0001
 1   
 2   
 3   
 4   * * * * * * * * * * * * * * * * * * * * * * * * * * * 
 5   
 6                 BINGO ADVISORY COMMITTEE 
 7                          MEETING
 8                             
 9                     SEPTEMBER 9, 2002
10   
11   * * * * * * * * * * * * * * * * * * * * * * * * * * * 
12   
13   
14   
15   
16   
17   
18   
19             BE IT REMEMBERED that the BINGO ADVISORY 
20   COMMITTEE meeting was held on the 9TH of SEPTEMBER, 
21   2002, from 10:09 a.m. to 3:52 p.m., before Shelley N. 
22   Jones, RPR, CSR in and for the State of Texas, 
23   reported by machine shorthand, at the Offices of the 
24   Texas Lottery Commission, 611 East 6th Street, Austin, 
25   Texas, whereupon the following proceedings were had: 
0002
 1                        APPEARANCES
 2   
 3   Chairwoman:
              Ms. Virginia Brackett - Lubbock, Texas
 4   
     Committee Members:
 5            Mr. Saleem Tawil - Austin, Texas
              Ms. Suzanne Taylor - Corpus Christi, Texas
 6             Ms. Marilyn Matthews - Odessa, Texas
              Mr. Daniel Moore - Houston, Texas
 7            Mr. Larry Whittington - Dallas, Texas
              Mr. Pete Pavlovsky - Rosenberg, Texas
 8            Mr. Mario Manio - Garland
 9   Charitable Bingo Assistant Director:
              Mr. Philip Sanderson
10   
11   
12   
13   
14   
15   
16   
17   
18   
19   
20   
21   
22   
23   
24   
25   
0003
 1                           INDEX
 2   
 3   Appearances.......................................   2
 4   
 5   AGENDA ITEMS
 6   ITEM NUMBER 1....................................    4
 7   ITEM NUMBER 2....................................    6
 8   ITEM NUMBER 3....................................    6
 9   ITEM NUMBER 4....................................  157
10   
11   
12   
13   
14   
15   
16   
17   
18   
19   
20   
21   
22   
23   
24   
25   
0004
 1                     September 9, 2002
 2             Bingo Advisory Committee Meeting
 3                 CHAIR BRACKETT:  All right.  It's a 
 4   little bit after 10:00, so the Bingo Advisory 
 5   Committee will be called to order.  We do have a forum 
 6   present, and I want to welcome all of you.  It's very 
 7   nice to see this many people come.  I know it's a 
 8   hardship for a lot of you.  But I'm glad to have you 
 9   here, and we appreciate your interest.  I'd also like 
10   to welcome Chairman Clowe of the Texas Lottery 
11   Commission.  So, Chairman, would you stand up and 
12   raise you hand so all these people can know who you 
13   are.  Thank you.  
14                 Billy Atkins is not here today.  He's 
15   on an extended honeymoon trip, so Phil Sanderson is 
16   sitting in for him, and it's good to have Phil.  He 
17   will be a very good substitute, I think.  And I need 
18   to announce to you that we have received a resignation 
19   from Ricky Turman, who was representing the public on 
20   the Bingo Advisory Committee.  And this will be 
21   referred to the Lottery Commission for replacement.  
22   If anyone -- I'm sure, though, that Mr. Clowe would be  
23   glad to get any recommendations from anyone who's here 
24   in the room.  And he'll answer questions, too, if 
25   y'all want to talk to him.  So, thank you for being 
0005
 1   here.
 2                 I believe the first order of business 
 3   and the reason everyone is here is Item No. 2 on the 
 4   agenda, which is consideration of and possible  
 5   discussion in our action on the Sunset process, 
 6   including the Bingo Advisory Committee's input to the 
 7   Texas Lottery Commission regarding the Sunset staff's  
 8   report and our involvement in the Texas Lottery 
 9   Commission.  I feel like that it would be a good idea 
10   for us to put a time limit on people who are 
11   testifying simply so everyone could be heard, and then 
12   if we need to extend that time limit, we can take a 
13   vote on that at the end of the presentation.  With 
14   everyone who wants to speak, be sure you fill out the 
15   Witness Form, and that we do have it here.  And, 
16   please, identify yourself for the benefit of the court 
17   reporter.  
18                 Phil, are you the timekeeper?
19                 MR. SANDERSON:  No, ma'am.  I've got 
20   somebody bringing a stopwatch.  We'll let one of the 
21   committee members handle that duty.
22                 CHAIR BRACKETT:  Okay.  Does anyone 
23   volunteer?  Saleem, you can do it?  Saleem will be our 
24   timekeeper.  Are there any objections to having the 
25   time limit?  Okay.  Also, I had thought it might be a 
0006
 1   good idea if we just take the issues as they are in 
 2   the report.  And start with Issue No. 4 and just go  
 3   through until we cover the ones that pertain to the 
 4   bingo industry.  All right.  Industry -- I mean Issue 
 5   No. 4, while we're starting with the distribution of 
 6   bingo profits.  I feel like we don't need to read 
 7   this.  I feel like everyone has -- has read it, 
 8   everyone on the committee and everyone who's here to  
 9   speak.  Are we ready to just go ahead and start 
10   hearing people --
11                 MR. MOORE:  Sure.
12                 CHAIR BRACKETT:  -- witness to this?  
13   Okay.  Who wants to break the ice and be the first 
14   witness regarding the distribution of the bingo 
15   profits method for it?  I knew there were no shy 
16   people in this room.
17                 PUBLIC SPEAKER FENOGLIO:  Good morning, 
18   Madam Chair and Commission Committee Members.  My name  
19   is Stephen Fenoglio.  I'm an attorney in Austin, 
20   Texas.  I've given a list of the charitable 
21   organizations that I represent, including some other 
22   licensees, a total of 992 that I attached to my list, 
23   and I'll be happy to be the first guinea pig.  
24                 You-all know the dire straits that 
25   bingo is in.  Lottery Commission in their most recent 
0007
 1   bingo bulletin accurately tracks the steady downturn 
 2   in bingo.  The recommendation in Section 4, the new 25 
 3   percent distribution formula, would be a death nail to 
 4   bingo.  My clients have started running numbers and we 
 5   haven't finished yet but we estimate that less -- if 
 6   that were the law, that less than 15 percent of the 
 7   charitable organizations, 15 percent of roughly 1500, 
 8   would be in business.  And it's ironic that in the 
 9   report that indicates that there may be some charities 
10   that will be out of business.  But there must be a 
11   disconnect somewhere when 15 percent of the licensed 
12   charities would remain standing.
13                 Janice Woods is here from the River 
14   City Bingo Charity Organization at Braker and I-35 
15   here in Austin, Texas, and we don't have a 
16   grandfathered commercial lessor license involved, and 
17   that charitable organization is out of business, 
18   that's all those five charities.  Now, it's true that 
19   one of the charities would be left standing under the 
20   25 distributions formula.  But that charity would only 
21   be able to conduct three times a week.  So under the 
22   harshness of the formula, that charity -- and I 
23   believe it's Family Elder Care -- I'm sure Janice can 
24   tell us which chair that is -- would be left standing.  
25   But ask yourself would they be in business long if 
0008
 1   they were only conducting three times a week?  It 
 2   cannot justify the red expense; and, again, we don't 
 3   have a grandfather commercial lessor involved.
 4                 It's an association of the five 
 5   charities acts as a lessor under the provision.  So, 
 6   we would all support more charitable distributions for 
 7   charity.  I don't know anyone who would oppose that, 
 8   but the recommendation, however beneficial the intent, 
 9   has the wrong result.  In the words of Pogo, we have 
10   met the enemy and it's us, as far as this 
11   recommendation.  
12                 I have some other points to make, Madam 
13   Chair, and it relates to the other provisions in the 
14   report.  I understand that you're going to take a 
15   little bit of time, so I have to come back at the 
16   appropriate time and share with you those other 
17   comments.  I will say, though, that there is -- when 
18   you're on Issue 4 -- there is one issue in 4 that is 
19   good, and that's 4.2.  It's something that 
20   Mr. Sanderson and I have periodically talked about.  
21   And I know y'all have talked about it.  And, if we 
22   could turn to the last page, I think it's the second 
23   to the last page of Section 4.  The commission should 
24   clarify the definition of charitable purpose and 
25   authorized expense.  In contested case hearings, this 
0009
 1   issue has come up.  And there was a reference in the 
 2   report to a letter by the VFW asking for a 
 3   clarification.  As you may know, I represent the VFW 
 4   and all of its VFW posts.  And the American Legion 
 5   shares the same concern about needing to know, not in 
 6   an audit, or not in an licensing provision, but far --  
 7   where is the line so that they can be on the right 
 8   side of the line.  And it's anecdotal.
 9                 If you and I  call the staff of the 
10   bingo, charitable bingo division where they want to do 
11   this, is this okay and, as we all know, the commission 
12   can't give binding legal advice and we've discussed 
13   this before, those issues, but you can at least get a 
14   sense.  And I would suggest to you that it would be 
15   far better to have it in it writing where the rule -- 
16   where the line is so that all the charities who want 
17   to -- and I would submit that all, if not all, would 
18   want to be on the right side of the line, that it 
19   could clarify so.  We're not opposed to everything and 
20   we have some other policy recommendations to make.  
21                 I'll be happy to answer any questions, 
22   if there are any, or otherwise, I'll sit down -- or go 
23   back and sit down.  Thank you.
24                 CHAIR BRACKETT:  All right.  Thank 
25   you.  Another witness on this same -- oh, hi, Janice.
0010
 1                 PUBLIC SPEAKER WOODS:  Since you used 
 2   my name, I'll just go ahead and do it to.  All right.  
 3   Hello everybody and good morning to the Bingo Advisory 
 4   Committee, it's always nice to -- 
 5                 CHAIR BRACKETT:  Wait, identify 
 6   yourself.
 7                 PUBLIC SPEAKER WOODS:  My name is 
 8   Janice Woods, and I'm representing the River City 
 9   Bingo Association.  Steve Fenoglio already used my 
10   name in vain.  So, with that mind, what -- I don't 
11   want to keep harp -- harping on this because you're 
12   going to hear it the rest of the day about the fact 
13   that we would all be out of the business maybe with 
14   the exception of one of our charities.  Based on 2001 
15   figures for our Bingo Club, which is probably one of 
16   the most successful halls until the downturn of Bingo, 
17   based on last year's figures, we would be required to  
18   distribute 250,000 plus dollars.  That's based on the 
19   adjusted 25 percent.  Last year, and again, we were  
20   highly successful, we were able to distribute over 
21   180,000, and that's good.  You know, don't get me 
22   wrong, but I don't know where at this point, where we 
23   could squeeze out, wring it out, $250,000.
24                 One of our charities would probably -- 
25   the charity, in and of itself, would have no income.  
0011
 1   Well, they would have income; but, I mean, they would 
 2   lose a lot of people.  They would lose a lot of people 
 3   and services for Austin.  So, we contend that if laws 
 4   like ours are going to go out of business, there's not 
 5   going to be very many bingo halls left in Texas.  So, 
 6   again the recommendations  will be forthcoming.
 7                 CHAIR BRACKETT:  Thank you.  Do you 
 8   have any other comments under this Section 4?
 9                 PUBLIC SPEAKER WOODS:  No.  Not at this 
10   time.  Other than, you know, the -- that the formula 
11   is not going to work.  It's just not going to work.  
12   There are 35 minimum, now, is kind a skewed thing, 
13   too.  So, I don't have -- I don't know the answer 
14   other than this isn't it so...  
15                 CHAIR BRACKETT:  Thank you.  Another 
16   one.
17                 PUBLIC SPEAKER KELLER:  Yes.  My name 
18   is Chris Keller, and I represent the 11 charities in 
19   San Antonio.  All 11 charities would be out of 
20   business if this is adopted.  Six of the charities  
21   are under a commercial lessor, five of them have an  
22   association.  Today they are profitable, but none of 
23   them would survive with the new rule and that's it.
24                 CHAIR BRACKETT:  Thank you.
25                 PUBLIC SPEAKER HEINLEIN:  My name is 
0012
 1   David Heinlein with Jetta Management.  I represent 
 2   about 40 charities, some at the grandfather lessor 
 3   halls and some at charity halls.  And the preliminary 
 4   numbers as we've -- we've been running numbers ever 
 5   since we've seen this report, we're still continuing 
 6   to do so and we hope to finish this before the 
 7   September 24th public hearing.  But the preliminary, 
 8   we believe that there would be a minimum of 70 percent 
 9   of the charities in the state that would be out of  
10   business with this new rule.  Steve says, he gave us a 
11   number of 15 percent.  I'm accounting for the fact 
12   that there would be some charities that would modify 
13   their operations to some extent, and I -- and I think 
14   that there might be 30 percent of them that could 
15   weather the storm and make a stand.
16                 The numbers that I've looked at, at 
17   least 80 percent would currently -- under year 2001, 
18   would not be able to make the distributions required.  
19   Now, does this mean that the charities don't want to 
20   make up this distribution early on?  These charities 
21   would love to do this.  We have been searching for 
22   ways so that we could increase our distributions 
23   because our charities are not able to give the same 
24   money they were giving a few years ago, even under the 
25   current formula.  Even though, we know this as we look 
0013
 1   at the state numbers.  There are a significant number 
 2   of charities who've -- who distribute in excess of the 
 3   current formula.  There are a lot of charities that 
 4   are not able to do that, though, from the current 
 5   profit structure of the year 2001; and it's even worse 
 6   in the year 2002.
 7                 What they are doing is distributing the 
 8   profits; and I believe even in Janice's hall that 
 9   might be true, that the current numbers that she is 
10   distributing for 2001 are not from the current cash 
11   flow.  But they are reaching back to previous profits 
12   in other years, and I find that to be true in a number 
13   of the halls that I have looked at when they are able 
14   to distribute more than is required to current 
15   formula.  It's not from the current operation, but 
16   rather they are reaching back to previous profits in 
17   previous years.  I think that mandating profit does 
18   not make that profit available.  You can mandate all 
19   you want, but it's just not going to make it 
20   available.
21                 Now, we've asked for -- Chairman Clowe 
22   has certainly been significant in helping us pass some 
23   new rules that will allow us new products, and we're 
24   looking forward to that.  We've been -- a lot of the 
25   halls have been hanging on, waiting until they can get 
0014
 1   those products to survive even in the current market.  
 2   But mandating products without also including some 
 3   provision for making it possible to earn more profits, 
 4   you know, we -- it doesn't make any sense.   But as we 
 5   have looked at these charities, who do distribute all 
 6   they can, because they have needs that they have to 
 7   meet and are reaching back to these other profits, I 
 8   believe that proves that the charities don't need to 
 9   be mandated on any kind of rule at all to be truthful.  
10   They're going to distribute as much as is available.  
11   We have a couple of fire departments that -- you know, 
12   they just -- they do $15,000 a month.  They just pay 
13   their gas and they are having a hard time getting that 
14   amount of money out of their internal operations and 
15   it's hurting them.  So, they are looking for some 
16   other way to -- to get these funds.  And if this rule 
17   passes, they simply will not be in business, and they 
18   will not be able to service their communities with the 
19   fire and rescue that they currently do.
20                 We must -- we just see that this rule   
21   cannot be made into law, that they have to distribute 
22   25 percent off the top dollar.  I don't know any kind 
23   of business that produces a business profile that 
24   takes 25 percent of the profit out of the proceeds 
25   right off the top.  Many will ask how we are going to 
0015
 1   do that.  If there's any kind of a corporation that 
 2   has that kind of profit, I'd like to buy stock in that 
 3   company because I'm going to make some money for at 
 4   least a month or two.  
 5                 Now, we can only conclude that what the 
 6   picture in Bingo would be, if this were passed, is 
 7   that we would go back to before bingo was authorized 
 8   in Texas.  It would be done in some small facilities, 
 9   it would be done in church facilities that they own, 
10   and maybe a VFW hall that they own. We would reduce 
11   charitable bingo to just a different kind of a 
12   situation.  Now, you know if that's where we want to 
13   go, well, then we can pass this rule and that's where 
14   we'll be at the end of it.  Thank you.
15                 CHAIR BRACKETT:  Any other witnesses on 
16   this?
17                 PUBLIC SPEAKER CHAVEZ:  I'm Teresa 
18   Chavez with the Ethel Daniels Foundation out of 
19   Dallas, Texas.  We've been a recipient of the 
20   charities for about eight years from the town east 
21   bingo.  We are a 10-bed facility that helps women in 
22   recovery.  Our goal is to provide temporary housing 
23   that is physically, mentally, spiritually, emotionally 
24   safe for women in recovery.  These women must have 72 
25   hours of sobriety before we take them in, and they 
0016
 1   don't have anywhere else to go.  In Dallas, Fort Worth 
 2   area there are facilities that help women in recovery; 
 3   but they have to have 30 days of sobriety.  So, we 
 4   fill that gap for these women.  We honestly, would 
 5   probably have more beds if we could afford it.
 6                 But I know for a fact if we -- if this 
 7   passes, we're going to be shut down immediately.  We 
 8   operate about $6,000  a month.  We get several 
 9   thousand, about $3,000 a month from this bingo; and it 
10   helps us.  We do not have any funding at all, so we 
11   benefit mostly from private donations and so forth.  
12   We do not have any grants that help assist us at this 
13   time.  So when they called us to let us know about 
14   this, we were very concerned.  Myself and my house 
15   director are here today in hopes that we can share 
16   with y'all what this would do for us and how this 
17   would effect us, and we hope that y'all will take that 
18   into consideration.  And we refuse this staff report.  
19   Thank you very much for your time.  Ethel Daniels 
20   Foundation.
21                 PUBLIC SPEAKER YOUNG:  Good morning.  
22   I'm Robert Young with AmVets in Dallas.  It's AmVets, 
23   all capital letters, it's American Veterans.  It's 
24   been a long time since I took a business course, and I 
25   don't profess to be the best student of that course.  
0017
 1   But, you know, taking profits out before you make 
 2   expenses, I don't remember that.  I'm just a simple 
 3   'ol boy, you know, trying to take care of the 
 4   community; and we do a lot of work in our community.  
 5   As one of other gentleman says, there's volunteer fire 
 6   departments.  We all do a lot of work with the 
 7   children's hospital and I'm not a bookkeeper either 
 8   but I guess -- like you said, I guess I probably 
 9   should sit back, you know, it's better not to say 
10   anything or speak up or show any difference, but I 
11   guess I'll get up here and tell you how I feel.  But 
12   I'm going to tell you that it's my understanding that 
13   we're not going to be able to function under these new 
14   rules, and I'd like to speak, you know, in general.
15                 When I first started coming down here 
16   we were looking to improve ways of getting more money 
17   to the charities.   We're not looking for less, we're 
18   looking for more.  We don't need more bureaucracy; and 
19   I urge each and every one of you to direct your 
20   chairman tomorrow, to tell our voice to him.  I plan 
21   on being here and I imagine most of these people will 
22   be also, but I urge the chairman to communicate our 
23   distress and that we need help.  We need -- we as 
24   charitable bingo produce six times what it actually 
25   costs to rent those.  And some of that money, we would 
0018
 1   like see spent, as we spoke of, on some advertising 
 2   and some help.
 3                 I appreciate your time and I urge you 
 4   that we're in distress and that's the way this should 
 5   be proceeded and I know y'all are a lot more capable 
 6   of probably expressing yourself than I am and please 
 7   use all your influence and give us some help.  Thank 
 8   you.
 9                 CHAIR BRACKETT:  Thank you.
10                 MR. WHITTINGTON:  Thank you.
11                 CHAIR BRACKETT:  Don't be bashful.  If 
12   you're wanting to speak just --
13                 PUBLIC SPEAKER WEATHERFORD:  My name is 
14   it Bruce Weatherford, and I'm here representing one of 
15   the charitable organizations that would be effected by 
16   this ruling if it is proposed.  And I appreciate the 
17   opportunity to appear before this advisory committee.  
18   We are a small organization and any change in the 
19   accounting or in the amount of money we receive from 
20   the charitable bingo that we are involved with would 
21   be very detrimental to our clientele that we serve.  
22   And if we make any changes or if there's any changes 
23   that even reduces the opportunity to provide one more 
24   rider to be able to ride those horses and get the 
25   value that is achieved from that, that would hurt us.  
0019
 1   But I'm afraid that it would impact us more than 
 2   that.  We will have to turn away riders because, at 
 3   the present time, we do not turn people away because 
 4   of lack of funding.  We --  we will offer them a 
 5   scholarship to ensure that they get to participate in 
 6   the program, and we don't want to see anything happen 
 7   to the funding that we receive because it is very 
 8   important to us.  We would very much appreciate it if 
 9   you express our desires to the commission pertaining 
10   to this report.  I say, no.  Thank you.
11                 MR. WHITTINGTON:  Excellent.
12                 PUBLIC SPEAKER BISHOP:  Hello, my name 
13   is Don Bishop of Dallas, Texas.  I'm a commercial 
14   lessor.  And today, if you think it's all right, I 
15   think, I would like to address the BAC in the role of 
16   commercial lessor.  I think someone needs to -- to say 
17   and point out that while the proceeds of bingo are  
18   attended and do go for charitable purposes, bingo is a 
19   business.  It's an industry.  It has to be run as 
20   such, or it doesn't survive to start with.  There's a 
21   comparison in this report to horse racing I saw 
22   somewhere.  I can't find it.  Horse racing is an 
23   industry.  Bingo processes over twice the money than 
24   horse racing does, so we have to think of it in terms 
25   of being a business.  Quarterly reports for July and 
0020
 1   August, I believe, has made this Bingo Advisory 
 2   Committee famous.  It's got all your names and 
 3   addresses on it.  There is a trend of declining 
 4   attendance and profits in bingo.  This has been going 
 5   on for quite a while.  I know of no business anywhere 
 6   in the world that can take 25 percent of its first 
 7   money and survive.  That's what's being suggested 
 8   here.  It is just not physically possible.  So, I hate 
 9   to -- to overuse the word no-brainer, but a decision 
10   on this matter to me seems like a no-brainer.  We just 
11   cannot do it.  It's -- it's not -- it just will not 
12   work.  Thanks.
13                 PUBLIC SPEAKER BROWN:  My name is 
14   Vernon Brown.  I represent the Round Rock Needy 
15   Children's Fund.  We provide services for families 
16   with children that don't have food on their table, 
17   that don't have clothes to wear.  They don't have 
18   money for their utility bills, or a place to live.  If 
19   we lose --
20                 CHAIR BRACKETT:  Could you speak a 
21   little bit more into your microphone?
22                 PUBLIC SPEAKER BROWN:  Yes.  I'm sorry 
23   Is that better?
24                 THE COURT REPORTER:  Yes, much better.
25                 PUBLIC SPEAKER BROWN:  Okay.  We 
0021
 1   provide services for families with children that do 
 2   not have food for their table, that do not have school 
 3   supplies, that don't have clothes to wear -- I'm 
 4   sorry, I'm a little excited.  This operation, the 
 5   Round Rock Needy Children's Fund, is a 100 percent 
 6   volunteer operation.  We have no paid employees at 
 7   all.  If our income, like in the year 2002, has 
 8   dropped over 50 percent because of the lack of private 
 9   donations.  If our donations that are -- our 
10   contributions from our bingo benefactor fall, we will 
11   too.  Thank you.
12                 CHAIR BRACKETT:  Thank you.
13                 PUBLIC SPEAKER LOONEY:  My name is 
14   Phillis Looney, I represent the Mencefield Volunteer 
15   Fire Department, Ladies Auxilliary.  I must say we've 
16   had a license from day one bingo was allowed in the 
17   state of Texas.  We've made lots of money through the 
18   years because of our volunteers.  At this time, we're 
19   doing good to do the minimum things for them, to help 
20   provide their training, when families are burned-out.  
21   It's sad to have to tell the people you don't have the 
22   money to help them with things they need.  I am very 
23   opposed to this.  Our volunteers work hard for money.  
24   We use to do fish fries.  So along came bingo and we 
25   got in on that but it has, without a doubt become 
0022
 1   harder and harder year by year, to keep that license, 
 2   to even want to keep it and I'm very much opposed to 
 3   this because we love our volunteers.  We love our 
 4   city.  And it's sad to have to tell our volunteers, 
 5   "We don't have the money this month."  We can't 
 6   provide whatever it is they're asking us to help with.  
 7   Thank you very much.
 8                 CHAIR BRACKETT:  Thank you.
 9                 PUBLIC SPEAKER WEBB:  Good morning.  My 
10   name is Don Webb, and I represent AmVets, Department 
11   of Texas, and the improved order of Redman, which is 
12   in Waco.  It's a fraternity organization.  One thing I 
13   wanted to bring up was this past week we've been going 
14   over our funds and stuff.  We provide services for the 
15   FHA in Ellis County and Hunt County, and if this 25 
16   percent -- we just -- we used to have the money to 
17   just give out.  We just had it all pulled together and 
18   kept them going.  We try to help the kids and this is 
19   one good way, if we can get them in FHA, if we give 
20   them a project to work on, that's the whole year, 
21   that's -- well, that just covers all.  It used to be 
22   FFA, that's how old I am but now it's FHA.  So, I just 
23   wanted to -- the 25 percent is not feasible right now 
24   to us because we're losing more money.  We've --  
25   we've got less money to distribute, and not only to 
0023
 1   the schools, to everything, the veterans, the 
 2   homeless.  So, we --  we would be --  we're very much 
 3   opposed to this.  And I thank you very much.
 4                 CHAIR BRACKETT:  Thank you.  Okay.  
 5   Does that conclude --
 6                 PUBLIC SPEAKER HEINLEIN:  Could I say 
 7   something else?  I forgot one thing.  I'll try to be 
 8   brief with your time frame.   David Heinlein with 
 9   Jetta Management.  At the end of each of these 
10   sessions there's a footnote about the physical 
11   implications, and it stated that there would be none.  
12   I would have to take issue with that.  I talked with 
13   one of my charities this morning that have already 
14   took at least approximately 40 kids off the streets 
15   and kept them from going into the penal institution.  
16   And I learned this morning that it's closer to a 
17   hundred now that he is able to service and do this 
18   for.  He's not been able to do this until he got the 
19   fees from bingo, and he's been able to get funds from 
20   bingo.  And he's produced a gym, and he takes these 
21   kids off the streets and puts them into an activity 
22   that makes them responsible and more disciplined.  
23   Now, if they were incarcerated by the State, he 
24   Said -- and I don't know this number at all, but he 
25   said he thought that it would cost close to $100,000 a 
0024
 1   year to incarcerate these kids, and he believed that 
 2   at least 25 percent of those kids would be 
 3   incarcerated if he didn't take them off the streets.  
 4   So there is definitely going to be a financial impact 
 5   if these charities are not able to provide the 
 6   services they now provide.  That one case, that would 
 7   be an additional two and a half million dollars in 
 8   addition to funds if they had to be able to provide 
 9   the service itself.  I think that's another number 
10   that needs to be looked at as to what would be impact 
11   to the State if these charities were or had to be 
12   replaced with state funds.
13                 The volunteer fire department would be 
14   another example.  Many of the fire departments today 
15   do get tax revenue, and it makes it possible for some 
16   of these volunteer fire departments to get people.  
17   But those that still are in Bingo would have to be 
18   replaced with other services.  Now, it's going to be 
19   tax dollars.  So I believe there is a physical impact 
20   on the State.  Thank you.
21                 CHAIR BRACKETT:  Anyone else who forgot 
22   something they wanted to say about this before we go 
23   on to the next section?
24                 PUBLIC SPEAKER IVES:  Good morning.  My 
25   name is Sharon Ives.  Some of you might remember me 
0025
 1   from the Bingo Advisory Committee.  I have a company, 
 2   Fort Worth Bookkeeping; and I could not imagine taking 
 3   25 percent off the top of my company's income.  First 
 4   of all, my payroll and health insurance, as you are  
 5   aware, rises every year.  And that's 68 to 70 percent, 
 6   and if I take 25 percent of that, well, that's what?  
 7   Five to seven percent?  Once that point gets there I 
 8   would be operating into my reserve funds, that's not 
 9   going to last a month, month and a half maybe two 
10   months tops and then I'll be standing in line at the 
11   unemployment office, which, since I'm a business 
12   owner, I cannot draw unemployment.
13                 The bingo operation is in the same 
14   outfit.  I don't see how they can take 25 percent and 
15   still be able to operate in months coming up.  I just 
16   don't see how that's going to work.  They will use 
17   their reserves, and they will be out of business.  And 
18   by the way, I handle over 50 organizations of bingo 
19   bookkeeping in the Dallas, Forth Worth area.  Any 
20   questions?
21                 CHAIR WHITTINGTON:  No.  
22                 CHAIR BRACKETT:  Is there anyone else 
23   on this item who wants to -- 
24                 MR. MOORE:  Madam Chair, I move that 
25   the Bingo Advisory Committee whole heartedly reject 
0026
 1   4.1 in conjunction, 4.2 I think we should support.  I 
 2   think that we do need to look at the distribution 
 3   formula but --
 4                 CHAIR BRACKETT:  Daniel, I'd really 
 5   like to just have one -- one item that we look at. 
 6                 MR. MOORE:  Okay.  But they really go 
 7   hand in hand, I think.  But that's fine, we can talk 
 8   about 4.2 when you want.  I still move that the Bingo 
 9   Advisory Committee reject 4.1; and I think, Madam 
10   Chair, that we should present this to the commission 
11   tomorrow if we all take this position.  And we should 
12   ask that the Lottery Commission support us in these 
13   recommendations.
14                 MS. MATTHEWS:  I second that motion.
15                 CHAIR BRACKETT:  That's probably the 
16   longest motion I've ever heard.
17                 MR. MOORE:  We just leave it alone.  I 
18   just move that we reject 4.1 --
19                 CHAIR BRACKETT:  Okay.
20                 MR. MOORE:  -- as a group.  
21                 CHAIR BRACKETT.  All right.  It's been  
22   moved and seconded that the Bingo Advisory Committee 
23   report to the Texas Lottery Commission that we reject 
24   rule -- proposed Rule 4.1.
25                 MR. WHITTINGTON:  I just want everybody 
0027
 1   to know in the house today that we are not the BAC 
 2   from three or four years ago.  We are trying to make a  
 3   difference in bingo for everybody, as far as 4.1.  
 4   It's a different story -- when you're making money and 
 5   25 percent is coming off, it's a different story when 
 6   you're making money.  But in today's time, bingo, if 
 7   you pay out $5,000 -- we're lucky to make $5,000 for 
 8   payoffs.  Okay.  And if you give it 25 percent, who 
 9   makes the payoffs?  The commercial lessor?  Is that 
10   against the law?
11                 Okay.  So we got to think and look.  I 
12   don't know where this -- where this has come from, 
13   they must have been kind of like back in time, five 
14   years ago, maybe '97.  They went around the bingo 
15   halls in '97 and found out what was really happening.  
16   But this is 2002.  It's a different story.  Okay.  
17   Yes, I do agree some days the charities are not making 
18   money and lessors should say -- okay, which they 
19   probably do -- about 80 percent.  Okay.  We can't 
20   charge rent today.  Okay.  We can make money, or we 
21   can't.  There's got to be a minimum and a maximum that 
22   we got to work with when it comes to rent.  And I 
23   think most of the charities and the commercial lessors 
24   are working with that.  Some are not, and I think 
25   that's where this all comes from.  Maybe two or three, 
0028
 1   in the states in the last five -- five, six years, who 
 2   are charging these charities rent everyday and don't 
 3   care if the bills are being paid or not.  But that's 
 4   what we need to work on, that deal, that minimum and 
 5   maximum when it comes to making money or not making 
 6   money.
 7                 But this is totally ridiculous to me.  
 8   I've read this and I've looked at it and ain't no way 
 9   that 25 percent can be taken off of anything.  And -- 
10   if we're going to survive -- I'm sure it's good for 
11   charity sake, oh, yeah, we're going to get 25 percent, 
12   but what happens to the people that have got to pay 
13   the bills that allows you to get this 25 percent?  
14   Okay.  They're going to go out of business, so you're 
15   not going to be getting anything.  It could be good if 
16   we had a Ross Perot to donate the building to rent and 
17   everything, and you can take this 25 percent and give 
18   the commercial lessors the other 75 percent.  They 
19   would be very happy, but we don't have a donator to 
20   donate all this money.  Okay.
21                 So we need to try our best to work with 
22   what we got, and we're going to try our best to do the 
23   best job that has ever been done from BAC towards 
24   their commissioners.  Mr. Commissioner, how are you 
25   doing back there?  So that's what we're trying to do.
0029
 1                 CHAIR BRACKETT:  All right.  Are you 
 2   ready for the question?  All those in favor of 
 3   rejecting the proposed 4.1 from the Sunset Commission, 
 4   please, say aye.  
 5                 COMMITTEE MEMBERS:  Aye.
 6                 CHAIR BRACKETT:  Is there any 
 7   opposition?  Okay.  Then that's what we will present 
 8   to the Texas Lottery Commission, that we oppose this 
 9   proposed change.
10                 Before we go on, I would like to ask 
11   the Chairman a question.  On the agenda tomorrow at 
12   the Lottery Commission, we will -- you will have time 
13   to hear the witnesses?  He's walking up here, because 
14   he's thinking.
15                 COMMISSIONER CLOWE:  I can't answer you 
16   back there because it won't be on the record.  My name 
17   is C. Tom Clowe, Jr., I'm the Commissioner for the 
18   Texas Lottery Commission, serving as Chairman.  As 
19   much as possible we will be happy to hear witnesses, 
20   we will be under some time constraint, as obviously 
21   your group is today.  The testimony this morning so 
22   far has been concise and moving right along.  And so 
23   in keeping with hearing from the public, I'll attempt 
24   to allow people who want to testify to do so and hope 
25   it goes as well and the people are brief and concise 
0030
 1   tomorrow as they are today.  It is my intention to 
 2   take the agenda out of order tomorrow and cover the 
 3   bingo issues first.  
 4                 CHAIR BRACKETT:  Thank you.  We 
 5   appreciate that.  
 6                 COMMISSIONER CLOWE:  Thank you. 
 7                 CHAIR BRACKETT:  And I might point out 
 8   that that meeting starts at 8:30 a.m. here in this 
 9   room.  
10                 All right.  Concerning 4.2, do we have 
11   anybody who would like to speak to or against this?  
12   How about you, Danny?  You had some thoughts on it.  
13                 MR. MOORE:  Well, I think there's 
14   always been a little problem with the formula that's 
15   been in place for quite a while.  I don't have an  
16   answer on what direction to go on.  It sounds like 
17   they want to address this issue, but I don't think the 
18   formula that everybody has applied, the 25 percent, 
19   works in any case.  I'm not sure what direction we 
20   want to go on and I don't know if anybody has any 
21   input on this.
22                 MS. TAYLOR:  I think what Virginia is 
23   talking about.  4.2 asks for a definition of what a 
24   charitable purpose is.
25                 MR. MOORE:  A what?  I'm sorry.
0031
 1                 CHAIR BRACKETT:  What a charitable 
 2   purpose is.  I personally think that we've heard a lot 
 3   of testimony previously about organizations that have 
 4   gotten in sideways with the Lottery Commission on some 
 5   of the distributions that have been made through the 
 6   general account what is and is not allowed.  So 
 7   clarifying this so that it solves these dilemmas 
 8   before they occur.  I think this is a great idea so 
 9   I'm personally in support of 4.2.
10                 MR. WHITTINGTON:  Yes.
11                 CHAIR BRACKETT:  Is there anyone who 
12   would like to testify on this to make clarification of 
13   the definition of charitable purposes?
14                 PUBLIC SPEAKER HEINLEIN:  I'm David 
15   Heinlein with Jetta Management.  Yes, we have had 
16   difficulties in the past identifying what is 
17   considered to be charitable purposes.  In some of the 
18   audits of the charities that had their general funds, 
19   of course, examined to be sure that the funds that 
20   they say they receive from charitable bingo are being 
21   properly used.  I support that.  I think we must be 
22   careful as to what these funds are being used for.  
23   The problem is we're not real sure what to say to our 
24   charities that are being able to use these funds.  
25   I've met with the -- recently with the VFW group and I 
0032
 1   was a unable to really define it.  I hadn't heard that 
 2   if they were to send their commander to a state 
 3   convention, which would be required to continue their 
 4   operation -- it's a mandated provision -- they could 
 5   not pay these expenses do that.  And he didn't 
 6   understand why they couldn't pay him because he was 
 7   representing the whole organization which had 900 
 8   members.  It's enough that I have to pay for my own 
 9   expense to have to go to this convention.  I said I 
10   don't really know because I don't have the set of 
11   rules and guidelines to give to you, but I do know 
12   that it's been said at some of the operator training 
13   sessions that's -- that's not an authorized expense.  
14   So I do believe that we need clarification of what 
15   would be a charitable purpose authorized expense.
16                 PUBLIC SPEAKER BRESNEN:  I'm Steve 
17   Bresnen and I'm here on behalf of Bingo Internet Group 
18   and I didn't plan to testify today, but I realized we 
19   were going to go issue by issue and since I may bear 
20   some responsibility for this, even being forced before 
21   us, I thought it made sense for me to give you a 
22   little background.
23                 About, going on two years ago, I was 
24   contacted by one of members of our group who was in an 
25   audit and there was some issues raised about what 
0033
 1   constituted an expense for charitable purposes.  So I 
 2   got to looking at the statute, and it's 
 3   extraordinarily vague.  I personally believe that this 
 4   is a good recommendation, but it probably needs to be 
 5   modified a little bit to get some additional 
 6   clarification from the legislature.  But you have 
 7   organizations that are reporting to the IRS under 
 8   their tax exemption and when they apply for that tax 
 9   exemption, they say we're going to do the following 
10   kind of things and they know what those rules are in 
11   order to retain that tax exemption.
12                 You've got at a state statute that has 
13   a bunch of verbiage in it that I, as lawyer -- I think 
14   I could cram a lot under there, but it never says "as 
15   long as you're acting consistent with your tax 
16   exemption, then you're acting for charitable 
17   purposes."  Although the Texas constitution does say 
18   that the money must be spent for charitable purposes, 
19   it doesn't define that the legislature has done that.  
20   What you've got here is a trap.  People go out and do 
21   things that seem perfectly reasonable and are 
22   consistent with their tax exemptions; and then when 
23   the audit comes around, they're are second-guessed 
24   about that.  That pulls them into the administrative 
25   process and their choice is to hire me or somebody 
0034
 1   else to come down here and work on it in an 
 2   administrative, either formal or informal, process or 
 3   to pay the money back out of their general fund back 
 4   to their bingo account which goes in the exact 
 5   opposite direction from all the testimony that you 
 6   just heard.
 7                 Naturally, it amounts to a reduction in 
 8   their distribution, if you think about it.  There are 
 9   some practical ways to address this that are within 
10   the power of the commission.  These things, like 
11   travel expenses for veterans groups to conventions.  I 
12   asked -- I wrote a letter and asked if it would be 
13   acceptable to pay travel expenses for a group that was 
14   going annually to put a wreath at the tomb of the 
15   Unknown Soldier at Arlington Cemetery, and I was 
16   informed that the commission was not authorized to 
17   give advisory opinions.  So these folks not knowing --  
18   not knowing and not being able to get an answer to 
19   their question that way, their choice was to go 
20   forward.  I think the statute accommodates that, but 
21   they can either take my advise and go forward and end 
22   up in the ditch or they can get some notice ahead of 
23   time.  This would go under the heading of Regulatory 
24   Relief in my book, make it easier, cheaper, pay the 
25   utilizes.  I'm talking general fund expenses, now, 
0035
 1   paying your utilities, paying staff, if you have 
 2   staff, and any kinds of things any organization will 
 3   incur to conduct a charitable expense.  Those kinds of 
 4   things ought to be made absolutely clear, and if 
 5   there's a difference of opinion about things like 
 6   travel expenses, then let's get it done in a rule.  
 7   And if the rule is no travel expenses, then at least 
 8   these people will know.  But that's -- that's the 
 9   background and we will support this recommendation.  I 
10   appreciate your time and attention.
11                 CHAIR BRACKETT:  Is there any other 
12   comment.  Okay.  Are we ready for the question on 
13   this?  I think I need a motion.
14                 MS. TAYLOR:  Okay.  I'll make that 
15   motion.  I move the BAC accept Issue 4.2 regarding the 
16   clarification of the definition of travel purpose and 
17   authorized expenditures. 
18                 MR. PAVLOVSKY:  Second.
19                 CHAIR BRACKETT:  All right.  It's been 
20   moved and seconded that we accept Provision 4.2.  All 
21   those in favor, please say aye.
22                 COMMITTEE MEMBERS:  Aye.
23                 CHAIR BRACKETT:  And there's no 
24   opposition?  Thank you.
25                 That's going to put us over to 5.1 
0036
 1   which deals with the lessor license repealing the 
 2   section of the Bingo Alien Act that allows the lessor 
 3   license to be grandfathered.  And we'll hear comment 
 4   on that.
 5                 PUBLIC SPEAKER SMITH:  My name is 
 6   William T. Smith, III.  There are several things just 
 7   off the top of my head.  These licenses are, I think, 
 8   effective.  The rent that is charged is negligent in 
 9   comparison to the inflation.  The rent has never been 
10   increased since the inception of these licenses.  
11   However, the expenses, and the electricity, fixing the 
12   plumbing, everything, continues to go up.  And it 
13   hasn't -- the rent has not increased.  Thank you.
14                 CHAIR BRACKETT:  Are there any other 
15   comments on this?
16                 PUBLIC SPEAKER FENOGLIO:  Madam 
17   Chairman, my name is Stephen Fenoglio again.  It 
18   sounds nice to talk about eliminating any organization 
19   that's full out to make a profit.  But, in effect, 
20   that's what bingo is about.  Charities making a profit 
21   in the form of a charitable distribution.  The 
22   recommendation on the elimination of the grandfather 
23   commercial lessor license may be noble as a theory, 
24   but in reality it is as much a failure as the Issue 4  
25   that you've just addressed.  Specifically, the 25 
0037
 1   percent rule.  Let me give you an example.  One of my 
 2   clients recently started a commercial hall in South 
 3   Texas.  They incurred about 400 to 480 thousand 
 4   dollars -- that's what I said $480,000 -- to start a 
 5   new commercial hall.  I don't know of many charitable 
 6   organizations, and I represent some of the largest 
 7   charitable organizations that conduct Bingo in this 
 8   state, that would be willing to risk that kind of 
 9   capital as a start-up.
10                 I had the opportunity and pleasure of 
11   helping start the River City Bingo Hall when we 
12   started at I-35 and Braker Lane.  Janice Woods, as you 
13   know, is our -- one of our hall managers, or whatever, 
14   manages the hall.  And Sherry Giesen is one of the 
15   five charities here as well.  We started that hall in 
16   a very unique circumstance, and we don't have a 
17   grandfather commercial lessor involved.
18                 The unique circumstances were -- were 
19   the real -- real estate market in Texas was in the 
20   toilet in the late '80s.  The strip center where we 
21   located, after having been taken advantage of a 
22   grandfather commercial lessor who ended up losing 
23   their commercial grandfather license -- the strip 
24   center had been vacant for at least a year and a 
25   half.  The landlord, as you might imagine, was 
0038
 1   desperate to get any tenant in, much less a tenant 
 2   that could pay good money, which we did from the very 
 3   beginning.  Three of the five charities that started 
 4   that were fine, had excellent financial credentials.  
 5   And when we presented our case to the landlord, the 
 6   landlord, again the market being in the tubes or in 
 7   the toilet -- down the tubes, did not require a 
 8   personal guarantee.
 9                 Many strip centers, when a charitable 
10   organization is involved, would require -- after 
11   looking at financial statistics from the charity would 
12   require someone to step forward and provide some sort 
13   of guarantee.  And I don't know too many people who 
14   want to, as a representative of a charity, make that 
15   type of personal commitment, that if the hall -- 
16   they'll make good on the rent.  And again, one charity 
17   just started a hall this year $480,000 in commitment.  
18   Obviously, that grandfather commercial lessor intends 
19   to make a profit.  They're not in it, not sinking 
20   $480,000 into a venture not to make a profit.  It 
21   takes time.  It takes talent.  It takes money to start 
22   halls and to keep halls going.  And in -- and in one 
23   sense it's a noble thought, that, well, let's just 
24   eliminate the grandfather commercial lessors.  But if 
25   you do that, charities go out of business.
0039
 1                 The Littlefield Corporation is one of 
 2   my clients there.  They are a publicly traded -- the 
 3   only publicly traded commercial lessor.  They have a 
 4   hall that's the biggest hall in the state, El Bingo 
 5   Grande, in South Texas.  And I say biggest.  It's the 
 6   biggest in terms of gross receipts, it's the biggest 
 7   in terms of prices.  It's the biggest in terms of 
 8   charitable distributions.  That hall is left standing, 
 9   but only if the commercial lessor is involved -- the 
10   grandfather commercial lessor.  I would submit to you 
11   that there's no way that those charities can remain in 
12   business if they have to take over all of the 
13   financial commitments for those halls.  Just to give 
14   you an idea, the second quarter of '02, the halls 
15   under the -- that conduct bingo, charities that 
16   conduct bingo in the Littlefield halls, had a total of 
17   $570,000 in charity distributions.  If you take away 
18   those grandfather commercial lessor licenses, 
19   $570,000, most of it goes away, if not all.  I'll be 
20   happy to answer any questions.  
21                 CHAIR BRACKETT:  Are there any 
22   questions?
23                 MS. MATTHEWS:  How many charities 
24   currently play under grandfather commercial lessor 
25   licenses?
0040
 1                 PUBLIC SPEAKER FENOGLIO:  That's a good 
 2   question.  We are researching those.  Among those, I 
 3   think -- over a thousand, I think, and I get that 
 4   there are over 200 active commercial lessor 
 5   grandfather licenses, as I recall.  And five times 200 
 6   licenses is a 1000 shares.  I don't know if you look 
 7   at that. We're running a lot of numbers trying to 
 8   understand what's in the report.
 9                 MR. SANDERSON:  I don't know exactly 
10   what that number is, a thousand maybe.  That's just a 
11   little bit too high.  There surely is a majority of 
12   them, of the 1400 or 1500 something conductors, it's a 
13   majority of them probably playing in the grandfather 
14   hall.  There's 200 -- is it 282 grandfathers?
15                 PUBLIC SPEAKER FENOGLIO:  There's 282 
16   grandfather licenses and 238, I'm sorry 282, yeah, 238 
17   grandfather commercial lessor licenses that are 
18   active.
19                 MR. SANDERSON:  238 that are active.  
20                 PUBLIC SPEAKER FENOGLIO:  Total 282.  
21   We've asked for those documents -- that documentation 
22   from both Sunset and from Lottery.  I did get the list 
23   Saturday of the current up-to-date grandfather 
24   lessors, and then we have the ability, by sifting 
25   through the data to figure out how many charities.  If 
0041
 1   you figure 232, that's over a 1000 or so, it's 
 2   somewhere around that, but certainly, the majority -- 
 3   overwhelming majority of the charities that conduct 
 4   are located in grandfather commercial lessor halls.
 5                 MS. MATTHEWS:  Let me ask you, does a 
 6   grandfather commercial lessor need $600 a session to 
 7   make a decent return on his investment?
 8                 PUBLIC SPEAKER FENOGLIO:  It would 
 9   depend on the specific hall, is the short answer.  But 
10   the real answer is very darn few are getting $600 per 
11   session, period, end of sentence.  I have a number of 
12   grandfather commercial lessor licenses, and I would 
13   say the overwhelming majority, and Ms. Matthews, 
14   that's a -- another number we've asked for and we will 
15   have it by, I would guess, before our presentation on 
16   the 24th or 25th of this month.  But, anecdotally in 
17   querying with my clients, far less than half are 
18   getting anything approaching 600.  My sense is, it's 
19   between three and four per session.  The 600 number 
20   was put into the statue, I want to say in the '87 
21   time frame.  Is that right, Phil?    
22                 MR. SANDERSON:  I believe it was '89.
23                 PUBLIC SPEAKER FENOGLIO:  '89.  So, you 
24   know, 13 years later that number is still frozen in 
25   time.  I -- I can tell you that if you eliminate all 
0042
 1   grandfathered lessors, there are halls that are locked 
 2   in under the -- if nothing else were to change in the 
 3   law, and presuming that charities could then step 
 4   forward and either take over an existing hall or start 
 5   their own.  In that recommended two-year phaseout, 
 6   that there are locations where 600 a day, which is 
 7   what you're left with generally under the tier 
 8   approach.  I guess you get 1200 a day if you lease one 
 9   charity who conducts twice on that day, and then 600 a 
10   day left.  But 600 a day isn't enough to pay the 
11   expenses for a hall in certain locations.  In River 
12   City Bingo, we're paying about 240, 230 a session, so 
13   that's right up near the -- the point and if the 
14   landlord goes up in rent -- and right now, of course, 
15   real estate market is pretty bad statewide, but if it 
16   turned around, if we had to renew a lease -- for 
17   example, in 1999 time frame with rents there, you 
18   know, it would be hard to get a good location for 600 
19   a day in -- in the Austin market now.  If you're from 
20   Odessa, I don't really know what the real estate 
21   market is in Odessa, but my senses are it's not as 
22   expensive as Austin.  
23                 MS. MATTHEWS:  No.
24                 PUBLIC SPEAKER FENOGLIO:  I hope it 
25   wouldn't be.  Did I answer your question, 
0043
 1   Ms. Matthews?
 2                 MS. MATTHEWS:  I think so.
 3                 MS. TAYLOR:  I have another question 
 4   for you.  The rent that you're talking about that you 
 5   pay is only the rent paid to the lessor of the 
 6   location?  It does not include your utilities, your 
 7   janitorial services, maintenance in the hall, or does 
 8   it?
 9                 PUBLIC SPEAKER FENOGLIO:  When you say 
10   you, you mean River City Bingo?
11                 MS. TAYLOR:  River City Bingo.
12                 PUBLIC SPEAKER FENOGLIO:  Yes.  It is 
13   just the -- we -- we pay a base rent and triple net in 
14   that 230 to 240 a session, and again Janice is here to 
15   clarify it.  She has a way of correcting me when I  
16   misstate; but yes, it does not include janitorial, 
17   paper goods, etc.
18                 MS. TAYLOR:  Off the top of your head 
19   what would you say that adds per session in rent?  Any 
20   idea?
21                 PUBLIC SPEAKER FENOGLIO:  I'm going to 
22   defer to Janice Woods or Sherry Giesen.  I have the 
23   numbers in the notebook, on the audited, and if I 
24   may -- if they don't know the answer, I can get those 
25   to you by the end of the day.  Maybe perhaps in the 
0044
 1   next couple of minutes.  It will take me a couple of 
 2   minutes.  We have them broken out by different expense 
 3   categories that benefit us, so we can track 
 4   management-wise.
 5                 MS. TAYLOR:  And those -- information 
 6   that you've requested from the Sunset and from the 
 7   Lottery Commission, do you know what's included in the 
 8   lessor rent, the grandfather lessor rent charge to the 
 9   organizations?
10                 PUBLIC SPEAKER FENOGLIO:  I'm sorry, I 
11   didn't --
12                 MS. TAYLOR:  Do you have any idea what 
13   is included in that?  Is that just a base rent, or 
14   does that include --
15                 PUBLIC SPEAKER FENOGLIO:  Yes.
16                 MS. TAYLOR:  -- electricity, 
17   utilities.  Is there any way for you to know what is 
18   included in that rent?
19                 PUBLIC SPEAKER FENOGLIO:  I don't think 
20   you can get that information from anything that the 
21   Lottery Commission -- I mean, some commercial 
22   lessor -- my sense is, and again it's anecdotally, but 
23   my sense is the majority of grandfather lessor 
24   licenses, whatever they charge in charity, includes 
25   everything.  And I do have grandfather lessor licenses 
0045
 1   who are charging very little, 50, $100 a session 
 2   because of the dire straits of bingo.  But most of 
 3   them are going to charge -- if it's 350 or 400 a 
 4   session, that includes the utilities, and sometimes it 
 5   will include janitorial.  Every hall is going to be 
 6   different, but I don't think you can pull those 
 7   numbers from the Lottery Commission quarterly reports 
 8   and figure that out.  And Phil is shaking his head no.
 9                 MS. TAYLOR:  Of the -- one other 
10   question since you've been getting all these figures.  
11   The rent shows that it is 6.6 percent of the charity 
12   expenditure.  Is that rent just to grandfather 
13   commercial lessors, or is that to all lessors 
14   combined?
15                 PUBLIC SPEAKER FENOGLIO:  That's to all 
16   lessors combined, including, for example, River City 
17   with the association license.  So, yes, it includes 
18   everything.
19                 MS. TAYLOR:  Are you going to be able 
20   to tell what percentage of that was paid just to 
21   grandfather commercial lessors?
22                 PUBLIC SPEAKER FENOGLIO:  We are 
23   trying.  We are trying.  And -- and now that we have 
24   an answer to your question, yes.  Now that we have the 
25   most recent list of -- what occurs to me is you ask 
0046
 1   that question, I need to know -- and Phil, do you know  
 2   this number, is that, I assume that would be.  And 
 3   what you're referring to is page 41 of the report, 
 4   rent 37,603,000.  I assume that's just a summation of 
 5   all commercial leases -- lease payments on the 
 6   quarterly report -- payment for the quarterly reports 
 7   of all licensed commercial lessors.  And this may be 
 8   an unfair question of you because this is a Sunset 
 9   Advisory report and not yours.
10                 MR. SANDERSON:  I believe that number 
11   comes from what all the conductors reported paying in 
12   rent during 2001.
13                 MS. TAYLOR:  One other question that I 
14   have, looking at this.  Is the association that -- for 
15   instance, in Corpus Christi, Saratoga Bingo is a 
16   charity lessor hall.  Each of the charities pays our 
17   Lady of the Rosary rent for their bingo session.  In 
18   turn, our Lady of the Rosary pays the lease to the 
19   shopping center.  Is that rent counted twice?  Once 
20   when it's paid to our Lady of the Rosary and once when 
21   that same rent, in turn, is paid to the shopping 
22   center?  Or is that rent counted one time?
23                 PUBLIC SPEAKER FENOGLIO:  Did you say 
24   that is an association?
25                 MS. TAYLOR:  It's not an association. 
0047
 1   One charity rents to the other charities in hall.
 2                 PUBLIC SPEAKER FENOGLIO:  Charity hall.
 3                 MS. TAYLOR:  Charity hall.
 4                 PUBLIC SPEAKER FENOGLIO:  Charity hall.
 5                 MS. TAYLOR:  So, each of them are 
 6   paying 300 a session.  It goes on their reports as 300 
 7   a session rent.  Our Lady of the Rosary, in turn, pays 
 8   the rent to the shopping center.  Is this rent counted 
 9   twice, or do y'all have it figured out so that it's 
10   only counted once against that particular hall?
11                 MR. SANDERSON: If they're reporting it 
12   correctly, it's only counted once.  But I don't know 
13   if they've reported it correctly or not.
14                 PUBLIC SPEAKER FENOGLIO:  It would have 
15   to be because if they're counting only the rent paid 
16   by the conductors as opposed rent recorded by the 
17   lessors --
18                 MR. SANDERSON:  Correct.
19                 PUBLIC SPEAKER FENOGLIO:  So in the 
20   case of River City, those five charities would 
21   be -- this number would be -- this number would 
22   presumably reflect what the five charities recorded as 
23   their rent payment on their quarterly report.  It 
24   wouldn't include, for example, the River City Bingo 
25   Association's rental payment.
0048
 1                 MR. SANDERSON:  No.  Because River City 
 2   Bingo does not report their rent payment to us.
 3                 PUBLIC SPEAKER FENOGLIO:  Any other 
 4   questions?  Thanks.
 5                 PUBLIC SPEAKER BRANOM:  Good morning.  
 6   Can you hear me okay?  
 7                 My name is Ed Branom, and I'm a 
 8   commercial lessor from Plano, Texas.  We've been in 
 9   the business now about 15 years.  And let me give you 
10   my viewpoint.  I'm am a real estate investor.  I have 
11   several other different kinds of businesses, and I got 
12   into bingo primarily because of the volunteer fire 
13   department when -- where I live.  And it has grown 
14   since then to benefit -- right now we have five 
15   volunteer fire departments that we are their sole 
16   source of income.  We have three Knights of Columbus.  
17   We have a Veteran's Group and also a VFW, and we also 
18   have a group called CARE which gives deserving high 
19   school students college scholarship.  We have a bingo 
20   in Plano, and we also have one in Denison, Texas.
21                 I'll tell you a little about the one in 
22   Denison, Texas.  Two years ago I bought this facility 
23   from the Knights of Columbus because they had gone 
24   bankrupt.  They had operated as long as they could and 
25   they did not have the money to invest in properties,  
0049
 1   nor did they have the management skills to make it 
 2   work.  I bought the property in an attempt to help 
 3   them and I have subsequently it spent $600,000 on this 
 4   property.  If I'm only allowed to recover rent at the 
 5   reduced rate, it will take me 12 to 15 years to get my 
 6   money back.  It's a lousy investment.  I don't know if 
 7   I'll ever collect $600 a session money, but at least I 
 8   have the hope that somewhere down the road I can get 
 9   my money out of this as an investor.  Aside from the 
10   fact that we are doing this volunteer work for these 
11   Knights of Columbus.
12                 In Plano I have a $500,000 investment 
13   in that property.  Right now my income in that 
14   property is $350 per session which equates to $21,000 
15   a month in round numbers.  My take-home pay is about 
16   $3,000 per month at all operating expenses after 
17   everything right down to the toilet tissue.  I think 
18   that's the only fair way to do it.
19                 We have three volunteer fire 
20   departments there that depend solely upon us for all 
21   their equipment, their buildings, everything.  That's 
22   been a great, a great sense of accomplishment for me 
23   to see these guys survive and all the other charities 
24   that work with us.  I think, as an investor, unless we 
25   are required to recover our investment and make some 
0050
 1   kind of profit on the thing, it's a bad deal; and the 
 2   guys like me who are out here will go do something 
 3   else.  I can buy a lot more real estate and make a lot 
 4   more money that I am doing on this.  So if all these 
 5   charities -- and I'm just talking about two small 
 6   bingos, just a handful of charities, but none of these 
 7   have the capability of going out and running their own 
 8   bingo.  If they did and wanted to, they could.  
 9   There's nothing to stop them.  They simply don't have 
10   the money.  They don't have the expertise, not saying 
11   that I do directly.  It's just one of those situations 
12   that is not going to happen.  If you compound this 
13   across the state, you're going to have a really major 
14   problem and all these this charities that play bingo 
15   for profit, they can't do that.
16                 MS. MATTHEWS:  I'd like to ask you a 
17   question.  You said $21,000 a month and you're netting 
18   3,000?
19                 PUBLIC SPEAKER BRANOM:  Yes.
20                 MS. MATTHEWS:  Could you give me a 
21   general idea of what the 18,000 is going for?
22                 PUBLIC SPEAKER BRANOM:  For rent, 
23   utilities, maintenance.  We have a nice place.  I 
24   spend a lot of time and money keeping the place in 
25   excellent condition.  We do things, like, we do murals 
0051
 1   all on the inside.  We support anything that comes 
 2   down the pike that needs it.  If one of our charities 
 3   has a special project, we donate.  It just is a 
 4   community effort on our parts.  We're all in this 
 5   together.  As I said, we help each other and it all 
 6   works but the bottom line is -- my net last year, I 
 7   paid taxes on $21,000 from the facilities; and I have 
 8   in the year area of $500,000 invested?
 9                 MS. MATTHEWS:  And how do you determine 
10   your rent of 350 if you could charge 600?
11                 PUBLIC SPEAKER BRANOM:  Because the 
12   charities can't afford to pay me more than that.
13                 MS. MATTHEWS:  And how do you determine 
14   at what point they can pay more?
15                 PUBLIC SPEAKER BRANOM:  Well, they just 
16   tell me.  Great communication.  We're all friends.  As 
17   I say, we're in it together.  If it works properly, 
18   everybody pitches toward the same game and everybody 
19   wins.  But fortunately for me, I have income from 
20   other sources.  If this were my sole income in doing 
21   business -- the bingo in Denison this last year lost 
22   $107,000, my part.  This year I'm going to hold about 
23   $80,000.  I haven't charged them any rent in a year.  
24   It's getting better.  Thank goodness.
25                 MR. WHITTINGTON:  Good.
0052
 1                 PUBLIC SPEAKER BRANOM:  This -- 
 2   bingo -- we don't use computers.  The vast people who 
 3   come to play bingo hate the things.  Our attendance is 
 4   growing daily.  Plus, we have largest facility.  
 5   There's a lot of parking, well-lit area and all of the 
 6   things that you need to make bingo work.  It or any 
 7   other business.  It's a business.  If not when I want 
 8   it, okay.
 9                 MR. WHITTINGTON:  Okay.  Let me ask you 
10   a question.
11                 PUBLIC SPEAKER BRANOM:  Yes, sir.  
12                 MR. WHITTINGTON:  If some of your 
13   charities, they couldn't pay your $350 would you go 
14   about getting -- I think this is where all this comes 
15   from, people charging too much rent.
16                 PUBLIC SPEAKER BRANOM:  Yes, sir.
17                 MR. WHITTINGTON:  As a commercial 
18   lessor if the charity couldn't pay their rent one or 
19   two or three days, would you say you got to pay your 
20   rent and drive these charities out of business?
21                 PUBLIC SPEAKER BRANOM:  No, sir.  As I 
22   said, in Denison, they haven't paid rent in over a 
23   year.  I don't charge them a penny.
24                 MR. WHITTINGTON:  I just want to 
25   reemphasize that.
0053
 1                 PUBLIC SPEAKER BRANOM:  My philosophy 
 2   is -- and maybe I'm just unique in this -- but my 
 3   philosophy is charity has to get healthy before the 
 4   business is successful.  They are the core of the 
 5   business.  Right now, all I'm concerned with is that 
 6   charities make money and they grow their bank account 
 7   and they become financially stable.  Then we'll talk 
 8   about something else.
 9                 MR. WHITTINGTON:  I think that's the 
10   way most commercial lessors are today compared to five 
11   years ago.  They care about them.
12                 PUBLIC SPEAKER BRANOM:  Yes, sir.  I 
13   been in this business 15 years and I have made a lot 
14   of friends in the business who are commercial lessors 
15   and I think without exception, and I know there's bad 
16   apples in the barrel.  There's some bad apples in 
17   every barrel.  All the lessors that I know personally 
18   care about their business.  They care about the 
19   charities and they care about the whole thing working 
20   as a whole.  Because if doesn't work as a whole, it 
21   doesn't work at all.
22                 MR. WHITTINGTON:  Exactly.
23                 PUBLIC SPEAKER BRANOM:  It's like every 
24   other business.  Every piece of it has got to work and 
25   it all fits together like have puzzle.  If it all fits 
0054
 1   together and everybody's working together, it works 
 2   great.  It's really neat.  So, anyway, that's all I 
 3   got to say.  Thank you.  Oh, James Schnitker is here.  
 4   He's the manager for the Knights of Columbus for 
 5   Denison; and if you would like for him to address you, 
 6   he will.
 7                 PUBLIC SPEAKER SCHNITKER:  Good 
 8   morning, I am James Schnitker.  I represent three 
 9   Knights of Columbuses, the hall that Ed owns in 
10   Denison.  He has helped us out quite a bit.  We do -- 
11   we have not paid his rent for in a year, over a year 
12   since he's been there.  One of the groups that I have, 
13   which I am the operator for, we are doing better than 
14   the other two groups.  But we still can't afford to 
15   pay rent.  The other two groups have only been in it 
16   for a year, the other two Knights of Columbuses.  They 
17   are just now starting to grow, and they are making a 
18   little bit of money but without Ed neither one of the 
19   organizations would be able to grow.  Thank you.
20                 CHAIR BRACKETT:  Go ahead.
21                 PUBLIC SPEAKER ZUNIGA:  Good morning.  
22   My name is Ramone Zuniga.  I own two halls in Dallas.  
23   I'm a commercial lessor.  Under the new rule, I hold 
24   one of the new licenses that you're talking about, 
25   where I have to have a conductor lessor in between the 
0055
 1   charities and me.  And I feel that if you eliminate 
 2   these licenses, the grandfather clause licenses, 
 3   that -- to tell you the truth, I'm barely making it as 
 4   it is.  And if you eliminate this then commercial 
 5   lessor or the grandfather clause licenses you're going 
 6   to destroy bingo completely.  There's not going to be 
 7   anybody out there that's willing to put out that kind 
 8   of money to keep a bingo hall going.  I put out a 
 9   whole bunch of money, the figure is $500,000 between 
10   the two halls; and it's going to take me about eight 
11   years to recoup all of that money.  So, if you take 
12   away these licenses all you're doing is hurting the 
13   whole bingo industry.  I'm here to answer any 
14   questions you have any.  
15                 MR. MOORE:  Ramone, aren't you opening 
16   a new facility?
17                 PUBLIC SPEAKER ZUNIGA:  Yes, I am.  In 
18   fact, it's costing me $250,000.
19                 MR. MOORE:  Would you have done that if 
20   you had seen this recommendation?
21                 PUBLIC SPEAKER ZUNIGA:  No, I wouldn't.
22                 MR. MOORE:  Okay.
23                 PUBLIC SPEAKER ZUNIGA:  And right now 
24   it's in the process.  I'm closing.  I hope to open on 
25   the 21st of this month.  Hopefully it's a success.
0056
 1                 MR. MOORE:  Thank you.  
 2                 MS. MATTHEWS:  I presume that you are 
 3   making more money from the leases that are 
 4   grandfathered than the other type.
 5                 PUBLIC SPEAKER ZUNIGA:  I don't have 
 6   any grandfather licenses.
 7                 MS. MATTHEWS:  Oh, I thought you said 
 8   you had one.
 9                 PUBLIC SPEAKER ZUNIGA:  No.  And as far 
10   as your question about rent being counted twice, yes, 
11   it is.  I have to pay a tax, and then the conductor 
12   lessor has to pay a tax.  Thank you.
13                 PUBLIC SPEAKER HEINLEIN:  David 
14   Heinlein.  I'm at Jetta Management.  I was going to 
15   answer that question to Suzanne.  I'm having a senior 
16   moment on what line it is, but I think it's line 19 
17   where we report rent paid on our quarterly report.  In 
18   the case of a conductor lessor.  He has to report the 
19   rent that he's paid on the next line, and when he 
20   reports that rents, he is reporting rent paid from his 
21   conductor lessor report.  And the charities that he's 
22   collecting rent from report rent.  So in a sense 
23   you-all have an overlap there of rent paid, which was 
24   being reported twice in some cases.
25                 Over the last few years, we've had two 
0057
 1   charity groups that have attempted to begin their own 
 2   conductor lessor type hall that -- River City has one 
 3   of them that we've talked about.  And we've been 
 4   unsuccessful in both attempts.  Now, we were in the 
 5   Houston market in one instance when we tried to lease 
 6   a space from Wal-Mart; but the charities did not have 
 7   sufficient financial resources to provide Wal-Mart 
 8   that they would be able to guarantee a lease.  So they 
 9   simply would not lease the space to these charities,  
10   and we had to abandon that idea.
11                 We had another grandfather commercial 
12   lessor hall where the grandfather lessor was so 
13   disenchanted with his income and was not making enough 
14   profits and so, unlike Ed, he decided that he wanted 
15   to do something that would be more profitable, and he 
16   offered to those charities they're taking over that 
17   facility.  And he was making a very good deal to them, 
18   but we put the numbers together and we -- even in a 
19   situation where we didn't have to financially 
20   guarantee something, we were not able to make the 
21   numbers work for us to be able to reduce the costs 
22   that we currently had with him.  And we weren't paying 
23   $600, and so we abandoned the ideas.
24                 Now, what we have found in the last two 
25   years maybe a little bit more is that these charities 
0058
 1   have been unable to continue to pay the rent that had 
 2   once been charged.  And in one particular case, I had 
 3   to say to my charities that, you know, you're going 
 4   broke.  You cannot afford to pay your lessor rent that 
 5   you're paying.  You have to have a meeting with him 
 6   and we either have to have the rent reduced or we have 
 7   to cease conducting bingo.  And we had that meeting, 
 8   and he agreed reluctantly to reduce his rent.
 9                 I've seen the numbers on line 19, if 
10   I've got the line right, where rent is paid and I 
11   looked at other halls and I noticed that the lessor, 
12   even though he's not collecting an average of $600 a 
13   session, its meaningful to have the opportunity to do 
14   that $600 a session because in some cases, because 
15   there's a difference in profitability of different 
16   days, like Monday seems to be a very bad day for a lot 
17   of halls and Tuesdays for other halls and Thursdays 
18   for other halls, he may charge no rent on those days 
19   but charge 600 for maybe Friday, Saturday, and 
20   Sunday.  And so the average comes down to the 350 or 
21   400 dollars that he's collecting in rent.  And I find 
22   that to be pretty typical.  I don't believe I come up 
23   with anybody who has an average over 400 in the last 
24   year per session.  What I see happening is though 
25   they're paying $600 as charged in a good quarters.  
0059
 1   Typically, it's the first quarter of the year that our 
 2   profits are better; and so it's possible to collect 
 3   the $600.
 4                 If this grandfather lessor, though, is 
 5   it's not able to continue, we've not been able to 
 6   discover the numbers that would make it possible for 
 7   us to conduct bingo under a new approach which does 
 8   not allow the flexibility if it's conducted this way 
 9   as  $600 per session.  We would be limited to a much 
10   smaller number per month and simply will not be able 
11   to provide the facilities or in some cases even the 
12   professional representation of the hall.  You know, 
13   the total investment that is made to make the hall 
14   presentable, to be used for conducting bingo.  They 
15   just would not be able to do that, and so we believe 
16   that the loss of the grandfather lessor is going to 
17   really reduce the amount of charitable bingos.  If we 
18   didn't have the 25 percent rule, we'd still be out of 
19   the business on the numbers that I looked at for 
20   certain, but it's at least 900 charities that conduct 
21   bingo in a grandfather lessor hall.  If those lessors 
22   weren't there, I don't know how we would be able to 
23   replace them.  Maybe a few would find economic 
24   situations where they could provide the hall, but they 
25   probably wouldn't be able to provide very often.
0060
 1                 PUBLIC SPEAKER BISHOP:  Hello, again 
 2   folks.  I'm Don Bishop again.  I'm going to speak as a 
 3   commercial lessor.  If my recollection is correct when 
 4   the legislature was considering passing the bingo 
 5   enabling act, I think, in October of 1981 when it 
 6   became official.  They in their studying and surveying 
 7   they determined that there were basically two types of 
 8   charities.  There were charities who were owners of 
 9   their own facility like the large VFW's and the 
10   Knights of Columbus and folks had been carrying on 
11   bingo actually illegally, if you can believe that.  
12   Then they discovered that there were a greater number 
13   of smaller charities who did not have their own 
14   facility.  And they said, "Well, what are we going to 
15   do about these people," and that's where the term and 
16   -- it's really a bad term -- "commercial lessor" 
17   concept came into being where 1, 2, 3, 4 -- at that 
18   time there was no limit on the number -- that's been 
19   added recently.  Smaller charities could pool their 
20   resources and share expenses in one facility.
21                 It seems to me like what we're 
22   considering here is changing something that should be 
23   done at the least legislatively and go through that 
24   process.  I don't know what the processes are.  I'm 
25   not a lawyer.  You can ask the lawyers on that, of 
0061
 1   course.  So far on this item, we're hearing from us 
 2   commercial lessors and the gentleman that keeps 
 3   books.  I would -- I would hope that after I leave, in 
 4   addition to the lawyers, that we would hear from some 
 5   of the charities present and let them tell us and tell 
 6   the committee or the folks present, what would they do 
 7   if they didn't have a commercial lessor.  Would they 
 8   continue to play bingo, or would they be left out in 
 9   the cold?  Thank you.
10                 CHAIR BRACKETT:  Thank you for that 
11   question.
12                 PUBLIC SPEAKER CHAVEZ:  I am Teresa 
13   Chavez again, and I'm with the Ethel Daniels 
14   Foundation.  We are a very small charity and we rely 
15   on the commercial lessors to provide the facilities 
16   for the bingo and if that changed, we could not 
17   operate in a bingo facility.  Our foundation relies 
18   strictly on volunteers.  The only paid employee that 
19   we have is our house director, and she oversees the 
20   facilities of the 10-bed facility that we operate in 
21   helping woman in recovery from drugs and alcohol; and, 
22   no, we could not operate.  So, yes, I mean, I 
23   understand how important that is; and I want wanted to 
24   let you know that we wouldn't know how to begin.  And 
25   we are so grateful to the work that y'all do for us 
0062
 1   and that -- you know, I can't imagine.  I can't 
 2   imagine how to operate anything like that, and we 
 3   thank you.  We appreciate what y'all do for us.  Thank 
 4   you.
 5                 MR. BRESDEN:  Okay.  Ms. Brackett, I 
 6   lied.  I lied on my form.  Steve Bresnen for the Bingo 
 7   Interest Group.  I just want to make three or several 
 8   quick points here.  If you look at this chart that 
 9   came out of the bingo bulletin -- and I don't have the 
10   date on it, but it's one of the most recent ones -- 
11   you see down here the charitable distributions by 
12   class of charity.  71 percent of all of the money 
13   that's had distributed comes from Class J charities.  
14   Class J by definition is the higher grossing 
15   charities.  All right.  So, if you take a pickax to 
16   the class J charities here, you're taking a pickax to 
17   the 71 percent of the distributed revenue in the 
18   state.  Ask yourself where do higher grossing 
19   charities play?  Are they playing in a 50-seat hall in 
20   a VFW with a bar down in Manchaca, Texas, or are they 
21   playing in a 450-seat hall on a freeway in Austin, 
22   Texas, with a lot of the traffic located near the 
23   bingo player market?  Ask yourself that.
24                 Now, you asked the best question of the 
25   day, Ms. Matthews and it was a Steve Fenoglio about 
0063
 1   was the rent satisfactory from their association's 
 2   point of view and his answer was exactly right.  It 
 3   depends on where you are.  The central problem with 
 4   regulation it, forget bingo, forget anything else.  
 5   Tom knows this better than anybody because he was in a 
 6   highly regulated industry for a long time -- is you 
 7   put a straight jacket on an entire state and with all 
 8   the numbers that get thrown about, not just in Odessa, 
 9   not just in Manchaca, Texas, but it has to work on a 
10   freeway in Houston, Texas, or Interstate 635 in 
11   Dallas, Texas, out in the town, east of this mall, 
12   which is where the shopping center is where.
13                 Mrs. Chavez's operation is located and 
14   that number  has to have enough elasticity in it to 
15   accommodate those combinations all across the state.  
16   And that number has been in place, I think it was 
17   before '89; but we'll go find out -- anyway you look 
18   at it.  I bought a house in 1990 that was on the 
19   market for about 50 percent of the value that it had 
20   been five years before.  Commercial real estate was 
21   slower to come back than the residential market in my 
22   estimation.  So I think that number is highly suspect 
23   to begin with.
24                 Another point.  There are probably -- 
25   I'm sure there is somebody in this state that is 
0064
 1   paying 600 a session and they may be getting it on, 
 2   like, Friday and Saturday night where there's lots of 
 3   production.  The Charity that has Monday the night 
 4   deal maybe paying no or in the 50s and in effect 
 5   what's happened is there's a levelizing.  You heard 
 6   people talking about this balancing out the cost of 
 7   the expenses between bingo accounts.  That's de facto 
 8   of what's happening here.  So the problem here -- it 
 9   would be great to say let's take at a meat ax to the 
10   rent and then there would be more money for the 
11   charities but that won't accommodate the various 
12   situations all across the state.
13                 One final question.  You are a 
14   conductor lessor.  Anybody can go get a conductor 
15   lessor license today.  Right?
16                 MS. MATTHEWS:  Right.
17                 PUBLIC SPEAKER BRESNEN:  Or they can 
18   get an association arrangement.  So if it was so 
19   feasible for people to do that, you would think that 
20   rational people would go do it; and the commercial 
21   lessor would be out of the business.  You'd have the 
22   competitive advantage because you'd be able to offer 
23   this exceedingly low rent and there would be so much 
24   more money to distribute and anybody would go for 
25   that.  I would go for it, but it's not happening.
0065
 1                 There are about 40 or 50, I think, 
 2   licenses from grandfathers, national licenses that are 
 3   inactive today.  Why are they inactive?  You would 
 4   think that people would be like Mr. Zuniga and going 
 5   out and planting halls everywhere they could, but 
 6   there's 40 or 50 inactive licenses.  So I submit to 
 7   you that under the current regulatory system that 
 8   rational people involved in these charities can 
 9   organize an association or they can get a conductor 
10   lessor tier situation setup and they could hold their 
11   rent down that way.  And they would be tripping over 
12   themselves to do it because it's an economically 
13   feasible and a rational thing to do.
14                 MR. WHITTINGTON:  Let me ask you a 
15   question.
16                 PUBLIC SPEAKER BRESNEN:  Yes, sir.
17                 MR. WHITTINGTON:  If I was a charity 
18   and I wanted to go out and open a bingo hall, which it 
19   basically costs $250,000 to $300,000 just to open up 
20   the doors would, I be a charity if I had that much 
21   money to do it.
22                 PUBLIC SPEAKER BRESNEN:  You might be 
23   but what you would be was a charity with a very 
24   substantial financial base.  The United Way, for 
25   example, a state United Way could go out and buy a 
0066
 1   building and be in the bingo business.  I don't see 
 2   them doing it.  Maybe they are.  Maybe you know or 
 3   somebody knows that there is United Way bingo 
 4   operation out there.
 5                 This man gets about this $45,000 a year 
 6   to put some kids who have problems up on the back of a 
 7   horse and do therapy with them.  That operation, if 
 8   you just heard Mr. Branom say, "By the way, I did get 
 9   inspired."  By the way, Mr. Branom sat up here and put 
10   out his entire financial situation on this and I think 
11   he's due a lot of credit for being honest enough and 
12   forthright enough to come up here and talk about his 
13   business.  And I know that Mr. Bishop and Mr. Smith 
14   and Mr. Garrison and other people I represent have 
15   done that time and time again.
16                 The last thing I'm going to say is that 
17   I've been a lawyer for a while.  Lawyers gets 
18   badmouthed all the time.  Accountants didn't used to 
19   think they'd get badmouthed until Enron came around.  
20   Now grandfather lessors are getting badmouthed once 
21   again.  Think about who all is getting badmouthed and 
22   how it can become your turn.  Thanks.
23                 PUBLIC SPEAKER WEBB:  Okay.  My name is 
24   Don Webb and I'm with the Redmen and AmVets, the 
25   American veterans.  We lease from commercial lessors 
0067
 1   because of the simple fact we cannot afford to go get 
 2   our own building.  Now, there's some of our 
 3   organizations that say -- in one part of Dallas, they 
 4   pay $2,000 presently.  Another are part may pay 300 
 5   but if that works out with your commercial lessor -- 
 6   he knows how to -- you know, he knows where you're 
 7   making money.  You make money sometimes on Friday 
 8   night and Saturday nights, but you've got Monday, 
 9   Tuesday, Wednesday.  Those days don't make as much.  
10   They have to pay lessors money.  They don't have that 
11   kind of money, and if we didn't have the commercial 
12   lessor -- like you said there may be some commercial 
13   lessors who are getting 600.  I don't know but I know 
14   that the small charities, there's no way that they can 
15   survive if they have to go out and get their own 
16   building and start from there.  So, we would be 
17   opposed to that.  Thank you.  
18                 PUBLIC SPEAKER SMITH:  William Smith.  
19   I think one point that I forgot to make was if the 
20   charities are making money they're able to pay their 
21   rent.  So I don't think there's anyone more concerned 
22   with the charities making their money and their 
23   distribution than the commercial lessors.
24                 PUBLIC MEMBER RILEY:  Good morning.  
25   Almost good afternoon, I guess I should say.  My name 
0068
 1   is Sheri Riley, and I'm the primary operator for the 
 2   Corpus Christi Jaycees.
 3                 For the past five years, we've played 
 4   at two grandfathered commercial lessor halls; and at 
 5   both halls the lessor understands that if the 
 6   charities are not making money, they will not make 
 7   money.  And in -- on page 41 in the report, I think 
 8   that it says that the single largest expense is rent.  
 9   Well, my personal single largest rent is my mortgage.  
10   Now, the charity -- the lessor is understanding enough 
11   to when we have bad days, when we have good days.  How 
12   it all comes out depends on our rent, and sometimes we 
13   pay rent and sometime we don't.  They're very 
14   understanding with that, and most charity lessors or 
15   grandfather lessors feel that way.  They realize that 
16   if the charity is not making money, they're not going 
17   to make money.
18                 The report further says there's no down 
19   numbers.  It says "potential" and "could earn" and 
20   "could earn this," you know, what exactly are they 
21   earning?  Because over the past five years at either 
22   of the halls, I would say the average rent we've paid 
23   is about 325 in the past five years.  And that started 
24   in '97 when bingo was pretty good so...  Thank you.
25                 CHAIR BRACKETT:  Thank you.  All 
0069
 1   right.  I don't think there are anymore comments 
 2   regarding this.  Is the committee ready to hear a 
 3   motion and take action on this?
 4                 MS. TAYLOR:  I'm ready to make a motion 
 5   it.
 6                 CHAIR BRACKETT:  It looks like -- are 
 7   you wanting to say -- 
 8                 PUBLIC SPEAKER FENOGLIO:  I have an 
 9   answer to Mrs. Taylor's question on River City Bingo.  
10   It's about $60,000 a year in additional lessor charges 
11   which are utilities, repair, and maintenance, and 
12   janitorial services for the River City Bingo 
13   Association.
14                 And then one final thing I want to say, 
15   and I apologize for not staying, if you eliminate over 
16   the provision that's recommended for elimination, the 
17   grandfather commercial lessor, by definition, you 
18   would double the number of commercial lessor licenses 
19   because you now have -- everyone would go to a tier.  
20   Almost everyone, I believe, would go to a tier.  If 
21   you figure that at 365 days a year times 600 per day 
22   is what basically a tier would get, $219,000 a year in 
23   rent that would pay for everything, if you will.  You 
24   got a 3 percent tax on that, which is $6570 and then 
25   an additional 240 licenses, again, doubling the number 
0070
 1   of licenses, if you move from a grandfathered lessor 
 2   relationship to a tier relationship.  That's about 
 3   $1.6 million in additional taxes that the charities 
 4   are going to have to pay, Ms. Matthews.  And you can 
 5   cut the fish any way you want but ultimately the 
 6   charities are going to pay that lessor tax at least 
 7   macroeconomically speaking and all the costs, 
 8   including taxes that are paid by the business, 
 9   ultimately the customer pays those taxes.  And so 
10   that's an additional reason why my -- in my view, you 
11   should not eliminate the grandfather lessor because 
12   you would have the perverse relationship of raising 
13   additional taxes on the charities.  For the halls that 
14   that don't pay anything close to 600 a session, you 
15   will have the effect of backing in this type of 
16   account.  I apologize there.  Thank you.
17                 MS. MATTHEWS:  What's the 3 percent 
18   tax?
19                 PUBLIC SPEAKER FENOGLIO:  It's the 
20   lessor rental tax that is paid to the State of Texas, 
21   and every commercial lessor pays 3 percent of whatever 
22   rents they collect on that, be it a commercial -- a 
23   grandfather commercial lessor or a tier lessor.
24                 MS. TAYLOR:   I have my trusty little 
25   calculator sitting here.  I have figured out that that 
0071
 1   adds $82.42 per session to your expenses, which brings 
 2   your rent, including those items to $327.32 which is 
 3   about what I'm hearing everyone is paying here.  One 
 4   other thing I wanted to say before I making my motion 
 5   is that if you notice in the statistics that's been 
 6   provided on page 41 of the book, that the lessor rent 
 7   actually decreased 2.08 million 1999 and 2001.  You 
 8   tell me who's not working with the charities to help 
 9   keep them in their business.  I truly believe that  
10   it's the grandfather lessors that are keeping 
11   charities alive and well and we do because of the pie 
12   in the sky because someday we think that just maybe it 
13   might pay off but in the meantime we're all crossing 
14   our fingers we all don't get too deeply in debt  
15   before bingo finally turns around and helps out the 
16   organizations and others across the state, that you 
17   really did work and even if they go bring in that 
18   smaller amount that we all hope they would.
19                 And with that I would like to make a  
20   motion.  I move that the Committee reject Issue 5.1, 
21   repealing the section of the act that allows lessor 
22   licenses to be grandfathered.
23                 MR. WHITTINGTON:  I second.
24                 CHAIR BRACKETT:  Okay.  It's been moved 
25   and seconded that the Bingo Advisory Committee reject 
0072
 1   Item 5.1 which is repealing the section that allows 
 2   licensees to be grandfathered.  All those is favor say 
 3   aye.
 4                 COMMITTEE MEMBERS:  Aye.
 5                 CHAIR BRACKETT:  All those opposed.
 6                 MS. MATTHEWS:  Aye.
 7                 CHAIR BRACKETT:  There's one 
 8   opposition, Ms. Matthews.  So the motion carries.  
 9   It's almost noon, but can we do 5.2, do you think, 
10   before we take a noon break?
11                 MR. WHITTINGTON:  5.2?
12                 CHAIR BRACKETT:  Is there anyone who 
13   would like to speak for or against 5.2?  I am just 
14   amazed.
15                 PUBLIC SPEAKER BRESNEN:  I'm sorry.  I 
16   lied.  I lied.  I can't be trusted.  I'm testifying 
17   right after I said I can't be trusted.
18                 Let me tell you where this came from.  
19   When the -- somewhere along the way, about the time 
20   that the commercial lessor license was created, it was 
21   provided that you could put your license into a 
22   corporation.  You could transfer it from an individual 
23   to a corporation and some -- a number of people did 
24   it.  And they came under the corporate tax laws and 
25   the corporation was the licensee.
0073
 1                 Well, a man died.  And he died before 
 2   he got the license transferred into the corporation.  
 3   Had he done that, the shares of the corporation would 
 4   have been transferred by his will to his heirs.  But 
 5   instead, there was no mechanism to transfer the 
 6   license and an asset that he had put his time and 
 7   money into building over the years evaporated.  That 
 8   didn't seem right.  So in 1997, we went to the 
 9   legislature; and we asked them to provide for the 
10   transfer of lessor licenses under several 
11   circumstances that are specified in the statute.  The 
12   underlying assumption behind this recommendation is 
13   that the grandfathered lessor was always intended as a 
14   line of business.  I think there's very slim support 
15   for that assumption.  I think there are some people in 
16   '89 who thought the grandfather lessor would go out of 
17   existence because charity lessors would spring up all 
18   over the place and the competition would put them out 
19   of the business and that would be that.  Well, that 
20   didn't happen.
21                 The legislature has legislated about 
22   grandfathered -- or about bingo at least in '95 or '97 
23   and, I think, in '93.  They obviously did in '89 so 
24   the legislature could have done away with them at any 
25   time.  Bottom line is these licenses are property to 
0074
 1   the extent that people keep them in good order.  They 
 2   don't get criminal convictions.  They stay capable of 
 3   getting a license.  They are connected to other 
 4   valuable assets, and it seems absurd to me in a state 
 5   that's supposed to believe in property rights that we 
 6   go through and just say we're going to eliminate a 
 7   whole class of property rights for 250 people out 
 8   there because, after all, their grandfathered 
 9   commercial lessors.
10                 That's where it came from.  That's why 
11   it's in there.  If you don't want to leave your house 
12   to your in children, we should just go change the law; 
13   and we'll probably prohibit you from doing it.  You're 
14   probably against that.  Thanks again.
15                 CHAIR BRACKETT:  Are there any other 
16   comments?  Do I hear a motion on No. 5.2?
17                 MS. TAYLOR:  I make a motion that the 
18   BAC reject the Issue 5.2 repealing the transferability 
19   of lessor licenses.
20                 MR. MOORE:  I second it.
21                 CHAIR BRACKETT:  Okay.  It's been moved 
22   and seconded that we reject 5.2, which deals with 
23   repealing the transferability of the license -- lessor 
24   license.  All those in favor please say aye.
25                 COMMITTEE MEMBERS:  Aye.
0075
 1                 CHAIR BRACKETT:  Any opposed?
 2                 MS. MATTHEWS:  Aye.
 3                 CHAIR BRACKETT:  There was one 
 4   opposition, but the motion carries.
 5                 Okay.  This is a good time to take a 
 6   lunch break.  We'll reconvene at 1:00 o'clock.
 7                 (Recess from 11:56 a.m. to 1:07 p.m.)
 8                 MS. BRACKETT:  It's about seven minutes 
 9   after 1:00.  So let's reconvene and start our meeting 
10   again.
11                 We are on Issue No. 7 -- 6.  Okay.  I'm 
12   sorry.  That's right.  I'm sorry.  We're on Issue No. 
13   6.  6.1 required the Lottery Commission to adopt rules 
14   governing all rule compliance monitoring and 
15   government procedures.  Is there anyone who would like 
16   to speak for or against this proposal?  It's page 51 
17   in the Sunset Commission.
18                 PUBLIC SPEAKER FENOGLIO:  Good 
19   afternoon.  For the record, Stephen Fenoglio.  You've 
20   already got the list of organizations I -- pardon 
21   me -- represent.
22                 We're opposed to this for the simple 
23   reason that as I read this, this is a -- if it's 
24   adopted there would be far, far more regulation 
25   charities would have to comply with.  We are not 
0076
 1   opposed to regulation per se, but reasonable 
 2   regulation.  And the concern we have -- and some of 
 3   you, I guess, were at the commission back in March of 
 4   this year when the commission staff put out about a 
 5   3-page document on the rule makings were they were 
 6   considering over the next 18 months to 24 months -- 
 7   and I think this is where this motion came from -- 
 8   from the commission bingo staff.  Superficially it 
 9   sounds good but bingo is not going to make it, if it 
10   makes it, by having more regulation.  It will make it, 
11   first, by having more revenue, which will be one of 
12   the other issues I hope we discuss.
13                 Madam Chair, before the end of the day 
14   some positive changes for bingo but with this one -- 
15   we -- there was an audit rule or a series of audit 
16   rules that was proposed.  I believe it was in January 
17   of this year.  We had that in a public meeting in 
18   March and the overwhelming -- and I was there for the 
19   meeting, the second meeting -- the overwhelming 
20   position for the chair position was saying no to that, 
21   and I don't think anyone has changed since then.  That 
22   suggests there needs to be more regulation by the 
23   charitable organizations, but if there were to be 
24   regulation, we are still ready, Mr. Sanderson, to meet 
25   with the commission staff in a stakeover type meeting 
0077
 1   and talk about rules that the commission has 
 2   identified and need to be brought forth separate and 
 3   apart from the Sunset recommendation.  I don't think 
 4   you need to vote for more rules that make the Bingo 
 5   Division -- if it believes the rules need to be 
 6   brought forth, do so.  And we would like to have that 
 7   in an open process, and we talked about it before.  I 
 8   know Ms. Kiplin has talked about it, about a mediating 
 9   rule-making procedure.  So I would be happy to answer 
10   any questions.  Thank you.
11                 CHAIR BRACKETT:  Repeat that 
12   recommendation that the rules should be brought about.
13                 PUBLIC SPEAKER FENOGLIO:  Independent 
14   of this recommendation, I mean, there's nothing to 
15   come to if it identifies a need to have this put into 
16   some sort of Sunset report.  Madam Chair, as you 
17   know -- and you were at one of those rules committee 
18   hearings that we had.  Industries willing to can sit 
19   down and try to work those issues through but not have 
20   them imposed from the top.  Thank you.
21                 CHAIR BRACKETT:  Is there anyone else 
22   that would like to speak to this or ask any 
23   questions?  Anyone on the committee?  Okay.  Is the 
24   committee ready to take action on this?
25                 MS. TAYLOR:  I'll make a motion.  I 
0078
 1   move that the BAC reject recommendation 6.1 requiring 
 2   the committee governing all rules and compliance 
 3   monitoring and enforcement procedures.
 4                 MR. WHITTINGTON:  I second.
 5                 CHAIR BRACKETT:  Any discussion at 
 6   all?  Okay.  All those in favor of that motion please 
 7   say aye.
 8                 COMMITTEE MEMBERS:  Aye.
 9                 CHAIR BRACKETT:  Are there any opposed?
10                 Okay.  Then we move to 6.2, which is to 
11   expand the Lottery Commission's authority to 
12   temporarily suspend bingo licenses to prevent 
13   financial loss to the state.
14                 PUBLIC SPEAKER BRESNEN:  Steve Bresnen 
15   on behalf of the Bingo Interest Group.  A little bit 
16   of background may help with this.  Before last session 
17   the Lottery Commission staff indicated an interest in 
18   getting summary suspension power, and there was a lot 
19   of discussion about that prior to the session.  We 
20   were opposed, and I think -- I think it's fair to say 
21   that when people in the license-regulating community 
22   were opposed to having a broad power for summary 
23   suspension, but we did agree that where State was at 
24   risk for tax revenue that the commission needed 
25   authority to go and be able to shut those operations 
0079
 1   down and collect the money.
 2                 In most cases the ability to summarily 
 3   or temporarily suspend someone really is not necessary 
 4   because there's an administrative process, an ability 
 5   to sanction them.  And in very, very few instances is 
 6   there is a clear and present danger, or loss, or peril 
 7   to the public.  In the interest of state revenue, it 
 8   would seem to me that the State would have an interest 
 9   in the State taking immediate action and putting in 
10   due process afterwards.  So that has been our historic 
11   position.  We were willing to accept that last time 
12   because there are some folks that don't pay their 
13   taxes.  And people that don't pay their taxes are 
14   getting a subsidy from the State against people who 
15   are complying with the rules, in effect.  So that 
16   would be our view of this particular recommendation, 
17   narrowly tailored as it is. 
18                 MS. TAYLOR:  So I'm confused on whether 
19   you're opposing it or approving it.
20                 PUBLIC SPEAKER BRESNEN:  I'm not 
21   opposing it.  I'm trying to be consistent with our 
22   historic situation.  If there's a problem with it's 
23   mean, we think the state ought to be able to collect 
24   the money.  We pay our taxes.  This is narrowly 
25   tailored.  I am trying to make it clear because the 
0080
 1   suspension deal is going to come up and where they 
 2   won't be able to recover the money after the fact then 
 3   that may be a legitimate use of that sort of power.  
 4   That's consistently where we've been.  See, people -- 
 5   I think I saw you nod your head.  We have had this 
 6   discussion in front of the advisory committee before, 
 7   and I think we've been fairly consistent on that.
 8                 MR. WHITTINGTON:  How long does it take 
 9   for the State to realize that somebody's behind on 
10   their taxes.
11                 PUBLIC SPEAKER BRESNEN:  I am not 
12   advised.  Phil, you might know kind of what the 
13   sequence would be when you find out somebody is out of 
14   whack.
15                 MR. SANDERSON:  Currently, when they 
16   file a quarterly report, which is due the 15th of the 
17   month following the end of the quarter, if they 
18   haven't paid their taxes, then we send them an 
19   opportunity to come into compliance and pay their 
20   taxes.
21                 MR. WHITTINGTON:  So, three months.  
22   That is as long as somebody can be out of compliance, 
23   about three months, before the State can come down on 
24   them about their taxes, correct?  Is that what I'm 
25   hearing?
0081
 1                 MR. SANDERSON:  That's before we take 
 2   any action against them, yes.
 3                 PUBLIC SPEAKER BRESNEN:  And they might 
 4   even have the revenue to cover the taxes that accrue 
 5   during the first two months and it may be the third 
 6   month that gets them out of whack or it may be a whole 
 7   quarter.  I suppose it is possible.  The investigative 
 8   staff might determine that something was out of whack 
 9   earlier, where you know the state is in jeopardy of 
10   being able to collect it's money or the audit staff, 
11   maybe it happens to be involved in an audit at that 
12   time or it may only be following the receipt of a 
13   quarterly report.
14                 MR. SANDERSON:  Primarily after the 
15   report is received.
16                 PUBLIC SPEAKER BRESNEN:  So two 
17   months.  
18                 MR. WHITTINGTON:  So apparently what 
19   they're here talking about is maybe this hiring of 
20   some more people to collect this instead of every two 
21   or three months.  It would be every month.  Is this 
22   what they're talking about here?
23                 PUBLIC SPEAKER BRESNEN:  Well, I don't 
24   see any recommendations, to make as a recommendation 
25   on the quarterly tax-free and prize payments.  So I'm 
0082
 1   not seeing any frequency of intelligence, if you will, 
 2   that the agency would get out of this.  It's just a 
 3   tool they would have to intervene at that time when 
 4   they do become aware of it.  I hate to be -- I'm 
 5   trying to explain what they had in mind, but that's 
 6   what this looks like.
 7                 MR. SANDERSON:  Currently when somebody 
 8   fails to report or fails to file a report and we 
 9   notice that they haven't paid their prize fees or 
10   taxes, we send them a notice and we give them an 
11   opportunity.  If they still don't pay that notice, 
12   then you have to go through an administrative process 
13   to terminate.  This takes 120 days and come to a  
14   resolution by that.  And they may nor may not have 
15   paid those quarters.  So now they're three quarters 
16   behind and with the temporary suspension.  We could 
17   stop it before they got three quarters behind.
18                 MR. WHITTINGTON:  Okay.  So basically 
19   the Lottery Commission comes in to close it all down. 
20   They have got the right to actually take -- you're 
21   saying it would take three, six months, maybe nine 
22   months before they can do it.
23                 MR. SANDERSON:  Under the current 
24   process, yes.
25                 PUBLIC SPEAKER BRESNEN:  Larry, just as 
0083
 1   background, we always taken the position that, you 
 2   know, if there's a problem, let us understand what the 
 3   problem is; and then let's help with the solution to 
 4   the problem.  But we don't have overreaching authority 
 5   because, while this particular administration may not 
 6   overreach, it's just an invitation for somebody to 
 7   overreach.
 8                 Most of the problems that you might run 
 9   into is there's plenty of time to deal with them and 
10   impose sanctions and sometimes criminal sanctions. In 
11   this case there's money sitting there in jeopardy and 
12   the state has an interest in it.  It's a narrowly 
13   tailored sort of approach, and we can accept that.  If 
14   there's a problem with that then, you know, people 
15   need to pay their taxes.  We do.  Thanks.
16                 PUBLIC SPEAKER BISHOP:  I'm Don Bishop, 
17   commercial lessor, AmVet.  A question just occurred to 
18   me.  Bingo, like any other business, is seasonal.  A 
19   lot of charities experience a real shortfall when 
20   school is out and the children start soaking up the 
21   money, July and August in particular.  What would be 
22   the remedy if charities, who get in a bind and get 
23   behind during that quarter, third quarter of the year, 
24   I guess July, August, and September.  That doesn't 
25   show up until their 15th of October report, and they 
0084
 1   may be recovering the money that they owe during the 
 2   fourth quarter, which is our best quarter of the year 
 3   in bingo.  And if they're allowed to continue to 
 4   operate, it's more than likely that they will be able 
 5   to catch up on their back prize fees they are 
 6   distributing and paying, if they're allowed to play 
 7   bingo during that period.  Whereas if they're 
 8   immediately shut down -- I don't know how the wording 
 9   of the rule would be, but if they were immediately 
10   shut down then how in the world would they ever find a 
11   way to catch up?  I don't have the answer.  I'm 
12   looking for the answer.
13                 CHAIR BRACKETT:  Does anyone have the 
14   answer?
15                 PUBLIC SPEAKER BISHOP:  Mr. Sanderson?
16                 MR. SANDERSON:  It's difficult to 
17   address any specific situation and, in general, the 
18   way I read recommendation 6.2 is, you know, the 
19   temporary suspension authority to keep the State from 
20   getting in debt or somebody here becoming too much in 
21   debt to the State to protect the State's interest.  
22   The prize fees, which I think are primarily what we're 
23   talking about -- the rental tax is not as prevalent as 
24   the prize fees and the prize fees are actually funds 
25   that are withheld from the winners and shouldn't be 
0085
 1   used for operating expenses, you know.  Whether they 
 2   are or not is hard to say.
 3                 PUBLIC SPEAKER BISHOP:  That brings up 
 4   another question.  At one time a lot of our charities 
 5   -- my personal AmVets charity, we want to send our 
 6   prize fees to the State on a monthly basis.  We want 
 7   to cut a check and get the money out of the account so 
 8   it wouldn't get off in some other area, and we were 
 9   told no that the State is not set up to accommodate 
10   that.  Is there any -- some way that that could be put 
11   under consideration by the staff, to allow the 
12   charities who choose to have an option of getting that 
13   money in to the State so that they don't get in that 
14   bind quite as easily, the ones that do.
15                 MR. SANDERSON:  Current statute does 
16   not allow for that.  Now, there's -- any 
17   recommendation, you know, that would need to be made 
18   to the legislature or even through this process, the 
19   Sunset process, you know.  That's open for it 
20   discussion.
21                 PUBLIC SPEAKER BISHOP:  Yeah.  I would 
22   still like to hear from someone about that first 
23   question I approached.  So I guess we'll just have to 
24   leave it open if no one has the answer to that.  Thank 
25   you very much.
0086
 1                 CHAIR BRACKETT:  Thank you.
 2                 MS. MATTHEWS:  I guess the problem with 
 3   this is it's too vague.  I mean, we could have a 
 4   better decision if we had a more closely worded 
 5   recommendation.  As Mr. Sanderson says, this is trust 
 6   money and it should not be used for expenses; but what 
 7   period of time should the charity be allowed to go on 
 8   before it makes it good.
 9                 MS. TAYLOR:  I think the thing that 
10   worries me the most about this temporary suspension, 
11   which has always, is I realize the charities should be 
12   paying it's prize fees.  This is money in trust, not 
13   in sales taxes.  That's not supposed to be used for 
14   expenses.  So one charity in the hall has been 
15   negligent, what happens to the other charity in this 
16   hall when this charity has been temporarily suspended? 
17   That's been my worry about that.  The bad apple in the 
18   hall affects the good apples.  Do they have a -- it 
19   may be they have already used their funds, so there 
20   may need to be a change.  What if the charity has done 
21   that?  Now they're temporarily suspended.  How long is 
22   it going to take for the other charity to regroup to 
23   this changing the schedule around so that -- maybe 
24   this charity had all three first sessions on Monday, 
25   Tuesday, Wednesday.  What happens to this second 
0087
 1   charity on Monday, Tuesday, and Wednesday.  I 
 2   guarantee this is going to kill their bingo session 
 3   when there is not a first session in front of them.
 4                 I would like to personally see it where 
 5   the other charities playing in the hall have had a 
 6   chance to regroup before their license is taken away 
 7   with a phone call, however this temporary suspension 
 8   is going to be done.  That's my concern, that it 
 9   effects people who are going to be playing by the 
10   rules and are trying to run their bingo sessions in a 
11   sound manner.  It can be negatively done by the 
12   charity who didn't run their business like they should 
13   have.  That's my concern with this.
14                 I recall what Steve was saying. You 
15   know, that's money that's due to the State, and it 
16   needs to be paid to the State.  And there's no in 
17   reason for the people playing by the rules have to be 
18   affected by the ones that aren't.  I just don't want 
19   this to negatively impact the ones that are doing 
20   right in each one of these it halls.
21                 CHAIR BRACKETT:  Is there any further 
22   comment or observation?.  Anyone in the audience?
23   Okay.  Are we ready to take action on this?
24                 MS. TAYLOR:  One question before we 
25   take action.  Can you -- Phil, can you tell me -- I 
0088
 1   mean, just give me a little bit of knowledge on what 
 2   happens when a temporary suspension -- how quick does 
 3   that happen when the license goes on hold?  Are they 
 4   still in their session times?  Explain to me what 
 5   happens.
 6                 MR. SANDERSON:  In my 10 years of 
 7   bingo, I've never been involved in a temporary 
 8   suspension, so I can't address that.  And as far as I 
 9   know, the Lottery Commission or when I was at the 
10   Alcohol and Beverage Commission, we never did a 
11   temporary suspension, so I don't know what the process 
12   would be.  Maybe one of the -- Bresnen or Fenoglio 
13   have possibly seen something like that who can 
14   enlighten you on the process but we haven't discussed 
15   that process.
16                 PUBLIC SPEAKER FENOGLIO:  Stephen 
17   Fenoglio for the record.  The Lottery and I have done 
18   this with licensing charges.  I've done the same thing 
19   with the lottery.  The Lottery has this statute and a 
20   rule that allows summary suspension and basically they 
21   give a 10-day written notice of validation.  It's 
22   called a show cause process and this licensee -- in 
23   that case, the retailer -- and the licensee in the 
24   charity is given 10 days to come to Austin in a 
25   hearing and show cause why their license should not be 
0089
 1   temporarily suspended.  For example, if it were on -- 
 2   if we were just talking about it and my clients -- I'm 
 3   trying to speak to Madam Chair because I'm sensitive 
 4   to the limit on time -- but if it were limited just to 
 5   the amount of what the King or the State is due, then 
 6   the charity would have that 10-day period to either 
 7   pay what is owed or show why it actually isn't owed 
 8   those taxes.  And if it cannot do one of those two 
 9   things, it would have the burden of proof in 
10   establishing that either they timely paid or that, in 
11   fact, there was an error in the calculation, then his 
12   license is suspended.  It's not revoked.  And under 
13   the lottery side, once the Chair -- once the licensee 
14   shows that it's in compliance, then its license is 
15   reactivated, if you will.  So it's put on suspension.  
16   It cannot conduct by law anymore.  If it attempts to 
17   do so, it's suspended and that's a potential penalty.
18                 MS. TAYLOR:  Let me interrupt you for 
19   just a second.  So does that mean another licensee 
20   cannot play on his time since that time was licensed 
21   to one that's been suspended.
22                 PUBLIC SPEAKER FENOGLIO:  That's -- 
23   that issue hasn't been flushed out in this 
24   recommendation.  In the case of a lottery retailer, 
25   no, unless there's a new licensee that's licensed at 
0090
 1   that lottery location.  For example, the 7-11, or 
 2   whatever it is, at the corner of 5th and Main, if it 
 3   hasn't paid what it's told to the State, then they 
 4   have three sweeps of their lottery account.  Then that 
 5   license is temporarily suspended.  If that never comes 
 6   into compliance, then that licensee at that location 
 7   can never conduct a lottery operation.  You can come 
 8   in with a totally new owner, unrelated to the existing 
 9   owner -- supposedly, under the analogy -- if that were 
10   the law.  And so that's the question.  It's an 
11   excellent question, Ms. Taylor.
12                 It's nothing I ever talked to Phil 
13   about.  What is the saying about that license, time, 
14   and location?  Under the traditional view, then, I 
15   think the staff would look at that -- I would hope 
16   that they would look at that -- that it's on a -- or 
17   that license is on a temporary hold while it's 
18   temporarily suspended and that someone else could 
19   substitute in.  But that's not been addressed in this 
20   recommendation at all, and it's an excellent question.
21                 And my clients would suggest if you're 
22   going to do that -- and they do pay their taxes and 
23   fees to the State and they want everyone else to pay 
24   their tax and fees to the State -- if you're going to 
25   do that, that you not hurt the hall by robbing that 
0091
 1   time to conduct bingo and thereby deny a bona fide 
 2   charity that has a license from substituting in.  
 3   Don't punish the good apples by the act of one bad 
 4   apple.  I hope I answered your question.  Thank you.
 5                 CHAIR BRACKETT:  Are there any other 
 6   comments or questions?  Are you ready for the 
 7   question?  Okay.  On recommendation 6.2 to expand the 
 8   Lottery Commission's authority to temporarily suspend 
 9   the bingo licenses to prevent financial loss to the 
10   State, all those in favor of this recommendation 
11   please say aye.
12                 COMMITTEE MEMBERS:  Aye.
13                 CHAIR BRACKETT:  All those opposed 
14   please say nay.
15                 All right.  6.3, which is the Lottery 
16   Commission should better coordinate the tracking of 
17   enforcement information.  Does anyone want to speak on 
18   this?  Does anyone know what this means?
19                 MR. WHITTINGTON:  I think they track it 
20   pretty good.
21                 CHAIR BRACKETT:  You think what Larry?
22                 MR. WHITTINGTON:  I think they track it 
23   pretty good.  They're always tracking something.
24                 CHAIR BRACKETT:  Well, I don't know 
25   what my high school English teacher would do?  It 
0092
 1   would certainly be better --
 2                 MS. MATTHEWS:  Well, it says on page 50 
 3   where there's a little bit further discussion.  It 
 4   says the Sunset staff warns the Lottery Commission of 
 5   properly enforcing regulations.  How can they better 
 6   coordinate if they don't know what's happening now.
 7                 MS. TAYLOR:  I think what this is 
 8   asking for is just what it gets from the security in 
 9   the Bingo Division that it -- that the complaint is 
10   tracked.  It's not lost in a crevice somewhere like a 
11   lot of things seem to be.  So personally I don't see 
12   anything wrong with this.  I think that the Lottery 
13   Commission should be tracking the compliance and 
14   knowing where it is and on what stage it is.  So I 
15   would move that the BAC accept recommendation 6.3.
16                 MR. WHITTINGTON:  I second.
17                 CHAIR BRACKETT:  Okay.  So it's been 
18   moved and seconded that the Bingo Advisory Committee 
19   accept Bingo issue No. 6.3.  All those in favor say 
20   aye.
21                 COMMITTEE MEMBERS:  Aye.
22                 CHAIR BRACKETT:  Any opposed?  
23                 6.4., the Bingo Division should 
24   consider using its temporary suspension power and 
25   evaluate its authority to adopt bingo rules.  Do we 
0093
 1   have a comment from the public on that?  
 2                 MS. TAYLOR:  Yeah.  I want to make one 
 3   comment before the public makes a comment.  There's a 
 4   couple of places in this book that I, as somebody 
 5   involved in the bingo industry, felt like our eyes 
 6   were being poked.  I don't know if everybody had a 
 7   chance to read this there but one of the sentences in 
 8   here says that a bingo hall is set up to cheat 
 9   players.  There is two different places in there where 
10   it talks about bingo halls cheating players.  I take 
11   offense that its talking about us cheating bingo 
12   players, like we're some slimy little industry.  So 
13   I'll say right off the bat that I oppose this rule.  
14   And I make a motion that the BAC reject 6.4 saying, 
15   using its existing temporary suspension power and 
16   evaluate its authority to adopt bingo rules.
17                 CHAIR BRACKETT:  All right.  It's been 
18   moved.  Do I hear a second?  Does anyone have any 
19   comments?
20                 MR. WHITTINGTON:  I second.
21                 CHAIR BRACKETT:  All right.  Are you 
22   ready for the --
23                 MR. PAVLOVSKY:  I have a comment.  Is 
24   this mike on?  There it is.  I listened to Phillip's 
25   comment awhile ago about them never suspending a 
0094
 1   license.  How many times has it been considered that 
 2   y'all suspends someone's license?
 3                 MR. SANDERSON:  I know there's a 
 4   difference between suspending a license and 
 5   temporarily suspending a license.  The temporary 
 6   suspension authority is like Mr. Fenoglio stated.  
 7   It's a 10-day window to get a hearing and determine 
 8   whether they should be suspended or not.  We have 
 9   suspended licenses after due process, an 
10   administrative process for violations of the acts.  
11                 MR. PAVLOVSKY:  Okay.  That answered my 
12   question.  Thank you.
13                 CHAIR BRACKETT:  Phil, do you have any 
14   comments on this particular proposed rule?
15                 MR. SANDERSON:  No, ma'am.
16                 CHAIR BRACKETT:  Any other comments?  
17   Okay.  Ready for the question?  All those in favor of 
18   6.3 -- 6.4.  I'm sorry.  6.4.  I can't read today.
19   Please say aye.
20                 MS. TAYLOR:  Are you saying in favor of 
21   to reject?
22                 CHAIR BRACKETT:  That was your motion?  
23                 MS. TAYLOR:  That was my motion.
24                 CHAIR BRACKETT:  Okay.  I'm sorry.  I 
25   was thinking in a positive thing.  Reject the 
0095
 1   positive, and we're going to accept the negative.  So 
 2   could you restate that motion?  Can you re-read that?
 3                 MS. TAYLOR:  I move that the Bingo 
 4   Advisory Committee reject recommendation 6.4, the 
 5   Bingo Division should consider using its temporary 
 6   suspension power and evaluate its authority to adopt 
 7   bingo rules.
 8                 CHAIR BRACKETT:  Okay.  I think 
 9   everybody is clear on the motion.  All those in favor 
10   say aye.  So we've got eyes and heads nodding, so it 
11   carries.
12                 All right.  That brings us over to 
13   Issue No. 7.  It deals with the Bingo Advisory 
14   Committee does not effectively advise the committee on 
15   the needs of the bingo industry in Texas.  And on the 
16   recommendations, first one is 7.3 requiring the Bingo 
17   Advisory Committee to develop an annual work plan and 
18   make a recommendation to the commission that 
19   identifies specific issues that need addressing.  Is 
20   there any public comment on that or any comment from 
21   the committee?
22                 MR. WHITTINGTON:  Well, like I said, I 
23   don't know what happened in the past.  Okay.  I don't 
24   know what kind of agenda the BAC had, but I hope 
25   everybody agrees we are all here to make a change and 
0096
 1   to make things better and, of course, yes, we should 
 2   have some type of agenda we follow.  But there's 
 3   always going to be new innovations that we talk about 
 4   and bring up every quarter, not once a year.  So I 
 5   agree with definitely having an agenda -- a real 
 6   agenda to follow and that we also get to have some 
 7   room where we can bring up new recommendations and 
 8   innovations that need to be brought up at that the 
 9   particular time.  
10                 MS. BRACKETT:  Saleem made the 
11   recommendation that we do that in the beginning of the 
12   new committee in year and we did not do it or we have 
13   not done it yet, maybe I can word it that way.  We 
14   still have time to set up a work plan.  Quite frankly, 
15   when does our year began?  Is it June 21?
16                 MR. WHITTINGTON:  June 28.
17                 CHAIR BRACKETT:  So this is still 
18   September, I think, isn't it?  So we can -- we can 
19   still have time.  We can go by the Federal fiscal year 
20   and make plans by October 1st.  Is there -- are there 
21   any other comments on this issue?
22                 PUBLIC SPEAKER BISHOP:  I have a 
23   question.
24                 CHAIR BRACKETT:  Okay.  What is your 
25   question?
0097
 1                 PUBLIC SPEAKER BISHOP:  Believe it or 
 2   not, I'm Don Bishop in Dallas, Texas.  I do not like 
 3   getting up here, I promise.  It the last item on page 
 4   59 on this.  There might be something we need to 
 5   address to the Bingo Advisory Committee -- you might 
 6   need to address to the Sunset Commission since this is 
 7   their report.  Just briefly, it says that the Sunset 
 8   staff observed several BAC meetings.  Then it goes on 
 9   to say that the Sunset staff witnessed several BAC 
10   meetings that were conducted in a disorganized 
11   manner.  BAC members' personal issues often become 
12   part of the meetings of discussion further while the 
13   general public is allowed an opportunity to make 
14   public comment.  Members of the audience consume a 
15   significant portion of the meetings with their 
16   comments and questions limiting effective 
17   consideration and action to agenda items.  The conduct 
18   of the meetings resembled an open forum rather than a 
19   structured public proceeding.
20                 My question is when in the heck is the 
21   Bingo Advisory Committee supposed to get input from 
22   the general bingo community, if not at their 
23   meetings?  I mean, what other venue do we have?  None 
24   that I know of.  Most of us sure don't relish coming 
25   down here.  Does anyone have any --
0098
 1                 MS. TAYLOR:  Well, I think most of the 
 2   committee members in the committee, if not every one 
 3   of us, agrees with you.  We discussed the fact that if 
 4   you come this far, we want to hear what you have to 
 5   say and we -- she just said she hates limiting the 
 6   amount of time people have to speak.  So we agree and 
 7   support you whole-heartedly on this.
 8                 PUBLIC SPEAKER BISHOP:  Well, I was 
 9   wondering if may be you could open a future meeting 
10   and put the agenda input from some of us and from 
11   yourselves about the ideas about to remedy part of 
12   that problem since it appears to be a problem.  That's 
13   all I got.  
14                 MS. BRACKETT:  Thank you for those 
15   comments, and it does seem that we do run into public 
16   meeting issues sometimes, but I think there are 
17   probably ways we can remedy that or work with it, I 
18   should say.
19                 Any comments on from the committee 
20   members?  Are you ready to take action on this?  You 
21   think so?  Okay.  All those in favor of 7.1, please 
22   say aye.
23                 COMMITTEE MEMBERS:  Aye.
24                 CHAIR BRACKETT:  Any opposed?  Okay.
25                 Okay.  7.2 is eliminating the statutory 
0099
 1   designation of a slot for a system service provider on 
 2   the Bingo Advisory Committee.  Any comments from the 
 3   public?  I'd like for Saleem to comment on this.
 4                 MR. TAWIL:  Yes.
 5                 CHAIR BRACKETT:  He is the system 
 6   service provider.
 7                 MR. TAWIL:  When I addressed item No. 8 
 8   the Sunset Commission Staff got the idea wrong.  The  
 9   system service provider is not an accounting system.  
10   There is no agency in this industry that requires 
11   regulation of accounting systems, so there's really 
12   more to it than this and I would ask the committee to 
13   reject this recommendation based on the fact that the 
14   system service should continue.
15                 CHAIR BRACKETT:  Is that a motion, 
16   Saleem?
17                 MR. TAWIL:  I make the motion that the 
18   committee reject this recommendation.
19                 MS. TAYLOR:  I second that.
20                 CHAIR BRACKETT:  Okay.  It's been moved 
21   and seconded that we reject 7.2.  Any further 
22   discussion?  Any questions?  Okay.  All those in favor 
23   please stay aye.
24                 COMMITTEE MEMBERS:  Aye.
25                 CHAIR BRACKETT:  Any opposed?
0100
 1                 Okay.  So we reject 7.2.  7.3 has to do 
 2   with management action commission should evaluate a 
 3   necessity of the Advisory Committee.  Any comments 
 4   from the public?
 5                 I think my comment would be:  Well 
 6   certainly.  Everyone gets renewed in every piece of 
 7   work that you do, travel paid or volunteer.
 8                 CHAIR BRACKETT:  My name is Janice 
 9   Woods, and I am a former member of the Bingo Advisory 
10   Committee, and I just looked around and there's four 
11   of my constituents that served on the first Bingo 
12   Advisory Committee and came under the Lottery 
13   Commission.  Well, to put it bluntly, that was the 
14   worst, unorganized Bingo Advisory Committee and group 
15   of people I have ever been involved with and I don't 
16   know if they would agree with me; but I think they 
17   would.  This is extremely organized and my hat is off 
18   to the last two Bingo Advisory Committees because 
19   y'all have got it going, whereas we were flagged and 
20   had no clue what we were doing.  It was Don and Jane 
21   and Sharon and I, and it was awful.  So therefore it 
22   was ineffective.  And I don't know if Sunset witnessed 
23   any of those but if they did, y'all would be gone.  
24   And I think Phil would probably agree with me on some 
25   of the things.  It was just not a real pretty picture; 
0101
 1   but what I would like to say, as far as the 
 2   effectiveness of the Bingo Advisory Committee -- and I 
 3   think in the Sunset before, they come out with the 
 4   fact that, you know, perhaps the commission does need 
 5   to listen more to what the industry is saying.  And I 
 6   think with Commissioner Clowe, I know that he's 
 7   personally been out to our bingo halls and other bingo 
 8   halls throughout the State.  And I think he's becoming 
 9   pretty well educated on what's going on, and they're 
10   learning.  Whereas before, another commissioner didn't 
11   know exactly what was going on; and I think the need 
12   for an Advisory Committee is we need it.
13                 Personally I prefer to have our own 
14   autonomous commission and personally, yet again, I'm 
15   speaking for a charity that we have more charity 
16   representation because that's what this is all about.  
17   So I just wanted to say thank you for your 
18   organization to date and that we are needy.  Because 
19   that's what we're here for is to advise them on what's 
20   going on.
21                 CHAIR BRACKETT:  Thank you.  We 
22   appreciate that Janice.  Just an observation that I'm 
23   sure every single one of you have had and past members 
24   too.  So many people don't take advisory for what it 
25   is.  They are disappointed in us because we don't make 
0102
 1   legislative changes and that we merely advise the 
 2   Lottery Commission, and then they take the action.  
 3   But that's just a comment.  I know when I go back to 
 4   West Texas people all the time are saying to me, "Why 
 5   didn't you tell them to do so" and you might tell 
 6   them, but they are not going to do it.  So -- do you 
 7   have a comment, Larry?  
 8                 MR. WHITTINGTON:  Yeah, I think 
 9   whenever books like this are written at whatever 
10   legislative meeting, they should talk to people who 
11   know what's going on, like the Bingo Advisory 
12   Committee.  So they can overturn a lot of this before 
13   it's written really.  I just felt like somebody got 
14   together and said, "Hey, we've been there studying 
15   this for five years."  What did you learn for five 
16   years?  "Oh, well, I learned this," instead of people 
17   talking about what's happening today; and I think it's 
18   all misconstrued because of that reason, because they 
19   haven't talked to the proper people, bingo itself.  
20                 CHAIR BRACKETT:  Oh, brother.  Who's 
21   this stranger over here that wants to make comments to 
22   us?  John Doe, right?
23                 PUBLIC SPEAKER BISHOP:  I know that I'm 
24   wearing all y'all out, but I feel moved to support the 
25   Bingo Committee without being in a discussion.  
0103
 1   Janice, I'm sorry that we didn't agree with anything 
 2   you said but...
 3                 I hate to think what would happen if we 
 4   had this forum without the proposed rules and where we 
 5   would have ever had any input into the staff.   
 6   Mr. Fenoglio suggested more rapport, you know, people 
 7   that have a stake in bingo instead of prior to the 
 8   rule-making process, prior to the proposal and 
 9   publishing, other than just the this meeting down here 
10   because a lot of people don't have time to come down 
11   here.  People here are busy, and we're all 
12   volunteers.  This room is full of volunteers, those 
13   who are not in the commercial industry of bingo.  But 
14   I truly support Bingo Advisory Committee, and the job 
15   that you guys do and volunteering your time.  My 
16   question would be is that they're calling for y'all to 
17   do this stuff, but where's the money for it?  Are you 
18   supposed to go into your pockets for it?  Well, if 
19   they want you to be charged with that duty and 
20   responsibility, I think there should be discussion 
21   about funding and giving you guys some money, a budget 
22   of some kind to spend.  I understand the budget things 
23   were just submitted, and I don't know if there's 
24   anything for that in the bottom of the budget or not.  
25   So we don't get it, I guess.  Thank you.
0104
 1                 CHAIR BRACKETT:  Are there any other 
 2   comments?
 3                 MR. PAVLOVSKY:  Yes, ma'am.  The thing 
 4   that comes to my mind when I read this particular 
 5   paragraph, it sounds like to me that the Sunset 
 6   Commission is talking to everyone else other than the 
 7   BAC here because we don't have the authority to tell 
 8   the commissioners, you know, what to do.  We can't go 
 9   out here and enforce Chapter 2110 of the Government 
10   Codes.  There's just -- I mean, we don't have that 
11   authority; and I wonder whether we should take any 
12   action on that particular item because of that.  If we 
13   do vote on it, I wouldn't have a problem doing it.  
14   Maybe we need to put an asterisk behind that and say 
15   the reason is because, you know, the commission -- the 
16   Sunset Commission should be talking to somebody else 
17   other than us -- and maybe they are addressing someone 
18   else other than the BAC when they wrote this 
19   particular clause.
20                 CHAIR BRACKETT:  Well, it's really not 
21   a real strong thing to say that the commission should 
22   advise the necessity of the advisory committee.  
23                 MR. PAVLOVSKY:  Well, they're saying 
24   they should comply with Chapter 21?
25                 CHAIR BRACKETT:  Well, yeah.
0105
 1                 MR. PAVLOVSKY:  To me they're saying 
 2   they ought to obey the law.  Well, we can't enforce 
 3   the law.
 4                 MS. TAYLOR:  I think this is kind of a 
 5   give me.  I mean, you can't say no to this because the 
 6   fact is they should be doing this.
 7                 MR. PAVLOVSKY:  I agree.
 8                 MS. TAYLOR:  They should be useful.  If 
 9   the BAC is not hear serving its purpose, then we 
10   shouldn't be here.  But I, like Larry, feel this is 
11   going to be a really good year and a couple of months 
12   from now the commission is going to be real glad to 
13   have the BAC there to help guide their decisions.
14                 CHAIR BRACKETT:  Another point is that 
15   somewhere over -- into this setup by the legislature 
16   -- this is by statute that the committee is required 
17   and, secondly, that runs out on like March 5th of 
18   2003, so this might be wasted effort to even 
19   consider.  But I think it would be fine to have the 
20   commission guide we are a necessity.
21                 MR. WHITTINGTON:  I agree.
22                 CHAIR BRACKETT:  I think they'll find 
23   that we are.  Well, I'm sorry I stated that opinion as 
24   chair.  I shouldn't have done that.
25                 Okay.  All those in favor of 7.3, the 
0106
 1   commission should evaluate the necessity of the 
 2   Advisory Committee please say aye.
 3                 COMMITTEE MEMBERS:  Aye.
 4                 CHAIR BRACKETT:  And any opposition?  
 5   Okay.
 6                 All right.  7.4, the commission should 
 7   ensure a greater balance between public and industry 
 8   members on the BAC.  Any comments?  We ought to start 
 9   issuing or renting roller blades, I think, for some of 
10   these people.
11                 PUBLIC SPEAKER FENOGLIO:  Thank you, I 
12   think, Madam Chair.  
13                 CHAIR BRACKETT:  It's just another way 
14   to make money for the charity.
15                 PUBLIC SPEAKER FENOGLIO:  My name is 
16   Stephen Fenoglio.  It's hard to argue about the 
17   recommendation having a greater balance.  However, 
18   with all due respect -- and I've never met 
19   Mr. Turman.  He's never been to one of the committee 
20   meetings.  It sounds good to have --
21                 CHAIR BRACKETT:  Just as a point of 
22   information, he has resigned; and the commission will 
23   be replacing him.
24                 PUBLIC SPEAKER FENOGLIO:  And you made 
25   that comment at the beginning, but that still doesn't 
0107
 1   change the fact that with the people the problem is 
 2   finding that rare individual who has plenty of time 
 3   and wants to come to this time and time again.  My 
 4   sense is that y'all are making this trip six, eight 
 5   times a year and spending, you know, at least a half a 
 6   day; and the salaries y'all get are truly phenomenal, 
 7   of course.  And you know it's destined for failure.
 8                 This is an advisory committee and it 
 9   sounds good to think, "Well, we ought to get members 
10   of the public."  I would suggest that Mrs. Matthews is 
11   quite capable of representing a public interest as a 
12   representative of the conductor lessor, the same way 
13   that Ms. Taylor does as does Mr. Tawil and the Chair 
14   and so on.  The fact is that there's a public interest 
15   in charitable bingo, and the staff has a role to play 
16   in that, as well.  And it sounds great to say, "Well, 
17   we ought to have public involvement," but unless you 
18   have people that are (A) committed to the process and 
19   (B) knowledgeable about the process -- bingo is a 
20   unique business, and it's a hard business to learn.  
21   There's no course work in this college, as far as I've 
22   determined, where you can learn what bingo is or is 
23   about.  So I think this is one of those notions of a 
24   perfect world.  We would have more truly public 
25   involvement, someone who's not tied in any way, shape, 
0108
 1   form, or fashion in the industry; but in the real 
 2   world those people are few and far between.  And you 
 3   may end up having a lot of empty chairs. I think you 
 4   would have a lot of the empty chairs.  Perhaps empty 
 5   voices means that the down side of that is you can 
 6   have people from the public who don't have a clue 
 7   about bingo, and it would be a waste of time.  I'll be 
 8   happy to answer any questions.
 9                 CHAIR BRACKETT:  Well my question is:  
10   Who is the public?  If the public is our bingo 
11   customers, then they are certainly representing.
12                 PUBLIC SPEAKER FENOGLIO:  Yes.  
13                 CHAIR BRACKETT:  If they are just the 
14   man on the street, they could care less about bingo.  
15   They don't even know how to spell it.  Then why bother 
16   to represent their interest to that?
17                 PUBLIC SPEAKER FENOGLIO:  I think your 
18   question answers itself.  I think you answered it.  
19   Yes.  Thank you.
20                 PUBLIC SPEAKER SMITH:  I'm William 
21   Smith.  This is a personal observation.  I think that 
22   we should have more charitable representatives here, 
23   charitable bingo operators here that work in the 
24   industry daily and that's how they make money for 
25   their charities.  They know about the industry more 
0109
 1   than any of us.
 2                 CHAIR BRACKETT:  Thank you.
 3                 PUBLIC SPEAKER CHAVEZ:  I'm Rachel 
 4   Chavez with the Ethel Daniels Foundation, one of the 
 5   charities and I'm very grateful for the benefits that 
 6   we receive from the bingo.  And I believe that there 
 7   probably should be more charities here, and I am a 
 8   volunteer.  Actually I am a flight attendant for a 
 9   major airlines.  I do not get paid for this. I was 
10   just informed Thursday about this meeting.  The 
11   possibility of even being off -- I was scheduled for a 
12   trip Sunday and Monday.  I would have been back from 
13   Guadalajara but I was able to put in for vacation to 
14   come down here and I asked my house director to come 
15   with me.  And I understand after being here today how 
16   important it is to be here, to be more involved in the 
17   process as well as our bingo people and I believe that 
18   we need more of us down here, as well, and I'm hoping 
19   we have some contacts back in Dallas and we'll call 
20   them immediately and inform them how important it is 
21   and what you-all are during and I truly do appreciate 
22   your work and thank y'all, too, for your work.
23                 CHAIR BRACKETT:  Well, thank you.  We 
24   appreciate you coming.  And there will be some dates 
25   to remember that will be important times.  Are there 
0110
 1   any further comments?
 2                 MS. MATTHEWS:  I move that we reject 
 3   point -- 7.4.
 4                 MR. MOORE:  I second.
 5                 CHAIR BRACKETT:  Okay.  It's been moved 
 6   and seconded that we reject 7.4.  All those in favor, 
 7   please say aye.
 8                 COMMITTEE MEMBERS:  Aye.
 9                 CHAIR BRACKETT:  Any opposed?
10                 Okay.  7.5 is the commission should 
11   limit the committee members terms for office to three 
12   years and stagger the appointments.
13                 MS. TAYLOR:  I move the BAC accept this 
14   recommendation.
15                 CHAIR BRACKETT:  Okay.
16                 MR. WHITTINGTON:  I second.
17                 CHAIR BRACKETT:  Okay.  It's been moved 
18   and seconded that we accept this.
19                 MS. TAYLOR:  I have a quick question.  
20   Isn't there already something written about that?    
21   Bill 9 is it?  It was a recommendation that he made 
22   previously when we were meeting across the street 
23   somewhere.
24                 CHAIR BRACKETT:  Okay.  Has this been 
25   presented to the Lottery Commission?
0111
 1                 MR. SANDERSON:  I believe it will be 
 2   presented tomorrow in the commission meeting about the  
 3   BAC rule.
 4                 MR. PAVLOVSKY:  Madam Chair, what is 
 5   that recommendation?  Is it just like this one?
 6                 MS. TAYLOR:  The recommendation was in 
 7   books the last time.  It was the one that had several 
 8   pages.  It was the rule that included one of Larry's 
 9   charities that got on the bad list that he's been 
10   kicked off the committee.
11                 CHAIR BRACKETT:  Terms with a limit, 
12   3-year terms.  Okay.  It's been moved and seconded 
13   that we support the commission to lengthen committee 
14   members' terms to three years and stagger the 
15   appointments.  All those in favor, please, say aye.
16                 COMMITTEE MEMBERS:  Aye.
17                 CHAIR BRACKETT:  Are there any 
18   opposed?  Okay.  Thank you.
19                 7.6 is that the commission should 
20   develop membership rules for the Bingo Advisory 
21   Committee.  I thought this was done.
22                 MS. MATTHEWS:  It's in the report.
23                 CHAIR BRACKETT:  So what do we do with 
24   this?  It's in the rule.
25                 MS. TAYLOR:  I make a motion we accept 
0112
 1   7.6.
 2                 MR. MOORE:  I'll second that.
 3                 CHAIR BRACKETT:  All right.  It's been 
 4   moved and seconded that we accept 7.6.  All those in 
 5   favor say aye.
 6                 COMMITTEE MEMBERS:  Aye.
 7                 CHAIR BRACKETT:  Are there any opposed?
 8                 All right.  7.7, appoint an attorney to 
 9   monitor the BAC meetings.  This has already been 
10   done.  Diane Morris has been assigned to us, and she 
11   hides in a corner.  If you are looking for her, she's 
12   over there.  So I think it would be proper for us to 
13   just  accept this because we have already gone over it 
14   with the rule.
15                 MS. MATTHEWS:  I move we accept 7.7.
16                 CHAIR BRACKETT:  Okay.  Do you want to 
17   second?
18                 MR. TAWIL:  I second.
19                 CHAIR BRACKETT:  Okay.  It's been moved 
20   and seconded that we accept 7.7.
21                 COMMITTEE MEMBERS:  Aye.
22                 CHAIR BRACKETT:  Is anyone opposed to 
23   it?  All right.
24                 All right.  It's been suggested we take 
25   all of 8 as just one item.  Is everyone in agreement 
0113
 1   with that?  As the system service provider, and Saleem 
 2   is the system -- the current system service provider 
 3   on the committee, and he has a statement he would like 
 4   he would like to make.
 5                 MR. TAWIL:  Thank you, Madam Chair. 
 6   Fellow committee members, I respectfully disagree with 
 7   the staff report recommendation as set out in Issue 
 8   No. 8, licensing and regulation of system service 
 9   providers; and all automated bingo services should be 
10   continued.  The Sunset Advisory Commission staff 
11   recommendations are based on a faulty statement of the 
12   statutes concerning automated bingo services.  
13   Relevant statutes, Texas Occupational Code 2001.002, 
14   these three provide that automated bingo systems mean 
15   a computer program or a system for registering or, 
16   emphasis added, for bingo sales, for prize inventory, 
17   prize fees, and et cetera.  Item No. C also goes on to 
18   say other business purposes, as well.  The staff 
19   report incorrectly states "an automated bingo system 
20   and computer program that registers and accounts for 
21   the sales and prizes, et cetera.
22                 Further the staff erroneously reports 
23   that an automated bingo system may be used for other 
24   business purposes.  Essentially the Sunset Commission 
25   Staff reports erroneously and assumes that an 
0114
 1   automated bingo systems are exclusively or near 
 2   exclusively for accounting purposes.
 3                 My company TXTV corporation has an 
 4   automated bingo system that the Texas Lottery 
 5   Commission has approved for all uses provided under 
 6   the statute.  TXTV was notified by them in January, 
 7   1988, that it's automated system was approved on a 
 8   restricted use basis.  TXTV subsequently worked to 
 9   automate the system to address the concerns of the 
10   Texas Lottery Commission and to make it more useful 
11   for its users.  In July of 1998, TXTV asked the Texas 
12   Lottery Commission for an unrestricted approval of 
13   it's modified automated bingo system.  TXTV was 
14   notified of unrestricted approval of its modified 
15   automated bingo system by letter from the Lottery 
16   Commission in November of '98.
17                 TXTV's automated bingo system well 
18   represents a significant investment that is now ready 
19   to provide for the charities and the Texas economy.  
20   Because the staff report is based on the faulty 
21   premise and the automated bingo system is now approved 
22   and ready for unrestricted use, the Texas Lottery 
23   Commission should continue this licensing automated 
24   bingo service.  Thank you.
25                 Madam Chair, I would appreciate if you 
0115
 1   would read that into the record tomorrow as part of 
 2   your report to the commissioners.
 3                 CHAIR BRACKETT:  Okay.  I would be glad 
 4   to.  Would y'all like to have some questions on it, 
 5   Larry -- I was looking at Larry, I'm sorry.
 6                 MR. WHITTINGTON:  Okay.
 7                 MR. TAWIL:  Madam Chair, I move that we 
 8   reject the recommendation on Sunset Commission staff 
 9   Item No. 8.
10                 MS. TAYLOR:  I second that.  
11                 MS. BRACKETT:  All right.  It's been 
12   moved and seconded that we reject Sunset Item C.  All 
13   those in favor of this say aye.
14                 COMMITTEE MEMBERS:  Aye.
15                 CHAIR BRACKETT:  All those opposed?   
16   Okay.  Then we --
17                 MS. TAYLOR:  I have one question that I 
18   would like to ask about the items in January.  Has the 
19   commission taken a position on the Sunset report?  
20                 MR. SANDERSON:  The Texas Lottery 
21   Commission recognizes the hard work that was done by 
22   the staff of the Sunset Advisory Commission, and we 
23   are currently reviewing the report.  And as a process 
24   prevails itself, we will be supplying our comments at 
25   a later date.
0116
 1                 MS. TAYLOR:  Okay.  Then I would like 
 2   to make the recommendation that the chair communicate 
 3   to the BAC their position on the recommendations to 
 4   the commission and have the commission to take a 
 5   similar position.
 6                 MR. TAWIL:  I second that motion.
 7                 CHAIR BRACKETT:  Do I need to repeat 
 8   the motion you made for the question?
 9                 MR. WHITTINGTON:  So what are you 
10   saying?  We --
11                 MS. TAYLOR:  No.  I'm asking Virginia 
12   to go to the commission and ask how they feel about 
13   the individual recommendations contained in the report 
14   and ask them to support us in our decisions or 
15   recommendations on the recommendations.  
16                 MR. WHITTINGTON:  Yes.
17                 CHAIR BRACKETT:  Are you ready for the 
18   question, then?  All those in favor please say aye.
19                 COMMITTEE MEMBERS:  Aye.
20                 CHAIR BRACKETT:  Oppose?
21                 And I will --
22                 MS. TAYLOR:  I would like to ask one 
23   more thing.  Would it be appropriate to make 
24   recommendations of our own that we would like to see 
25   in the report?  Is that out of line with the agenda?
0117
 1                 MS. MORRIS:  I've been back there to 
 2   stay out of your way.  I'm Diane Morris.  I'm the 
 3   assistant general counsel.  I didn't want to get in 
 4   your way.  No.  I think your question is:  Is it 
 5   appropriate -- and I have to say maybe I missed 
 6   something, but I didn't hear Item No. 9.  Yet, I know 
 7   we went to No. 8; but I thought Issue 9 may also 
 8   deserve some of your attention and maybe I'm just 
 9   misunderstanding -- or 10?
10                 MR. WHITTINGTON:  No. 10.
11                 MS. MORRIS:  Are you at the end of all 
12   the bingo issues?
13                 MR. WHITTINGTON:  Key element of bingo.
14                 MS. MORRIS:  And I know that you went 
15   ahead and spoke.  As you said your motion, I thought 
16   you were talking about all your in motions, but are 
17   you going to reach 10 or not?
18                 CHAIR BRACKETT:  Well, I had planned to 
19   it.
20                 MS. MORRIS:  Well, I still want to go 
21   ahead and answer your question as I understand your 
22   motion.  And I think that in fairness, so that the 
23   Lottery Commission can understand, it may be helpful 
24   to give more meat to something than either "I accept 
25   or reject."  You might want to give them some reason.  
0118
 1   And there's room for y'all to deliberate.  For reason 
 2   that you might -- what you might want to see or other 
 3   suggestions.  And I think that's what you were asking 
 4   me.  So, yes, I do.
 5                 MS. TAYLOR:  Yes.
 6                 CHAIR BRACKETT:  Okay.  I would like to 
 7   welcome Mario to the meeting.
 8                 MR. MANIO:  Thank you.
 9                 CHAIR BRACKETT:  He has been traveling 
10   but he has kept up with bingo because he wrote me a  
11   note.  He's done his homework.  So thank you, Mario.
12                 MR. MANIO:  Thank you.
13                 CHAIR BRACKETT:  All right.  On issue 
14   No. 10, it's dealing with key element of the Bingo 
15   Alien Act.  It says they do not conform to the license 
16   and procedures, commonly applied license and 
17   procedures.
18                 MS. TAYLOR:  I would like to make a 
19   motion that the Bingo Advisory Committee supports 
20   Issue 10.  
21                 CHAIR BRACKETT:  Is there a second?
22                 MR. MANIO:  I second the motion.                  
23                 CHAIR BRACKETT:  Thank you.  It's been 
24   moved and seconded that we support all sections of 
25   Issue 10, which deals with licensing  enforcement and 
0119
 1   the impact of that.  All those in favor please say.
 2                 COMMITTEE MEMBERS:  Aye.
 3                 CHAIR BRACKETT:  Any oppose?
 4                 Okay.  Thank you.  Are there any other 
 5   comments from the public?  We're getting close to the 
 6   end of our agenda, and we'd be happy to hear if 
 7   there's anything else you would like to comment on.  
 8   Chairman Clowe, do you have any thoughts?
 9                 MS. TAYLOR:  I would like to offer a 
10   couple of things that I wish I had seen in this 
11   report.  There's been a lot of papers passed around of 
12   things that the Bingo Advisory Committee has discussed 
13   that we felt would help improve, if anything.  There 
14   are seven items that are close to my heart, and I'll 
15   read them to you:  one, allow progressive bingo as 
16   provided in House Bill 2119727, regular session with 
17   the limit of $21,000; two, repeal sales tax on bingo 
18   paper, pull-tabs at number 5 divided by the tax for 
19   charitable organizations conducting bingo; three, 
20   allow charities to have 12 temporary licenses per 
21   year; four, allow use of debit cards with any 
22   associated expense as an authorized bingo expenditure;  
23   five, revise the licensing fees to be commensurate 
24   with the cost of administering charitable bingo and 
25   require use of excess funds to be used for advertising 
0120
 1   bingo; six, eliminate the winner's prize fees on 
 2   prizes of $5 or less; seven, allow video pull tab 
 3   terminals.
 4                 MR. MOORE:  Did you mention the 40 
 5   percent rule on the paper?  
 6                 MS. TAYLOR:  Near and dear to my heart. 
 7   Feel free to add anything you would like to as near 
 8   and dear to your heart.
 9                 MR. MOORE:  I just want to make a 
10   comment.  These things she just brought up were all -- 
11   had been bantered about for this three or four months  
12   leading up to this review and to be honest with you, I 
13   was are pretty disappointed.  I didn't see any of 
14   these in the report.  I would hope that may be we can 
15   be effective in the next few weeks and make a 
16   presentation at Sunset and bring up some of these 
17   points.  I don't know if that's in our ability, but we 
18   sure would like to at least be heard.
19                 CHAIR BRACKETT:  Sure.  You're talking 
20   about the hearings on the 24th and 25th?
21                 MR. MOORE:  Right.
22                 CHAIR BRACKETT:  Well, I would assume 
23   that we certainly could.
24                 MS. MORRIS:  I'm thinking that, at the 
25   very least, we might want to post the presence of the 
0121
 1   BAC members if you're going to be there.  I will check 
 2   with my general counsel.  But I want to make sure.  
 3   But generally the answer is, no, there's no 
 4   prohibition for the members of the BAC to come to the 
 5   Sunset hearing and participate in the recommendation.
 6                 MS. TAYLOR:  So with the addition of 
 7   No. 8, I was wondering if anybody felt very strongly 
 8   about they would like to have seen in this commission 
 9   report.
10                 PUBLIC SPEAKER BRANOM:  I'm Ed Branom.  
11   Can you hear me okay?  One of issues that are close to 
12   me is the fact that we're not able to revenue share 
13   within bingo itself.  And the reality of it is most of 
14   the people who are in the bingo business revenue share 
15   when they are reducing the rent on Mondays and 
16   increasing the rent on Saturdays, changing the 
17   charities from Monday and Tuesday.  It's a freaking 
18   nightmare, to be honest with you.  If all we have to 
19   do is allow revenue share so that each charity makes 
20   the same amount of money as every other charity.  So 
21   the charities who play on Mondays are not envious of 
22   the people who play Saturdays.  Not a company in the 
23   world does it like that; and why we don't do it, I 
24   don't have a clue.
25                 PUBLIC SPEAKER BISHOP:  Don Bishop, 
0122
 1   Dallas, Texas.  One of the things that's been a 
 2   problem from the very beginning in bingo is the thing 
 3   about the smaller individual charities being required 
 4   to have an operator present at every occasion, and I 
 5   was wondering if we could start some reconsideration 
 6   of having a particular operator in the commercial 
 7   halls.  In the charity halls, it's no problem.  I 
 8   present when charities are there.  But in the 
 9   commercial halls, if we could have some sort of 
10   cashier or assistant cashier/manager position because 
11   in reality that's what we have anyway.  We just don't 
12   have it in the law, and the way that most of the 
13   places do is the charities make everybody a member of 
14   their charity.  And it's just -- it's really unwieldy 
15   and unmanageable really.
16                 So if we could have it may be even on a 
17   licensing basis, maybe we could have people licensed 
18   because every time a person who has gone through the 
19   system, the DPS and all, to work in one place.  They 
20   leave there.  They go to another place and be sent 
21   through the whole thing again.  When we review our 
22   licenses, that all has to be done over again.  Each 
23   time each charity and all their employees have to go, 
24   if I understand it right, through the DPS system once 
25   every year and that must be a pretty good expense for 
0123
 1   the commission to go through.  So I'd like to get 
 2   bylaws started on that and get it in the record or the 
 3   record with you to consider that in your next meeting.
 4                 PUBLIC SPEAKER BRESNEN:  Steve Bresnen 
 5   on behalf of the Bingo Interest Group.  One other 
 6   suggestion to you and that would be to add to your 
 7   list a two-year licensing for the charities.  Let's 
 8   eliminate 50 percent of the paperwork.  When it comes 
 9   to renewing those licenses, if there's been 
10   substantial changes, the officers or directors -- or 
11   maybe there is some other trigger set there for when 
12   you have to file a complete license application.  But 
13   if all things are stable, if we renew these licenses 
14   for a couple years at a time, that would give them 
15   stability and save them some money and get out of the 
16   paperwork behind that.
17                 MS. TAYLOR:  Are you talking about 
18   renewing licenses every two years and paying annually?
19                 PUBLIC SPEAKER BRESNEN:  Well, you 
20   know, obviously, we want to increase the bottom line 
21   of their charities, so one thing they could do is quit 
22   taking so much money out of it.  I can go either way. 
23   I think the paperwork causes concern, trouble, and 
24   difficulty.  When we went to lunch awhile ago, I had a 
25   half a dozen people say they were making money and the 
0124
 1   reason they were are quitting is because of the 
 2   paperwork.  So I think if we get rid of the paperwork 
 3   first -- obviously I would like to save them fees -- 
 4   whatever we can.  But a two-year licensing period 
 5   would be sufficient.  I don't know about you, but the 
 6   older I get, the world turns a whole lot faster than 
 7   it used to.  Plus it would save the Lottery Commission 
 8   staff a lot of time processing those applications.
 9                 MS. MORRIS:  Madam Chair, I was wrong 
10   in my prior statement.  I need to make a correct 
11   statement.  I had said when the question was asked 
12   going back to the public Sunset public hearing as a 
13   BAC member, and I misspoke.  As I understand it, the 
14   charge and the duty of the BAC is based from the 
15   commission as advisory and input to the commission.  
16   So I was wrong.  Certainly any person can attend the 
17   Sunset hearing on an individual capacity, but in 
18   insofar as whether the BAC should attend the Sunset 
19   hearing -- it may be that tomorrow you can address 
20   that to the commission to see if that is how they 
21   perceive your duties or your purview.  However, I was 
22   wrong to say that so quickly.
23                 CHAIR BRACKETT:  All right.  Gary Grief 
24   who is a Sunset agency project manager would like to 
25   make some comments.
0125
 1                 MR. GRIEF:  Thank you, Madam Chair.  
 2   For the record, my name is Gary Grief; and I'm the 
 3   director of policies and operations and more 
 4   importantly, for today, a project manager.  I am in 
 5   charge of the putting together the official agency 
 6   response for the Sunset report, and I just want to 
 7   bring to the BAC's attention that the deadline for 
 8   submitting our response for the agency is the 25th of 
 9   September.
10                 In our commission meeting tomorrow, the 
11   commissioners will be hopefully approving our official 
12   written response and, not knowing the will of the 
13   commissioners and what part, if any, of what comes out 
14   of this meeting today will ultimately be approved, I 
15   would ask that the BAC consider bringing any 
16   information or recommendations or the results of the 
17   votes that were taken today to the commission meeting 
18   tomorrow in the form of one concise document that I 
19   can have.  So I can then have time to take what 
20   portion, if any, of that and include it into the 
21   agency's response.  I guess my point is we're short on 
22   time.  If I don't have something or the commissioners 
23   don't have something that they can really look at and 
24   review and think about in tomorrow's commission 
25   meeting, we're going to be up against the deadline.
0126
 1                 MS. TAYLOR:  I'll put that together 
 2   this evening, and I'll have it tomorrow.
 3                 CHAIR BRACKETT:  Well, I was going to 
 4   ask what your definition is of "one concise document" 
 5   because I thought that's what we were planning to do 
 6   so far.
 7                 MR. GRIEF:  It sounds like we were 
 8   on -- we're in sync.  Perhaps a memo only.  You know, 
 9   you're going to have at least one memo or statement 
10   and maybe you can add to that.
11                 CHAIR BRACKETT:  Okay.  Any other 
12   suggestions that would make our point known and your 
13   work easier?  
14                 MR. GRIEF:  If possible, Ms. Taylor, if 
15   you're going to be working on that, if you could bring 
16   that in the form of a disk, perhaps, computer disk.  
17   That would help us too.  I would appreciate it.  I 
18   appreciate that.
19                 MR. TAWIL:  I would be happy to answer 
20   any questions.  If you'll hand me a list of what we 
21   voted on.  What's so difficult?  Is a simple sheet of 
22   paper at a minimum --
23                 MR. GRIEF:  My understanding is 
24   whatever the BAC comes up with, that's going to be 
25   presented to the commission -- the Lottery Commission 
0127
 1   tomorrow, and what I'll take back to the Sunset 
 2   Commission is what our commission votes on as an 
 3   approved agency response.  And I don't know how that's 
 4   going to shake out in tomorrow's Lottery Commission 
 5   meeting.
 6                 MR. TAWIL:  You can't say this is the 
 7   BAC's recommendation?
 8                 MR. GRIEF:  No.  No, sir.  I report to 
 9   the Lottery Commission.  
10                 MS. MATTHEWS:  Could you explain to me 
11   the process?  I mean, when is this accepted or 
12   rejected or changed?  What is the process?
13                 MR. GRIEF:  We will submit our official 
14   agency's response on the 12th, as I said, and then on 
15   the 12th, there will be the public hearing.  And in 
16   that public hearing not only the issues that were 
17   raised in the report can be heard, any that our agency  
18   chooses to raise in the response will or may include, 
19   but also any additional issues raised by the Sunset 
20   Commission members or staff or members of the public 
21   could also be considered at that public hearing.  Once 
22   that public hearing is concluded, a hearing in 
23   November -- I think, the week of November 13th -- 
24   wherein no more public testimony will be heard.  But 
25   the Sunset Commission will make their final decisions 
0128
 1   on the recommendations.
 2                 MS. MATTHEWS:  And then those are made 
 3   to who?
 4                 MR. GRIEF:  Those would be turned over 
 5   to the legislature and during this is when the next 
 6   legislative Sunset bill will be developed, filed, and 
 7   passed within the discretion of the legislature, 
 8   whatever recommendations are passed. Okay.
 9                 MR. WHITTINGTON:  Well, let me ask you 
10   a question.  So are you in agreeance with anything 
11   that we've talked about?
12                 MR. GRIEF:  I don't have an opinion one 
13   way or the other.
14                 MR. WHITTINGTON:  I think we got one 
15   day, and y'all had five years.
16                 MR. TAWIL:  Larry, I think the staff 
17   recommendation to the Sunset Commission itself will 
18   decide whether this goes forward, if anything, and 
19   there could be a whole new set of issues that could 
20   come out of this or something totally different.
21                 MR. GRIEF:  Any other questions for me?
22                 CHAIR BRACKETT:  No.  Would anyone from 
23   the public -- anybody have anything they would like to 
24   ask?  Thank you.  We appreciate it.  Thank you for 
25   being here today.
0129
 1                 MS. TAYLOR:  Virginia, just so we can 
 2   put into this -- with our original acceptance and 
 3   rejecting of these recommendations, I'd like to add 
 4   the ten recommendations that we discussed, the seven I 
 5   read earlier, the eliminate the 40 percent rule, 
 6   revenue sharing in halls, two-year licensing period.  
 7   I'd like to make a motion that the BAC support these 
 8   items, and we would like to see them in the Sunset 
 9   report.
10                 MS. BRACKETT:  Okay.  Do you need for 
11   her to read those to get them all in this motion?  
12   Will it help you to read all these together?  If you 
13   could, list all them at one time here.
14                 THE COURT REPORTER:  Yes, go ahead.
15                 MS. TAYLOR:  One, allow progressive 
16   bingo as provided in House Bill 2119727, regular 
17   session with the limit of $21,000; two, repeal sales 
18   tax on bingo paper, pull-tabs at number 5 divided by 
19   the tax for charitable organizations conducting bingo; 
20   three, allow charities to have 12 temporary licenses 
21   per year; four, allow use of debit cards with any 
22   associated expense as an authorized bingo expenditure;  
23   five, revise the licensing fees to be commensurate 
24   with the cost of administering charitable bingo and 
25   require use of excess funds to be used for advertising 
0130
 1   bingo; six, eliminate the winner's prize fees on 
 2   prizes of $5 or less; seven, allow video pull-tab 
 3   terminals; eight, eliminate the 40 percent rule in 
 4   electronic bingo; nine, all revenue sharing in the 
 5   halls; ten, allow for a two-year licensing period.
 6                 MR. WHITTINGTON:  Could we add one 
 7   more?  In one hall two charities play per day, first 
 8   session, second session.  And, as we all know, 
 9   sometimes the second session is a lot better than the 
10   first on some days.  Some days the first is better 
11   than the second.  How come those two charities that 
12   are allocated to play on that day, why can't they play 
13   either session instead of just first or just second.
14   Why can't they be set up to --
15                 MS. TAYLOR:  I believe if we allow the 
16   revenue sharing as was discussed by Redmen that that 
17   wouldn't be a problem.  That would make a bit of 
18   difference.
19                 MR. WHITTINGTON:  But if not, let's 
20   just say -- if not, I mean, you are playing that day 
21   anyway.  Why don't they play second session on this 
22   day and they play first.  A lot of paperwork.
23                 CHAIR BRACKETT:  You're talking about 
24   flip-flopping?  
25                 MR. WHITTINGTON:  Yes.  I knowledge 
0131
 1   that the second session is better than the first and 
 2   the first session if we flip-flop there would be more 
 3   balance for receiving monetary gain.
 4                 CHAIR BRACKETT:  Like revenue sharing, 
 5   I guess.
 6                 PUBLIC SPEAKER WOODS:  My name is 
 7   Janice Woods.  A quick comment to Gary -- with all due 
 8   respect -- from the Lottery Commission.  You are a 
 9   Bingo Advisory Committee, and I think that the Bingo 
10   Advisory Committee has a right to be heard before the 
11   commissioners and whatever we have to say can 
12   certainly be condensed down to, you know, a brief 
13   summary of what happened today.  But I just take 
14   offense to that and just kind of wanted to let y'all 
15   know that the bingo industry has a right to be 
16   well-heard in front of the commissioners in whatever 
17   detail is necessary.  Thank you.
18                 MS. BRACKETT:  Thank you.  That is kind 
19   of drawing a close on this particular agenda item, but 
20   I really would like it if anybody has any comments 
21   they would like to make or any concerns they would 
22   like to express, I hope you would take advantage of 
23   this opportunity.  Did I not state the motion?  I'm 
24   sorry.  We need a second.
25                 MR. TAWIL:  I second.
0132
 1                 MS. BRACKETT:  Okay.  Does everyone 
 2   understand Suzanne's motion?  I don't need to repeat 
 3   it?  I'm sorry I was switching on that.  All those in 
 4   favor of the motion as expressed by Suzanne and 
 5   seconded by Saleem please say aye.
 6                 COMMITTEE MEMBERS:  Aye.
 7                 CHAIR BRACKETT:  And all those 
 8   opposed?  Okay.  Then we will be making that 
 9   recommendation and adding those things to our 
10   recommendations.
11                 This might be a good time to take a 
12   quick break.  Maybe like 15 minutes, and we'll come 
13   back together and quickly go over some other things.
14                 (Recess from 2:33 p.m. to 2:57 p.m.)
15                 CHAIR BRACKETT:  All right.  We'll call 
16   back to order.  And what we need to do right quick is 
17   get our heads together and think about our report 
18   tomorrow to the lottery commissioners because they 
19   need to be sure and understand what our thinking is 
20   behind our actions, both the -- well, maybe not the 
21   acceptance but the rejections of some of the issues.  
22   And if we can get open our notebooks and get back to 
23   No. 4.1. Suzanne has some good notes, and we can real 
24   quickly -- briefly will y'all tell me what page that 
25   is on.
0133
 1                 MS. TAYLOR:  34.
 2                 CHAIR BRACKETT:  Okay.  Found it.  Run 
 3   through these in sequence and make sure we're all 
 4   satisfied with why we are rejecting and identify that 
 5   we are rejecting and that we have enough information 
 6   to send back to the commissioners.  Okay.  The first 
 7   one was issue No. 4.1 to simplify the statutory 
 8   charitable distribution formula.  Suzanne, what are 
 9   your notes on there.
10                 MS. TAYLOR:  The changes would be 
11   detrimental to the organization.  Do you want me to 
12   read all the notes that I have on this?
13                 CHAIR BRACKETT:  Well, just -- let's 
14   just kind of compare things.  I have that less than 15 
15   percent would remain.  All support cannot carry it 
16   out, that some estimate it would be 70 percent out of 
17   the business.  Any other notes on that?
18                 MR. WHITTINGTON:  Bingo in Texas is 
19   just not making enough money this day and time to even 
20   deal with 10 percent, no less 25 because every day is 
21   different.  You can't say weekends are better because 
22   Mondays are better than weekends sometimes.  That's 
23   how bingo is in Texas.
24                 MS. TAYLOR:  So it's our understanding 
25   that 7 percent or thereabouts of the charities 
0134
 1   currently in this business could not remain in 
 2   business if required to make this distribution.
 3                 MR. WHITTINGTON:  I would say 80 
 4   percent.
 5                 MS. TAYLOR:  80 percent?
 6                 MR. WHITTINGTON:  Yes.
 7                 CHAIR BRACKETT:  And this is based on 
 8   your business experience with --
 9                 MR. WHITTINGTON:  Yes, 20 years.  And 
10   I'm talking about today's, Tom, not 1997.  I'm talking 
11   about 2002.
12                 MR. MOORE:  I think we're going to need 
13   some back-up data.  I don't think we can just assume 
14   these things.  There's David Heinlein and there's been 
15   quite a few parties in the room here.  I'm sure even 
16   Fenoglio has a lot of data.  We can't just assume 
17   these things, but I think that talking with these 
18   people, their data is there to back this up.  So 
19   somehow we need to bring that along with us, if not 
20   tomorrow, you know, in the near future.
21                 MR. WHITTINGTON:  Well, I really think 
22   their data is talking about other states than Texas.  
23   I think that's basically their opinion on other states 
24   compared to Texas.
25                 MS. BRACKETT:  Okay.  Well, let's think 
0135
 1   on that a minute.  And let Chairman Clowe address how 
 2   the report should be tomorrow.  Okay.  Chairman?
 3                 COMMISSIONER CLOWE:  Thank you, 
 4   Virginia.  My name is T.C., Tom Clowe, Jr., and I'm a 
 5   Texas Lottery Commissioner and acting as chairman.  
 6   The reason I've been asked to speak with you at this 
 7   point in time with your meeting is I hope to clarify 
 8   for many of you who have been here today and been part 
 9   of this process what is going on in the Sunset process 
10   and to help you get in focus some of the things that 
11   you're attempting to achieve for your industry.  And I 
12   hope my remarks are going to be helpful and not 
13   confuse you or mislead you; and to that end, I've 
14   asked Kim Kiplin, the general counsel with the Lottery 
15   Commission, to be here with me.  And she is the 
16   authority that I turn to in regard to the process and 
17   legal correctness.  So if I make a mistake in the 
18   comments that I am going to make to you, I would want 
19   her to immediately correct me so I don't misspeak for 
20   a very long period of time.
21                 This is my first time to go through 
22   Sunset.  I have been associated with another State 
23   agency.  This is the first time that I, as a  
24   commissioner, have undergone Sunset.  And perhaps 
25   that's true for you as members of the industry and 
0136
 1   members of the BAC.  I think it is true for the other 
 2   two commissioners, and it may be true for many of the 
 3   staff members who are employed by the Texas Lottery 
 4   Commission.  It is an excellent process.  It is a 
 5   process wherein every State agency over a 12-year 
 6   period must be reviewed by a permanent agency, the 
 7   Sunset Commission and looked at very carefully and 
 8   determined whether or not that agency should be 
 9   continued as a State agency.  Just recently there was 
10   a State agency that was literally done away with 
11   because of some number of reasons.  I don't know the 
12   details on it, but it is a very serious undertaking.  
13   It is also, I think, in the case of this agency's 
14   review, a very positive experience for us.  I have 
15   been meeting with the staff here and with the Sunset 
16   staff numerous times and there has been excellent 
17   work.  There has been excellent effort devoted to this 
18   process, and we are coming through the process.  And I 
19   want to continue that work over and over again and 
20   what I'm saying to you:  This is a process, and it 
21   takes a number of steps.
22                 Next, I want to say to those members of 
23   the public who you heard today and have come forward 
24   and given testimony, thank you very much for your 
25   effort and the time you've committed to this and to 
0137
 1   the funds that probably most of you have taken out of 
 2   your own pockets to be here in Austin and say the 
 3   things that you wanted to say to this committee.  This 
 4   is really what government is all about.  And you 
 5   cannot sit at home in a State the size of Texas and be 
 6   unhappy with your State government and get anything 
 7   done and not come to Austin and participate the way 
 8   you-all have participated today.  And I want to thank 
 9   you for doing this.
10                 I also want to say to you that as a 
11   citizen who has done this for 25, 35 years, it is also 
12   a very frustrating process.  It is not something that 
13   you get immediate gratification from.  You have to 
14   come and you have to speak and you have to do other 
15   things, which I'm going to describe to you here this 
16   afternoon to get to a final conclusion, which is 
17   usually not exactly what you want but it may be 
18   something better than you had when you started.  I 
19   never got -- when I was in private enterprise trying 
20   to get out of State government what I want, what I 
21   asked for but I usually got enough to make it worth 
22   while for the effort I put forth.
23                 We've been meeting with the Sunset 
24   staff for a number of months now.  And Gary Grief, who 
25   is the chair of that committee for the Texas Lottery 
0138
 1   Commission, has brought us to a point where we have 
 2   the sunset staff recommendations because of your 
 3   active interests in the bingo industry; and a portion 
 4   of that was brought on by the problems that exist in 
 5   the bingo industry.  We have a large number of the 
 6   recommendations that have been made which relate to 
 7   bingo.  I think that's a little bit on the unusual 
 8   side because by a measure of revenue, the lottery is 
 9   so much larger than bingo.  You'd expect there to be 
10   made eight to two out of ten.  It's not that way, and 
11   the reason I think it's not that way is because you 
12   have focused in on the BAC meeting and with the Sunset 
13   staff on things that need to be addressed.  Now, 
14   that's to your credit.  You have gotten the issues in 
15   front of your staff.  The Sunset staff in my opinion 
16   -- now, again, all the remarks that I am making to you 
17   here this afternoon, remember I am not speaking for 
18   the commission.  I am speaking as one of three 
19   commissioners, not in a public meeting where it's a 
20   commission meeting with a public agenda.  I'm giving 
21   you my thoughts.
22                 My reaction to the Sunset report that 
23   you've been going over today is that for the most part 
24   they opted not to deal with what I call policy 
25   issues.  And many of the comments that Suzanne Taylor 
0139
 1   made when she introduced her list are policy issues.  
 2   They are issues that require either legislation or 
 3   rule changing to achieve.  In my opinion, the sunset 
 4   Committee -- the Sunset staff opted not to address 
 5   some of those issues.  The Lottery Commission staff 
 6   put some of those policy issues in front of the Sunset 
 7   staff, and they said, "We do not choose to deal," and 
 8   they put them aside, I think both from the lottery and 
 9   the bingo industry position.
10                 So if you didn't get some of the things 
11   in the report that you've been talking about that you 
12   wanted -- and I think the Lottery Commission side of 
13   it, the Lottery itself didn't get some of their policy 
14   issues answered that I think is coming on down the 
15   road.  What you have to do is to take public comment 
16   on the items that apply to the bingo industry.  You 
17   have voted on those items.  You have a sense of what 
18   the public input is and I think tomorrow as the chair, 
19   Virginia, of the BAC, it is your role to communicate 
20   to the commissioners what your position is.
21                 It has been suggested that you work 
22   with Kim or with Diane to help you to put that in a 
23   format that will be easy for the commissioners to 
24   assimilate, but your verbal presentation to the 
25   commissioners tomorrow is very important, the entire 
0140
 1   summation of what has happened here today.  And you 
 2   need to give the commissioner, in my opinion, as much 
 3   input and answer their questions as best you can so 
 4   they can understand what the BAC has voted on and why 
 5   they voted the way they did.
 6                 I've been asked here today, "How do you 
 7   feel about this," and my response is I cannot say.  I 
 8   am here today to hear, to understand the feelings of 
 9   the people.  But my time comes tomorrow.  That's when 
10   I'll be in the commission meeting, and I'll be ready 
11   to cast my votes.  There will be input from the staff 
12   tomorrow, from you, Bingo Division staff.  It may be 
13   different in some aspects from those recommendations 
14   that you-all are making as of your voting today.  And 
15   the commissioners tomorrow -- in order to be timely so 
16   that the response to the Sunset staff can be presented 
17   by September the 12th, the commissioners really need 
18   to make their decisions in that meeting tomorrow.  And 
19   I think the commissioners really have a tough job, to 
20   take all of this, not only for the bingo industry, 
21   what you worked on today, what the staff is making in 
22   the way of recommendations, and the lottery issues, as 
23   well, and then it has to report back to the Sunset 
24   staff.
25                 Now, that's another step after today.  
0141
 1   Then we go to the step of September the 24th when the 
 2   commission will appear before the Sunset Commission -- 
 3   the Lottery Commission will appear before the Sunset
 4   Commission, and they will take in our testimony.  They 
 5   will take in public comment.  They will take in 
 6   comments from industry representatives, and they will 
 7   begin to work up their report to the legislature.
 8                 In my opinion, it would not be proper 
 9   for you as members of the BAC to appear before the 
10   Sunset Commission as a representative of the BAC or as 
11   a group.  My understanding of your authorization by 
12   statute and by rule is that you are an advisory 
13   committee to the commission.  And you're filling that 
14   role today.  So, I think that when Virginia makes her 
15   report tomorrow to the commission insofar as Sunset as 
16   a BAC member, you have completed your task.  I want to 
17   make it very clear that you certainly have the right, 
18   and I would encourage to you appear as an individual, 
19   as a citizen, as an industry member before the Sunset 
20   Commission and do -- anything by way of testimony you 
21   wish to.
22                 I want to clarify that point because 
23   Diane said something, and she wanted to clarify it.  
24   And I want to repeat it.  So there's no lack of 
25   understanding on it.  When the Sunset Commission makes 
0142
 1   its report to the legislature -- that will be in 
 2   November -- the legislature will then take that 
 3   report, and they will begin to determine what 
 4   legislation is required on what they want to do as a 
 5   result of the Sunset Commission report.  Now, here's a 
 6   time when the process again is ongoing, when people 
 7   who are individual citizens, lobbyists who are 
 8   employed by interest groups in the industry, in the 
 9   bingo industry and the lottery industry, will be 
10   contacting legislators saying we need this for our 
11   industry to be healthy.  That's a time when the door 
12   is wide open, and that's when some really important 
13   things happen.  Legislation is introduced, and as the 
14   legislation works it's way through the next session of 
15   the legislature, that's the process that really is the 
16   final step.
17                 Now, I would urge you, for the things 
18   that you think are necessary for your industry that 
19   require legislative action, contact your legislators 
20   and work with them to achieve your goals.  I've heard 
21   today.  I've heard, at previous BAC meetings, so many 
22   of your thoughts that I feel fairly comfortable in 
23   understanding a great many of the problems that you've 
24   described in the industry.  But there are others in 
25   the state who do not understand your bingo industry, 
0143
 1   do not understand the gaming industry in the State of 
 2   Texas.  There are about a third of the people in the 
 3   State of Texas who do not want legalized gaming of any 
 4   kind in the State of Texas, and those folks have a 
 5   position and they have a voice in the legislature and 
 6   those people will be talking to the elected 
 7   representatives in the legislature as we go through 
 8   the process in 2003.  So, I hope what I've said helped 
 9   you understand what I think you have achieved today 
10   and what you've achieved in meetings where you've come 
11   in the past and made your presentations.  The job that 
12   is still ahead and the biggest part of the job in my 
13   mind is still ahead.
14                 The first thing that happens tomorrow 
15   morning is Virginia gets called on to give her 
16   report.  That's very important.  I hope the 
17   commissioners will ask her some questions.  Phil will 
18   be making the report from the staff's standpoint.  
19   Commissioners will be deciding.  They will, then, 
20   hopefully be ready to vote and their commission's 
21   response to the Sunset recommendations will be 
22   finalized.  It goes on September the 12th to the 
23   Sunset staff.  This commission appears before the 
24   Sunset commission, the full commission on September 
25   the 24th.  Then they take approximately a month, month 
0144
 1   and a half, almost two months, and they make their 
 2   report to the legislature.  Then the legislative 
 3   process begins.  Bills are introduced, and then bills 
 4   either get killed or they die or they get approved.  
 5   They go to the Governor, who can either sign them or 
 6   veto them.  Now, that's the process we're in.  It's 
 7   the greatest of any country in the world but it's 
 8   lengthy and time-consuming and it takes a lot of hard 
 9   work.  Have I misspoken on the process?
10                 MS. KIPLIN:  No.  The only thing -- my 
11   name is Kimberley Kiplin.  I'm the general counsel for 
12   the Lottery for the record.  The only thing I would 
13   like to add, I guess, is that not only does the Bingo 
14   Advisory Committee through Ms. Brackett, as the 
15   chairman, have the opportunity to come before the 
16   commission and provide a response, I think this is a 
17   response through the public testimony but the 
18   commission has routinely received comment from 
19   individuals on any item on their commission meeting 
20   agenda.  So if there are people who have -- or are in 
21   attendance today or others that would appear tomorrow 
22   that wish to address the commission on this item or 
23   any other item, I feel reasonably confident that the 
24   commission would receive comment from them as well.
25                 COMMISSIONER CLOWE:  Yeah, I think 
0145
 1   maybe, Kim, you weren't here earlier this morning when 
 2   Virginia asked that question; and I told her that I 
 3   would deal with the bingo issues on the beginning of 
 4   the agenda in the morning and hopefully we would 
 5   receive public comment and we hope it would be as 
 6   brief and concise.
 7                 I congratulate you on running the 
 8   meeting today and all those of who you who commented.  
 9   I think y'all had very important things to say and you 
10   said them briefly and concisely and it makes it more 
11   meaningful.  When a person gets emotional and gets 
12   wound up, you know, you lose your thrust; but you had 
13   a good input from the public today.
14                 I do -- because we're in a BAC meeting 
15   and I do want to comment on one thing specifically 
16   that's in my mind and my mind alone and that is the 
17   role of the BAC.  And that's been the subject of maybe 
18   two or three recommendations from the staff.  I 
19   understand, I think, the difficulty of the job that 
20   BAC members have.  You-all are individual business 
21   people and your experience is one of running a 
22   business in the bingo industry; and when you're 
23   invited to become a member of a group like this, you 
24   just don't leave that experience behind and become a 
25   statewide person.  That takes work, and some of the 
0146
 1   criticism that I read in the Sunset report about you 
 2   not staying with the agenda and maybe representing 
 3   more of your individual views more than a statewide 
 4   view, I think I understand that.  It's very difficult 
 5   when you get into these discussions not to be 
 6   provincial in your thinking and to keep on a statewide 
 7   level in the remarks in the business that you're 
 8   conducting and to me that's a -- that's a process also 
 9   that you have to work at, that you have to get 
10   through.
11            It takes a strong chair to stay on the 
12   agenda and to keep the conversation on the record, 
13   focused on the agenda.  The question about terms and 
14   the question about staggering, the question about 
15   having an attorney present, those are things that the 
16   commission needs to look at -- the Lottery Commission 
17   needs to look at and make it more beneficial and 
18   helpful for you so that you can go through this 
19   process.
20                 I for one, as a commissioner, have 
21   encouraged the participation at the BAC and I continue 
22   to feel that this is a good source of input for the 
23   commission.  Commissioners cannot come as a group to 
24   this meeting.  They are prohibited from doing that.   
25   I've suggested in the past, and it's not timely right 
0147
 1   now but I hope it will be timely at some point in the 
 2   future, that we can have joint meetings between the 
 3   BAC and the Lottery Commission.  I think that the 
 4   Lottery Commission could do a better job in the future 
 5   of helping you understand your role and giving you 
 6   direction and helping you get a work plan for a year 
 7   and having agenda work that might keep you focused on 
 8   things that you want to bring before the commission, 
 9   the commission wants you to bring before the 
10   commission.  And your public, your industry, your 
11   constituency wants you to concentrate.
12                 I would if anybody has a doubt in their 
13   mind about the BAC, I don't want you to leave here 
14   today with any doubt about my position.  You know, I'm 
15   just speaking as one commissioner.  I think this kind 
16   of input is very valuable, and I'm delighted to see 
17   the extent of the public comment that you've heard and 
18   dealt with here today.  It's a hard job.  Thank you 
19   for it, and I thank you for your attention.  And I 
20   think those are the things that I wanted to say to you 
21   that might hopefully clarify some of your questions 
22   about the Sunset process and help you understand where 
23   we're going from here.
24                 This is not the end, today.  This is 
25   the beginning, and when we get to the end of the 
0148
 1   session in 2003 and bills are either passed or signed 
 2   by the Governor or the Sunset committee reports 
 3   directing the Lottery Committee to do certain things, 
 4   those are the conclusions that are driving us.  Any 
 5   questions for me?  Virginia, I thank you for letting 
 6   us appear before you.
 7                 CHAIR BRACKETT:  Well, thank you.  We 
 8   appreciate.  We appreciate you coming to the 
 9   meetings.  Is there any further comment, public 
10   comment?
11                 MR. TAWIL:  Madam Chair, I'm wondering. 
12   Did Chairman Clowe say that the staff has already -- 
13   has its recommendation report together?
14                 COMMISSIONER CLOWE:  We present it 
15   tomorrow.
16                 MR. TAWIL:  Okay.  I'm just wondering 
17   how different it is from what we did.  
18                 COMMISSIONER CLOWE:  I guess we'll see 
19   tomorrow.
20                 MR. TAWIL:  I guess we'll see tomorrow.
21                 CHAIR BRACKETT:  Okay.  Let's move on 
22   agenda Item No. 4, which is consideration and possible 
23   action on future Bingo Advisory Committee meetings, 
24   dates.
25                 MS. TAYLOR:  Madam Chair, before you do 
0149
 1   that, just one question.  Were you going to go through 
 2   each of these recommendations and --
 3                 CHAIR BRACKETT:  Ask for further input?
 4                 MS. TAYLOR:  Yeah.  Or were we just 
 5   going to go with what we thought was the will of the 
 6   committee, your thoughts on each of the these 
 7   subjects?
 8                 MS. BRACKETT:  Okay.  Did any of you 
 9   gentleman and ladies keep notes as we went through and 
10   discussed these, that you would be happy to share with 
11   us?
12                 MS. TAYLOR:  Let me ask you if this one 
13   would work for 4.1.  After reviewing the records of 
14   bookkeepers and operators, it has been found that 70 
15   to 85 percent of the bingos conducting sessions would 
16   not be able to remain in business with the new 
17   distribution formula.  Is that pretty fair for why we 
18   voted the way we did?  
19                 MR. MANIO:  It's probably a fair 
20   statement, but it's very hard to prove the numbers, 60 
21   percent or 50 percent.
22                 MS. TAYLOR:  Well, I'm just going by 
23   the numbers that were given to us today.
24                 MR. PAVLOVSKY:  Given the testimony.
25                 MS. TAYLOR:  Yeah, during the 
0150
 1   testimony.
 2                 CHAIR BRACKETT:  Well, didn't they 
 3   refer to things like does not need to be mandated that 
 4   the charities are doing what they've always done.  
 5   It's not good business advise to take the profit 
 6   first.  I have a couple of pages hear.
 7                 MS. MATTHEWS:  Maybe we could look at 
 8   it, too.  Generally we consider that prizes take 70 
 9   percent of the gross.  If we put another 25 on there, 
10   we've now taken 95 percent of the gross.  That leaves 
11   5 percent to pay expenses give or take.  There's no -- 
12   I don't think -- when you take 70 and add 25, which is 
13   the required distribution you have to satisfy.
14                 MS. TAYLOR:  Now, what they are 
15   allowing in this formula is if you have a $100 in 
16   gross profits and you pay $75 in expenses, that would 
17   leave $25.  You would be required to distribute 25 
18   percent of $25. 
19                 MS. MATTHEWS:  That's right.  That 
20   still doesn't leave very much for expenses.  You can't 
21   run a business if you don't pay your expenses.
22                 CHAIR BRACKETT:  Okay.  Now, Diane, 
23   that's what you're saying they are looking for, these 
24   notes that we've made along with it clarifying, like, 
25   on 4.2 we wanted clarification for it.  We needed 
0151
 1   additional clarification because of inflation.  There 
 2   are -- just different notes like that that we made?
 3                 MS. MORRIS:  Yes, I think as the chair 
 4   was talking, it would be very helpful for the Texas 
 5   Lottery commissioners and particularly  on some of 
 6   these items that you may not have any notes, you in 
 7   particular Chair, to fill in what's the reasoning.  
 8   Some of your items, you know, y'all felt unanimous in 
 9   that you agreed or disagreed but there was not really 
10   discussion, if you will, and after you leave here 
11   today, there's no option for you to this meet as a 
12   group before tomorrow.  And so try to help the Chair 
13   and, I would say within about two or three sentences, 
14   try to help her fill in the blanks for what is the 
15   thinking or reasoning, the consensus of the group.  
16                 MS. BRACKETT:  Okay.
17                 MR. TAWIL:  Madam Chair, why don't we 
18   just -- as a group, why don't we extemporaneously 
19   react to each one of those and give Suzanne all the 
20   notes and that way she can take them and that way we 
21   know -- unless y'all have other way.  Then we just 
22   need input on why we rejected something.
23                 MS. TAYLOR:  Our main concern is not  
24   the ones that we necessarily had public comment on but 
25   the ones that we approved or disapproved without 
0152
 1   public comment and without a lot of discussion. 
 2                 MS. MORRIS:  Well, then frankly the 
 3   public can say whatever they want and y'all may have 
 4   totally disagreed with them.  They don't know that, 
 5   yet, but unless you talk amongst yourselves.  Now, I'm 
 6   really thinking on most of your comment when the 
 7   public did talk, you don't disagree with what they 
 8   were saying.  But, no, to answer your question, it is 
 9   not mostly on just the items that only had -- that had 
10   no public and then just y'all took a vote on.  It's 
11   really for all of them.
12                 The Chair was saying that it would be 
13   very helpful to understand, if you will, the consensus 
14   of -- in two or three sentences at least, the summary 
15   of why you would reject or the summary of why you 
16   would not reject an idea.
17                 CHAIR BRACKETT:  Okay.  I think we are 
18   fixed real fine on 4.1 and 4.2.  We have a lot of 
19   notes on that.  5.1 we rejected that.  That's to 
20   repeal the lessor license.  It's on page 42.  What are 
21   your notes that you have on that, and Suzanne what do 
22   you have?
23                 MS. TAYLOR:  Very few organizations who 
24   have the ability and desire to be both financially 
25   responsible for setting up a hall and providing a 
0153
 1   long-term.  Most chairs have been recipients and lease 
 2   or rent by their lessors to help them through the 
 3   difficult times.  Over 900 organizations will lose 
 4   access to facilities if this recommendation is allowed 
 5   pass.  Anything to add?
 6                 MR. MOORE:  I think that's adequate.
 7                 CHAIR BRACKETT:  Okay.  Look at page 51 
 8   and 6.1, we rejected that, said it should be brought 
 9   about independently.  And also 6.2.  How are your 
10   notes on that, Suzanne?
11                 MS. TAYLOR:  6.1, the only person that 
12   I have that spoke was Steve Fenoglio and I have 
13   written down that he was opposed to it.  So I really 
14   don't have much on that one.  And 6.2, I have Steve 
15   Bresnen, Don Bishop, and Steve Fenoglio.  Steve 
16   Bresnen agreed.  The other two disagreed.  And it's my 
17   understanding on 6.2 that -- my personal opinion was  
18   that when you create a hardship for the other 
19   organizations in the halls, it effects the bingo 
20   sessions.  Does that sound like a consensus of it?  
21                 MR. PAVLOVSKY:  Yeah.
22                 MS. TAYLOR:  Well, we have the effect 
23   of the license at the time because these items are not 
24   developed or...
25                 CHAIR BRACKETT:  Well yeah.
0154
 1                 MS. TAYLOR:  Okay.
 2                 CHAIR BRACKETT:  And 6.3 we accepted.  
 3   6.4 we rejected.  We were offended by language in such 
 4   a way to cheat players.  We might could leave that 
 5   little detail out.  But do you have notes on that 6.4?
 6                 MS. TAYLOR:  Yes.
 7                 CHAIR BRACKETT:  Okay.  Then 7.1. we 
 8   agree with.  7.2. we disagreed with, and I had the 
 9   statutory designation of the assistance system 
10   provided.  We have something for that written out.  
11   7.3 we approved.  7.4 we disagreed with.  Which I 
12   think we all understand that because of the difficulty 
13   of the public et cetera.  Anybody got any other?
14                 MR. WHITTINGTON:  And we represent the 
15   public.
16                 CHAIR BRACKETT:  Yeah.  Yeah. We 
17   represent the not only the industry but the public.  
18   7.5 we accepted, 7.6 and 7.7.  And then on No. 8, 8.1 
19   and that's what you wrote.
20                 MR. TAWIL:  Yes, ma'am.  If you would 
21   read that.
22                 CHAIR BRACKETT:  Then No. 10.  My notes 
23   say that we supported the entire thing; is that 
24   correct?
25                 MR. PAVLOVSKY:  Yes, ma'am.
0155
 1                 CHAIR BRACKETT:  Okay.  So we're in 
 2   pretty good shape.  All right.
 3                 MS. MORRIS:  Madam Chair, would you 
 4   care to add any reasonings on the list that Suzanne 
 5   had extra.  Is there anymore that anybody would like 
 6   to add explaining -- and maybe lumping them together.  
 7   I heard progressive and some other forms of --
 8                 CHAIR BRACKETT:  Oh, on that list that 
 9   she had.
10                 MS. MORRIS:  -- of bingo games and it 
11   may be that you want to lump them together and say the 
12   so and so enhancement or whatever, characterization 
13   that y'all would have supported that for whatever 
14   reason to increase bingo or something like that.  
15   They're -- I don't know that you had many reasons for 
16   your --
17                 MS. TAYLOR:  Yeah, I think most of 
18   these bingo -- are items that the BAC has visited 
19   before and agreed with.  I just want to make sure  
20   that the new BAC was still in agreement with these 
21   enhancement items.
22                 MS. MORRIS:  Okay.  Okay.  Very good.
23                 MR. TAWIL:  I think we should -- excuse 
24   me.  Commissioner Clowe said that they -- I think we 
25   can present those.  But they already said that the 
0156
 1   staff at the Sunset wasn't really interested in them; 
 2   isn't that correct?
 3                 MS. TAYLOR:  Well, there's certainly 
 4   been some changes that they proposed that have been, 
 5   you know, policy issues, getting rid of commercial 
 6   lessors, getting rid of commercial providers.  That's 
 7   all legislative issues so...
 8                 MR. TAWIL:  I don't know if --
 9                 MS. MORRIS:  I'm going to clarify that 
10   for you.  I want to help you on that one?  Have you 
11   read what's called the self-evaluation report?
12                 MR. TAWIL:  Not all of that, no.
13                 MS. MORRIS:  I don't want to put you on 
14   the spot, any of y'all.
15                 It's a document that this agency --
16                 CHAIR BRACKETT:  The problem is new 
17   members don't have one.
18                 MS. MORRIS:  Well, it's publicly 
19   available.  We'll get you one if you don't have one.
20                 And if you look at the self-evaluation 
21   report, what I think, Chairman Clowe was talking about 
22   is issues were raised in that.  And then the Sunset 
23   staff came and visited.  And it's not in here.  A lot 
24   of the policy issues that were raised in the 
25   self-evaluation report including issues involving 
0157
 1   bingo are not addressed.  And that's what, you know, 
 2   Suzanne, I think was talking about as well.  And I'm 
 3   just trying to help you add more meat to it, if you 
 4   will.  Because if you look at some of the 
 5   self-evaluation report that the Lottery wrote.  It was 
 6   neutral.  You know, just to throw the policy issue out 
 7   to the Sunset staff; and, as he said, for whatever 
 8   reason, they didn't include it in this report.
 9                 CHAIR BRACKETT:  So we need to include 
10   it in our report?
11                 MS. MORRIS:  Yes, and I think your 
12   motion was that as part of the report tomorrow, you 
13   were going to include, I think it was ten more 
14   additional items that she should be including in her 
15   report to the lottery commissioners tomorrow what the 
16   BAC feels is missing or what's recommended in the 
17   response from the commission to the Sunset Staff 
18   Report.
19                 MR. MOORE:  That's right.
20                 MS. BRACKETT:  Okay.  Okay.  Well, do 
21   we feel comfortable with that now, our notes.
22                 MS. TAYLOR:  Sure.
23                 CHAIR BRACKETT:  Okay.  What items -- 
24   when do we want to meet again and what items do we 
25   want to put on the agenda?
0158
 1                 Is there any further public comment?  
 2   All right.  So when is a time that we need to meet?  
 3   What do you think?
 4                 MR. WHITTINGTON:  October.
 5                 CHAIR BRACKETT:  This is a bad time  
 6   for people to decide when we're meeting again, at the 
 7   end of the day.
 8                 MR. MOORE:  Let's meet in October.
 9                 MR. WHITTINGTON:  Yeah, October.
10                 CHAIR BRACKETT:  By the end of October, 
11   like the 24th.
12                 MR. WHITTINGTON:  What's that on?
13                 CHAIR BRACKETT:  It's on a Thursday.  I 
14   just happened upon that.
15                 MR. WHITTINGTON:  Thursday is fine.
16                 MS. MATTHEWS:  What if we met after the 
17   13th of November when the Sunset Commission makes it's 
18   final report.
19                 CHAIR BRACKETT:  Okay.  Do we know -- I 
20   have that they'll be make being a report on the 12th 
21   and 13th.  So do we know what day they will be 
22   considering the Lottery Commission and bingo, Diane?
23                 MS. MORRIS:  No.  No, ma'am.
24                 CHAIR BRACKETT:  When do you think we 
25   would know that?
0159
 1                 MR. SANDERSON:  Normally they post 
 2   their agenda about a week to two weeks before.  It has 
 3   to be at least 10 days but usually about two weeks 
 4   before the meeting is scheduled.  In fact, the meeting 
 5   is scheduled for the 24th and 25th.  I believe they 
 6   posted last Friday.  So that gives you a time frame of 
 7   how much notice there is.
 8                 CHAIR BRACKETT:  Okay.  So if we would 
 9   just -- how would y'all like to do this, just kind of 
10   tentatively know we're going to meet one of those two 
11   days and wait until we find out it's posted.  Would 
12   that give us enough time to get our time posted?
13                 MR. SANDERSON:  Now, are you asking 
14   that you want to post a meeting to be at the --
15                 CHAIR BRACKETT:  Yeah.  We want to wait 
16   until they have posted when they're going to meet so 
17   that we can be in town the same time they're meeting.  
18   I suppose.  Is that going to be -- maybe we should 
19   just do it a week later.
20                 MR. SANDERSON:  That would probably be 
21   better.
22                 CHAIR BRACKETT:  I'm sorry.  You don't 
23   follow my train of thought do you?  So sometime the 
24   week of the 18th, like Thursday or Friday, the 21st, 
25   22nd, whatever.
0160
 1                 MS. MATTHEWS:  Well, when is 
 2   Thanksgiving?
 3                 MR. SANDERSON:  Thanksgiving is the 
 4   28th.
 5                 CHAIR BRACKETT:  It's the 28th, okay.  
 6   Somebody suggest something.
 7                 MR. MOORE:  Just pick a day after it.
 8                 MR. PAVLOVSKY:  What?
 9                 MR. MOORE:  After they meet.
10                 MS. TAYLOR:  I think Friday.
11                 CHAIR BRACKETT:  Okay.  Friday the 
12   22nd.   Okay.  So can you get that posted for us, 
13   Phil?
14                 MR. SANDERSON:  Yes, ma'am.
15                 MR. PAVLOVSKY:  What day did you say?
16                 CHAIR BRACKETT:  Friday, the 22nd of 
17   November.
18                 MR. MOORE:  I think we should do it on 
19   Thursday.
20                 MR. WHITTINGTON:  Yeah, me too.
21                 MR. MOORE:  Well, it's just a getaway.  
22   That's a holiday week the next week.  A lot of people 
23   travel, I think.
24                 CHAIR BRACKETT:  Okay.  So is Thursday 
25   all right with everybody?
0161
 1                 MR. WHITTINGTON:  That would be fine.
 2                 CHAIR BRACKETT:  Okay.  Thursday the 
 3   21st.  Okay.  In talking about places to meet, Suzanne 
 4   was wondering -- have you had time to consider it and 
 5   do anything about our big famous meeting outside --
 6                 MS. TAYLOR:  No, I haven't.
 7                 CHAIR BRACKETT:  Okay.  But you're not 
 8   going to forget it?
 9                 MS. TAYLOR:  No.
10                 CHAIR BRACKETT:  Okay.  I believe that 
11   will conclude our agenda.
12                 MR. SANDERSON:  Did you want to go over 
13   the ten items for the meeting?
14                 CHAIR BRACKETT:  Yeah.  Thank you for 
15   calling that to my attention.  What would be the 
16   purpose of that meeting?
17                 MS. MATTHEWS:  Well, review the Sunset 
18   committee's final recommendations.
19                 MS. TAYLOR:  Last time we said that we 
20   were going to be doing a committee report on 
21   advertising, a committee report on satellite and 
22   linked bingo games.  We were going to go over 402.555 
23   card-winding, 402.567 BAC, 402.558 bingo cards.  We 
24   were going do discuss the 1-800 number.  We were going 
25   to talk about receipt and disposition of monies.
0162
 1                 MR. SANDERSON:  Excuse me, Suzanne.
 2                 MS. TAYLOR:  Yes, sir.
 3                 MR. SANDERSON:  Are you reading from 
 4   the agenda from the last meeting?
 5                 MS. TAYLOR:  Well, these are the items 
 6   we said we were going to go back over again at our 
 7   next meeting.
 8                 MR. SANDERSON:  Okay.  My understanding 
 9   is that you-all passed the paper rule or you approved 
10   it to go before the commission tomorrow.
11                 MS. TAYLOR:  Right.  And we were going 
12   to discuss it, the paper rule, what's going on with 
13   it.  These are the items that instead of them getting 
14   lost, we were going to discuss and finish with them.
15                 MR. SANDERSON:  If the commission 
16   chooses to go ahead and propose those two rules 
17   tomorrow, there's only a 30-day comment period.  And I 
18   know we're going to have, I believe -- set a public 
19   hearing on the paper rule.
20                 MS. TAYLOR:  Okay.
21                 MR. SANDERSON:  But I don't know what 
22   day that's going to be in so...  I don't know what you 
23   want to discuss about 558 at the next meeting.
24                 MS. TAYLOR:  I was just taking notes on 
25   things that we said we were going to be talking 
0163
 1   about.  So Virginia can have them on the agenda or not 
 2   on the agenda, whatever her desire is.
 3                 We were also going to talk about the 
 4   second tier bingo system again to see if there was any 
 5   further information on that.
 6                 MS. BRACKETT:  The agency?
 7                 MS. TAYLOR:  The charitable bingo 
 8   system.
 9                 CHAIR BRACKETT:  Yeah.  Just to update 
10   on that.
11                 MS. TAYLOR:  Most of these were all 
12   update reports.
13                 CHAIR BRACKETT:  What is the procedure 
14   on this?  We certainly have time to get these things 
15   posted, right, if we think of other items of business.  
16   What would be the procedure in doing that?  An 
17   individual can do that, can't they, an individual 
18   committee member.
19                 MR. SANDERSON:  Yes, an individual 
20   committee member can request or add anything to the 
21   agenda.  Of course, you would have the final approval 
22   of what to post; and I think that we're asking for any 
23   items that you're your putting on the -- or that you 
24   request to be on the agenda, that you have the 
25   information to us within 21 days before.  So that we 
0164
 1   can prepare the notebook and get it back out to you, 
 2   as members, in time for the me to review.  So that 
 3   would be around the first of November.  If you got 
 4   agenda item or requested an agenda item, that you have 
 5   that information to us by November 1st.
 6                 CHAIR BRACKETT:  Okay.  Does 
 7   everyone -- 
 8                 MR. WHITTINGTON:  That's fine.
 9                 CHAIR BRACKETT:  Don't forget this. And 
10   there was something else we need to go ahead and have 
11   on that is the report from the group, Suzanne, the 
12   meeting from outside.
13                 MR. MOORE:  Billy, also said that if we 
14   come up with agenda items, to try to get any back-up 
15   information, to give him that too.
16                 MR. SANDERSON:  That's what I'm talking 
17   about by November 1st, anything that has to do with 
18   your agenda items so that the other members of the 
19   committee can review that prior to the meeting to get 
20   an understanding of what your interests are.
21                 CHAIR BRACKETT:  Gary, would you like 
22   to speak us again?
23                 MR. GRIEF:  Yes, Madam Chair.  Thank 
24   you again.  For the record my name is Gary Grief.  
25   After hearing today's proceedings, our Chairman has 
0165
 1   asked that I provide a draft copy of our agency 
 2   written response and make that available in multiple 
 3   copies out here on the table tomorrow morning at 
 4   approximately 8:00 o'clock.  I apologize that several 
 5   people have left the meeting, but I did want to let 
 6   the BAC know and those of who are in the audience.  We 
 7   will have the agency draft response available for you 
 8   to pick up and look at prior to the meeting.
 9                 CHAIR BRACKETT:  Okay. Thank you.    
10                 MR. MOORE:  That's great.  Thanks.
11                 MR. GRIEF:  Thank you.
12                 MS. MORRIS:  I'm going to interrupt you 
13   one more time, but did you take up your Item No. 3 for 
14   public comment in the event there's anybody sitting 
15   here wanting to address --
16                 CHAIR BRACKETT:  Yes, we did.  The 
17   public has commented.  Correct?  Is the public 
18   commented out; is that correct?  All right.  Thank you 
19   for the reminder.
20                 Now is the last chance to say anything.  
21   Besides, good bye.
22                 MR. SANDERSON:  I would like to make 
23   sure that all the members have signed their travel 
24   vouchers and if you haven't signed it, see Rolanda 
25   after the meeting.
0166
 1                 CHAIR BRACKETT:  Listen.  Thank you for 
 2   all your time and your listening ears today.  And I 
 3   hope we see all of you tomorrow, and thank you. 
 4                 (The meeting adjourned at 3:50 p.m.)
 5   
 6   
 7   
 8   
 9   
10   
11   
12   
13   
14   
15   
16   
17   
18   
19   
20   
21   
22   
23   
24   
25   
0167
 1                 REPORTER'S CERTIFICATION
 2   
 3   STATE OF TEXAS      )
 4   COUNTY OF TRAVIS    )
 5   
 6                 I, SHELLEY N. JONES, Certified 
 7   Shorthand Reporter in and for the State of Texas, do 
 8   hereby certify that the above-captioned matter came on 
 9   for hearing before the BINGO ADVISORY COMMITTEE as 
10   hereinafter set out, that I did, in shorthand, report 
11   said proceedings, and that the above and foregoing 
12   typewritten pages contain a full, true, and correct 
13   computer-aided transcription of my shorthand notes 
14   taken on said occasion.
15   
16                 Witness my hand on this 12th day of 
17   September, 2002.
18   
19   
20                      ________________________________
                        Shelley N. Jones, RPR, CSR #8058
21                      Expiration Date:  12/31/04
                        1609 Shoal Creek Boulevard, 
22                      Suite 202
                        Austin, Texas 78701
23                      (512) 474-4363
24   
25   JOB NO. 020909SNJ