0001 1 TRANSCRIPT OF PROCEEDINGS 2 BEFORE THE 3 BINGO ADVISORY COMMITTEE 4 (TEXAS LOTTERY COMMISSION) 5 AUSTIN, TEXAS 6 7 QUARTERLY MEETING OF THE § BINGO ADVISORY COMMITTEE § 8 WEDNESDAY, FEBRUARY 4, 2009 § 9 10 COMMITTEE MEETING 11 WEDNESDAY, FEBRUARY 4, 2009 12 13 BE IT REMEMBERED THAT on Wednesday, the 14 4th day of February 2009, the Bingo Advisory Committee 15 meeting was held from 10:05 a.m. to 12:00 p.m., at the 16 Offices of the Texas Lottery Commission, 611 East 6th 17 Street, Austin, Texas 78701, before KIMBERLY ROGERS. 18 The following proceedings were reported via machine 19 shorthand by Aloma J. Kennedy, a Certified Shorthand 20 Reporter of the State of Texas, and the following 21 proceedings were had: 22 23 24 25 0002 1 APPEARANCES 2 BINGO ADVISORY COMMITTEE: 3 Ms. Kimberly Rogers Mr. Earl Silver 4 Mr. Thomas "Tom" Weekley Mr. Larry Whittington 5 Mr. Knowles Cornwell Mr. Francis M. Ciancarelli 6 7 CHARITABLE BINGO OPERATIONS DIVISION DIRECTOR: Mr. Phil Sanderson 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 NOTE: Commissioner Schenck appeared via video conference, until such time as Chairman Cox 25 arrived at the meeting in person. 0003 1 TABLE OF CONTENTS 2 PAGE NO. 3 AGENDA ITEM NO. 1 - The Bingo Advisory Committee will call the meeting to order...... 5 4 AGENDA ITEM NO. 2 - Consideration of and 5 possible discussion and/or action on the minutes of the November 5, 2008 Bingo 6 Advisory Committee meeting..................... 5 7 AGENDA ITEM NO. 3 - Report, possible discussion and/or action on the 81st 8 Legislature................................... 6 9 AGENDA ITEM NO. 4 - Report, possible discussion and/or action on 3rd quarter 10 calendar year 2008 bingo conductor information................................... 16 11 AGENDA ITEM NO. 5 - Report, possible 12 discussion and/or action on Draft 16 TAC §402.420 Qualifications for 13 license....................................... 20 14 AGENDA ITEM NO. 6 - Report, possible discussion and/or action on Draft 16 15 TAC §402.405 Temporary Authorizations......... 46 16 AGENDA ITEM NO. 7 - Report, possible discussion and/or action on Draft 17 16 TAC §402.100 Definitions................... 51 18 AGENDA ITEM NO. 8 - Report and possible discussion and/or action on the workgroup – 19 Market Conduct................................ 70 20 AGENDA ITEM NO. 9 - Report and possible discussion and/or action on new product 21 and new products committee.................... 83 22 AGENDA ITEM NO. 10 - Report and possible discussion and/or action on the 2008 23 BAC Annual Report............................. 83 24 25 0004 1 TABLE OF CONTENTS 2 PAGE NO. 3 AGENDA ITEM NO. 11 - Report and possible discussion on Bingo Advisory Opinion 4 Request #2008-0829-0011....................... 84 5 AGENDA ITEM NO. 12 - Report and possible discussion and/or action on the content 6 of the Operator Training Program.............. 89 7 AGENDA ITEM NO. 13 - Public comment........... 92 8 AGENDA ITEM NO. 14 - Consideration of and possible action on future Bingo Advisory 9 Committee meeting dates and or items to be considered for future meetings................ 92 10 AGENDA ITEM NO. 15 - Adjournment.............. 95 11 REPORTER'S CERTIFICATE........................ 96 12 13 14 15 16 17 18 19 20 21 22 23 24 25 0005 1 P R O C E E D I N G S 2 WEDNESDAY, FEBRUARY 4, 2009 3 (10:05 a.m.) 4 AGENDA ITEM NO. 1 5 MS. ROGERS: Good morning. It is 10:05. 6 We will call this meeting to order. We do have a 7 quorum. We are missing Suzanne Taylor, Markey Weaver 8 and Pat Gifford. We would like to say good morning to 9 Commissioner Schenck. He is joining us via video 10 confirmation -- "confirmation" -- conference. Good 11 morning. 12 COMMISSIONER SCHENCK: Good morning. 13 AGENDA ITEM NO. 2 14 MS. ROGERS: The first item -- the 15 second item, I should say, is consideration of and 16 possible discussion and/or action on the minutes of 17 the November 5, 2008 Bingo Advisory Committee meeting. 18 I have looked these over and they looked 19 good to me. Do I have a motion? 20 MR. CORNWELL: I move that we adopt 21 those minutes. 22 MS. ROGERS: Thank you. 23 Second? 24 MR. WHITTINGTON: Second. 25 MS. ROGERS: Thank you. 0006 1 All in favor? 2 FROM THE COMMITTEE: Aye. 3 MS. ROGERS: All opposed? 4 Let the record show that everyone does 5 approve to adopt those minutes. 6 AGENDA ITEM NO. 3 7 MS. ROGERS: No. 3, report, possible 8 discussion and/or action on the 81st Legislature. And 9 Nelda Trevino. 10 MR. WHITTINGTON: Hi, Nelda. 11 MS. VILLASENOR: Good morning, Madam 12 Chair and members. For the record, I'm Melissa 13 Villasenor, Governmental Affairs representative, 14 reporting to you today on behalf of Nelda Trevino, 15 Director of Governmental Affairs. 16 The Legislature convened its regular 17 session on January 13, 2009, and one of the items 18 included in your meeting packet is a listing of 19 legislative dates of interest. The other item 20 included in your meeting packet is a copy of the 21 minutes from the November 13, 2008 hearing of the 22 House Committee on licensing and Administrative 23 Procedures. 24 Nelda reported at your last meeting that 25 the House Licensing Committee was going to meet to 0007 1 consider and adopt recommendations for the 81st 2 Legislature, and this document provides the actions 3 and recommendations adopted by the committee. 4 At the bottom of Page 6, you will note 5 the interim charge considered by the committee related 6 to the Bingo Enabling Act. And on Page 7 you'll find 7 the two recommendations adopted related to this 8 interim charge. 9 For the record, Recommendation 17 10 states, "Pass the recommendations made by the 11 Committee to the 80th Legislature, as refined by the 12 Committee's staff working with the Lottery Commission 13 and bingo groups, to streamline the bingo accounting 14 and licensing systems, reduce unnecessary regulatory 15 costs imposed on charities and approve enforcement of 16 the bingo laws." 17 Recommendation No. 18 states, "In light 18 of the fact that total revenues paid to the state and 19 local governments from taxes and fees imposed on 20 charitable bingo far exceed appropriations for 21 enforcement, increase appropriations to the Charitable 22 Bingo Division to allow full enforcement of the Bingo 23 Enabling Act and bingo administrative rules." 24 As of this date, no bills related to 25 charitable bingo have been filed. With regard to 0008 1 House and Senate committees, the House Committee on 2 Licensing and Administrative Procedures continues to 3 have jurisdiction over the Lottery Commission and 4 gaming industries. 5 And the Senate Committee on State 6 Affairs will continue to oversee all matters 7 concerning state policy and a general administrative 8 of state government. Agency budgets and 9 appropriations will be considered by the House 10 Appropriations Committee and the Senate Finance 11 Committee. 12 Additionally, the agency has two 13 commissioners who will go through the Senate 14 confirmation process, and they will be considered by 15 the Senate Nominations Committee prior to the full 16 Senate's consideration for the confirmations. 17 Lieutenant Governor Dewhurst announced 18 last Friday the Senate committee assignments, and we 19 have provided you a list of the membership for each of 20 these assignments or committees. 21 It is anticipated Speaker Straus will 22 issue the committee assignments for the House within 23 the next week. 24 I would also like to mention, the agency 25 included in its legislative appropriations request a 0009 1 request for $2.5 million in additional funding for a 2 redesign of the automated charitable bingo system. 3 This concludes my report, and I'll be 4 glad to answer any questions you may have. 5 MS. ROGERS: Any questions? 6 MR. CORNWELL: Excuse me. What was your 7 first name, again? 8 MS. VILLASENOR: Melissa. 9 MR. CORNWELL: Melissa? 10 MS. VILLASENOR: Yes. 11 MR. CORNWELL: Melissa, Knowles 12 Cornwell. Are there any changes in the State Affairs 13 makeup of the committee from the last session? 14 MS. VILLASENOR: From the last time? 15 Let me check; let me just double check real quick. 16 I would need to double check and cross- 17 reference from the last -- from the 80th, 18 Mr. Cornwell, and confirm with you. But they look 19 pretty much -- 20 MR. CORNWELL: The same? 21 MS. VILLASENOR: -- the same. 22 MR. CORNWELL: Melissa, if a state 23 legislator, a senator or a rep, was to ask you about 24 pending bills for the adoption of possible VLTs 25 entering our state, if a rep or a senator asked you 0010 1 today as to what effect would that have on the 2 lottery, what would your response be? 3 MS. VILLASENOR: Well, Mr. Knowles, I 4 would have to say at this time it's under the 5 jurisdiction and it's at the pleasure of the executive 6 and legislative branches of government. So it's 7 whatever their direction is, we will then put into 8 place. 9 MR. CORNWELL: Well, have there been any 10 studies or direction you're given -- you're there to 11 educate the legislators. Right? 12 MS. VILLASENOR: Yes. My colleague, 13 Colin Haza and Nelda Trevino, the Director of 14 Governmental Affairs, yes, under the direction of the 15 Commission and the executive management here at the 16 agency. 17 MR. CORNWELL: And so if asked, what 18 would your response be? 19 MS. VILLASENOR: Repeat the question 20 again. 21 MR. CORNWELL: There is a VLT bill that 22 says it's going to be regulated by somebody other than 23 the Lottery Commission -- I'm going to give you 24 that -- and they ask, "Well, what's that going to do 25 to the Lottery Commission?" how would you respond? 0011 1 MS. VILLASENOR: If it's going to be 2 regulated by another entity -- 3 MR. CORNWELL: Right, another agency. 4 MS. VILLASENOR: -- another agency, how 5 would that impact us? 6 MR. CORNWELL: Yes. 7 MS. VILLASENOR: That would all depend. 8 There's a bunch of variables there, and it's not under 9 our jurisdiction, so it's under the jurisdiction of 10 another agency to execute that. 11 MR. CORNWELL: Well, what effect would 12 it have on lottery sales? 13 MS. VILLASENOR: That we would have to 14 see. That would take a trend. We would have to see 15 the impact on sales over a period of time. 16 MR. CORNWELL: Well, do you have any 17 idea, Melissa, whether it's done in other states? 18 MS. VILLASENOR: In other states? There 19 have been studies, and I would have to get back with 20 you on those studies from other states as far as their 21 review on VLTs and the impact of -- their impact on 22 lottery sales. 23 MR. CORNWELL: Would you say it's going 24 to increase lottery sales or would you say it would 25 probably decrease lottery sales? 0012 1 MS. VILLASENOR: I couldn't quantify 2 that at this time. 3 MR. CORNWELL: Okay. Thank you, 4 Melissa. 5 MS. VILLASENOR: Is there anything you 6 would like to add, Phil? 7 MR. SANDERSON: Knowles, I would like to 8 add that whenever there is a bill filed -- 9 MR. CORNWELL: Yes, sir. 10 MR. SANDERSON: -- we have staff that 11 prepare analysis of impacts -- 12 MS. VILLASENOR: Fiscal notes. 13 MR. SANDERSON: -- fiscal notes, you 14 know, what the impact of sales would be, what the 15 impact to the agency would be; in fact, general 16 revenue and so forth. And so, you know, depending on 17 the language in the bill, it could vary. If there's 18 VLTs at race tracks, that's one analysis. 19 MR. CORNWELL: Right. 20 MR. SANDERSON: If there's VLTs in other 21 venues -- 22 MR. CORNWELL: Right. 23 MR. SANDERSON: -- that's another one. 24 So each bill has its own note. And I believe that 25 once the fiscal note has been developed and analyzed, 0013 1 I believe Nelda and her staff get a copy of that so 2 that if they're asked a question, they will have what 3 impact that particular bill would have on the lottery 4 and/or charitable bingo. 5 MR. CORNWELL: And this brings up a 6 question that, you know, you're kind of getting at. 7 When Nelda gets that request, those bills on those 8 fiscal notes, you will have input on this, will you 9 not, Phil, about the effect of VLTs on charitable 10 gaming in the state? 11 MS. VILLASENOR: Yes. 12 MR. SANDERSON: Most definitely. 13 MS. VILLASENOR: Most definitely. 14 MR. CORNWELL: Okay. 15 MS. VILLASENOR: And it's my 16 understanding, once Governmental Affairs does get the 17 fiscal impact analyses, then that gives us the basis 18 of our view and what message the agency and executive 19 management wants us to convey to members. Again, it's 20 at their pleasure and at their will. 21 MR. CORNWELL: You mentioned that once 22 you prepare all this information, it goes through the 23 executive management of the lottery. Right? 24 MS. VILLASENOR: Yes, sir. It's a very 25 thorough review. 0014 1 MR. CORNWELL: And there is no reason to 2 think that they would shelve any kind of effect on 3 charitable bingo. Right? 4 MR. SANDERSON: Absolutely not. 5 MR. CORNWELL: Good. 6 MS. VILLASENOR: No, sir. 7 MR. CORNWELL: Thanks. Thank you, 8 Melissa. 9 MS. VILLASENOR: Yes, sir. Thank you. 10 MS. JOSEPH: Kim -- 11 MS. ROGERS: Yes, ma'am. 12 MS. JOSEPH: -- along these lines -- 13 excuse me. I'm Sandy Joseph, Special Counsel for the 14 agency. And I would just like to take this 15 opportunity to remind all of the members that the 16 Commission does not have authority to lobby for or 17 against any legislation. As a result, the BAC also is 18 not authorized to do that. The BAC's sole duty is to 19 advise the Commission. 20 Of course, this does not prohibit any of 21 you from acting individually if you have matters of 22 concern to bring before the Legislature. But please 23 do not step out and say you are representing the BAC 24 in any way. That is not allowed. 25 MR. CORNWELL: Did I say I was? 0015 1 MS. JOSEPH: No. 2 MR. CORNWELL: My point was, I just 3 wanted to make sure that the charitable bingo issues 4 are going to be before the state legislators and 5 presented to the state legislator when you are asked, 6 this agency is asked. 7 MS. JOSEPH: And I was not reacting 8 solely to your comments. This was an appropriate 9 place. I had planned to remind everyone of this 10 anyway. 11 MR. CORNWELL: Okay. 12 MS. JOSEPH: So I'm not reacting to your 13 comments. 14 MR. CORNWELL: Thanks. 15 MR. SANDERSON: And Commissioner -- go 16 ahead, Commissioner. 17 COMMISSIONER SCHENCK: Can you hear me? 18 MR. SANDERSON: Yes. Go ahead. 19 COMMISSIONER SCHENCK: I believe that 20 prohibition on the Lottery isn't applicable to the 21 individual Commissioners -- is that right? -- the 22 prohibition on the lobbying? It is not applicable to 23 the Commissioners? 24 MR. SANDERSON: It is not applicable to 25 the Commissioners. Is that correct? 0016 1 MS. JOSEPH: I believe that's correct. 2 I would have to double check that. 3 COMMISSIONER SCHENCK: All right. Well, 4 if there is a strong sense on the BAC that if there is 5 legislation pending or moving forward that would be 6 detrimental to the interest of bingo, I would like to 7 know about it. We'll have at least two confirmations, 8 so we'll be talking to individual legislators, so 9 these lines of communication are open. 10 MS. JOSEPH: Okay. And I'll double 11 check that. 12 MR. CORNWELL: All right. Thank you, 13 Commissioner. 14 MS. ROGERS: Thank you. 15 AGENDA ITEM NO. 4 16 MS. ROGERS: Moving now to No. 4, 17 report, possible discussion and/or action on 3rd 18 quarter calendar year 2008 bingo conductor 19 information. 20 MR. MINER: Good morning. Commissioner 21 Schenck, committee members, for the record, my name is 22 Bruce Miner, Manager of the Taxpayer Services 23 Department. I'm here to present to you the third 24 quarter information for 2008 as reported by our 25 licensed authorized organizations. All of the 0017 1 information presented to you today will be year to 2 date for the period January to September 2008, for a 3 similar period for comparison purposes for 2005, 2006 4 and 2007. 5 Prize payout for regular bingo for the 6 third quarter year to date, 2008, was 76.6 percent of 7 gross receipts. Regular bingo consists of paper and 8 electronic bingo. The prize payout percentage for 9 instant bingo was 72.3 percent of gross receipts. 10 This pie chart reflects the percentage 11 each disbursement category represents as it relates to 12 the total disbursements. These disbursements do not 13 include prize payouts. Salaries account for over 14 32 percent of total disbursements, while rent payments 15 account for just over 23 percent and cost of goods 16 sold and charitable distributions are around 17 19 percent. 18 This pie chart shows that instant bingo 19 sales continue to exceed regular bingo card sales. 20 For the year to date for 2008, instant sales 21 represented almost 45 percent of total sales, while 22 the regular card sales represented 32 percent, and 23 electronic bingo was 23 percent. 24 This chart shows a comparison of gross 25 receipts for regular card sales, electronic card sales 0018 1 and instant bingo for the third quarter year to date 2 for each year from 2005 through 2008. As you can see, 3 the decline of regular card sales is offset by the 4 slight increase in electronic sales and the continued 5 increase it instant bingo. And that result was that 6 the overall gross receipts have shown an 8 percent 7 increase for this four-year period. 8 This chart shows the comparison of net 9 receipts, which is gross receipts minus prizes awarded 10 for the third quarter year to date for each year of 11 '05 to '08. As you can see, net receipts for instant 12 bingo appear in yellow, have increased each successive 13 year from 2005 to present, while the net receipts for 14 regular bingo, the red line, continues to decrease for 15 the same time period. The result is that overall net 16 receipts are up almost 7 percent over the past four 17 years. 18 This slide compares the gross receipts 19 for regular bingo, the prize payout reported and net 20 receipts for each of the past four years. You can see 21 the downward trend of gross receipts in red and a 22 similar decline for prize payout for regular bingo in 23 yellow. Gross receipts for regular bingo have dropped 24 $23.6 million, or 7.6 percent, and prize payouts have 25 dropped $12.1 million, or 5.2 percent. This results 0019 1 in a decline in net receipts of 11 and a half million, 2 or 14.7 percent. 3 This next slide shows the same 4 information for instant bingo. Gross receipts have 5 increased $63.8 million, or 38.4 percent. Prize 6 payouts have increased $44.2 million, or 36.2 percent, 7 resulting in an increase in net receipts of 8 19.$6 million, or 44 percent. 9 This slide charts the prize payout 10 percentage for regular and instant bingo for the past 11 four years. The payout percentage for regular bingo 12 has increased from 74.7 percent to 76.6 percent, while 13 the payout percentage for instant bingo has dropped 14 slightly, from 73.5 percent to the current 72.3 15 percent. 16 This chart shows the average number of 17 players per occasion and the average spend per player. 18 This shows that even though the average attendance has 19 declined since 2005, there has, however, been a 22.7 20 percent increase in the average spending rate per 21 player for the same period. 22 This slide illustrates the comparison 23 between what the organizations reported as charitable 24 distributions as opposed to what the Bingo Enabling 25 Act requires that the minimum required be distributed. 0020 1 The required distributions have consistently been 2 around $8 million, while organizations are reporting 3 distributing around $24 million, or approximately 4 three times the required distributions amount. 5 And, finally, this slide illustrates the 6 comparison between reported charitable distributions 7 and the total net proceeds for each of the last four 8 years. Net proceeds is gross receipts less prizes 9 awarded and all expenses. One reason the net proceeds 10 are higher than the charitable distributions is that 11 organizations are holding on to more funds in their 12 bingo accounts. For example, the reported 13 undistributed proceeds from January 1, 2008 was 14 $29.3 million. On September 30, 2008, it was 15 $33.6 million. 16 That concludes my report for this agenda 17 item. I'll be happy to answer any questions you may 18 have. 19 MS. ROGERS: Members, any questions? 20 Thank you, Bruce. 21 MR. MINER: Thank you. 22 AGENDA ITEM NO. 5 23 MS. ROGERS: No. 5, report, possible 24 discussion and/or action on draft 16 TAC 402.420, 25 qualifications for a license. 0021 1 Phil Sanderson. 2 MR. SANDERSON: Members, in your 3 notebook is a draft rule, 402.420, qualifications for 4 a license. This rule is being developed as a result 5 of the internal audit on the Licensing Services 6 Department of the Bingo Division that was recently 7 completed, and one of the recommendations was to 8 outline and provide clear guidance and instruction for 9 each type of organization that is authorized to 10 conduct bingo so that organizations who apply for an 11 original license would know what information to 12 provide in order have a determination of their 13 eligibility to be licensed. 14 And it's for your discussion and 15 informal comments. Once we have the comments from the 16 BAC, we'll, you know, review those and make any 17 adjustments, if necessary, and then we'll move forward 18 with possibly moving this to the Commission for 19 adoption or for proposal. And so I'll leave it up to 20 you now for your discussion. 21 MS. ROGERS: Thank you. 22 I looked this over. And I find it 23 interesting and helpful the way that you separated it 24 with qualifications, then what the documentation is, 25 because I know when licensing, that's a huge, you 0022 1 know: What do I need? What do I need to give them to 2 prove? 3 Members, any comment? 4 MR. CORNWELL: The format is good. 5 MS. ROGERS: The format is very good. 6 MR. CORNWELL: Format. 7 MS. ROGERS: Has anything, Phil, changed 8 in here as far as are there more requirements, more 9 necessary documents than what was before? 10 MR. SANDERSON: I don't believe so. 11 I'll let Meagan or Bruce answer that. And I believe 12 that -- my understanding is that we've sat down with 13 both Internal Audit and our Legal Division and have 14 gone through the statute and compared what information 15 we would need to verify or to cover each individual 16 section of the statute that requires organizations to 17 notify us of, you know, how long they have been in 18 existence, how they're organized, what their, you 19 know, 501(c) status is and the eligibility 20 requirements. 21 MS. ROGERS: Okay. Very good. 22 Bruce, could you tell me if there is 23 anything different? 24 MR. MINER: I didn't hear the question. 25 I was responding to a young man here, so Meagan can 0023 1 tell us. 2 MS. ROGERS: Meagan, is there any 3 different additional? 4 MS. AHMAD: There is no additional 5 information. 6 MS. ROGERS: Okay. 7 MS. AHMAD: In fact, in a lot of the 8 areas, there is less information that's being 9 required. We felt that we could utilize different 10 documents to be able to verify most of these. 11 MS. ROGERS: Meagan, thank you. 12 Committee members, if you don't have any 13 other comments, we do have some public comment. 14 Mr. Jeff Minch, would you like to 15 comment at this time on Item No. 5? 16 MR. MINCH: Sure. There are three rules 17 in front of you. So in order to economize on your 18 time, I'm going to make just some general comments 19 about all them that apply to all of the rules 20 together. The first thing I wanted to ask was, Phil, 21 have these rules gone through any of the BAC working 22 subgroups? 23 MR. SANDERSON: I don't believe these 24 have, no, sir. 25 MR. MINCH: Okay. I wanted to make a 0024 1 general comment, that with the number of rules that 2 are being passed, we find ourselves in a situation 3 that the rules are this thick (indicating) and the Act 4 is this thick (indicating). And so we find ourselves 5 being ruled by rules as opposed to necessarily 6 following the Act. I'm all in favor of rules. I 7 think these particular ones are good rules, that they 8 address things that are important, but I think we're 9 really getting to a point that we're being overwhelmed 10 by rules as opposed to simply having the rules 11 implement what the enabling legislation identifies. 12 It's very difficult in some of these 13 rules to identify exactly what problems are attempting 14 to be solved or what the public policy objective is. 15 And so I'm going to talk for just a second about the 16 things which use the definition of somebody being 17 active or somebody being an active member or 18 critiquing the performance of the charity after they 19 have a license and as relates to their continuing 20 operations. 21 I'm also concerned that the sheer 22 magnitude of the rules puts the Lottery Commission in 23 the difficult position of simply not having enough 24 staff to actually enforce the rules that they have 25 right now. And so I think that there's a great number 0025 1 of rules -- and you and I have spoken of them -- that 2 are simply not being enforced right now. And so I 3 would simply make a caution that any rules to a body 4 of rules that are not receiving consistent and active 5 enforcement to me is a very questionable practice. 6 I give you one example that troubles me. 7 In the transfer of information from the Comptroller's 8 office to the Lottery Commission a great number of 9 years ago, original license applications were lost for 10 a huge portion of the industry. Okay? That is a 11 correct statement, is it not? 12 MR. SANDERSON: I don't know. 13 MR. MINCH: Okay. Well, in response to 14 an inquiry that I have made, that was what I was 15 informed. And so after almost a decade, no attempt 16 has been made to rebuild those license applications, 17 and renewals are routinely being granted to people who 18 literally don't have a file showing that they were 19 ever granted a license originally. So that's an 20 example of something where I'm saying that we're 21 failing to enforce the existing rules. 22 Let me take on just a couple of the 23 things that are identified in these new rules. One is 24 the definition of what's active and what's an active 25 member. 0026 1 MR. SANDERSON: That is not this agenda 2 item particularly. But if you want to -- 3 MR. MINCH: Well, it's actually -- the 4 definition is used in this particular one, because the 5 rule discusses active and active members. 6 MR. CORNWELL: It does. 7 MR. WHITTINGTON: Yes, it does. 8 MR. MINCH: That's one of the criteria 9 that are applied to the chart that you made. Is that 10 fair? I'll be glad to speak at a later time. Is that 11 okay? 12 MS. JOSEPH: Yes, yes. 13 MR. MINCH: Okay. Okay. So I think 14 that the concepts as you've applied them here are 15 arbitrary, vague and inconsistent, and they're 16 inconsistent in context because they're applied 17 differently in each one of those organizations. 18 Fraternal organizations, churches and veterans 19 organizations each have a different definition of what 20 would be required to be active or to be an active 21 member, and I give you an example. 22 I think in a pragmatic charity, you may 23 have a single member who is simply a large donor. 24 They don't come to a meeting; they don't do anything 25 for the charity. Once a year they write a great big 0027 1 check. And by the definition that is involved here, 2 they would not be an active member of the charity. 3 They would be disqualified in some form or fashion 4 from participating in the dialogue of the operation of 5 bingo. Certainly from the charity's vantage point, if 6 they would choose between having three members who 7 were writing a $50,000 check and three members that 8 came to every single board meeting, their answer would 9 be obvious. They're in the business of raising money 10 for the charity, and so I think the definition is a 11 little stilted. 12 In many charities, a member simply 13 cannot be active. That charity is ruled by a board of 14 directors or an executive director. And so when you 15 sign up to become a member of that charity, you really 16 have no voice in the activities of the charity. And, 17 frankly, there's lot of folks who don't want to have 18 that voice; and, yet, they would be people who would 19 be ideal to be involved in some form or fashion in 20 charitable bingo, and it might be the only 21 participation that they have with the charity. 22 Many charities simply do not have 23 members, and so I'll give you an example. One of our 24 charities is the Travis County Sheriff's Benevolent 25 Relief -- and I'm sure I butchered that name. But 0028 1 it's a very worthwhile charity. When a deputy is 2 killed in the line of duty in Travis County, the 3 sheriff has the ability to make sure he is buried with 4 dignity and to ensure that his family is taken care of 5 for some period of time. If a fellow is wounded in 6 the course of his duties and he doesn't have 7 sufficient medical coverage from the department, he is 8 able to be taken care of if there is some grievous 9 accident in his family. All they've really got at the 10 end of the day is one member and a checkbook. 11 Now, if they've made sixty, $80,000 a 12 year from a bingo hall and it's been very worthwhile, 13 they would literally have no members. And there is 14 really nothing in that charity that would require them 15 to have members, and that clearly is a very noble and 16 worthwhile cause. It's not something that we would 17 want to have disqualified from participating in 18 charitable bingo, simply because they didn't have 19 active members. 20 The proposed three-year term whereby a 21 member has to be active for a period of three years is 22 inconsistent with how charities operate. I've served 23 on the board of a number of charities. I've served -- 24 not charities related to bingo. I serve on a charity 25 right now that's a foundation for a major university 0029 1 and our terms are typically one year. 2 And so people don't volunteer for 3 protracted periods of time. And in that one-year 4 period, that's as much membership as you can really 5 have. In addition, many of those charities at the end 6 of a year, you're happy to go. You've had all the fun 7 that you want to have. You've invested a year or two 8 years of your life. You're doing exactly what they've 9 asked you to do. And the simple truth of the matter 10 is that you may want to part all and that was all the 11 contribution that you were prepared to make. And so 12 to screen somebody for a three-year period seems 13 unrealistic, even what actually happens with 14 charities. 15 MS. ROGERS: Mr. Minch, can I stop you 16 right there. Could you tell me where it says that you 17 have to be a member of a charity for three years? I 18 must have skipped that. 19 MR. MINCH: Well, it's actually in the 20 note when they're talking about whether or not 21 somebody is active for a three-year period, so they 22 would look at the membership. And it's not in the one 23 we're talking about right now. 24 MS. ROGERS: All right. And we're a 25 little bit -- 0030 1 MR. MINCH: Actually -- it actually is 2 in the one. 3 MS. ROGERS: I'm a little bit confused, 4 because most charities that I know do also have a 5 one-year term. So I don't know that the lottery has 6 put down a rule that they have to be three years. Is 7 that what you're -- I'm asking you, is that what 8 you're saying? 9 MR. MINCH: On Page 7 -- 10 MS. ROGERS: Okay. 11 MR. MINCH: -- of 402.420, bottom of the 12 box, "Membership actively and continuously engaged in 13 furthering its authorized purposes for the past three 14 years." 15 MS. ROGERS: I believe that's talking 16 about the charity. Is that -- 17 MR. SANDERSON: That's talking about the 18 charity membership, not a specific member of the 19 charity. 20 MR. MINCH: Okay. 21 MS. ROGERS: The charity has to have 22 been in operation for three years. That hasn't 23 changed. 24 MR. SANDERSON: And I might add, that's 25 verbatim from the statute. 0031 1 MR. MINCH: Okay. There is another note 2 that I want to make about that same thing. As a 3 pragmatic reality on charities, it's very difficult to 4 induce somebody to become involved with bingo, so I'll 5 use as an example my personal involvement with the 6 People's Community Clinic here in Austin. 7 The People's Community Clinic, I was on 8 the board for a number of years. They desired to play 9 bingo. Recognizing my position, which was not 10 technically a conflict, I resigned from the board. 11 They found it very difficult to find somebody who 12 would become knowledgeable about bingo. They did for 13 a number of years. 14 They changed their chief financial 15 officer organization just after having being fifty to 16 $80,000 a year, and the new chief financial officer, 17 who did not take the time to learn the industry, 18 simply terminated the relationship. A few years later 19 they called me up and said, "How can we get back in 20 the bingo business?" 21 And so the idea that a person would be 22 involved with a charity and have their only 23 involvement being bingo and, therefore, not 24 participate in any other activities of the charity 25 and, therefore, be disqualified from being a primary 0032 1 operator is not consistent with the way charities 2 actually view bingo. They assign somebody to bingo, 3 and they want that person to become their bingo 4 expert, and there may be no other time for them. The 5 People's Community Clinic is a particularly 6 interesting example, because a member literally cannot 7 participate in their activities. And I guess if you 8 were a doctor, you could participate in their 9 activities. So their entire activity ends up being 10 purely administrative. People are on the board and 11 primarily they raise money for the organization. 12 Some charities will not allow their 13 members to become active in their activities. So the 14 example that I just used of the People's Community 15 thing is an example that I would point out to you. 16 There are some charities today who have 17 members of their charity who are active in bingo and 18 they are then compensated as a result of that. And 19 the net result of this is that it dilutes the cash 20 flow going to the charities. I'm familiar with a 21 particular bingo hall -- it's one of ours -- and they 22 have a charity rep from each one of the charities who 23 participates in the preparation of the bingo hall for 24 that night, and they're paid by their individual 25 charities. Now, I'm sure that they're paid a nominal 0033 1 sum. I don't know what the sum is. It's none of our 2 business. But that effective dilutes the cash flows 3 coming to the charity. 4 And so the conflict itself here is 5 between having, as an example, a bingo hall manager 6 who would act as a member of the charity, a 7 legitimately signed on member of the charity -- and, 8 remember, many of these charities, you must qualify to 9 join. As an example, a VFW charity would have to have 10 somebody, in fact, would be able to qualify to be part 11 of the VFW. And so that conflict is going to 12 ultimately cost money to the charities. 13 I want to comment also about 14 proprietary, equitable and credit interest. And if 15 you would like, I will hold my comments until that 16 comes up, if you would prefer that. 17 MS. ROGERS: That is totally Item No. 18 7 -- 19 MR. MINCH: Okay. 20 MS. ROGERS: -- because I would like to 21 go back and discuss that with you, because I don't 22 quite read it the same way that you're discussing it. 23 So if we could hold off on that, that would be great. 24 MR. MINCH: Then I want to talk just for 25 a second about the subject of significant progress. 0034 1 One of the tests that's set up with charities -- 2 MS. ROGERS: That, once again, is No. 7. 3 MR. MINCH: Well, no. Actually, that's 4 in this one right here. 5 MS. ROGERS: The definition of it is in 6 No. 7. And so maybe if we can wait and hold off until 7 we all go over the definitions and then discuss it, 8 maybe that would be a little bit better. 9 MR. MINCH: That would be fine. 10 I guess the other thing I want to speak 11 about is also something that's a definition. So those 12 would be the comments that I would share with you. 13 MS. ROGERS: Thank you. 14 MR. MINCH: Thank you. 15 MS. ROGERS: Thank you so much. 16 MR. SANDERSON: And I would like to just 17 add as a note on this particular rule, the first 18 column under "Qualifications and Requirements," all of 19 that language is strictly taken out of the statute 20 word-for-word. And what we're putting in the second 21 column is the necessary documentation to substantiate 22 or to verify that particular qualification or 23 requirement. 24 And what we've added to the definitions 25 in Item No. 7 that we'll be talking about soon is 0035 1 clarifying, for example, using the term "significant 2 progress," what we mean by "significant progress" so 3 that organizations are made aware of what is required 4 to meet that requirement of demonstrating significant 5 progress towards the accomplishment or the 6 organization's purposes. 7 MS. ROGERS: Thank you, Phil. 8 We also have a witness affirmation. 9 Mr. Fenoglio, would you like to make a comment at this 10 time? 11 MR. FENOGLIO: Yes, Madam Chair, 12 briefly. My name is Stephen Fenoglio. I'm an 13 attorney in Austin. 14 On the rule, I notice on Page 8 of the 15 draft rule, the second box from the top, the types of 16 acceptable documents include, for the fraternal 17 organization, newspaper clippings. And in the one for 18 religious society, that language is left out. It 19 occurs to me for each of these, when you're looking at 20 the type of proof that you would need, it would 21 include, if they have them, either newspaper ads or 22 newspaper clippings. And the fact that you've 23 included it in one and excluded in another, I suggest 24 that perhaps that wouldn't be sufficient, and I would 25 suggest to you that it would be. 0036 1 And then the other observation that I 2 would make -- and it's been an issue that has come up 3 in past license applications -- is the membership of 4 some charitable organizations they consider 5 confidential. They don't mind producing it to the 6 Commission, but they want to be sure that their 7 membership under freedom of association rights 8 guaranteed by the U.S. and Texas constitution are 9 protected. 10 MR. SANDERSON: And we're looking into 11 that right now. 12 MR. FENOGLIO: I don't see anything 13 about this rule that would compromise that. I just 14 want to make the observation. And other than that, I 15 agree with you, Phil and Ms. Ahmad, that what you had 16 outlined here is very consistent with your licensing 17 practices that you have observed over the last five 18 years and makes sense to me. 19 MS. ROGERS: Thank you. 20 MR. CORNWELL: Madam Chair, can I make a 21 comment? 22 MS. ROGERS: Yes, sir. 23 MR. CORNWELL: On the way down here this 24 morning -- we drove in from Dallas, had an early 25 start -- and I got a phone call, and it wasn't related 0037 1 for my trip down here in front of the BAC. But, you 2 know, this particular person started in and said, "You 3 know, I don't know about bingo. This is just -- it's 4 getting to be too much. Now I have to worry about 5 margins tax. My charity has now got to worry about 6 the expansion that all operators got to go under 7 operating training. I've got to worry about the UBIT 8 taxes." 9 As Bruce was so kind to show, you're 10 seeing instant pull-tabs at $230 million in gross 11 revenue when it used to be $21 million before the 12 advent of the event ticket. It's caused the UBIT 13 concern. That's unrelated business income tax -- 14 that's what UBIT stands for -- to clarify that. 15 And this person added, "Now I'm 16 getting -- it seems like I'm getting rules every day 17 out of the Lottery Commission. It's just becoming too 18 much." And it's a statement to public policy with all 19 these other issues in front of the charities today. 20 And, Phil, I'll give you credit. You've 21 been very fair and straight with your rules, and 22 you've been trying to do it right. And I know you're 23 under pressure from the Internal Audit, but it's 24 getting to the point where maybe we ought to ask the 25 Commissioners if you could slow down the rulemaking 0038 1 process so that we've got more time, the charities 2 have more time to absorb what you're doing here 3 instead of just -- we're getting a lot of rules out, 4 and that's to your credit, I'll give it to you. A lot 5 of them are needed rules, by the way. But -- 6 MR. SANDERSON: Well, thank you for 7 those comments. And, you know, we have gone through a 8 lot of rulemaking in the last -- 9 MR. CORNWELL: Yes, sir. 10 MR. SANDERSON: -- two or three years. 11 And I know that, you know, there are a lot of rules, 12 and I acknowledge that. But I also -- for example, I 13 think this rule and several of the other rules that we 14 just recently discussed at the last meeting and the 15 Commissioners are going to look at the meeting this 16 month, they're really rules that are just putting 17 organizations on notice what terms mean, what we need, 18 what information we need. 19 As far as what I would consider like 20 strictly enforcement type rules that talk about the 21 conduct of the game, the recordkeeping, you know, 22 those items -- you know, there's not as many of those. 23 These are more processed items. 24 MR. CORNWELL: Oh, no, I give you that 25 credit, that those are. But the general perception 0039 1 out there -- 2 MR. SANDERSON: Well, I agree. 3 MR. CORNWELL: -- is that I'm advising 4 you of, is that it's just -- they're inundated. They 5 don't know this; unfortunately, they don't know this. 6 And I don't know -- and I've never attended an 7 operator training session. Maybe my fellow members 8 can. But when we have an operator training session 9 and when we have these things, do we cover new rules 10 for them or -- 11 MR. SANDERSON: Yes, we do. In fact, I 12 believe there's either one particular module right now 13 or one that we're working on, all it is, is new rules 14 that are adopted. And it goes over the rules and 15 explains what they contain and what, you know, the 16 intent of the rule is for. 17 Bruce? 18 MR. MINER: Bruce Miner, Taxpayer 19 Services Manager. 20 I had the pleasure to be in Paris, Texas 21 this weekend presenting an operator training program, 22 and that's what we observed. They need more 23 information on what is expected, because right now 24 we're -- we don't want to play "I got ya," because we 25 didn't tell you what the rules were. We're trying to 0040 1 give you the information so that you can comply with 2 what we're already -- 3 MR. CORNWELL: Asking you to do. 4 MR. MINER: -- asking you to do. So my 5 emphasis was to present the information that's already 6 there in the Act where we have a module that we're 7 trying to enhance related to rules, because they are 8 changing. We get a number of calls. We try to put it 9 in perspective. And hopefully they understand that 10 we're not trying to make their jobs harder, because it 11 would make ours harder. 12 So what we want to do is put all the 13 information out there, and we will have a module. 14 Because of all the changes, we already are developing 15 plans to take our on-line program, which we are proud 16 of, on the road, because a lot of people aren't 17 computer literate or they don't have the opportunity 18 to travel. So, for example, we're trying to right now 19 develop the El Paso-Odessa-Lubbock-Amarillo week, and 20 we've got the Valley week. So we're going to get the 21 information out there, try to answer their questions, 22 because if they're calling you, they've called us 23 already. 24 MR. CORNWELL: Yes, sir. 25 MR. MINER: And so -- 0041 1 MR. CORNWELL: I do understand. And my 2 point, I guess, Bruce, to you is that there's a lot of 3 other issues out there facing these operators and 4 charities today, you know, and then we're adding 5 rules. And it becomes a frustration. And it's a 6 matter of just being able to communicate that better 7 to these charities. And a lot of people would 8 probably care for some guidance on margin, not 9 everybody, but some people would like some guidance on 10 margin tax, somebody would like some guidance on the 11 UBIT. I know that's not necessarily your place to do 12 that. 13 MR. MINER: We do touch on it in 14 operator training, because I hear the comments. We 15 have included it in the training. And, of course, we 16 don't regulate it, but we do address it, to make them 17 aware that -- 18 MR. CORNWELL: It exists. 19 MR. MINER: -- it exists, because in the 20 past when we had training, we took IRS with us, and we 21 don't have that luxury anymore. So we captured their 22 priorities and put it in modules. 23 MR. CORNWELL: And when this old-time 24 charity, been around playing bingo for probably since 25 inception, calls with that frustration level and is 0042 1 considering giving it up, we're reaching a point 2 where, guys, we need to take it and maybe rethink the 3 whole process or -- I don't know. I'm just telling 4 you about the frustration level, and you know it 5 exists out there. 6 MR. MINER: And just to kind of put it 7 in perspective, when we -- sorry. 8 MR. SANDERSON: Commissioner Schenck. 9 COMMISSIONER SCHENCK: I believe that 10 this recent round of -- can you hear me? 11 MR. SANDERSON: Yes. Go ahead. 12 COMMISSIONER SCHENCK: I seem to recall 13 that I asked this question when I first came on the 14 Commission, as I was also concerned with, we seem to 15 have a high volume of rulemaking. But I think this 16 process began not from something from Internal Audit 17 but from the State Auditor's office shortly before I 18 came on the Commission. Is that right? 19 MR. SANDERSON: It was actually from -- 20 the big push for rule development came from an 21 internal audit on the Audit Department, because there 22 were some rules that we had had in place in years past 23 that were continued to be, so to speak, enforced, I 24 guess. And they asked us to relook at the whole 25 operation and to provide guidance and clear 0043 1 instruction to the organizations, so that's where we 2 began developing these additional rules. 3 COMMISSIONER SCHENCK: So this is all 4 (inaudible) State Auditor getting involved at some 5 point? 6 MR. SANDERSON: Bruce? 7 MR. MINER: Well, I was going to add 8 that the Bingo Enabling Act -- the last time was 9 2003 -- I don't remember how many rules required to 10 implement that, but there were a number. The 1156 11 that we went through two years ago, I did count those. 12 And if we had to implement that act, if it had made it 13 through, it requested 15 rules be written. So if 14 there's a lot of requirements in statutes, there must 15 be a rule. And then there's the other aspect of the 16 internal audit and the State Auditor. 17 MR. WHITTINGTON: Well, Bruce, basically 18 what I see, like you said, I see a lot of Commission 19 under the Bingo Division. Y'all actually setting 20 there writing rules, the BAC come in and start 21 informing you what's happening in the real world in 22 bingo. 23 MR. MINER: Right. 24 MR. WHITTINGTON: A lot of the stuff 25 don't get taken care of. Okay? I think y'all got a 0044 1 lot of people that works in bingo that basically don't 2 know too much about bingo, and they can't answer no 3 questions when they come to bingo halls, about what 4 they write. That's a big problem in, obviously, the 5 bingo. 6 MR. MINER: Well, I think what we'll end 7 up doing, now with these discussions, is we'll make 8 workgroups to discuss it in further detail. We'll 9 capture your input. And I think in the past, you 10 know, we've had a team effort go forward. 11 So whatever has gone through the 12 Commissioners in the past has had your comment, the 13 public comment, and we've captured all those concerns 14 that we're within our jurisdiction. So maybe you're 15 talking about auditors, because all I know about is 16 licensing in -- 17 MR. WHITTINGTON: Okay. Okay. I'm 18 talking about in the bingo hall that people got to go 19 through every day just to make it. And it's hard to 20 make it where they've to go sign this and sign that 21 and look at this, don't understand it. When people 22 come in and talk to them about it, they still don't 23 know. What are you talking about? I'm trying to 24 operate. I'm trying to survive, and a lot of people 25 are trying to survive. 0045 1 MR. MINER: We want to make that as easy 2 as possible. 3 MR. CORNWELL: Larry, is it the existing 4 rules that's set out there or -- is it the existing 5 rules that they have on the books today or is it rules 6 you feel like need to be made, or is it both? 7 MR. WHITTINGTON: Well, just like when 8 they -- 9 MR. CORNWELL: There's some items in the 10 Enabling Act that, you know, probably need some rules 11 on them, because the Enabling Act is not very clear in 12 very many spots, or its intent is not even clear. 13 There is no legislative intent on it. 14 MR. WHITTINGTON: Exactly. Some 15 rules -- 16 MR. CORNWELL: But your question is the 17 existing rules that you have problems with or things 18 that need to have rules on it? 19 MR. WHITTINGTON: Things that need to 20 have rules need to have rules. But some rules are so 21 complex that they really can't understand them. 22 MR. CORNWELL: Well, I agree with that. 23 MR. WHITTINGTON: That's the problem. 24 They need to simplify and break it down. Some things 25 we don't need that we got now, we don't need them. We 0046 1 really don't. Okay? And I'll cover that spot later 2 on in the meeting. 3 MR. MINER: And if you inform us of 4 those things that need clarification, you can either 5 do it by revision of rule -- 6 MR. WHITTINGTON: Right. 7 MR. MINER: -- or we can emphasize it 8 during operator training when we're out there speaking 9 to the individuals. 10 MR. WHITTINGTON: Yes. 11 MR. MINER: So we'll be glad to work 12 that. 13 MR. WHITTINGTON: Just give it a -- I'm 14 done. 15 MR. CORNWELL: Go ahead. Don't get 16 started on my account, Larry. 17 MS. ROGERS: Any other comment on this? 18 MR. WHITTINGTON: Well, I'll comment 19 later on. 20 MS. ROGERS: Very good. Okay. No 21 further public comment? 22 AGENDA ITEM NO. 6 23 MS. ROGERS: Item No. 6, report, 24 possible discussion and/or action on draft 16 TAC 25 402.405, temporary authorizations. 0047 1 Phil Sanderson. 2 MR. SANDERSON: Once again, this is a 3 rule that we currently have that's being amended to 4 provide additional clarification for the section of 5 the Act that allows for temporary authorizations. And 6 I'll leave it up to you for discussion. 7 MS. ROGERS: Phil, the dark underlined 8 is new or there is no new terminology? You're just 9 explaining it better? 10 MR. SANDERSON: The dark underlined is 11 new language, I believe. 12 MS. ROGERS: New language. 13 Committee members, anyone have a comment 14 on this? 15 MR. CORNWELL: These changes are your 16 current procedure now -- right? -- your internal 17 procedure? 18 MR. SANDERSON: For the temporary 19 authorizations? 20 MR. CORNWELL: Yes; yes, sir. 21 MR. SANDERSON: I believe so. 22 MR. CORNWELL: You're doing all these 23 things currently if somebody requested a temporary 24 application. Right? 25 MR. SANDERSON: Well, this is temporary 0048 1 authorization. 2 MR. CORNWELL: I mean authorizations. 3 MR. SANDERSON: You know, the statute 4 has their language that indicates -- once we receive a 5 completed application and a background has been 6 conducted and the 501(c) has been verified and one 7 other item, that we either have to issue the license 8 or deny the application, and that's within 31 days. 9 MR. CORNWELL: Correct. 10 MR. SANDERSON: So what this rule is 11 outlining is what is meant by "completed application" 12 and, you know, what we look at to start that 31-day 13 clock to process that application. And if we don't -- 14 if we can't issue a license in 31 days and we don't 15 deny it in 31 days, then we have to grant a temporary 16 authorization that is good for I want to say up to 60 17 days -- 18 MR. CORNWELL: I think it's 60. 19 MR. SANDERSON: -- so they can begin 20 conducting bingo at that point in time. So this is 21 another -- you know, one of the findings from that 22 internal audit on licensing, that we needed to make 23 some clarifying language in this rule to allow for 24 understanding of what is necessary to proceed with 25 that temporary authorization issuance. 0049 1 MR. CORNWELL: Thanks. 2 MS. ROGERS: Any members have comments? 3 We have public comment. Mr. Minch, 4 would you like to comment. 5 MR. MINCH: No, thank you. 6 MS. ROGERS: No? 7 Okay. Mr. Fenoglio. 8 MR. FENOGLIO: Thank you. For the 9 record, my name is Stephen Fenoglio. I'm an Austin 10 attorney. 11 And the only observation is striking the 12 word "a" in new Subparagraph (b). The way it reads 13 now, "will issue a temporary authorization," as 14 opposed to what I think it should read, "will issue 15 temporary authorization for . . ." And the reason is, 16 if you keep the word "a," it might mean only one 17 session. Later in the rule, it talks about up to 18 perhaps weeks of temporary authorizations. So I think 19 to be consistent, it should strike the word "a." 20 MS. ROGERS: And it should read how? 21 MR. FENOGLIO: It would then read, "will 22 issue temporary authorization for," et cetera. That's 23 the only comment I have. 24 MR. SANDERSON: And let me -- I guess, 25 Steve, on that, it's still just one temporary 0050 1 authorization with, you know, possible extensions of 2 that authorization. 3 MR. FENOGLIO: Yes, there is a possible 4 extension. But the way that -- "a temporary 5 authorization" suggests that there was only one 6 authorization requested a session, and I don't think 7 that's what typically, when the charities I have been 8 involved with, apply for. It's several temporary 9 authorizations at once. 10 MR. SANDERSON: Well, you're talking 11 about temporary occasions? 12 MR. FENOGLIO: Yes. 13 MR. SANDERSON: Not -- 14 MR. FENOGLIO: Oh, I'm sorry. Yes. But 15 it still could be authorized for two temporary 16 authorizations, in the remaining body of the rule. As 17 I read it, no more than two extensions may be issued. 18 So, for example, it may be one, only one temporary 19 authorization, but the body of the rule says there 20 could be two extensions of the authorization, so I 21 didn't want the staff to foreclose. And then there is 22 just a typo on Subparagraph (i), which should be "A 23 regular license," as opposed to "An," change the word. 24 Thank you, Madam Chair and members. 25 MS. ROGERS: Thank you. 0051 1 We have no further comment about this? 2 AGENDA ITEM NO. 7 3 MS. ROGERS: We'll move to Item No. 7, 4 report, possible discussion and/or action on draft 16 5 TAC 402.100, definitions. 6 Phil Sanderson. 7 MR. SANDERSON: This is amending the 8 Rule 402.100, definitions, to provide clarification 9 and meaning for words that are I believe primarily in 10 the qualification or eligibility requirement rule 11 where most of these are listed, and then also some 12 other terms that we have come across in the statute 13 that we feel like need some further clarification 14 through definition. 15 MS. ROGERS: So these are just to really 16 clarify what you're speaking of, nothing in here -- 17 any comments? 18 MR. SILVER: I do on "Active member," 19 the definition of an active member going to be 20 "directly participates in an organization's activities 21 other than bingo. . ." I mean, there are people who 22 their sole job is bingo in a charity. And to 23 discriminate against them or exclude them, I don't 24 think we would want to get to that battle, because if 25 you're trying to discriminate somebody saying, "Well, 0052 1 you can't participate in the charity because you do 2 bingo," or "You can't do bingo because you don't 3 participate in the charity," because your sole job is 4 bingo, then -- I lost my train of thought. Let me 5 think about it again. I got confused. 6 MR. SANDERSON: Can you hold that 7 thought? 8 MR. SILVER: Yes. 9 MR. SANDERSON: Commissioner Schenck, 10 Chairman Cox has arrived, if you would like to make 11 any closing comments. 12 I can't hear you. Turn the mute off. 13 COMMISSIONER SCHENCK: Thanks, Phil. I 14 think it would be helpful for us to kind of look at 15 these rules and keep thinking about the possibility of 16 simplification. As soon as I get to the point of 17 covering all the details we covered, (inaudible) under 18 the Act, I think we really need to look at 19 simplification. 20 With that, I'll sign off. And thank you 21 again for giving me the opportunity. 22 MR. SANDERSON: Thank you, Commissioner. 23 MS. ROGERS: Thank you. 24 At this time we would like to welcome 25 Commissioner Cox to our meeting. Thank you, sir. 0053 1 CHAIRMAN COX: Thank you. 2 MS. ROGERS: Go ahead, Earl. 3 MR. SILVER: I just think "other than" 4 seems a more discriminatory term than -- that 5 shouldn't even be in there. 6 MS. ROGERS: And I would agree on that. 7 How do you look at handling -- you know, the Lions 8 Clubs have what they call members at-large, and 9 they're members of the organization, but they may live 10 an excessive distance from where the meetings are 11 held. They may only come to one meeting or they may 12 not come to any meeting, but they are part of the 13 organization. So how would they be handled under 14 this, Phil or Bruce? 15 MR. SANDERSON: Bruce or Meagan. 16 MS. ROGERS: Okay. Did you hear my 17 question, Bruce? 18 MR. MINER: How would we handle the 19 at-large members? 20 MS. ROGERS: Exactly. 21 MR. MINER: We would count them as 22 members. But I guess I'm confused, because if they 23 couldn't make it to the meetings, why would they be 24 running the bingo operation? So all we're concerned 25 is that the individuals are members of the 0054 1 organization as required by the Act. 2 MS. ROGERS: Okay. 3 MR. MINER: And the Act says must be an 4 active member, and we're making an effort to define 5 that -- that's a work in progress. 6 MS. ROGERS: Right. But if the Lions 7 Club considers them an active member, then we have no 8 room to say. 9 MR. MINER: We consider them an active 10 member. 11 MS. ROGERS: Okay. 12 MR. MINER: There's the situation out 13 there that we're well aware of, and the charity makes 14 that decision, that "You make me a member and I'll run 15 the game for you and I'll guarantee you X amount." 16 Well, if that individual has the best 17 interest of the charity at heart, that works, but it 18 doesn't always work out that way. So then the charity 19 is having to live with the consequence. So "active 20 member" is in the Act. We just wanted to make sure 21 that it's defined so everybody knows what that 22 consists of. And it will be worked on by the group, 23 by the public comment, and then we'll move forward 24 with that. 25 MR. SILVER: The "other than" is what 0055 1 throws me for a loop, because what happens if a 2 charity gets involved in bingo, becomes successful in 3 bingo and their sole operation or their sole money- 4 making endeavor is bingo? Then they would have no 5 active members. And were you trying to disqualify the 6 charity from playing bingo from that statement, 7 because they wouldn't have any active members and 8 then -- because they evolve to just their money-making 9 strictly in bingo, they have no other forms of money- 10 making? 11 MR. MINER: And that's fine. I think 12 our desire is that they be involved with the meetings 13 and make decisions and share the information that 14 shows how well they're doing. They make decisions on 15 what's done with that money, just like other members 16 would. I mean, you don't have to be an officer to be 17 an operator, but you do have to be a member to be an 18 operator. So we're just trying to identify what a 19 member consists of. 20 MR. CORNWELL: Bruce, would you repeat 21 your intent here. You want -- give me your intent. 22 What's the problem? What's the intent? And what 23 other avenues have we tried to go down, other than in 24 a definitional -- what other alternatives have we 25 looked at other than a definitional change in "active 0056 1 member"? 2 MR. MINER: Like Jeff mentioned, if you 3 have a clinic and it's made of all committee 4 individuals and they're all doctors and lawyers and 5 people that -- 6 MR. CORNWELL: Professionals. 7 MR. MINER: -- professionals that have a 8 lot else going, the way the Act is currently written, 9 they must be an active member to be a conductor -- I 10 mean, to be an operator. Well, when they were getting 11 into bingo, they didn't realize that if they consist 12 of the only members, if they're only identified as 13 active members, that they don't have the time or 14 desire to be involved in bingo, we're stuck with the 15 Act. And that's one scenario that doesn't really 16 address the question. 17 The other one is when we're trying to 18 license these organizations and they're an active -- 19 it says an active member, but the person wasn't even 20 on the membership but they're involved with the hall, 21 well, we can't -- the organization has to realize that 22 that person that's dealing with that money should have 23 the best interest of the charity at heart and that 24 that's a decision they make, to make that person -- 25 all we're saying is, that person should be involved 0057 1 with the whole activity instead of just running bingo. 2 MR. WHITTINGTON: Let me ask you a 3 question. My charities, we have adopted a thing that 4 our charities put our workers as a member under the 5 Bingo Division in that subchapter of the organization. 6 Okay? And, believe me, my workers know about the 7 organization, know what their organization is all 8 about -- okay? -- like premature babies or battered 9 women. We know why we're working so hard to raise 10 money for that organization, because they put us under 11 their Bingo Division in their organization as members 12 to work bingo to raise money for that charity. So we 13 know that. Okay? Does that make my workers a bona 14 fide member? I think so, because we know who we're 15 working for. We know we're working for bingo only for 16 that charity. We know what that charity represents. 17 MR. MINER: That -- 18 MR. WHITTINGTON: What's wrong with 19 that? 20 MR. MINER: If the organization has made 21 that decision to make all your people members so they 22 can be operators, that's their decision. 23 MR. WHITTINGTON: And they are listed on 24 the Bingo Division in their rules as one of the 25 members. 0058 1 MR. MINER: Right. So we're trying to 2 address what we consider an active member as required 3 in the Act. 4 MR. WHITTINGTON: Is that active? 5 MR. MINER: Sir? 6 MR. WHITTINGTON: Is that an active 7 member, my workers, under that situation under that 8 charity? 9 MR. MINER: Well -- 10 MR. WHITTINGTON: I think so, because 11 they are working every day for them. They are working 12 as bingo to raise money for that charity. They know 13 what it's all about. They know why they're working. 14 MR. MINER: Well, it probably wouldn't 15 meet our definition here. 16 MR. WHITTINGTON: It should. 17 MS. ROGERS: But I was saying -- 18 MR. MINER: It might be for us to 19 discuss the next time, to flesh out. 20 MR. WHITTINGTON: That's what I'm 21 talking about. 22 MR. CORNWELL: Have y'all thought about 23 considering and accepting a memorandum of 24 understanding between the board and a person charged 25 with bingo operations -- 0059 1 MR. MINER: I'm not aware of that. 2 MR. CORNWELL: -- about certain 3 responsibilities that that member has to report to the 4 board at least once a year or -- 5 MR. MINER: I would think that that 6 would have to be a -- 7 MR. CORNWELL: -- and the board members 8 recognize that they need to make contact with any 9 bingo questions that go to them? Is that something 10 that could be acceptable to the Lottery Commission? 11 MR. MINER: I'm sure it would have to 12 require a rule. 13 MR. CORNWELL: Damn! Why don't we just 14 jump in? 15 MS. ROGERS: I would like to make a 16 comment. I still don't quite understand here. You're 17 dealing with hundreds of charities across the State of 18 Texas. 19 MR. CORNWELL: Thousands. 20 MS. ROGERS: Thousands. And a charity 21 in Dallas and a charity in McAllen and a charity in 22 San Angelo might have different views on what their 23 active members are. And I just don't really see the 24 right to come up there and say, "Well, I'm sorry. Joe 25 is not an active member because Joe did this and this, 0060 1 and Suzi is." I don't see how that would be a 2 question posed -- I understand where the rule comes 3 in. I understand the legal part of it. But if your 4 charity deems that that person is an active member and 5 they consider that, really and truly, does the lottery 6 have the right to say? 7 MR. SANDERSON: Well, and I think the 8 first paragraph, Paragraph A is probably more 9 important than Paragraph B to a certain extent. I 10 think the organization, the way that they're formed 11 and their bylaws or organizing instruments, articles 12 of incorporation, wherever they may have the language, 13 if a person meets their membership requirements to be 14 a member, then, you know, that may be determined that 15 they're an active member. 16 MS. ROGERS: And you're exactly right. 17 Thank you for pointing that out. Just like I asked 18 you when you have a member at-large, if their bylaws 19 say member at-large is an active member, they're an 20 active member. 21 MR. SILVER: Then why have Paragraph B? 22 MR. SANDERSON: Well, you know, there 23 again, when we develop these, we look at all avenues 24 and different area, look at other jurisdictions and 25 see how terms are defined in their regulations and/or 0061 1 statutes. The whole purpose of bringing this to the 2 BAC in the first place is to get your comments -- 3 MS. ROGERS: Right. 4 MR. SANDERSON: -- and your input. And 5 if you desire to create a workgroup to work with the 6 staff on these, then, you know, that's your decision 7 and, you know, we'll move forward. 8 MR. WHITTINGTON: Well, I really think 9 we should, because we get with some of the people 10 that's really on the board of our charities and we 11 meet with them and they look at the bingo, what we are 12 doing, and they tell us, "Thank you for being a member 13 and taking care of us in bingo." Okay. And that's 14 what they tell our workers, because they actually work 15 for them to raise money for their charities. 16 And they don't have too much to do with 17 bingo because they don't know too much about it. They 18 just ask us questions about it. We answer those 19 questions 100 percent. And they say, "Thank you for 20 clarifying bingo. We understand bingo now." And I 21 think that's what -- well, the smoking ban and the 22 government and everything, they don't understand 23 bingo. If they would, they wouldn't put a smoking ban 24 on bingo, as I understood it. That's just another 25 example. They just don't understand bingo. 0062 1 MS. ROGERS: So does that mean that you 2 would like to chair a workgroup? 3 MR. WHITTINGTON: Yes. 4 MS. ROGERS: Okay. Excellent. Would 5 someone else like to serve? 6 MR. WHITTINGTON: Bruce, would you like 7 to be on it? 8 MR. MINER: Thanks for volunteering. 9 MR. CIANCARELLI: I will go. 10 MS. ROGERS: I've learned from the best, 11 Suzanne. 12 MR. CORNWELL: Yes. 13 MS. ROGERS: So we have Larry to chair. 14 We have Francis to help him with that, Mr. Miner also. 15 MR. MINER: Yes, please. 16 MS. ROGERS: And, Phil, what would you 17 like to call this workgroup or do you want to name it? 18 Definition workgroup? 19 MR. SANDERSON: Will you just have one 20 workgroup for definitions? But I think you can also 21 incorporate -- there is a desire to have a workgroup 22 for the -- what's the rule, eligibility requirements? 23 MR. WHITTINGTON: Yes. 24 MR. SANDERSON: Qualifications and 25 requirements, and they kind of go hand-in-hand. Most 0063 1 of the terms in that rule are what we're defining in 2 the definition section. 3 MS. ROGERS: Okay. 4 MR. SANDERSON: So, you know, maybe just 5 the qualifications and requirements and definitions 6 workgroup. 7 MS. ROGERS: Very good. 8 Is there anyone in the public that would 9 like to volunteer to be on this? 10 Mr. Minch, Mr. Fenoglio. 11 Okay. It's in y'all's hands. Very 12 good. Thank you. Thank you, Larry, for stepping up 13 to the plate to help with that. 14 MR. WHITTINGTON: Well, you know, you 15 get to the point that workgroups in a bingo hall based 16 on (inaudible), the representative charities because 17 they're not listed. Okay? They get to a point that, 18 "I'm scared to work on it. I mean, I'm afraid they 19 might come in here and write me up," you know, and 20 that ain't right when they working so hard trying to 21 raise money for charities every day. Okay? 22 MS. ROGERS: I would just say keep in 23 mind that charities are different, which they have in 24 the -- 25 MR. WHITTINGTON: I don't care. It 0064 1 applies to any charity. 2 MS. ROGERS: Mr. Minch, would you like 3 to make a comment on this or would you like to save it 4 for the workgroup? 5 MR. MINCH: I'll be glad to made a 6 comment on this. 7 MS. ROGERS: Okay. 8 MR. MINCH: I want to comment on all of 9 the definitions that are contained in this rule, not 10 necessarily every one of them, but my comments will be 11 comprehensive. 12 To reiterate the comment I made before, 13 I think that a definition of someone being active is 14 really the matter of the charity. And I'll use again, 15 as I said before, the example of a veteran's 16 organizations, the fact that somebody has been in a 17 war, that's all the qualification they need in order 18 to be an active member of that charity. 19 There is a definition of proprietary, 20 equitable or credit interest, and that definition I 21 think is a little sketchy. And I had sent to you, 22 Phil, a suggestion for how it might be drafted. And 23 I'll be glad to give you a copy just for the record. 24 I don't think it's something that we can necessarily 25 discuss or debate here. But I think the basic 0065 1 differences are that a proprietary interest is direct 2 or indirect ownership. An equitable interest is an 3 indirect, contingent or beneficial ownership. And a 4 credit interest is a direct, indirect, contingent or 5 beneficial interest and a promise to pay. 6 And so I think that those things are 7 very clear. In the securities business, those 8 definitions are extremely well-defined. And a later 9 part of that has to do with a public company that I'm 10 going to comment upon. But I think everybody who ever 11 had a question about that could simply look to any 12 securities legal dictionary, and I think those things 13 are very well-defined. I think the same thing is true 14 also in real estate. 15 I would like to comment also upon the 16 concept of significant progress. The definition of 17 significant progress, I think it's important to 18 recognize that in the life of a charity, there are 19 points in time -- and I think today is one of them -- 20 it is very questionable whether the charity should do 21 anything. You may have a charity that has a very 22 ambitious program that's extremely expensive. And at 23 this point in time, the right thing for them to do is 24 to save money and do nothing. And so the economy 25 oft-time will have some impact on what progress a 0066 1 charity would be able to make. 2 And I think it would be regrettable if 3 the Bingo Division found itself in a position that it 4 had to inquire into the magnitude of the progress that 5 someone was making, because simple survival in these 6 times might be all the progress you would hope to make 7 in the reality of the economy. 8 As it relates to the issue of any 9 fraternal organization, I would also say to you, when 10 you think in terms of the real progress, I think you 11 have to look in particular for fraternal 12 organizations. Being a veteran, I'm particularly 13 sensitive to the issues with veterans. 14 And most veterans -- and I mean this not 15 in an unflattering way, because there are many -- an 16 unfair share of it -- there's an awful lot of drinking 17 beer and telling war stories, and that therapeutic 18 effect is exactly what these times require, in 19 particular for young veterans who are just coming home 20 from Iraq and Afghanistan. 21 Now, in the greater scheme of things, 22 that does not appear to be significant progress. But 23 for those young guys who have just come home from a 24 year in combat, it's a very important thing. So you 25 would almost be grading to make sure that they're 0067 1 drinking enough beer, telling enough stories that that 2 would be under "significant progress." 3 As relates to the issue of a real party 4 in interest, I would propose a definition to you that 5 a person who is a direct, indirect, equitable, 6 beneficial or other financial interest and granting or 7 under operation of a commercial lessor's license. And 8 I think the more important thing is a definition that 9 precludes a strawman. A real party in interest may 10 not be a strawman. A person used by a commercial 11 lessor applicant or licenseholder to obtain a license 12 which would otherwise be permissible to the issue, 13 because I think that's the real extent of that 14 section. 15 So those are the comments that I wanted 16 to make. May I answer any questions? 17 MS. ROGERS: I appreciate that, and I'm 18 sure you'll have a significant amount of time to work 19 on this with Larry. 20 MR. MINCH: Okay. Could I do one -- 21 MS. ROGERS: I just have one on that. I 22 did notice, though, in the defense of the definitions 23 they had put forth, they don't say any specific 24 amount. And I understand saving the money. Trust me, 25 we all need to save up because who knows what the 0068 1 economy is going to do? But $100 shows that they are 2 doing something. 3 MR. MINCH: Well, I guess what I'm 4 concerned about is that it's a fairly arbitrary 5 standard. And I think the more important thing is 6 that if a charity maintains their tax status, they're 7 able to continue to operate, I'm not sure having been 8 granted a license initially, why it should be an 9 ongoing maintenance requirement of the Lottery 10 Commission to continue to inquire into that, absent 11 some evidence to the contrary. And so if you have a 12 VFW post that has been playing bingo for 25 years and 13 hadn't fundamentally changed anything about it, it 14 seems to me like it's a bit of a reach to inquire 15 again as to whether or not they're making significant 16 progress. 17 MS. ROGERS: Right. 18 MR. MINCH: Now, if they're an 19 established charity and the team might want a renewal 20 or something else, that that's not something 21 appropriate for the Lottery Commission to be inquiring 22 into. 23 MR. SANDERSON: Well, I mean, Section 24 2001.105 refers to a license issuance or renewal. And 25 it says, "The commission shall issue or renew a 0069 1 license to conduct bingo on payment of the license 2 fee . . . if the Commission determines that: 3 "(4) The applicant has made and can 4 demonstrate significant progress toward the 5 accomplishment of the purposes of the organization 6 during the 12 months preceding the date of the 7 application for a license or . . . renewal." 8 MR. MINCH: Well, that's why the 9 definition -- since it is in the Act, that's why the 10 definition of it, which today does not exist, is so 11 important -- 12 MR. SANDERSON: Yes. 13 MR. MINCH: -- to make sure that it 14 doesn't overstep that. And again I think of VFW that 15 originally had received its license. Remember, VFW 16 has to be chartered by Congress before it would be 17 able to receive that license. As long as they 18 maintain all that, I think that they've established 19 that. So the definition of "significant progress," 20 therefore, becomes very important. And that's what 21 we're talking about, the definition. 22 MS. ROGERS: Thank you. 23 MR. MINCH: Can I make one last comment? 24 I would like to take just a second and introduce 25 Nicole Stofer. Nicole is representing the Texas 0070 1 Association for the Advancement of Charitable Bingo, 2 and that's an organization I'm the president of. All 3 the comments I'm made today are in relationship to the 4 Littlefield Corporation's interest in these matters. 5 Thank you. 6 MS. ROGERS: Thank you. 7 Any further comments? 8 Okay. Mr. Fenoglio, would you like to 9 comment at this time? 10 MR. FENOGLIO: I'll wait until the 11 workgroup. 12 MS. ROGERS: Thank you, sir. 13 AGENDA ITEM NO. 8 14 MS. ROGERS: Moving on to Agenda Item 15 No. 8, report and possible discussion and/or action on 16 the workgroup of market conduct. Markey Weaver is not 17 here. Mr. Silver, do you want to make any comment? 18 MR. SILVER: There has been no progress 19 in market conduct. The group was established in 20 February 6, 2008, just under a year ago. The members 21 were Markey Weaver, chair; myself; and Thomas Weekley. 22 Our public members are Kris Keller and Steve Bresnen. 23 With the lack of progress with this 24 workgroup, I would really like to propose that we form 25 it with a few different members. I don't know if this 0071 1 is the time or place. Maybe the last meeting should 2 have been. But maybe we can find a new chair. And I 3 would be happy to serve on it. 4 MS. ROGERS: This is under your proposed 5 workgroup? 6 MR. SILVER: I did that part. 7 MR. CORNWELL: Thanks. 8 MR. SILVER: You're welcome -- because 9 talking with Knowles casually, that I thought there 10 was a workgroup like this previously dealing with 11 market conduct. And if there was and there were 12 members on the BAC that were on that workgroup, they 13 may have more of an insight than I would be chairing 14 it, but I would be willing to participate in it. 15 And I feel bad because it just wasn't 16 done, and it was called because of an issue that needs 17 to be addressed for Mr. Keller. That's why he's been 18 so diligently on this. And I feel bad for not keeping 19 up with his progress or his needs on it, so I thought 20 that it needed to be re-formed. 21 MS. ROGERS: And I don't have any 22 problems with that. Phil, how do we go about re- -- 23 MR. CORNWELL: Madam Chair, can I -- 24 MS. ROGERS: Yes, sir. 25 MR. CORNWELL: -- add something to this? 0072 1 I did talk to Ms. Weaver yesterday. She's done some 2 work on it, and she wants everybody to know that if 3 they will contact her or e-mail her, she will get some 4 of that work to you. She has had some family illness 5 that's involved, and that's made it impossible to get 6 here. 7 Earl, I don't mind joining the 8 workgroup, and it keeps us underneath the quorum. 9 I'll join and help out, whatever I can do. I would 10 like to see what Markey has done on this subject. And 11 it's my understanding that the workgroup is not only 12 dealing with pricing issues, it's about how the market 13 is conducted as a whole. So that is the task of the 14 workgroup. It's not only on pricing issues, but it's 15 the market as a whole. It's a very broad group. 16 MS. ROGERS: And it's a very important 17 workgroup and something that we need done. Is there 18 an objection to -- 19 MR. CORNWELL: I don't mind joining it. 20 MS. ROGERS: Right. Is there an 21 objection maybe to switching the chair to take the 22 responsibility off of Markey, still letting her 23 assist, and maybe putting Earl in charge so he can 24 head up the group to get more involved and more things 25 done? 0073 1 MR. SANDERSON: That certainly is one of 2 your options, yes. 3 MS. ROGERS: That would be my 4 suggestion, keep Markey, by all means, on the group 5 but take the load of being the chair, which is the 6 person who has to gather everybody up, and one of you 7 gentleman take that and go with the workgroup from 8 there. 9 MR. SILVER: I will. 10 MR. CORNWELL: I will be a member of the 11 group. I'll work with you on that. 12 MR. SILVER: Okay. 13 MS. ROGERS: Phil, are we allowed to 14 have four BAC members? 15 MR. SANDERSON: You can have, you know, 16 four BAC members on a workgroup, yes. 17 MS. ROGERS: Okay. So we have Earl 18 Silver as the chair. BAC members will consist of 19 Knowles Cornwell, Francis Ciancarelli, Markey Weaver. 20 Public members will be Kris Keller and Steve Bresnen. 21 Mr. Bresnen is not here. 22 Kris, you are still willing to serve on 23 this? 24 MR. KELLER: Sure. 25 MS. ROGERS: Okay. Is there any comment 0074 1 that the members would like to make at this time about 2 the market conduct, anything you would like to see 3 happen? No? 4 Okay. Mr. Keller, would you like to 5 make your comment? 6 MR. KELLER: All right. My name is Kris 7 Keller. And one thing, I didn't know whether I could 8 talk before if I didn't sign up to talk on the 9 subject, but I have heard this term "significant 10 progress." Doesn't that mean significant progress of 11 a charity from their involvement in bingo or -- no? 12 MR. SANDERSON: No. 13 MR. KELLER: No. Okay. And I just 14 wanted to tell Larry, I agree with you on the rules -- 15 too many. 16 Back on the subject of the lottery 17 setting a price that an electronic can be sold for, I 18 definitely think we still need to look at this issue. 19 In my area, Bexar County, and Ms. Rogers' area, you 20 can see it just deteriorating worse than last time I 21 stood in front of you. 22 Now there are more halls involved in the 23 prize floor of $4.00 computers and free food and 24 whatever, just ridiculous stuff. And I just can't 25 understand. If there is anybody anywhere that wants 0075 1 to sell their electronic for less than $4.00, then let 2 them come stand up here and tell you why, because I 3 can't. There is no reason why. So I'm thinking maybe 4 we need to take a different approach. Instead of me 5 stand here saying why I think we should do it, maybe 6 we should just do it and let somebody else come up 7 here and say why we shouldn't do it. How does that 8 sound? Can we do that? 9 MS. ROGERS: I don't have an answer for 10 you. 11 MR. CORNWELL: Phil, would you explain 12 to Kris the process of doing that, what all it would 13 take to have something like that done, so he just 14 understands the process. 15 MR. SANDERSON: As far as the Commission 16 setting a price or a limit or -- 17 MR. CORNWELL: Yes. 18 MR. SANDERSON: -- floor? 19 MR. CORNWELL: Yes. If they should so 20 choose to do so, what is the process? 21 MR. SANDERSON: Well, the process would 22 be to draft a rule that (laughter) -- 23 MR. CORNWELL: I knew that would come. 24 MR. SANDERSON: -- would set the -- you 25 know, that would set the price or floor, you know, 0076 1 potentially and then go through the remaining process. 2 MR. CORNWELL: For the eventual adoption 3 of the rule by the Commissioners? 4 MR. SANDERSON: Yes. 5 MR. CORNWELL: Yes. 6 MR. KELLER: Well, once again, why can't 7 we start this process and let someone that's objecting 8 to it stand here and tell you why they object to it? 9 I mean, I'll come before the committee and say, "Let's 10 do this." I don't see anybody behind me saying, "No, 11 let's don't do this." 12 MR. SANDERSON: Well, you know, my 13 understanding was, you know, one of the purposes of 14 the workgroup was to get together and do research and 15 to come up with a proposal to recommend to the 16 Commission or to make some recommendation to the 17 Commission as to how they would like to see them 18 proceed and, you know, if they so choose, to set 19 prices or floors or -- 20 MR. KELLER: I've got the research. 21 Everyone I spoke to is in favor of it. I've talked to 22 bingo operators; I've talked to vendors. That's all 23 that's involved in the bingo. 24 MR. SANDERSON: Customers. 25 MR. KELLER: I've told my charities 0077 1 about it. They're way in favor of it. So that's the 2 research I've done. 3 MR. WHITTINGTON: Sir, let me ask you a 4 question. Are you sitting there telling me that 5 somebody is selling a computer for $4.00 per session? 6 MR. KELLER: You bet you! 7 MR. WHITTINGTON: I don't even have -- I 8 don't sell one game for under seven bucks. 9 MS. ROGERS: I believe, Larry, in 10 San Antonio, they have been know to even sell 11 computers for effectively a dollar. 12 MR. WHITTINGTON: I mean, they got to 13 pay the distributor something. I just don't 14 understand, and I really agree with you, if somebody 15 drop that low on an electronic when your paper is more 16 almost. 17 MR. KELLER: That is another one to save 18 us, set a minimum price of $10.00, then. 19 MS. ROGERS: Well, Mr. Keller, we have 20 just rearranged the group. And I agree with you and I 21 really think Knowles and Earl will get this going. 22 Unfortunately, Ms. Weaver didn't have the chance to 23 get it going. I think it's going to take research. 24 We're going to have to get it to Legal to make sure 25 it's not -- 0078 1 MR. CORNWELL: Kris, would you say -- 2 and this is just thoughts -- when do you think this 3 started? When do you think all this process of the 4 degradation of pricing started? 5 MR. KELLER: Well, I think it started in 6 the Corpus area a long time ago. I know in Bexar 7 County, it was about maybe two years ago. 8 MR. CORNWELL: I've seen it happen to 9 every market in the state except for maybe some 10 isolated ones in Dallas, yes. Do you feel like some 11 of this pricing is done, you know, as competitive 12 measures or do you think some of these things are done 13 in a manner that is trying to retard entry of 14 charities come play bingo in the San Antonio area? Is 15 it a method that's used to run people out of the 16 business or thinking they're running people out of 17 business or is it a method to keep charities from 18 coming in to play bingo in Bexar County? 19 MR. KELLER: I would say it's a method 20 to run charities out of business. 21 MR. CORNWELL: And would you sit down 22 and say that it's led by one group, one person, one 23 charity? 24 MR. KELLER: No, I can't say that. 25 MR. CORNWELL: Have you tried to find 0079 1 charities in Bexar County to play at your place and 2 say, "Yes, because they're charging so little money 3 for your electronics, I don't want to play," that's a 4 barrier of entry to playing bingo at your hall? 5 MR. KELLER: Well, we don't have any 6 openings for charities, so I'm having to -- 7 MR. CORNWELL: You're in good shape, 8 then. Are you forgetting -- 9 MR. KELLER: We are in good shape. But 10 I'm telling you, it's going to deteriorate, and it's 11 going to deteriorate at a fast pace. 12 MR. CORNWELL: Well, Kris, are you -- 13 you're a commercial lessor. Are you getting full 14 rents down there at your halls? 15 MR. KELLER: You bet. And I'll say 16 this, too, my charities were No. -- in the top 10, I'm 17 going to guess, in the state -- 18 MR. CORNWELL: They always have been, 19 Kris. 20 MR. KELLER: -- in charitable 21 distributions, which brings me to another point on the 22 significant progress. What I was thinking it was and 23 it's not, but whenever I look at the state records and 24 I see where a charity made $1.62 profit for their end 25 of the bingo, and then I see in the Bugle where 0080 1 they're selling their computer for this ridiculous 2 price, you've got to ask yourself, "Who is making 3 money here?" I mean, who is making the money? It's 4 not the charity at $1.62. I don't even know how a 5 charity can justify buying a license and making $1.62 6 a session, but they do. 7 Anyways, I want to speed this process 8 up. I want to do a leapfrog across whatever we've got 9 to do here. Like I say, I've done the research. So 10 let's just put this in front of the lottery and move 11 forward with it. And then, as I've said before, let 12 somebody that's objecting to it come up here next time 13 and say this is why. So let's leapfrog over it. 14 MS. ROGERS: The more information, then 15 the faster you can get it through the workgroup and 16 then -- 17 MR. KELLER: What else do y'all want to 18 know? 19 MS. ROGERS: I believe you need to sit 20 down with Earl and Knowles and y'all put it together. 21 I don't think you can just throw it out. I mean, it 22 needs to be a little bit more organized. 23 MR. KELLER: Well, when we sit down, I'm 24 not going to tell you much more than right now. I've 25 talked to several charities and several -- the three 0081 1 distributors and the people that I've talked to from 2 those distributors have said they think it's a great 3 idea to set the minimum price. And every charity I've 4 talked to, including two of them that are in the price 5 floor, have said the same thing: "Yes, we would love 6 to get out of it." 7 MS. ROGERS: And I think that's great 8 information to list. It can be brought up so we can 9 make the Commissioners aware of it when they look at 10 these rules -- this rule. 11 MR. KELLER: I guess I'm not going to 12 get my leapfrog. 13 MS. ROGERS: I think you can. Our next 14 meeting is in May. I'll talk to Kim. 15 MR. SILVER: Kris, I'll talk to Worlanda 16 and see if I can get the meeting for next Tuesday. If 17 I can get the meeting room, we'll meet up here next 18 Tuesday. 19 MR. KELLER: That would be great. 20 MR. SILVER: I'll talk to her before we 21 leave, and I'll let you know something before you 22 leave. 23 MR. KELLER: All right. 24 MS. ROGERS: Your frog is taking off. 25 MR. KELLER: Yeah. 0082 1 MR. WHITTINGTON: Well, I just feel, 2 too, I mean, I think it definitely should be some type 3 of preparation from the electronic distributor, 4 because the charity is not making anything, is selling 5 for -- 6 MR. KELLER: And then you look at the 7 list on the Internet, and it's growing. 8 MR. CORNWELL: I know. So -- 9 MR. KELLER: And one comment about what 10 Bruce has said, that, you know, I can see the 11 Lottery's position where they're concerned about a 12 person that's gone to a charity and said, "Get in 13 bingo. I'll take care of everything. I'll give you X 14 amount of money." 15 If a person has done that with a 16 charity, maybe the Lottery should say, "You're the 17 person that went to the charity and did that. You're 18 responsible for their bills, including their taxes to 19 the state. If you don't be sure that those are paid, 20 then you shouldn't pay yourself, you shouldn't pay the 21 lessor, whatever, until you have paid all your bills." 22 I guess that's it. 23 MS. ROGERS: And I think you'll have 24 your time to incorporate the rule. Thank you so much 25 for your time. 0083 1 MR. WHITTINGTON: Thank you. 2 MS. ROGERS: Members, any other comment? 3 AGENDA ITEM NO. 9 4 MS. ROGERS: Okay. Then we will move on 5 to Item No. 9, report and possible discussion and/or 6 action on new products and new products committee. 7 MR. CORNWELL: Madam Chair, I apologize. 8 My guest had to cancel on me. And if we can postpone 9 that to the next meeting. 10 MS. ROGERS: Okay. We will postpone 11 that and be sure you get that on the agenda. 12 AGENDA ITEM NO. 10 13 MS. ROGERS: No. 10, report and possible 14 discussion and/or action on the -- it reads in your 15 book 2007 BAC Annual Report. It should read 2008. We 16 will move this item to No. 14 as it relates to that 17 item. And Suzanne and I will be ready for this in 18 May. But we'll talk about that on Item No. 14, so we 19 will pass No. 10. 20 Yes? Five-minute break, is that okay 21 with everyone? 22 It is 11:35. We'll take a five-minute 23 break. Thank you. 24 (Recess: 11:35 a.m. to 11:47 a.m.) 25 MS. ROGERS: Committee members, if you 0084 1 would go to your seat, please. 2 All right. Our members are back. It is 3 11:47. 4 AGENDA ITEM NO. 11 5 MS. ROGERS: Call the meeting back to 6 order, and we'll move on to Item No. 11, report and 7 possible discussion on Bingo Advisory Opinion 8 2008-0829-0011. 9 This was requested by Ms. Taylor who, 10 unfortunately, could not make it to our meeting today. 11 There was a question sent in for an advisory opinion 12 about when a bingo occasion officially starts. And 13 you can all read in the back of your book. 14 I would have some really in-depth 15 questions about this. I think this needs to be looked 16 at. 17 Are y'all lost? 18 MR. WHITTINGTON: I don't think we got 19 11. 20 MR. CORNWELL: It's No. 10. 21 MR. WEEKLEY: It's No. 10. They skipped 22 a number on it. 23 MR. WHITTINGTON: That's why. They 24 skipped 10. Okay. 25 MS. ROGERS: No problem; no problem. If 0085 1 you read over this, it states that as in the Bingo 2 Enabling Act, the bingo occasion officially begins 3 when a licensed organization opens the area used to 4 conduct bingo. My personal opinion is that this needs 5 to definitely be looked into. It needs to be added to 6 maybe one of our workgroups that we already have. I 7 would be more than happy to help, to maybe kind of 8 help clarify this, or with staff to look at this. 9 Does anyone have any comments about 10 that? 11 MR. SILVER: I'll help. 12 MS. ROGERS: Okay. 13 MR. CORNWELL: Why don't you form a new 14 workgroup. 15 MS. ROGERS: Do you think we need a new 16 workgroup? 17 MR. CORNWELL: Yes. Madam Chairman, 18 it's a very specific issue. We can open the 19 workgroup, close the workgroup. 20 MS. ROGERS: Okay. That is perfectly 21 fine. 22 MR. SANDERSON: You realize that the 23 language that's quoted in here is out of the statute. 24 So when it talks about an area -- "premises" means the 25 area subject to the direct control and actual use, is 0086 1 in the statute. 2 MS. ROGERS: Yes, sir, I realize that. 3 I printed off the BEA just so I would have it in front 4 of me. But I also believe that, as we said before 5 numerous times today, that the Bingo Enabling Act is a 6 little bit vague on some things. And I think what it 7 says is, a bingo occasion officially begins when a 8 licensed authorized organization opens the area. I 9 don't think it specifically says that your second 10 bingo occasion begins. It says "a" bingo occasion 11 begins, and that could be your first. So I would feel 12 better if we formed a workgroup. You know, we can 13 work and discuss and maybe get a little bit of the 14 vagueness out of there for people to understand. 15 MR. SANDERSON: You are welcome to form 16 a workgroup and provide information to us, and we'll 17 be glad to look at it. 18 MS. ROGERS: Very good. We can do that. 19 MR. CORNWELL: Mr. Sanderson -- can I 20 ask Mr. Sanderson? 21 MS. ROGERS: Sure. 22 MR. CORNWELL: Have you looked at this 23 to see what needs to be changed in the statute? 24 You've clarified the issue to normal operating 25 policies that are in existence today? 0087 1 MR. SANDERSON: I have looked at it. 2 I've not prepared any particular what I would consider 3 recommendations, but I have looked at it. And I've 4 done some research on when the language changed in the 5 statute. And I think that there are some areas that 6 we could, you know, discuss. 7 MR. CORNWELL: Could that also be in the 8 topic of this workgroup or would that be going out of 9 bounds of the BAC? 10 MR. SANDERSON: You know, I will be glad 11 to work with the BAC in any manner that would help, 12 you know, to -- 13 MR. CORNWELL: Well, the reason I ask 14 that question, that may turn into a legislative -- 15 MR. SANDERSON: And that's where I've 16 got to be careful in how I move forward with this. 17 MR. CORNWELL: Okay. 18 MS. ROGERS: Okay. 19 MR. WHITTINGTON: So, Kim, what are you 20 wanting to see changed as far as what would you 21 recommend when you come to operating times on the 22 bingo hall? I know some of us go long games. They go 23 for four hours in a row or eight hours a day. 24 MR. CORNWELL: Larry, when these 25 first -- 0088 1 MS. ROGERS: I personally do not think 2 that it was the intent of the Legislature when they 3 wrote this, the Bingo Enabling Act, to make it when 4 you open your doors, you have four hours to close your 5 doors. That's my personal opinion at this time. So I 6 do not believe that was the intent, because if that 7 was the intent . . . 8 MR. WHITTINGTON: Well, I mean, you 9 might open your doors as 9:30 and people don't get 10 there until 10:30, but you've got it opened up. Some 11 people might come at 9:45 or 10:00. So I understand 12 that. So we need to clarify it. 13 MS. ROGERS: I think it needs to be 14 clarified a little bit. I think it needs really more 15 in-depth with people who are already in the day-to-day 16 business of bingo working with staff, which Phil will 17 work with us to maybe clarify that a little bit 18 better. 19 MR. WHITTINGTON: Okay. 20 MS. ROGERS: Okay. I will be happy to 21 chair the workgroup. I will nominate Suzanne to be on 22 the workgroup, because she's not here to say no. 23 Mr. Earl Silver would like to go on the 24 workgroup. 25 MR. WHITTINGTON: Two, Earl. 0089 1 MS. ROGERS: Any other members? 2 Any public members that would like to 3 serve and help? Mr. -- 4 MR. WHITTINGTON: Jeff. 5 MS. ROGERS: -- Minch. Okay. Anyone 6 else? 7 Phil, who will we work with on staff? 8 MR. SANDERSON: Go ahead and put my name 9 down or my designee. 10 MS. ROGERS: Okay. 11 MR. SANDERSON: When the time comes, 12 I'll have someone that you can talk with. 13 MS. ROGERS: Okay. So BAC members, we 14 myself, Kim; Suzanne; Earl Silver. Public, we have 15 Mr. Minch. And staff, we have Phil. And we will look 16 into this and hopefully have something to report back 17 on the May 5th meeting. 18 Any further comment? 19 AGENDA ITEM NO. 12 20 MS. ROGERS: No. 12, report and possible 21 discussion and/or action on the content of the 22 operator training program. 23 Mr. Ciancarelli. 24 MR. CIANCARELLI: Hi. My name us Frank 25 Ciancarelli, BAC member. First I would like to take a 0090 1 moment and thank Phil Sanderson and his staff for all 2 their help and support and kind of taking me along the 3 way as I ask a lot of question, being the new person. 4 I guess December of 2007, I was 5 notified, after submitting an application and the 6 background check came through, that I was accepted for 7 the registry, and I got one of these little badges. 8 And my organization said, "Great! Thursday night you 9 got bingo." 10 And I said, "Well, what do I do?" 11 They said, "Walk around and you can look 12 at anything you want." 13 "Okay." 14 Then I submitted an application for a 15 membership to BAC. At one point I decided that maybe 16 I should learn a little bit more. So on my own, I 17 took the on-line training course for the operator 18 which, by the way, was excellent. It sure opened my 19 eyes, and I realized that bingo for an organization 20 was really their business, and I guess I wasn't given 21 that impression initially. 22 And I think I heard some comments from 23 other members this morning about training. And what 24 I'm suggesting is that we look at a condensed operator 25 training on-line course, because I'm not so sure how 0091 1 many people know out there beyond these walls they 2 have to train everyone that's listed on their license, 3 and eight hours might be hard to get compliance. 4 But I think the first step to getting 5 people to know what they're doing and knowing what's 6 going on is to have a brief overview and offer that as 7 an opportunity to learn more. And maybe you can have 8 in there a suggestion you take the full course, the 9 eight hours which took me 10, because I don't like to 10 miss test questions, you know. 11 And I guess this could really trickle 12 down to the halls, cashiers, callers, ushers. I don't 13 know how much they really understand about that. So 14 what I was bringing up for consideration and 15 discussion at some future date would be a condensed 16 training course for operators and anyone else that 17 might benefit from it. 18 Thank you. 19 MS. ROGERS: Thank you. 20 Any further comment from others? 21 Questions? 22 MR. SANDERSON: I would like to bring up 23 one point. I mean, I'm in favor of looking at 24 developing, you know, certain modules that may have 25 some brevity to them that would provide information to 0092 1 individuals. But we do have the statutory requirement 2 that the training is eight hours. You know, there's 3 eight hours of training for the operators and the 4 bingo chairperson. 5 So at some point they would need to take 6 all the modules, you know, that would encompass enough 7 time for eight hours. And I think -- and as we've 8 discussed, you and I discussed earlier this morning, 9 we do have a module out there for our pre-licensing 10 interview for new organizations getting into bingo 11 that may have the information that you're looking for 12 and a brief form that would give the organizations the 13 idea and the information they need of what they're 14 responsible for. 15 MS. ROGERS: Thank you. 16 Any further comment? 17 AGENDA ITEM NO. 13 18 MS. ROGERS: Okay. Item No. 13, public 19 comment. Do we have anyone who would like to speak? 20 AGENDA ITEM NO. 14 21 MS. ROGERS: Okay. Item 14, 22 consideration of and possible action on future Bingo 23 Advisory Committee meeting dates and/or items to be 24 considered for future meetings. 25 Our next meeting is tentatively 0093 1 scheduled for May 5th at 9:00. At that time I would 2 like to ask that we put on there the report and 3 discussion of the 2008 BAC Annual Report. Suzanne and 4 I will have that ready for that meeting. So that will 5 be one item. 6 Is there an item -- I'm sure Mr. Silver 7 and Mr. Cornwell would like -- 8 MR. CORNWELL: Yes, put it on there. 9 MS. ROGERS: -- for the market 10 conduct -- 11 MR. SILVER: To be on there. 12 MS. ROGERS: -- to be on there. 13 Okay. Anything else anyone can think 14 of? 15 MR. CORNWELL: New products, please. 16 MS. ROGERS: New products. 17 Larry, what group were you in charge of 18 back here? Sorry. 19 MR. WHITTINGTON: What was the name? 20 What are we naming that? 21 MS. ROGERS: One of the rules. 22 MR. SANDERSON: It was the qualification 23 and requirements and definition rule. 24 MS. ROGERS: It was I think -- 25 MR. WHITTINGTON: Oh, yes, we definitely 0094 1 will have something. So I just need to get Jeff's and 2 a couple more people's phone number. 3 MS. ROGERS: Qualifications and 4 definitions. 5 MR. WHITTINGTON: Bruce, can we do a 6 conference call from here with you? 7 MR. MINER: Yes. 8 MR. WHITTINGTON: Okay. Good. 9 MS. ROGERS: Okay. May 5th is okay with 10 everyone, as long as it's available at the Lottery? 11 Okay. If so, no further comment? 12 It is straight-up 12 o'clock. 13 MR. SANDERSON: Does Chairman Cox want 14 to say anything? 15 MS. ROGERS: Chairman Cox, would you 16 like to say anything? Sorry. 17 CHAIRMAN COX: No, you gave me an 18 opportunity. I would like to thank all of you for 19 your service. Thank you for filling in for Suzanne. 20 You did an excellent job. Thank all of you for being 21 here, and all present as well. We appreciate your 22 interest in bingo. 23 And I continue to be impressed with the 24 diligence and the commitment that you bring to the 25 industry. Thank you very much. 0095 1 MS. ROGERS: Thank you, sir. And thank 2 you for coming. We appreciate that. 3 No further comment? 4 MR. SANDERSON: And I would like to just 5 add, we had expected Commissioner Williamson to be 6 here as noon, and she's been delayed at some of her 7 meetings that she had this morning. I know she is on 8 her way back. And if you would like, after you 9 adjourn, if you want to stay about 10 or 15 minutes, 10 she should be here, and you can meet Commissioner 11 Williamson. 12 MS. ROGERS: Oh, very nice. 13 AGENDA ITEM NO. 15 14 MS. ROGERS: It's 12 o'clock. The 15 meeting is adjourned. Thank you, everyone in the 16 public, for attending. We appreciate it. 17 (Meeting adjourned: 12:00 p.m.) 18 19 20 21 22 23 24 25 0096 1 C E R T I F I C A T E 2 STATE OF TEXAS ) 3 COUNTY OF TRAVIS ) 4 I, Aloma J. Kennedy, a Certified 5 Shorthand Reporter in and for the State of Texas, do 6 hereby certify that the above-mentioned matter 7 occurred as hereinbefore set out. 8 I FURTHER CERTIFY THAT the proceedings 9 of such were reported by me or under my supervision, 10 later reduced to typewritten form under my supervision 11 and control and that the foregoing pages are a full, 12 true and correct transcription of the original notes. 13 IN WITNESS WHEREOF, I have hereunto set 14 my hand and seal this 13th day of February 2009. 15 16 17 ________________________________ 18 Aloma J. Kennedy Certified Shorthand Reporter 19 CSR No. 494 - Expires 12/31/10 20 Firm Certification No. 276 Kennedy Reporting Service, Inc. 21 Cambridge Tower 1801 Lavaca Street, Suite 115 22 Austin, Texas 78701 512.474.2233 23 24 25