16   does it affect our gross receipts and distribution?
17                  MR. FENOGLIO:  And I think probably Phil
18   knows the answer to that.  I know El Paso and the City
19   of Dallas has very stringent nonsmoking ordinances.
20   I'm.  Not aware of any other cities that have a very
21   stringent nonsmoking ordinance.  Many cities have
22   something similar to the City of Austin, again,
23   separate ventilators and, you know, separate nonsmoking
24   facilities.  My sense is, probably 85 percent of the
25   cities that regulate smoking have something like the
0114
 1   City of Austin.  There are a lot of small cities that
 2   have no smoking ordinances, but no big surprise,
 3   there's not a lot of bingo players in small cities
 4   because there are not a lot of people who live there,
 5   but that would not -- there are VFW posts within those
 6   small cities that aren't regulated at all as far as
 7   smoking goes.
 8                  MR. DOUGHERTY:  I would be interested in
 9   totally banned cities like Dallas.
10                  MR. FENOGLIO:  And, Madame Chair, I
11   assume you were reading from the BAC -- I'm sorry --
12   the commission rule on what the BAC is supposed to be
13   doing.  The statute is clear, the committee may advise
14   the commission on the needs and problems of the state
15   of the bingo industry, so that falls into the issue
16   that you addressed.
17                  CHAIR TAYLOR:  Thank you.
18                  MR. ATKINS:  I do think it's important
19   just to note that I think that this is information that
20   the commission will be happy to receive.  I do think
21   what is indicated, Steve, you referenced the fact that
22   there was an earlier work group that looked on this and
23   I think at the time it was the commission's position
24   that they wanted to be clear that these local
25   ordinances weren't matters that the commission had any
0115
 1   authority over.
 2                  MR. FENOGLIO:  Right.
 3                  MR. ATKINS:  And so, subsequently, just
 4   to make sure that there is not necessarily going to be
 5   any action that the commission themselves can take as a
 6   result of these, but I do agree that in terms of the
 7   effect that it's having on organizations would be
 8   information that can be beneficial for the commission
 9   to have.
10                  MR. FENOGLIO:  And, ultimately, it could
11   affect the state in the since of the prize fees that
12   are collected or not collected as a result of that.
13                  MR. WHITTINGTON:  I'd like to get the
14   information on how many halls have closed because of
15   this.
16                  CHAIR TAYLOR:  This is something -- the
17   work group is going to bring us this information back,
18   so that instead of asking questions at the next
19   meeting, we'll have some answers.
20                  MR. DOUGHERTY:  And I think there was
21   one other person who wanted to be a part of this group.
22                  CHAIR TAYLOR:  Yes.  I do want to call
23   on Sharon Ives.
24                  MS. IVES:  My name is Sharon Ives.  For
25   the record, I just wanted to volunteer to be on that
0116
 1   work group.
 2                  CHAIR TAYLOR:  So be it.
 3                  MS. IVES:  Thank you.
 4                  CHAIR TAYLOR:  Okay.  We are -- we are
 5   going to move on to the next topic.
 6                  MS. LAUDER:  Suzanne?
 7                  CHAIR TAYLOR:  I'm sorry, I didn't even
 8   see you there.
 9                  MS. LAUDER:  I'd like to step out of my
10   facilitator role and just share a couple of comments on
11   the smoking issue.  I don't know that anyone on the
12   committee knows that I --
13                  CHAIR TAYLOR:  Will you introduce
14   yourself.
15                  MS. LAUDER:  I'm sorry.  My name is I'm
16   Carol Lauder and I work for the controller's office and
17   I normally serve as a meeting process facilitator for
18   the BAC.  My regular job is managing tobacco programs
19   to keep kids off cigarettes, and so I work every day on
20   this issue of tobacco and so I just wanted to share
21   with you that this direction that the state is going
22   concerning smoking is probably going to continue, and
23   there's a lot of reasons for that.  It has to do with
24   the health care costs of second-hand smoke that is now
25   proven, and so there's a lot of reasons that this is
0117
 1   happen, so I encourage the subcommittee to look at ways
 2   to bring your customers in that are nonsmoking to get
 3   the ordinances passed where you have a separate
 4   ventilation so you can accommodate your smokers.  I do
 5   want you to realize that it's going to be a very uphill
 6   battle because of the data concerning second-hand smoke
 7   that is available, and I would encourage you to apprize
 8   yourself of a lot of that information as well.
 9                  CHAIR TAYLOR:  Thank you.
10                  (AGENDA ITEM NUMBER TEN)
11                  CHAIR TAYLOR:  Item Ten, report and
12   possible discussion on the 79th legislature.
13                  MS. TREVINO:  Good morning, Madam Chair
14   and members.  For the record, I'm Nelda Trevino and I'm
15   the director of governmental affairs.  At your last
16   meeting we provided a copy of the speakers' interim
17   charges issue to the House Committee on Licensing and
18   Administrative Procedures and the report that one of
19   the committee's charges which relates to the sale of
20   lottery tickets at new alternative locations was the
21   subject of the committee hearing that was held in Fort
22   Worth in February.  Included in your bingo packet
23   behind tab ten is a copy of the July 26th meeting
24   notice for the House Committee on Licensing and
25   Administrative Procedures.  At this hearing, the
0118
 1   committee considering another one of their interim
 2   charges relating to the Texas para mutual racetracks.
 3                  The other agenda item considered by the
 4   committee at this hearing was the general oversight of
 5   the lottery commission, and the committee heard
 6   testimony from the state auditor's office and also from
 7   the agency as it related to three audit reports that
 8   had been issued by the state auditor's office and those
 9   audit reports relate to the security of the Lottery
10   Commission.  And it's our understanding the committee
11   will issue an interim committee report sometime in the
12   fall that will include recommendations for the 80th
13   Legislature to consider.
14                  This concludes my report and I'll be
15   happy to answer any questions.
16                  MR. ATKINS:  If I could add, I
17   understand that under the item dealing with the needs
18   of the para mutual racetracks, one of the items that
19   was discussed in the committee was the authorization of
20   video lottery terminals at racetracks, and, as I think
21   most everyone on the committee is aware of this, it's
22   an item that's been considered in the past.  We have,
23   in response to requests from the legislature in terms
24   of the development of the fiscal note, identified that
25   it's been our estimation that the introduction of those
0119
 1   video lottery terminals, everything else remaining
 2   status quo, that is, no other changes or anything, I
 3   believe that we've conservatively estimated that we
 4   could anticipate a 50 percent reduction in gross
 5   receipts, et cetera, for charitable bingo organizations
 6   within an immediate area located next to those tracks,
 7   which I believe it was around a 30 percent reduction
 8   statewide.
 9                  MR. CORNWELL:  Billy, in the state of
10   Missouri -- at the start of casino games in the State
11   of Missouri, they had 939 charities playing bingo in
12   Missouri; today there are a little over 400 charities.
13                  CHAIR TAYLOR:  I believe -- well, I know
14   that a couple of years ago the Lottery Commission had,
15   I believe, written something to somebody that actually
16   had it listed down and they used Kingsville as a
17   go-between point.  Do you know that?  Could we get
18   that?
19                  MR. ATKINS:  Yeah, I guess.  Yeah, I
20   guess we'd still have it.
21                  MS. TREVINO:  I believe it was a letter
22   that we might have sent to a member of the legislature.
23                  CHAIR TAYLOR:  Absolutely right, it was.
24                  MS. TREVINO:  And we centered some of
25   the research, Billy, I believe down around the
0120
 1   Kingsville area because there was a proliferation of
 2   eight liners in that area and so we used that as kind
 3   of a base.
 4                  CHAIR TAYLOR:  It had some really
 5   interesting data in there.  I was just wondering if we
 6   could make that available to the committee.  I've come
 7   across it several times, because I'm a pack rat and I
 8   keep lots and lots of paper, but to try and find it
 9   would be difficult, but it was very interesting.
10                  MS. TREVINO:  I'll work with Billy and
11   get that copy of the letter and get it distributed to
12   the committee members.
13                  Anything else?  Thank you very much.
14                  CHAIR TAYLOR:  Any other discussion on
15   this topic?  Public comment?
16                  (AGENDA ITEM NUMBER 11)
17                  CHAIR TAYLOR:  Moving on to item 11:
18   Report and possible discussion on public service
19   announcements.
20                  Rosie.
21                  MS. LOPEZ:  My favorite subject.  Is
22   Bobby here?
23                  MR. ATKINS:  No, he's not here today.
24                  CHAIR TAYLOR:  Rosie, did you want him
25   to be here?  If so, we can take a break.
0121
 1                  MS. LOPEZ:  I just need to give him
 2   something.
 3                  I'm handing out a handout to all the BAC
 4   members and I think there's some extras that can go out
 5   to the audience and copies can be made available to
 6   anyone that would like one.
 7                  But, basically, I guess I'm real excited
 8   about the Texas Lottery Commission Charitable Bingo
 9   public service announcement that was created here by
10   the TLC's public relations department.  They've done
11   such an awesome job and I have to say that this has
12   been probably the best tool that we can use
13   collectively to continue to promote charitable bingo.
14   I took this beta format PSA to all of my local networks
15   in the Midland/Odessa area, and before you -- starting
16   in May, I have Studio 7, which is our local KOSA TV.
17   They also own the UPM channel.  All of these -- these
18   two networks have aired a total of 372 spots from May
19   to about July 31st.  The incline value that these
20   television stations, just in the Permian Basin, have
21   donated about $14,000 worth of public service
22   announcements to promote charitable bingo.  The other
23   stations are ABC, Big Tune News, and I know they do the
24   PSA's in the log and they will be running as soon as
25   they obviously have some time to air these slots.
0122
 1                  So I guess I'm here pleading with
 2   everyone, and this is just not the BAC committee but
 3   any member in the general public, to make available the
 4   public service announcement to those cities that are
 5   interested in taking that PSA back to your local
 6   networks.  You know, by law, TAB broadcast stations are
 7   to air public service announcements.  Meet with them,
 8   they'll run them for you and, not only that, I mean,
 9   it's going to promote charitable bingo in your city, in
10   your community, so I'm real excited about that.  I have
11   all of the actual run sheets, which is the actual proof
12   that the ads did run.  I'm going to hand these over to
13   the Lottery Commission because these are the originals
14   and I just kept a copy of them for myself.
15                  But I think that, again, this PSA has
16   been very, very beneficial.  We have a lot of people,
17   customers, tell us, we've seen, you know, that bingo ad
18   but it doesn't say "strike it rich."  Well, that's
19   okay, it just says bingo.  That's the whole point, is
20   getting the word out.  And so, again, I encourage
21   everyone to make available -- make yourself available
22   at that PSA and talk to your local TV stations about
23   airing your PSA's.
24                  MS. ROGERS:  Rosie, have you seen any
25   increase in new customers?
0123
 1                  MS. LOPEZ:  Yes.  Now, is it attributed
 2   to PSA's?  There's a lot of factors.  There's been some
 3   bingo halls in the Midland/Odessa area that have had
 4   some recent changes and that might be the reasoning
 5   that we've seen some different customers coming in from
 6   Midland to Odessa, but a lot of our customers that have
 7   seen the PSA's, you know, have made that known to me.
 8   Because it's on the air a lot, and they'll tell me, oh,
 9   we saw the ad on TV, you know.  So I think that you
10   know, there's a lot of factors of why we've seen new
11   faces, not only that the PSA obviously is working but
12   we've had some other changes in the bingo industry in
13   our particular area of the state.
14                  CHAIR TAYLOR:  Great.  Good report, good
15   information.  Any other discussion on this from the
16   BAC?  Public comment?
17                  Okay.  If not, we're going to take
18   another break for 15 minutes and then come back and
19   finish up.
20                  (A short break was taken.)
21                  (AGENDA ITEM NUMBER 12)
22                  CHAIR TAYLOR:  Back to order.  Item
23   Number 12, report and possible discussion and/or action
24   on the 2005 bingo advisory committee annual report.
25                  This has been handed out to you at the
0124
 1   beginning of this meeting.  Does everybody have one?
 2   If somebody would like one that doesn't have one, we
 3   have a couple more copies up here.
 4                  The committee met and put together this
 5   report.  We used the data off of the charitable bingo
 6   website.  I think the data is pretty accurate.  It was
 7   very interesting to put this report together and see
 8   just where everything has gone.  Very briefly, Kim and
 9   I are going to take turns reading this.  It's not very
10   long, the written part, for those of you that don't
11   have this book.  I'm going to start going through gross
12   receipts and Kim is going to take charitable
13   distribution for you.
14                  The bingo advisory committee used data
15   contained in the charitable conductor Return summaries
16   from the statewide financial reports provided by the
17   Texas Lottery Commission charitable bingo website.  The
18   committee analyzed the data and makes the following
19   recommendations for the improvement of bingo in Texas
20   to the commission.
21                  Number one, gross receipts.  Gross
22   receipts have continue to improve because of the
23   increased instant bingo sales due to event tabs while
24   card sales entrance fees decreased by $19,631,513 and
25   electronic sales decreased by $424,224, instant bingo
0125
 1   sales increased by $49,436,059 resulting in an increase
 2   in instant bingo sales of approximately 28 percent and
 3   creating an increase in gross receipts of approximately
 4   five percent or $29,380,322.  However, as the sales of
 5   instant bingo have increased, so have the prizes paid
 6   out.  Additional improvement in gross receipts would be
 7   achieved by adding progressive bingo, linked bingo,
 8   satellite bingo, or instant bingo card minders.
 9   Continuing to allow instant bingo sales only in halls
10   conducting bingo sessions is also recommended.
11                  We have charts on pages four, five, six,
12   and seven related to this topic.  If you'll look at the
13   chart on page four, we've got on here from 2000 to
14   through 2005 and we can see where our sales were going
15   down, down, down through 2002 and have continued to
16   grow.  This is our total month's receipts and how
17   they've continued to grow through 2005.
18                  The chart on page number five is
19   actually the adjusted gross receipts.  So we've got
20   your total gross receipts in blue, the prizes are in
21   pink, and our adjusted gross receipt is in green.  What
22   this graph is showing us is that while our gross
23   receipts have risen because the prizes have also risen,
24   the money that's left in just the gross receipts has
25   remained just fairly stable, so although we've got more
0126
 1   money in, it's more money out.
 2                  The chart on page six is just a
 3   comparison between 2004 and 2005.  It's got the three
 4   items, the card sale entrance fees, the electronic
 5   sales, and the instant bingo sales broken down and it's
 6   showing just what we were talking about earlier.  The
 7   card sale entrance fees have decreased; electronic
 8   sales remain fairly stable, but the instant sales have
 9   continued to dramatically increase.
10                  Page seven is a chart that I was very
11   interested in, seeing what is the person sales doing on
12   these particular items, so this is one of my favorite
13   charts because we can see that per person, entrance
14   fees back in 2000 were $13.80 and now they've gone down
15   to $13.01, so fairly stable.  The per person electronic
16   sales was at $5.31, it's up to $7.39, so it's risen a
17   bit with more people using electronic, but if you look
18   at the per person instant bingo sales, this is actually
19   proved something I took back to the commission when we
20   were trying to get this rule pushed through and I had
21   projected that in my hall that I felt that our sales
22   were just about this number of $3 and that if we
23   followed the trend in Louisiana, we should go up to $11
24   or $12 per person, and this chart shows exactly that.
25   We've gone from $3.46 in 2000 up to $11.14 per person
0127
 1   in 2005.  And, remember, there's a lot of halls that
 2   are not alone, but there are a lot of halls that don't
 3   sell instant tabs, but you can really see the
 4   difference that instant tabs has made to this business,
 5   and this is because of the event tabs.
 6                  Now, we come to this conclusion, I asked
 7   Knowles if he could do me a favor and put together a
 8   little report for me, which he brought to me today --
 9   thank you very much -- on the pull tab breakdown.
10   Because right now in our quarterly reports, it's really
11   difficult to -- I mean, we all know in the halls that
12   the event tabs are where we're making the money, but
13   there's really nothing written down showing us where
14   it's coming from because they're put on one line on our
15   quarterly rough report.  There's a lot of charities
16   that don't break them down at this time.  We break them
17   down in my hall events and instants, but then they're
18   lumped back together to form the report.  So Knowles
19   brought me this little report from Good Time Bingo, and
20   the total ticket sales for the distributor for last
21   year were $3,811,157, of this amount, 18 percent were
22   instant bingo sales and 81 percent were event ticket
23   sales, so a perfect example of, this is what we have
24   been saying all along, but this is real interesting to
25   me to see it written down that this is what the
0128
 1   difference the distributors are selling so we can
 2   figure out that 81 percent of this is our event
 3   tickets, if the other distributors run to the same as
 4   this, which I am going to ask if each one of them can
 5   give us some kind of a report.
 6                  Anyway, back to the report.  This is
 7   item number seven and -- or page seven, so it really
 8   gave us a good look at why our numbers have gone up,
 9   the gross has gone up.
10                  MR. DOUGHERTY:  Can I ask one little
11   question?
12                  CHAIR TAYLOR:  Yes, sir.
13                  MR. DOUGHERTY:  Is this $11 per event?
14                  CHAIR TAYLOR:  Per person.
15                  MR. DOUGHERTY:  Per person?
16                  CHAIR TAYLOR:  Per person at each
17   session.  What we did is, we took the total sold and
18   divided it by the total attendance, so through the year
19   it averages out that at each session, because that's
20   the attendance from every single session playing in the
21   state, that at each session it would average out that
22   every single person has spent $11 $14 on tabs.
23                  MR. DOUGHERTY:  I would have thought it
24   would have been higher than that because of all day.
25   It sure is for me, but that's all right, I'm just
0129
 1   surprised.
 2                  CHAIR TAYLOR:  It's per person.  It's
 3   the total attendance -- it's the total amount spent on
 4   instant tabs divided by the total attendance, so at
 5   every single session that was run in this state for the
 6   entire year, $11.14 was spent by every person that
 7   walked in the door.
 8                  MS. ROGERS:  And some don't play
 9   instant.
10                  CHAIR TAYLOR:  Right, just the tabs.
11                  MS. ROGERS:  Okay.  Number two is
12   charitable distribution.  Charitable distributions have
13   continued to increase over the last year.  Charitable
14   distributions in 2004 were $30,048,545.  They rose by
15   $298,130 to $30,346,675 in 2005.  This is the third
16   year in a row to see a slight increase in charitable
17   distributions even though there has been a decrease in
18   conductors during the same time period.  In many
19   instances, organizations must use income from instant
20   bingo sales to help pay for the $2,500 prize board from
21   bingo games.  Increasing the gross revenue from card
22   sales and electronic sales through increased attendance
23   would allow more income to be available for charitable
24   distributions.
25                  And if you look on page eight, we have a
0130
 1   chart there and you can see where, in 2000 it was
 2   $36,890,265.  It had a decrease down through 2004 and
 3   now is slightly going back up, which in 2004 it was
 4   $30,048,525 and in 2005 it is $30,346,675, so it has
 5   started to go back up and continues to rise.
 6                  CHAIR TAYLOR:  Okay.  The expenses.  The
 7   expenses have remained relatively stable throughout the
 8   last six years and we're actually $3,564,287 less in
 9   2005 than in 2000, showing that conductors have been
10   managing their expenses well.  There was an increase in
11   expenses of $1,554.088 from 2004 to 2005.  This was due
12   largely to the increase in mortgage payments of
13   $1,205,697 for this time period.  Rent payments
14   increased by $1,174.  Lease payments to distributors
15   for electronic equipment increased by $365,840, and the
16   cost of goods sold increased by $343,150.  The first
17   year "other expenses" have been broken down was 2005;
18   therefore, no comparisons could be made item by item;
19   however, other expenses as a total decreased by
20   $361,773.  To increase the charitable distributions,
21   the focus should be on revenue enhancement rather than
22   on cutting down expenses.
23                  The charts on page nine through 13 are
24   the expenses.  The total expenses are on page number
25   nine.  It shows years 2000 through 2005.  You can see
0131
 1   that we went down in 2002.  We continued to increase
 2   just a smidgen.  They're just really, really stable
 3   these last four years without very much increase.  The
 4   chart on the next page, on page ten, we put the
 5   expenses in order of what it actually cost the charity
 6   because we did have the 2005 expenses categorized so we
 7   were able to actually separate all those other
 8   expenses.  Obviously rent is the highest expense and
 9   payroll is right on the heals of rent.  Electronic
10   expenses looks to be about 50 percent, maybe a little
11   more, of the rent expense and the rest of them go on
12   down with janitorial, security, license fees,
13   advertising.  There is only -- there's one other
14   expense of $1,544, so I don't know what the other
15   expense was, but it's an interesting chart just to see
16   the expenses on it.
17                  Page 11 charts 2004 and 2005 together,
18   and you can see the lines are just almost right on top
19   of each other; you couldn't get a whole lot closer with
20   this many different people for an entire year.  Page 12
21   is the actual -- the net revenue broken down as to how
22   much was left and where the money went to in a pie
23   graph.  And if you flip over from page 12 to page 13,
24   one is 2004 and the other is 2005, and it looks like
25   almost the same pie chart, the only difference is the
0132
 1   other expenses went down one percent and the mortgage,
 2   which was at a zero percent, went up to one percent.
 3   Everything else is just -- you flip back and forth and
 4   it looks like the same pie chart between 2004 and 2005.
 5                 Were there any questions?
 6                  MR. DOUGHERTY:  Yes.  On page ten, where
 7   does utility, electrical and all that, come in to play
 8   there?  Which one of those categories would cover the
 9   electrical expenses?
10                  CHAIR TAYLOR:  The utilities are put on
11   for a line with a lot of other items in there.
12                  MR. DOUGHERTY:  Isn't that a pretty
13   large expense?  It is in Austin.
14                  CHAIR TAYLOR:  What you have to remember
15   is that not all the organizations are paying that.  A
16   lot of that is included in the rent that they're
17   paying, so that might not necessarily be here because
18   it might be over on that first column.  My charities
19   for the last years, I've always paid that bill, so that
20   would be in the rent and not in the utilities.
21                  MS. ROGERS:  Because you have the option
22   to do either one.
23                  MS. LOPEZ:  Maybe they're included in
24   rent?
25                  CHAIR TAYLOR:  Yeah, included in the
0133
 1   rent.  You know, so I'm not the only one that has the
 2   utilities in the rent.
 3                  MS. ROGERS:  The charity pays one fee.
 4                  CHAIR TAYLOR:  That's why you're not
 5   going to see that, because it depends upon what's
 6   included in the rent.
 7                  MS. ROGERS:  Item number four is
 8   attendance.  Attendance --
 9                  MR. DOUGHERTY:  You didn't give me page
10   two.  Does anybody got a book that's got page two on
11   it?  Thank you.  Go ahead.
12                  CHAIR TAYLOR:  You know, while we took
13   this brief break, you'll notice that all these numbers
14   on the charts came off of the figures on page three, so
15   any numbers you want to actually look at the whole
16   thing, everything is on page three that these numbers
17   are from.
18                  MS. ROGERS:  Attendance has decreased
19   approximately 22 percent from 2000 to 2005.  It's gone
20   from 25,820,526 down to 20,041,191 with a decrease in
21   attendance of 1,555,879 from 2004 to 2005.  The
22   continued decrease is due in part to bingo games that
23   are no longer exciting to the general public,
24   competition for the gaming dollar, i.e., lottery,
25   internet games, floating casinos, and casinos in
0134
 1   neighborhood states, and from lack of advertising bingo
 2   in Texas.  Recommendations for improvement include
 3   Progressive Bingo, link or satellite bingo, increasing
 4   license times, and adding an appropriation for
 5   advertising to the bingo budget.  Improving attendance
 6   remains the key issue to the success of charitable
 7   bingo in Texas.
 8                  And there is a chart on page 14 which
 9   will show the decrease however so slightly, in some
10   eyes it's huge.  And, once again, if the people who
11   play the games are not excited and they can go right
12   across the border to some bingo hall that is 30 or 40
13   miles and they have games that they can win more money,
14   play longer, they do it, and that is the one thing we
15   need for attendance.
16                  CHAIR TAYLOR:  Are there any questions
17   on this section?
18                  MR. CORNWELL:  I've got a question.  In
19   here we make recommendations for linked or satellite
20   bingo, how do you see that linked or satellite bingo
21   working?  And I have to address that to Billy, too.
22                  CHAIR TAYLOR:  Just let me explain.
23   This is actually the work group, and previously we had
24   had people come to the meeting and talked about linking
25   different halls together where you could link a prize,
0135
 1   whichever hall is linked together, and have a common
 2   gain, you know, and have a common prize, one big prize.
 3   The satellite bingo is just items that have been
 4   brought to us by the work group previously.  And if you
 5   look back, I'm sure you'll find somewhere where the BAC
 6   had recommended that we liked the idea of adding
 7   something to the bingo games.
 8                  MR. CORNWELL:  Suzanne, I'm going to
 9   have to ask Billy.  Billy, what is -- have you looked
10   at the reality of those possibilities of linked or
11   satellite bingo?  Is it going to require a legislative
12   change or a constitutional change?
13                  MR. ATKINS:  It could require both, it
14   just depends on which illegal advice you give and
15   whether or not the language in the constitutional
16   amendment authorizing bingo limits the game in and of
17   itself to one location.  That's been a question that's
18   been raised.  Both will require some kind of
19   legislative activity.  It's nothing that the commission
20   can do unilaterally.
21                  MR. CORNWELL:  Well, could we request an
22   attorney general's opinion on that issue?  Or do we
23   want to?
24                  MR. ATKINS:  On which issue?
25                  MR. CORNWELL:  Linked or satellite
0136
 1   bingo, whether it requires a legislative change or a
 2   constitutional change.
 3                  MR. ATKINS:  You know, I don't know if
 4   that would be, you know -- well, I know that there has
 5   been legislation introduced in the past to authorize
 6   linked bingo games and the people who prepare that
 7   legislation are, in essence, the attorneys for the
 8   legislature, and so I think they would be the people to
 9   ask in terms of if it would require a constitutional
10   amendment.
11                  MR. CORNWELL:  Well, my only reason is,
12   we've extended efforts and money on this thing and
13   getting some of it passed and I wanted to make sure
14   that we pass the right piece of legislation and that's
15   one of the reasons why I asked.
16                  CHAIR TAYLOR:  What the work group is
17   looking for at this time is a motion to accept the
18   annual report from the work group and present it to the
19   commission.
20                  MR. SANDERSON:  Madam chair, Phil
21   Sanderson, assistant director of the charitable bingo
22   division.  The question came up about where the
23   utilities services are in the report.
24                  CHAIR TAYLOR:  Yes, sir.
25                  MR. SANDERSON:  That is included on the
0137
 1   line item for fees, callers, cashiers, ushers,
 2   janitorial services, and utility supplies and services,
 3   and that's based on the instructions in the quarterly
 4   report.  The line item for the mortgage payments prior
 5   to 2005 was strictly just mortgage payments and after
 6   2005 it also included insurance expenses, so that may
 7   be the reason why that has gone up a little bit.
 8                  CHAIR TAYLOR:  Thank you.
 9                  MS. ROGERS:  I make a motion to have
10   this accepted for the commission.
11                  CHAIR TAYLOR:  Is there a second?
12                  MR. WHITTINGTON:  I second.
13                  CHAIR TAYLOR:  All in favor?  Opposed?
14   Then this is the report that will go to the commission
15   at their next meeting.
16                  Was there any other discussion on this
17   topic?
18                  MS. ROGERS:  Great report.
19                  CHAIR TAYLOR:  Thank you.
20                  (AGENDA ITEM NUMBER 13)
21                  CHAIR TAYLOR:  Okay.  Item Number 13,
22   report and possible discussion on redesign of
23   charitable bingo operations division website.
24                  MR. ATKINS:  Thank you, Madame Chair,
25   members.  One of the things we wanted to do, members,
0138
 1   was just begin a discussion of the advisory committee
 2   on the division's website.  We are considering and
 3   working with our information resources department on
 4   making changes to the website with the goal of making
 5   it more user-friendly and kind of expanding the focus
 6   of the website.  If you'll go ahead and pull up our
 7   website now, Phil.  This is currently the website, and
 8   just for everyone's information, when it was originally
 9   designed, our focus was based, I would you say,
10   primarily on licensees and putting information for
11   licensees out there, getting as much information as we
12   could pushed out to the website and make it more
13   accessible to licensees.
14                  One of the things that we're considering
15   doing, as I mentioned, was expanding the focus of the
16   website to be attractive not only to licensees but
17   applicants, bingo workers, players, and those are
18   probably the four main groups, and so what we have been
19   in discussions with in our information resources
20   division is kind of one of the ways to go about doing
21   that, and a suggestion that they have given us to look
22   at is -- Phil, if you'll scroll across the top on the
23   "about us" applications.  You'll notice, as you scroll
24   along, you have drop-down items where you can select
25   different items that you want to go to, but then when
0139
 1   you get to that page, you don't necessarily know on the
 2   website where you are, so one of the things we're
 3   looking at -- if you'll go to the Georgia lottery
 4   site -- is this functionality over here on the
 5   left-hand-side, and what that does is, if you click on
 6   one of these items -- click on education on the left --
 7   it will pull up that page but it will also show you the
 8   submenus underneath that, so as you're going through
 9   the website, you'll always know where you are, and so
10   that's kind of a design feature that we're looking at.
11                  Also, you know, using kind of this
12   Georgia lottery as an example, you'll notice that the
13   web page is broken down into, you know, what you can
14   refer to as kind of different sections of -- you know,
15   on their page, you know, they have their games right up
16   there on top and then they have a section underneath
17   for lottery news and updates, featured games, but they
18   have kind of these chunks broken down that are specific
19   to certain items.  And, also, another feature on this
20   is, you don't really have to scroll down to get the
21   bulk of what's on the page; it's right there when you
22   open it up, so one of the things that we've been
23   meeting with our folks on is to develop our page in a
24   way similar so that there are chunks, you know, maybe
25   four different main sections on the main page as well
0140
 1   as this feature on the left-hand side which serves as a
 2   navigation tool to make it, you know, easier for the
 3   user as they're going through.  So, in doing that -- if
 4   you want to pull up some of the test pages -- and,
 5   again, these are -- our IT folks have, you know, asked
 6   to emphasize that these are just very, very rough
 7   examples.  But, you know, for example, one of the
 8   things we could do, you know, we talked about, you
 9   know, making the information a lot more specific for
10   specific types of users, you know, licensees versus
11   workers versus players versus applicants; that's one
12   suggestion.  Another suggestion that they have is, you
13   know, a little similar, it's not a lot.  Again, they
14   have that functionality on the left-hand side where
15   they would have the different features, and, again,
16   just some chunks where, you know, here we put the bingo
17   services center information up on top, some of the news
18   alerts on the spotlights there on the main page.
19                  Again, what we've been thinking about --
20   again, this isn't interactive; this is just a screen
21   shot, but if you look over on the left-hand side where
22   it says "licensees," kind of what we're envisioning is,
23   a user could go out and click on that and what will
24   come up are the different types of licensees.  We have
25   conductor, lessor, manufacturer, distributor, and so
0141
 1   you can go to the specific information for the specific
 2   type of license that you're looking at.  For example,
 3   you know, if you clicked on conductors, it would take
 4   you to applications and forms specific to conductors or
 5   the quarterly report form specific to conductors or a
 6   set of FAQ's that are specific to conductors.  Do that
 7   for each of the application types.  And, you know,
 8   we've also talked about creating one for the bingo
 9   workers where they could go get their registration
10   forms.  There would be a link to the list of registered
11   workers, again, an FAQ specific to registered workers.
12   You know, create a link as it is here just for bingo
13   players that would include, you know, the hall locator
14   service, you know, access to the complaint form, the
15   public service announcement, FAQ's.  Also, you know,
16   something that's been suggest, you know, for lack of a
17   better word, we called it "bingo buddy," but it's one
18   of those functions where they have the ability to send
19   the link to this website to someone else, you know.
20   And then, you know, we have, you know, some of the
21   standard information that we have up there, "about us,"
22   regulations, and statutes, et cetera.
23                  So what we wanted to do is just bring
24   this to the committee's attention and let you know that
25   we are looking at working on this with our information
0142
 1   resources and, again, with the idea of being -- making
 2   it more user-friendly and, again expanding kind of the
 3   appeal of the website
 4                  MS. LOPEZ:  You know what would be
 5   really neat, you know how the other Georgia web page
 6   had like that little, what was that, member thing,
 7   wouldn't it be neat if you could have alternating bingo
 8   halls throughout the State of Texas rotate on a -- I
 9   don't know -- monthly basis or something like that
10   featuring a different hall every month or something?
11   It's just a thought.  I mean, a picture of the hall in
12   Dallas, something like that.
13                  MS. ROGERS:  Just the name of a hall?
14                  MS. LOPEZ:  The name of a hall, the
15   city, whatever.
16                  MS. ROGERS:  And it starts with A and
17   goes to Z, that way it's alphabetical.
18                  MR. CORNWELL:  Would you like to put the
19   name of the hall or would you like to put the charity
20   and the purpose of the charity?
21                  MS. LOPEZ:  Probably the name of the
22   hall, I think.
23                  CHAIR TAYLOR:  Unfortunately, I agree
24   with Rosie on this one, because I think a lot of the
25   players don't really care which charity they're playing
0143
 1   with.  They care what game is there in the hall and how
 2   much money they're going to win.
 3                  MS. LOPEZ:  I think just the name of the
 4   hall and the city, the address, maybe.
 5                  MS. ROGERS:  They could probably tell
 6   you all the charities that play at their hall because
 7   they hear it every night over and over again, which is
 8   a good thing, but they know it more by the hall.
 9                  As long as you keep the numbers like you
10   have them, Billy, up there because they are very, very
11   helpful.
12                  MR. ATKINS:  Well, it's not our intent
13   to take away any --
14                  MS. ROGERS:  Right, but I'm just saying,
15   that's really made a difference in the last couple of
16   years to have that up there.
17                  MR. ATKINS:  There are -- I would just
18   say this, Rosie, there are certain statewide
19   requirements for state agencies in terms of all the
20   flash and et cetera, et cetera, so that is one
21   restraint that we work under.
22                  CHAIR TAYLOR:  Well, I was thinking on
23   the main in Georgia, even if you had the city name and
24   then you -- and the halls that are in the city and just
25   have that rotate.
0144
 1                  MS. ROGERS:  You can't have flashing in
 2   the State of Texas, you have scrolling.
 3                  MS. WEAVER:  I have a question.  Are you
 4   looking to redesign the lottery page also or just the
 5   bingo page?
 6                  MR. ATKINS:  The lottery is looking at
 7   redesigning their page, yeah.
 8                  (AGENDA ITEM NUMBER 14)
 9                  CHAIR TAYLOR:  Okay.  Item 14, report on
10   the implementation of the new Administrative Penalty
11   Guideline rules.
12                  MR. ATKINS:  And the only thing I have
13   to report on that, members, is, as I reported to the
14   commission at their last meeting, we're holding our
15   full implementation of the Administrative Penalty Rule,
16   particularly the expedited penalty rule, again, as a
17   result of the internal audit report that was mentioned
18   earlier, and I'll some more information for you on that
19   later on.  We're holding on the implementation of that
20   until we get further into the recommendations made by
21   the internal audit report.  So that's my only update on
22   that item.
23                  (AGENDA ITEM NUMBER 15)
24                  CHAIR TAYLOR:  Item 15, report and
25   possible discussion on 1st quarter 2006 bingo conductor
0145
 1   information.
 2                  Is Phil going to be doing this for us?
 3   oh, there you are.
 4                  MR. SANDERSON:  Good afternoon, members.
 5   For the record, my name is Phil Sanderson, assistant
 6   director of the charitable bingo operations division.
 7   I am here to present to you the first quarter 2006
 8   information as reported by the licensed authorized
 9   organizations.
10                  Prize payouts for regular bingo in the
11   first quarter were 72.6 percent while prize payout
12   percentages for instant bingo were 73.1 percent.  This
13   chart indicating disbursements other than prizes we
14   have changed at the suggestion of the commission and
15   the BAC to reflect percentage of net receipts where
16   previously we were using percentage of gross receipts.
17   The highest percentage being rent payments at
18   22.2 percent; salaries for the callers, cashiers, and
19   ushers are 19.3 percent; distributions at 17.4 percent;
20   lease payments to distributors is 11.3 percent; with
21   the remainder of the other expenses at seven percent or
22   below.
23                  This pie chart is a graphical indication
24   of what percent each expense is as it relates to total
25   expenses, once again, not including prize payouts.
0146
 1   Salaries for the janitorial, callers, cashiers, ushers,
 2   security, legal, and accounting account for
 3   52.1 percent of total expenses.  When including rent
 4   payments, the amount represents 91.4 percent of total
 5   expenses.
 6                  Now, I'd like to show you a new chart
 7   that we've added to this presentation.  This pie chart
 8   shows the product mix for bingo.  Of the total gross
 9   receipts for the first quarter, instant bingo
10   represented 39 percent of total sales.  This is the
11   first time in history that instant bingo has surpassed
12   regular card sales during a specific quarter.  As you
13   can see, the reminder of the sales were 38 percent for
14   regular card sales and 28 percent for electronic card
15   sales.
16                  This is another new slide that we have
17   added.  This chart shows the comparison of net receipts
18   for the first quarter of 2005 to the first quarter of
19   2006, net receipts being gross receipts minus prizes.
20   And, as you can see, the net receipts for regular bingo
21   decreased $1.8 million while net receipts for instant
22   bingo increased $3.9 million.  This last slide charts
23   the average attendance per occasion for the first
24   quarters of 2004, 2005, and 2006.  This slide indicates
25   that the average attendance per occasion continues to
0147
 1   decline.  In your note book is an analysis that was
 2   performed by Suzanne Beasley, program specialist for
 3   the office of the controller.  I would like to point
 4   out one new bullet item that has been added to her
 5   report, and that is the second bullet, net receipts,
 6   indicating that net receipts for the first quarter of
 7   2006 has increased 4.9 percent over the first quarter
 8   of 2005 and 3.9 percent over the first quarter of 2001.
 9                  That concludes my report for this agenda
10   item and I'll be glad to answer any questions you may
11   have.
12                  MS. ROGERS:  Those two new charts, that
13   was nice to see.  Very nice report.
14                  CHAIR TAYLOR:  What it looks like is,
15   we're continuing to follow the same trend that we were
16   following last year.  Most of those numbers just keep
17   looking the same, going up in one and going down in the
18   other.
19                  Is there any other discussion on this
20   topic by members?  Public comment?  Great report and
21   I -- like Kim, I like pictures; I like those two new
22   charts.
23                  (AGENDA ITEM NUMBER 16)
24                  CHAIR TAYLOR:  Item Number 16, report,
25   possible discussion on the characteristics and/or
0148
 1   profiles of organizations conducting bingo.
 2                  MR. ATKINS:  Members, Phil Sanderson and
 3   I will kind of split this presentation up.  The first
 4   thing that we wanted to give you is a presentation that
 5   we've recently given to the commissioners.  As you all
 6   know, there's something unique to bingo and that is
 7   that bingo is authorized on a local option basis.
 8   Bingo may be authorized on a county level, a justice
 9   precinct level, or the city or town level.  If an
10   election is held to legalize bingo at the county level,
11   it's assumed to be authorized throughout the county
12   unless the jurisdiction such as the city or town holds
13   an election to prohibit bingo.  Likewise, you could
14   have one city within a county that holds an election to
15   authorize bingo without any other jurisdiction in the
16   city holding an election.  For example, you could have
17   one city where bingo is authorized and another city in
18   the same county five miles down the road that hasn't
19   authorized bingo.  And just for your information, most
20   of the elections to authorize bingo occurred in 1982
21   and 1983 shortly after the constitutional amendment was
22   adopted, with the last election to authorize bingo
23   being held in Sterling County in 2003.
24                  Now, the first map we have for you shows
25   in red the 26 counties in which bingo is not legal,
0149
 1   that is, there has never been an election at any
 2   jurisdictional level authorizing the conduct of bingo
 3   games.  This map shows in blue where bingo has been
 4   authorized at the county level, that is, it's assumed
 5   that bingo is authorized throughout the county.  And
 6   this map shows in stripes the remaining counties where
 7   bingo has been authorized at some level below the
 8   county level.  Either one or more cities or towns or
 9   one or more JP precincts.  Now, something that's unique
10   to this map, and if you look to Harris County, which is
11   in kind of the lower right-hand part, the striped
12   county, it shows up as being partially legal, again,
13   because elections were held at the JP level.  However,
14   all JP precincts in Harris County held elections to
15   authorize bingo effectively making it legal throughout
16   the county, and since it was done at the JP level, it
17   shows up on this map.
18                  Now, this last map shows in green the
19   counties where bingo is legal at some level and is
20   being conducted.  So what this map also shows in blue
21   and in stripes is the 37 counties where bingo is legal
22   at some level but is not being conducted.  So, those 37
23   counties plus the 26 counties in red where bingo is not
24   legal provides a total of 63 out of the 254 counties in
25   Texas where bingo isn't being conducted.
0150
 1                  Now, some of the things that we noticed,
 2   if you look up in the Pan Handle, the large number of
 3   counties where either bingo hasn't been authorized or
 4   it's not being conducted, you also start to see over on
 5   the eastern side of the state butting up against
 6   Louisiana some counties where bingo is not being
 7   conducted, although, it's authorized.  Those areas, if
 8   you look at the Pan Handle, they're surrounded by New
 9   Mexico and Oklahoma.  In Oklahoma they have the
10   high-stakes Indian games and in New Mexico they have
11   casinos.  Those counties along the Louisiana border,
12   there are a number of casinos along that border with
13   Louisiana that those organizations have to contend
14   with.
15                  Now, originally when we looked at this
16   map and saw these counties, we were concerned about, of
17   course, the number of counties where it's authorized at
18   some level but not being conducted, and a little
19   further analysis has led us to believe that that's
20   probably, more than anything, a function of the
21   population within those counties.  Now let me talk
22   about that.
23                  According to the figures from the 2006
24   Texas State Directory, the population of the counties
25   where bingo is not authorized, those are the red
0151
 1   counties, is 189,000 and in the counties where bingo is
 2   authorized but not being conducted, the population is
 3   420,000, so that means there's just over -- there's
 4   counties with populations of just over 600,000 out of
 5   the almost 22.5 million people living in Texas who
 6   reside in a county where bingo is not conducted.  That
 7   doesn't appear to us on the surface to be significant
 8   given the proximity of neighboring counties where bingo
 9   is available.  So, if no one has any questions --
10                  CHAIR TAYLOR:  I have one question.  Did
11   you say 62 -- there's 254 counties in Texas and of the
12   254, there's only 62 counties not playing bingo?
13                  MR. ATKINS:  There's 63 where the bingo
14   is either not authorized or authorized and not being
15   conducted, that's correct, out of 254 counties.
16                  okay.  Then I will turn it back over to
17   Phil for the rest of this presentation.
18                  MR. SANDERSON:  Good morning, members.
19   Once again, for the record, I'm Phil Sanderson,
20   assistant general director of the charitable bingo
21   operations division.
22                  Commissioner Cox at the May 3rd
23   commission meeting had asked for a profile of a
24   successful charity as well as an unsuccessful charity,
25   that being based on charitable distributions both as a
0152
 1   dollar amount and a percentage of net receipts.  After
 2   consulting with Dr. Sizemore and Mr. DeSoto in the
 3   research department, it was determined to look at the
 4   time period of 2003 through 2005 and only use those
 5   organizations that conducted at least 12 occasions per
 6   year.  Additionally, we excluded those organizations
 7   that were members of a unit or participating in unit
 8   accounting in 2005.  We were anticipating conducting an
 9   additional analysis of those organizations at a later
10   date.  The information provided is as reported by the
11   licensed authorized organizations and is unaudited.
12   The information is as reported to us as of May the
13   12th.  Keep in mind the statewide average for all
14   conductors reporting during this time period is
15   distribution percentage was 18.8 percent; regular prize
16   payout percentages were 73.7 percent; and the cost of
17   goods sold was 20.3 percent.  Now, that's distribution
18   percentage as it relates to net receipts and prizes
19   have been paid and the cost of goods sold percentages
20   are based on the net receipts after prizes have been
21   paid
22                  MR. ATKINS:  And, again, these are
23   averages.
24                  MR. SANDERSON:  Correct.  Now I'd like
25   to present to you some basic information that falls
0153
 1   into specific categories that I will discuss with this
 2   slide and a comparison of successful versus successful
 3   will occur at the conclusion of the presentation.
 4                  Here in the first slide, this shows you
 5   the top five organizations that are based on actual
 6   dollars districted.  Now, each of the slides will have
 7   the conductor's name; have the city; the years of
 8   operation; whether they own or lease the premises where
 9   they conduct bingo; what type of games are plaid,
10   whether it's regular cards, electronic cards, instant
11   bingo, or a combination of the three; whether or not
12   they hold a license to lease bingo premises; the net
13   receipts; and the charitable distributions for the time
14   period 2003 through 2005; what percent the distribution
15   is of net receipts; what the prize payout percentage
16   for regular bingo is; and what the cost of goods sold
17   percentage for paper, electronic, pull tabs, and lease
18   payments to distributors as it relates to net receipts.
19                  We looked at the prize percentage for
20   instant bingo and we found that there was very little
21   variance between the organizations.  Some common
22   characteristics between these organizations are, the
23   St. George Maronite Center in San Antonio and the VFW
24   6873 both owned the location that they conduct bingo as
25   well as lease the location to other organizations.
0154
 1   Midtown Youth Organization, they leased their location
 2   from a commercial lessor and then they turn around and
 3   sublease it to other organizations.  While the other
 4   two organization, the Humane Society and Hidalgo County
 5   and The Missions Lions Club up in McAllen both play at
 6   a commercial hall and both paid the $600 maximum for
 7   rent.  It is also interesting to note that these two
 8   organizations play at the same location.  All five of
 9   these organizations play three times per week; they
10   offer three types of bingo, the paper, electronics, and
11   the pull tabs.  The three that are conductor lessors,
12   as indicated by the "S" in the lessor column, have
13   prize payout percentages of 71 to 74 percent on regular
14   bingo and the other two organizations have a regular
15   prize payout of 53 and 55 percent.  The cost of goods
16   sold for these organizations ranged from 7.5 percent to
17   16.8 percent.  Additionally, the organizations that are
18   both a conductor and lessor had substantial rent income
19   during this time period.
20                  This slide shows the top five as it
21   relates to distributions as a percentage of net
22   receipts.  All of these organizations play at their own
23   location; basically they play once per week, and they
24   have no salary expenses.  Two of the organizations, the
25   Immaculate Conception Church and the Volunteer Fire
0155
 1   Department play only regular bingo, paper or hard
 2   cards, the other three play instant as well as regular
 3   bingo, but none of these organizations utilize
 4   electronic card minders.  As you can see, these
 5   organizations are not conducting in big cities.  Three
 6   are located in the coast around Victoria and Corpus
 7   Christi and the other two are in north, Northeast Texas
 8   and they are the only conductor within their county.
 9   As you can see, for the most part, the cost of goods
10   sold is relatively low and the prize payout percentage
11   does fluctuate between 33 percent for the Volunteer
12   Fire Department at Holly Lake and 83.9 percent for St.
13   Mary's Church.
14                  Now, for the bottom five organizations,
15   this slide shows the bottom five as it relates to
16   dollars distributed.  The VFW Auxillary and VFW 2466
17   both started conducting bingo in 2003 and they have
18   been paying back money that was transferred from their
19   general fund account to start up their bingo
20   operations.  However, as you can see, they're prize
21   payout percentage for regular bingo is high at 96.4
22   percent and 93.5 percent.  The other three
23   organizations have a regular bingo prize payout
24   percentage of 95 percent, 85 percent, and 80 percent.
25   Two of those organizations, the America GI Forum and
0156
 1   the Merkle Cemetery Association, have a very high cost
 2   of goods sold at 37.5 and 40 percent, respectfully.
 3                  This slide shows the bottom five based
 4   on percentages of net receipts.  Unlike the top five
 5   organizations where you had different organizations in
 6   the top five on dollar amount and the top five on
 7   percentage amount, the bottom five organizations are
 8   the same for both as it relates to dollars distributed
 9   and percentage distributed.  The only difference here
10   is they're just in a little bit different order.
11   Finally, there were two organizations that did not make
12   a charitable distribution over this three-year period.
13   This slide shows the Gulf Coast Council of Larasa had a
14   97 percent payout percentage and their cost of goods
15   sold was 45 percent.  They play in a large hall three
16   times per week.  The other organization is the VFW 2527
17   Auxillary, they play once a week and they had a prize
18   payout percentage of 88.4 percent and a cost of goods
19   sold of 3.6 percent.
20                  In conclusion, three of the top five
21   dollar amount organizations are also commercial
22   lessors.  They had about the average payout percentage
23   as it relates to the statewide average; their cost of
24   goods sold is below the statewide average; and,
25   additionally, they all had a combined rental income of
0157
 1   over $1 million during this time period.  The top five,
 2   based on percentage, all play at their own location;
 3   for the most part, they have a very low cost of goods
 4   sold; they pay no salaries; they do not play electronic
 5   card minders.  Compared to the organizations which did
 6   not make any distribution, the VFW 2527 Auxiliary, you
 7   can see that they had a little higher payout percentage
 8   and cost of goods sold as well as this VFW paid rent of
 9   $2,800 to the VFW where they conducted their bingo
10   games at.  The other two organizations that are in the
11   top five, based on the dollar amount, had below average
12   payout percentages and a below average cost of goods
13   sold.  While you can see, the other three on this slide
14   have a very high payout percentage and a very high cost
15   of goods sold.
16                 So, in conclusion, to determine the
17   successful operation, I guess, an unsuccessful
18   operation, some of these factors that we looked at,
19   based on a these assumptions, were the regular prize
20   payout percentage had a factor, the cost of goods sold
21   percentage was a factor, whether or not they owned or
22   leased the premises where they conduct bingo was a
23   factor; and whether or not they use volunteers or
24   salaried employees.  Now, these factors here are not
25   necessarily exclusive.  This conclusion is based solely
0158
 1   on the information as reported to us by the
 2   organizations.  There are other factors that could
 3   determine what is successful versus unsuccessful, such
 4   as the location, market conditions, and other
 5   intangible factors.  With that, I concludes this
 6   presentation and I believe that at the commission
 7   meeting Suzanne and Kimberly had offered some insight
 8   into some of these organizations as well.
 9                  CHAIR TAYLOR:  I wanted to ask you, can
10   you go back to that one slide to those two successful
11   ones in McAllen or the two successful organizations.
12   Do you know offhand, did you look at their attendance?
13                  MR. SANDERSON:  I did not look at the
14   attendance.
15                  CHAIR TAYLOR:  I believe these might be
16   two halls.  Because I've gone to those halls in McAllen
17   on my scouting trips and they're attendance was
18   humungous.  I walked in the hall and they were packed
19   like this, so there must have been four or 500 people
20   in that hall, but the cost -- I mean, actually, their
21   prize payout percentage, well, if you've -- you're
22   going to pay out $2,500 and so if you have 500 people,
23   it's going to be a whole lot less percent of your gross
24   than if you have 100 people in that hall paying out the
25   same $2,500.  Because I would love it if we only had a
0159
 1   53 percent prize payout, unfortunately, at my hall and
 2   a lot of other halls, it's 100 percent plus.  We seldom
 3   bring it at the register.  Because we run a report
 4   every night at that register about 15 minutes into
 5   bingo and we are so happy when we have $2,500 in that
 6   register, it's like, hallelujah, we can actually pay
 7   out bingo games with the bingo money.  Because usually
 8   we have to go get the money from the tab person to pay
 9   out on bingo games, and I'm not alone.  But, I mean,
10   that's awesome.  But I think that attendance -- I mean,
11   I love this chart and this is really interesting to see
12   the attendance up there with those other numbers.
13                  MS. WEAVER:  It seems to me that paid
14   employees and volunteer employees, I mean that's just
15   like for volunteers, period, and they pay it.  I'd like
16   to see it where it was separated from that, also,
17   because, I mean, if you've got a hall that's ran on
18   volunteers compared to a hall that has got your paid
19   employees, that's totally different numbers then what
20   you're portraying.  Right?
21                  MR. SANDERSON:  Well, the organizations
22   that had the highest distribution percentage all used
23   volunteer employees.  So, what is successful?  Is it
24   you know, the percent of money that you make or is it
25   the dollar amount that you distribute?  And, also, what
0160
 1   do you define as being successful?  $10,000 a year is
 2   something that, you know -- or $100,000 a year?
 3                  MS. WEAVER:  In the halls that have zero
 4   distribution, are they still open?  How can they be
 5   open?
 6                  CHAIR TAYLOR:  Yeah, this is what Phil
 7   was actually talking about.  The commissioners, Kim and
 8   I were at the last meeting, and they asked us if we
 9   could explain what was going on with the hall, because
10   one of the high halls and one of the low halls was in
11   Corpus and the other one was in Kim's neighborhood, and
12   the Gulf Coast Council of Larasa, they are the ones
13   that actually put the hall together, and when they
14   opened their hall, they opened it right across the
15   parking lot from another bingo hall with the
16   understanding that the first bingo hall was giving up
17   their -- it was a charity-run hall and they were
18   throwing in the towel and giving up, so -- this is what
19   the lady who built the hall told me, is that they
20   opened with the intention that that other hall was
21   closing and that people would just come across the
22   parking lot to this new bingo hall.  Unfortunately, the
23   hall was built and the other hall didn't close, so now
24   you've got two halls across the parking lot from each
25   other, one is a half pay hall and one is a full-pay
0161
 1   hall.  The Gulf Coast Council hall was the full-pay
 2   hall, so whether they had 50 people walk in there or
 3   250 people, they were paying out 100 percent of the
 4   money each and every session.
 5                  But one thing that I didn't think about
 6   when I was at the commission meeting that I thought of
 7   later as I was dulling out the money this last month
 8   was that the organizations in Corpus Christi receive
 9   donations back, I don't know if your organizations do.
10   Some halls they play the -- workers get tipped in other
11   halls, the customers make donations, and our halls in
12   Corpus are donations, and the normal is, when somebody
13   wins a bingo game, anything $100 or up they donate back
14   to the charity, so the charities might, you know, get
15   $1,500 in a quarter distribution.  They receive the
16   income off of the money given back to them as
17   donations, so they make every bit as much and more in
18   the donation of dollar money because they also sell
19   dollars in the bingo hall, and last month, I mean, any
20   one of the charities in my hall got $645, which, you
21   know, that's just one month, so you multiply that over
22   the course of a year and you've got a substantial
23   amount of money that -- although, it might not -- it
24   doesn't show that all in the bingo report because it's
25   not bingo income, although, they wouldn't receive it if
0162
 1   they weren't participating in bingo, so, I mean, that's
 2   over $6,000 a year that each and every one of them is
 3   going to receive that is never going to show up
 4   anywhere in the charts or graphs, so perhaps that's the
 5   reason the hall in Corpus continues.  Because even if
 6   they're not making a distribution, they're still
 7   receiving money from their bingo games, not exactly
 8   from the games but from the donations back.  And
 9   especially the event tabs have made a dramatic increase
10   in the amount of donations we receive back.  Since it's
11   so public that somebody just won $500, they feel the
12   need to give the donation back, too.  When it was a big
13   secret, you usually didn't see a donation, you know, on
14   the instant tabs, but now that it's an event and people
15   are watching, we receive an awful lot of money back on
16   the donations from not just bingo games but from the
17   tabs.
18                  And Kim your hall was --
19                  MS. ROGERS:  Well, the number one hall
20   is in San Antonio, and from the knowledge that I have
21   of that hall, I would attribute that to they own their
22   own property; they've been in business for quite a few
23   years in bingo; and they own some of their own
24   machinery, their electronic.  They don't own all of
25   them but they do own quite a few of them, and so owning
0163
 1   that I think really helps them.  And they're also in an
 2   area of San Antonio that -- in an area of San Antonio
 3   that they have an abundance of bingo players in their
 4   location.  Because you are going to find I think
 5   certain areas in certain cities and each city will be
 6   different and you're going to have more players than in
 7   other areas due to jobs, the income of the house
 8   levels, you know, what goes on.
 9                  MR. CORNWELL:  Kim, there's a lot of
10   intangibles that go into the successful.
11                  MS. ROGERS:  Exactly.  Exactly.
12                  MS. LOPEZ:  You're right about location
13   because, you know, it doesn't matter what city you live
14   in, if you've got two or three bingo halls, you've got
15   your different customer clientele that goes to each
16   hall and some are larger spenders than others, so it
17   all plays on location.
18                  MR. ATKINS:  I was going to say that I
19   think at the end of this analysis, that's the kind of
20   work we landed.  You know, it's a good exercise; it's a
21   lot of interesting information, you know.  Suzanne and
22   Kimberly were able to offer information that we don't
23   collect, you know, or necessarily have access to as the
24   agency, so I don't know if there is any kind of exact
25   formula that you could point to and say, you know, this
0164
 1   is a successful hall.  Sure, some contributing factors,
 2   but, again, their comments.
 3                  MS. ROGERS:  In the bingo world there's
 4   no exact formula to say why on Tuesday night you have
 5   200 people and on Wednesday you have 75, which, of
 6   course, you know, that's just some arbitrary numbers,
 7   but, you know, it just attributes to all kinds of
 8   stuff.  This is where we got in the conversation of
 9   charities being in larger halls versus, you know,
10   charities, you know, on their own, how it helps them if
11   everybody works together, and maybe that was more of a
12   successful.
13                  Thank you, Phil, that was very nice; I
14   liked that report.
15                  CHAIR TAYLOR:  Knowles, did you have
16   something?
17                  MR. CORNWELL:  Phil, I've tried to do an
18   average by booking my attendance numbers in and I would
19   probably talk to your research people and say, okay,
20   how does a successful bingo hall manage its prize
21   board?  I think I'd look at spins per person, what are
22   they doing in those areas to make their spin, and I'd
23   break that spin like Suzanne did, against paper,
24   electronics, and tabs, and see what they're doing and
25   what combination and how they're using their tabs and
0165
 1   working those tabs within their scheduled games.  And
 2   prize board management is going to have -- as these
 3   people are indicating to you, prize board management
 4   out there is going to become -- as because bingo
 5   receipts continue to fall, prize board management is
 6   going to become a big issue before long and we've got
 7   to come up with some way that is attractive to the
 8   current and existing players out there that allows us
 9   to play either the same games for less money or more
10   games for less money, something.
11                  CHAIR TAYLOR:  Great report; very
12   interesting.
13                  MR. SANDERSON:  Thank you.
14                  MR. DOUGHERTY:  Suzanne?
15                  CHAIR TAYLOR:  Yes, sir.
16                  MR. DOUGHERTY:  Could you expound just a
17   little on what you said?  I believe you said that some
18   bingo halls, they donate their prize money, like $100,
19   back to the --
20                  CHAIR TAYLOR:  On prizes of $100 and
21   more, they normally make a donation back.  There's
22   some, when you give somebody $100, they don't give $5
23   back.  You give them more money and you get bigger
24   prizes.  You give them $200, they give you $10.
25                  MR. DOUGHERTY:  So it's a tip?
0166
 1                  CHAIR TAYLOR:  It's not a tip; it's a
 2   donation to the organization.
 3                  MR. DOUGHERTY:  Not just to the runner?
 4                  CHAIR TAYLOR:  No.  They don't tip
 5   the -- a lot of halls -- and I believe Rosie's hall is
 6   one that the players are used to tipping the workers.
 7   In our halls in Corpus, the tendency is for the player
 8   to donate back to the organization part of their
 9   winnings.
10                  MR. DOUGHERTY:  And how do they do that?
11   Just go up to the counter and --
12                  CHAIR TAYLOR:  When you go to make the
13   payout, when we go to take their payout, they'll hand a
14   $5 back.  We always make sure that we have those $5 and
15   $1 in that prize payout, of course.  They'll pick the
16   $5 up and hand it back to you and they'll take three $1
17   and hand it back or you'll get a good one and they'll
18   give you $20 or $25.  They give more money, actually,
19   now off of the event tabs since the payout is more.
20   Those winners seldom do they not.  When they don't
21   donate back, we all raise our voice like, "Holy cow,
22   they didn't make a donation," but that's just, once
23   again, bingo in every area is different from every
24   other area.  In our halls in Corpus, the players have
25   been trained to donate back.  We don't clap anymore
0167
 1   like we used to 15 years ago every time they donate,
 2   but the caller does acknowledge it and say, "We'd like
 3   to thank that last player for their very generous
 4   donation to Campfire USA, we really appreciate all
 5   those donations," so if you don't and the caller
 6   doesn't saying anything, the whole hall is aware of the
 7   fact that you didn't make a donation back to the
 8   charity.  It's subtle, but it works in Corpus, but if
 9   you go to Austin, it's not going to be that way, nobody
10   donates back.
11                  MS. LOPEZ:  Nobody donates back in
12   Odessa.
13                  MR. DOUGHERTY:  In river City they just
14   tip a certain two or three percent of what they win and
15   it all goes into a tip pool and all the workers share
16   it.  You don't tip any one person.  That's the way they
17   do it in River City.  Is that fairly common?  I'm just
18   curious.
19                  MR. CORNWELL:  Jack, it depends.  I've
20   seen it happen both ways, where the tips are not tips,
21   they're donations back, like Suzanne is saying.  I have
22   also seen from time to time where somebody will
23   actually say, "I will donate my prize."  Usually these
24   are people who are members of the charity that are
25   playing bingo for fun that night and they will stand up
0168
 1   and say, "Listen, I'm a member of the so-and-so charity
 2   and I just won the bingo prize, thank you very much and
 3   I want it to go to my charity."  And then the
 4   callers -- I've seen it often, the callers do stop,
 5   they recognize the gentleman or the lady and thank them
 6   for their donation and what charity they're playing
 7   for.  They do a good job of that.  I'd like to see more
 8   of it.
 9                  CHAIR TAYLOR:  It's an additional source
10   of income, so that's just an explanation as to perhaps
11   why you might see a zero charitable distribution and
12   the charity actually is receiving income because
13   they're also selling the dobbers and they're making a
14   fairly profitable bit of money on the dobbers, so it's
15   just one explanation as to why organizations might stay
16   in bingo with zero distribution.
17                  (AGENDA ITEM NUMBER 17)
18                  CHAIR TAYLOR:  Okay.  Well, if we've
19   finished with this topic, let's go on to Item Number
20   17, report and possible discussion on the status of
21   nominations for filling vacant Bingo Advisory Committee
22   positions.
23                  MR. ATKINS:  Just wanted to let you
24   know, members, we did mail out, the first part of July,
25   nomination forms for the license commercial lessors.  I
0169
 1   believe that to date we've only received one nomination
 2   and that individual is also listed on the records
 3   charity organizations, so we are still looking for
 4   nominations that would fit that position.
 5                  CHAIR TAYLOR:  Any other discussion?
 6                  (AGENDA ITEM NUMBER 18)
 7                  CHAIR TAYLOR:  Item Number 18, report
 8   and possible discussion on the activities of the
 9   Charitable Bingo Operations Division
10                  MR. ATKINS:  You have the information in
11   your notebook, members, of the press releases that have
12   been issued and the website status.  I would just point
13   out, we have put on our website video and audio copies
14   of PSA's, so that is available.  We made allocations
15   for the first quarter of 2006 on May 26th.  Quarterly
16   reports for this quarter were due on July 25th.  We are
17   planning to make allocations next week, the week of
18   August 18th.  I also have on there the nomination form.
19   There are copies of press releases as well as the
20   updated graphics and the information on allocations.
21                  I did want to let the BAC know, as has
22   been mentioned during the meeting, the TLC internal
23   audit staff issued a report last week relating to the
24   audit functions of the Charitable Bingo Division.  A
25   copy of that report is also available on the website.
0170
 1   As a result of that audit and recommendations, we're
 2   going to be making some substantial changes to the way
 3   we conduct our audits.  The impact of the BAC is going
 4   to be that we do anticipate that this process will
 5   include some rule making, which we will be bringing
 6   before the BAC.  Madame Chair, that's all I have.
 7                  CHAIR TAYLOR:  Any questions?
 8                  MR. CORNWELL:  Billy, does the county
 9   and city have to request these funds?
10                  MR. ATKINS:  The city and county had
11   to -- in order to legalize, they had to, at the time,
12   vote to impose what, at the time, was a gross receipts
13   tax, and then subsequent to that is the gross receipts
14   tax that evolved to the prize fee allocation.  Cities
15   and counties had to have imposed that tax by -- and I'm
16   looking to Phil Sanderson for the exact date.
17                  MR. SANDERSON:  The city and county had
18   to have the local tax option imposed by January 1st,
19   1993.
20                  MR. ATKINS:  So, subsequently to that,
21   there is no means through statute for organizations to
22   subsequently get a portion of that allocation.
23                  MR. CORNWELL:  The question is, when you
24   make these allocations, do you mail the check or does
25   the city or county have to request the money?
0171
 1                  MR. ATKINS:  We do both things, direct
 2   deposit as well as mail some warrants out.  It's
 3   automatic.
 4                  MR. CORNWELL:  It is all automatic?
 5                  MR. ATKINS:  All automatic.  If they
 6   imposed it, we sent a payment to them.
 7                  MR. CORNWELL:  I was curious, because
 8   I've been to Galveston County and met with the
 9   commissioner down there and he says, "You're with bingo
10   and I want to take you over here.  Look what we did
11   with our bingo money."  Do you ever get reports back
12   from that county?  They built the nicest county
13   building they've got in Galveston with the bingo gross
14   receipts?
15                  MR. ATKINS:  No, I don't know that we've
16   ever gotten any feedback from cities or counties in
17   that respect.
18                  MR. SANDERSON:  The only thing that I
19   can recall was several years ago when there was some
20   discussion about doing away with allocations, that
21   there were some cities and counties with jurisdictions
22   that, you know, the money that they get from bingo pays
23   one of our officer's salaries, or things of that
24   nature.
25                  MR. WHITTINGTON:  We just need to notate
0172
 1   that.
 2                  MR. WEEKLEY:  If the city has not met
 3   the requirement of imposing that gross receipts tax by
 4   1993, what do they do to get on the list?
 5                  MR. SANDERSON:  They can't.
 6                  MR. WEEKLEY:  You mean it's impossible?
 7                  MR. SANDERSON:  Yeah.  We've had
 8   jurisdictions in both counties legalize bingo since
 9   1993 and try to get the prize fee allocation.
10                  MR. WEEKLEY:  Well, they can go through
11   the legislature, surely?
12                  MR. ATKINS:  If we did, they would
13   require a change to the legislation.
14                  MS. LOPEZ:  I have a question, like when
15   we talked about the distributions that go to our cities
16   and our counties, for those of us that obviously did
17   have our cities and counties receive allocations, when
18   the check or electronic funds are sent, does it
19   stipulate that it's coming from, what, charitable
20   bingo, the Lottery Commission?  How is it identifying
21   so that our cities and our counties know that this
22   money is coming from charitable bingo from the
23   charities in that county?
24                  MR. ATKINS:  I know that the warrants
25   that are actually mailed include a flyer that do
0173
 1   identify that, you know, this is their quarterly
 2   allocation from the conduct of charitable bingo.
 3                  MS. LOPEZ:  Does that say like, for
 4   example, say, Hector County, you know, there's four
 5   halls, does it identify which -- it doesn't?
 6                  MR. ATKINS:  No.
 7                  MS. LOPEZ:  I think that would be kind
 8   of neat if there was some kind of identification that
 9   went along with the payment so our cities and counties
10   know when they see that name of those four halls or
11   five halls that this is where the money is coming from,
12   it's coming from XYZ Bingo Hall here in our community,
13   other than, you know, meeting with your local
14   commissioner and city council and mayor and letting
15   them -- you know, making them aware of that, but maybe
16   not everyone has that same resource to where it could
17   be, you know, identified as to which of the
18   contributing halls that are actually making that money
19   go to that city or that county.
20                  MR. ATKINS:  My sense is that, you know,
21   everyone in the jurisdiction may not know, but those
22   familiar with those funds know where it comes from.
23   And I just say that because, early on when bingo
24   transferred over, when we were getting accustomed to
25   it, there were times that, you know, it maybe took us
0174
 1   longer to get the allocations out and they did call
 2   because they knew that, you know, money was due.
 3                  MR. CORNWELL:  Rosie, I'll say this, you
 4   do a great job out there in your county and in your
 5   city.  I've been to your presentations out there and
 6   you do a really great job.  I think, if I was you --
 7   and this is just do what you want -- but I would take
 8   this quarterly allocation and I would certainly make
 9   that a part of my presentation at your awards banquet
10   and you let them know exactly what you're doing, not
11   only are you keeping Odessa beautiful but you're
12   providing "X" amount of tax dollars to the county and
13   to the City of Odessa.  This is great information to
14   take to your senators, to your house of
15   representatives.
16                  MR. ATKINS:  And that information is
17   also available on the website.
18                  MS. LOPEZ:  Thank you.
19                  MR. SANDERSON:  And I think we also do
20   press releases on allocations for, you know, the
21   newspapers to pick up in the different counties, too.
22                  MS. LOPEZ:  And I guess when you guys
23   send out press releases, do you do this like right
24   after the, you know, quarter filing or how do you do
25   that?  Because I'd like to follow up with our local
0175
 1   newspaper and say, "Did you get the pre-release from
 2   the TLC talking about charitable bingo?"  Unless you do
 3   a follow-up, pretty much those news releases sometimes
 4   get overlooked in both not only print media but in TV
 5   media as well, so, I mean, is there some kind of a time
 6   line on those?
 7                  MR. ATKINS:  We do.  We generally issue
 8   a series after the end of the quarter, one that covers
 9   allocations made, one that covers prizes awarded, and
10   one that covers distributions.  So, you know, we do --
11   instead of, you know, trying to do one massive press
12   release that covers everything, which I think, you
13   know, could overwhelm someone, what we try to do is try
14   and space it out, and, you know, we provide this
15   information like it's in here but it's, you know,
16   specific to accounting, ordinarily.
17                  MS. LOPEZ:  Again, this is great; this
18   is great information.
19                  (AGENDA ITEM NUMBER 19)
20                  CHAIR TAYLOR:  Okay.  We're down to Item
21   Number 19, public comment.
22                  MS. JOSEPH:  I'm not public -- this is
23   Sandra Joseph, assistant general counsel -- but I felt
24   that I needed to make a couple of comments to you from
25   a legal perspective.  There have been a lot of ideas
0176
 1   and a lot of new -- several new work groups formed
 2   today, and in thinking about all this during the space
 3   of the meeting, I'm concerned that some of the ideas
 4   and/or groups may be outside the purview of the
 5   commission, and, of course, you know the BAC is not a
 6   trade association; you're not authorized to promote
 7   bingo or to promote legislation, neither is the
 8   commission, and you're acting, of course, to advise the
 9   commission.  The BAC, you're to advise the commission,
10   which implies that you're to advise the commission on
11   matters within its jurisdiction, so I'll be reviewing
12   different groups and the issues presented and there may
13   be a conclusion that we're not authorized to spend
14   staff resources on some of these matters.  That's not
15   to say that you as individuals or as a group outside of
16   the BAC couldn't do some of these things, but
17   specifically I'm still concerned about this smoking
18   ordinance.  I heard words like "promote" and
19   "proactive," and those words sound a little more like
20   something a trade association would do, to me.
21                  The commission -- just to refresh your
22   memory or for those of you that are new, the
23   commission's statutory purpose is set out in a portion
24   of the Bingo Enabling Act, and the primary words there,
25   the key words we need to keep in mind, are that the
0177
 1   commission is to exercise strict control and close
 2   supervision so that bingo is fairly conducted and so
 3   that proceeds derived from bingo are used for an
 4   authorized purpose.  And I'm bringing that up hopefully
 5   not to bore you but just to try to help you keep to the
 6   forefront what it is the commission is trying to do,
 7   trying to be sure bingo is fairly conducted and the
 8   proceeds are used for an authorized purpose.  So I just
 9   wanted to give you a little warning or a little caveat
10   that we'll be looking at these things.  Any questions?
11   Thank you.
12                  CHAIR TAYLOR:  Carol.
13                  MS. LAUDER:  Good afternoon, my name is
14   Carol Lauder and I serve as a consultant in terms of
15   meeting facilitation for the committee, and I just want
16   to review just a little bit for the members what that
17   means.  Back in December of 2004 at the request of
18   Chairman Clowe, the commissioners were actually looking
19   very seriously at whether they thought the Bingo
20   Advisory Committee should continue, whether it was
21   making the contribution that they wanted it to make --
22   and those are my words, how I took it -- and so we had
23   what they referred to as a historic meeting and we met
24   with the industry, the Bingo Advisory Committee, the
25   commissioners, and the Bingo Division personnel at a
0178
 1   big meeting.  We had about 80 people in here and we met
 2   for about seven hours and each of those groups defined
 3   what they saw as their role in this entire initiative
 4   and then each group also defined what their goals were
 5   and then each of the other groups evaluated whether
 6   they agreed with, say, what the BAC thought their role
 7   was and their goals were, so it was a very dynamic
 8   discussion and it brought a great deal of understanding
 9   to each group's role in this initiative, and I think a
10   lot of progress was made.  Over half of the BAC members
11   today were not present at that time, so I hope that you
12   will take the time to go back and look at the minutes
13   from that meeting because I think it will contribute a
14   lot to your understanding of how the BAC has arrived
15   where it has today.  And they re-upped the BAC
16   wholeheartedly, and so I felt like we made a lot of
17   progress in terms of defining people's roles.
18                  I am a certified professional
19   facilitator for meetings and I am here to contribute to
20   the processes that you use to make decisions and to
21   have your discussions.  I will never make a comment as
22   a facilitator on your content.  I'll never say, "Well,
23   my opinion about what you should do on this issue is."
24   What I will make comments on are the processes that you
25   use to have your conversations to make decisions to
0179
 1   problem solving.  Okay?  Any questions about the role
 2   that I play?
 3                  MS. WEAVER:  Carol, when was that
 4   meeting?
 5                  MS. LAUDER:  I believe it was
 6   December 9th, 2004, but I could be wrong on the actual
 7   date.
 8                  MS. WEAVER:  And those are still
 9   available on line?
10                  MS. LAUDER:  Billy, is that correct?
11                  MR. ATKINS:  Yes.  I'm going to look.
12   It's December 20th, 2004.
13                  MR. CORNWELL:  Right before Christmas.
14                  MS. LAUDER:  Right, right.  Before the
15   holidays.
16                  Any other questions before I talk about
17   today's meeting just for a little bit?
18                  All right.  From our meeting in
19   December, one of the things I grasped of the role of
20   the BAC was to look at issues affecting things that are
21   pretty much at a statewide level, things that affect
22   everyone.  I understand that you each represent a
23   particular aspect of bingo, whether you're a
24   distributor or the public or a conductor, but today it
25   seemed as if a couple of times people got into
0180
 1   advocating for their particular area of the industry,
 2   and I think that's natural; I think that's human
 3   nature, but I just wanted to remind you that -- I want
 4   to use the example, Rosie brought up an issue that
 5   brought out a lot of passionate discussion, and I'm all
 6   for that.  I think you really will be a much better
 7   committee if you really open up and have those tough
 8   conversations, but it seemed as if a lot of assumptions
 9   were made about what Rosie was or was not saying, and
10   so I would advocate to you to ask more questions when
11   someone brings something like that up, to delve more
12   into, what are your concerns, what are your issues, and
13   try to get a better grasp of what the issue is before
14   you advocate for what you do think should happen or
15   don't think should happen.  Any questions about that?
16   Does that make sense?  Because I think a lot of times
17   when people, you know, say, "Are you saying this?" and
18   she didn't really have an opportunity to say, "No, I'm
19   not saying that," but then that came up a little later,
20   so you would save some time if you ask some more
21   questions.
22                  Suzanne, on Item Number Seven, Larry's
23   item, I thought you did a terrific job of clarifying
24   what exactly it was that Larry was asking for, and I
25   really think y'all could do even more of that.  Because
0181
 1   sometimes the discussion goes on for a while and you
 2   can get kind of confused about what's really on the
 3   table.  A couple of times you had asked, "Should we
 4   form a committee?" and no one really answered and it
 5   kind of didn't get resolved, necessarily.  I just want
 6   to encourage you to continue to do that type of thing.
 7                  And I have been freezing, so if you hear
 8   my voice shaking, I'm like freezing.  This ring now
 9   fits on this finger; when I walked in this morning, it
10   fit on this finger, so it's been really cold in here
11   today.
12                  One of the things I want to bring up is
13   a process that I've seen happening since December of
14   2004, a tremendous amount of collaboration between the
15   BAC Bingo Division personnel in coming up with ideas
16   and the way you've moved forward, and so I just wanted
17   to encourage you to continue that collaboration.  I
18   know the BAC can form subcommittees of their own, and I
19   think you have every authority to do that, but I think
20   the results you've been getting are because the
21   division and the BAC have worked together and so things
22   don't take quite as long and maybe some things do and
23   some things don't, but I would encourage you to
24   continue that collaboration.  I think you went back and
25   said, "Yes, Sandy, we do want you on the committee or
0182
 1   we do want someone," and I just want to encourage you
 2   to continue that collaboration because that really
 3   helps the commissioners know that you've worked with
 4   the bingo division personnel and they had an
 5   opportunity to share their concerns and provide some
 6   input.
 7                  Some really small stuff -- well, it's
 8   not small but it seems small.  One person talking at a
 9   time, really.  Y'all had a lot of opportunity today to
10   break that guideline and it's very difficult, and,
11   actually, one of the problems was -- I mean, it's a
12   problem, you must have one person talking at a time.
13   Another issue that's kind of on the same kind of scale,
14   side conversations.  I just discourage you from having
15   them.  It's human nature to have them, but this is a
16   public meeting.  I suspect it's probably illegal in the
17   Open Meetings Act to have a side conversation because
18   everything is supposed to be documented and open, but
19   that's not really my issue because that's going to
20   happen.  My concern about side conversations is that
21   you miss the benefit of what's being said by someone,
22   and so conversations can get taken way back because
23   someone missed something because they were having a
24   side conversation, so I'm just encouraging you to try
25   to watch that
0183
 1                  Congratulations on your annual report.
 2   I think it's certainly the most professional-looking
 3   report I have seen since my involvement here.  I do
 4   want to encourage you to take better advantage of Rule
 5   402.102, which requires you to report to the commission
 6   with specific recommendations for improvement on those
 7   items that you report on.  I would like to see you make
 8   even more specific and tangible recommendations about
 9   what you think would help those specific areas.  Any
10   questions for me?  Thank you
11                  CHAIR TAYLOR:  Thank you.  Any other
12   public comments?  Commissioner.
13                  COMMISSIONER COX:  For the record, my
14   name is Jim Cox.  I'm a member of the Texas Lottery
15   Commission.  I want to thank all of you for your
16   service, and your dedication to the role that you play
17   here is really exemplary.  Markey and Knowles, thank
18   you for joining us.  We value your participation and
19   I'm sure glad you're here.
20                  There are a couple of things that I want
21   to underscore.  One, I think this annual report is just
22   excellent.  Certainly Carol points out that the purpose
23   of it includes not only information but
24   recommendations, and to the extent that they are not as
25   clear as she would like, it might be worthwhile to talk
0184
 1   to her and see specifically what she's looking at
 2   there, but I think it's an excellent report.  And who
 3   did this report?
 4                  CHAIR TAYLOR:  Me.
 5                  COMMISSIONER COX:  It's really nice.
 6   The other thing, Billy mentioned that our internal
 7   auditors have just completed a pretty thorough look at
 8   the bingo audit function, and I encourage all of you to
 9   read that audit report, as Billy pointed out it's on
10   the website.  It is a road map for much of what we're
11   going to be doing here in the next year or so and it is
12   certainly an indication of where the commission has
13   asked Billy, Phil, and Marshal to focus their
14   attention.  The report is very constructive.  It offers
15   an awful lot of opportunity for significant
16   improvements and we are committed to making those
17   improvements.  One of the most important
18   recommendations I think is right at the very top of
19   things, and that's a recommendation that there be a
20   clear articulation of the philosophy of the charitable
21   bingo division, and this is something that I have asked
22   Billy to put at the very top of the list and try to
23   have that to us in the first meeting in September, I
24   believe.  Billy?
25                  MR. ATKINS:  That's correct.
0185
 1                  COMMISSIONER COX:  And this is -- while
 2   I can't tell you exactly what it's going to say, I will
 3   tell you that the instruction that the commission has
 4   given in a couple of public meetings leads me to
 5   believe that it's going to say that what we're going to
 6   do is going to be clearly authorized by law and that
 7   we're not going to have a rule and we're not going to
 8   enforce anything that we don't have the clear authority
 9   either by statute or by a properly promoted rule to
10   enforce, and those rules are going to be clear.
11   They're not going to be, oh, well, we think this is
12   clearly the case and it hasn't been clearly found to be
13   the case.  So what I've asked Billy to do here is to go
14   through every rule that we enforce, every rule that we
15   don't enforce but perhaps should be because it was part
16   of a case or something, and we're going to zero base
17   those things and see, are they legal?  Are they fair?
18   Are they competent?  Are they reasonable?  So I think
19   you're going to see a significant change in the role of
20   the auditors and I think it's going to be a significant
21   improvement.
22                  Now, I asked you to read this report for
23   a couple of reasons.  One, I just want you to know it's
24   there, but, two, I think as you go forward with things
25   that you're discussing, recognize that if it's in that
0186
 1   report, Billy and his people are already committed to
 2   doing it, because they agree with every recommendation
 3   the auditor made and we will be making all those
 4   directions, all those improvements on a prioritized
 5   basis.  Rosie, the point that you had about the
 6   clarification of the various roles of the charity and
 7   of the distributor, that will probably be part of it,
 8   as Steve Fenoglio pointed out.  There are certain
 9   things that are in the statute that we don't have any
10   control over, but there are certain ways we get to deal
11   with those.  For instance -- and, Billy, you may be
12   able to help me with this -- but we had a case that we
13   looked at at our last meeting where someone other than
14   the representative of the charity had signed a lease
15   for equipment that the charities were using, and it had
16   been reported, and I think there was a case in there,
17   that said that this was inappropriate conduct of bingo,
18   and our counsel looked at that and said, well, there
19   are two ways we can know they're conducting bingo, one
20   is that everything in the whole umbrella is conducting
21   bingo and therefore no one but a charity could own a
22   hall or anything.  On the other hand, it could be that
23   all they're talking about in the conducting of bingo is
24   pulling the balls out and awarding the prizes, so we
25   dismissed that case and asked the staff to get a
0187
 1   clearer picture of what it means to conduct bingo.
 2   That's just an example of the kind of thing that we're
 3   doing to try to be sure that we're on solid ground, so
 4   I hope you will read that because there will be times
 5   perhaps when you ask Billy if he can look at this and
 6   he's going to have to say, "No, I've got a commitment
 7   to the commission to have this report to them and this
 8   action taken by this date and we just don't have the
 9   resources right now to devote to that particular issue,
10   but once these things are behind us, we'll get there."
11                  And I'll try to answer any questions if
12   you have them.
13                  CHAIR TAYLOR:  We've have that report
14   available on line?
15                  MR. ATKINS:  Yes, it's available through
16   the website.
17                  COMMISSIONER COX:  The last two bingo
18   meetings -- and I think those are the first Wednesday
19   of the month I guess of June and July -- no, July and
20   August, I guess -- I would encourage you to look at the
21   transcript of those meetings.  Now, there's quite a bit
22   of discussion about regulatory philosophy and how
23   Chairman Clowe and I see things will be coming.  I
24   think that you will be seeing things headed that
25   direction.  Okay.  Thanks again for your service; we
0188
 1   really appreciate it.
 2                  (AGENDA ITEM NUMBER 20)
 3                  CHAIR TAYLOR:  If that is it on that
 4   topic, Item Number 20, consideration of and possible
 5   action on future Bingo Advisory Committee meeting dates
 6   and/or items to be considered for future meetings.
 7                  MR. DOUGHERTY:  Suzanne?
 8                  CHAIR TAYLOR:  Yes, sir.
 9                  MR. DOUGHERTY:  Our meeting dates are
10   set for August 8th, I would recommend that the February
11   7th we move it back one week otherwise we're going to
12   start encroaching too far to the first of the month, so
13   my recommendation would be to set February 14th as our
14   February meeting rather than the 7th, which it would
15   have done if you had gone with the same pattern.
16                  CHAIR TAYLOR:  Well, the 14th might not
17   be --
18                  MR. CORNWELL:  It's Valentine's day?
19                  CHAIR TAYLOR:  Well, at this time, we
20   have our next meeting set for November 8th.  Okay.
21   This is the tentative next meeting, and at that meeting
22   I think that the committee could recommend meeting
23   dates for next year.  I'll probably have to also work
24   and see when the room is available and when the staff
25   would be available for those meetings, also.
0189
 1                  MR. DOUGHERTY:  My point was, we seem to
 2   be -- we're backing up a little bit, we don't want to
 3   get to the first, so...
 4                  CHAIR TAYLOR:  I don't think we're going
 5   to because we meet the second Wednesday of the month.
 6                  MR. DOUGHERTY:  That would be the 14th.
 7                  CHAIR TAYLOR:  So we will work on that.
 8   Actually, I believe we have met on Valentine's Day
 9   before, if you go back; I really think we have.  Okay.
10   So the next meeting will be the 8th of November at
11   10:00 a.m. here.
12                  Now we need to come up with some items
13   for the agenda.  I think that one of the items we
14   should have is possible discussion on the audit reports
15   since we've all been charged with reading the report.
16                  MR. CORNWELL:  Suzanne, it is normal to
17   have the committee's report so you don't have to put
18   that on the agenda.
19                  CHAIR TAYLOR:  You do need to put it on
20   agenda.  Anything we're going to be discussing needs to
21   be on the agenda.
22                  MR. CORNWELL:  Make a report on the work
23   we've done on Rule 402.300.
24                  CHAIR TAYLOR:  And we have the smoke
25   work group.  Depending on what Sandy finds out, we'll
0190
 1   tentatively schedule that to be on the agenda.
 2                  MS. ROGERS:  If we could put the
 3   nomination for filling the vacant bingo advisory
 4   commission on there just in case.
 5                  MR. CORNWELL:  New product presentation,
 6   alternative styles of play.
 7                  CHAIR TAYLOR:  So at this time we've got
 8   these items.  Anything that you would like to add in
 9   addition to this?  If there's something that you think
10   of, you can either call me or Billy.  If you e-mail me,
11   it's good to give me a phone call to get me to look
12   because I don't look every day.  Otherwise you can
13   notify either of us.
14                  (AGENDA ITEM NUMBER 21)
15                  CHAIR TAYLOR:  And if there's no other
16   discussion, then the meeting is adjourned and it is
17   2:50.
18   
19   
20   
21   
22   
23   
24   
25   
0191
 1                   REPORTER'S CERTIFICATION
 2   
 3   STATE OF TEXAS         )
 4   COUNTY OF TRAVIS       )
 5   
 6             I, KIMBERLYE A. FURR, Certified Shorthand
 7   Reporter for the State of Texas, do hereby certify that
 8   the above-captioned matter came on for hearing before
 9   the BINGO ADVISORY COMMITTEE as hereinafter set out,
10   that I did, in shorthand, report said proceedings, and
11   that the above and foregoing typewritten pages contain
12   a full, true, and correct computer-aided transcription
13   of my shorthand notes taken on said occasion.
14   
15             Witness my hand on this the 20th day of
16   August, 2006.
17   
18   
19                 _____________________________
                   KIMBERLYE A. FURR
20                 Texas CSR No. 6997
                   Expiration Date:  12/31/08
21                 1801 North Lamar Boulevard
                   Mezzanine Level
22                 Austin, Texas  78701
                   (512) 474-4363
23   
24   JOB NO. 060809KAF
25