1 1 2 3 4 * * * * * * * * * * * * * * * * * 5 6 TEXAS LOTTERY COMMISSION 7 MEETING 8 9 SEPTEMBER 19, 2001 10 11 * * * * * * * * * * * * * * * * * 12 13 14 15 16 17 18 BE IT REMEMBERED that the TEXAS LOTTERY 19 COMMISSION meeting was held on the 19TH of SEPTEMBER, 20 2001, from 8:30 a.m. to 3:20 p.m., before Brenda J. 21 Wright, RPR, CSR in and for the State of Texas, 22 reported by machine shorthand, at the Offices of the 23 Texas Lottery Commission, 611 East Sixth Street, 24 Austin, Texas, whereupon the following proceedings 25 were had: WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 2 1 APPEARANCES 2 3 Chairman: Mr. C. Tom Clowe, Jr. 4 Commissioners: 5 Ms. Elizabeth D. Whitaker Mr. Walter H. Criner, Sr. 6 General Counsel: 7 Ms. Kimberly L. Kiplin 8 Executive Director: Ms. Linda Cloud 9 Charitable Bingo Operations Assistant Director: 10 Mr. Philip D. Sanderson 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 3 1 INDEX 2 3 Appearances...................................... 2 4 AGENDA ITEMS 5 Item Number 1.................................... 4 6 Item Number 2.................................... 32 Item Number 3.................................... 40 7 Item Number 4.................................... 40 Item Number 5.................................... 41 8 Item Number 6.................................... 43 Item Number 7.................................... 63 9 Item Number 8.................................... 65 Item Number 9.................................... 72 10 Item Number 10................................... 73 Item Number 11................................... 5 11 Item Number 12................................... 5 Item Number 13................................... 75 12 103 Item Number 14................................... 80 13 Item Number 15................................... 80 Item Number 16................................... 91 14 104 Item Number 16................................... 91 15 104 Item Number 17................................... 91 16 106 Item Number 18................................... 97 17 130 Item Number 19................................... 98 18 Item Number 20................................... 100 Executive Session................................ 103 19 Reporter's Certificate........................... 132 20 21 22 23 24 25 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 4 1 SEPTEMBER 19, 2001 2 CHAIRMAN CLOWE: Good morning. It is 3 8:30, September the 19th. Commissioner Criner is here 4 with me this morning. Commissioner Whitaker is caught 5 in traffic. I'm going to call the meeting to order 6 with a quorum, and Commissioner Whitaker will be 7 joining us shortly. 8 In light of the national disaster which 9 has occurred just a little over a week ago, 10 Commissioner Criner and I would like to open this 11 meeting with the Pledge of Allegiance to our flag. 12 And if you would stand and join us, we'll do that at 13 this time. 14 (Pledge of Allegiance.) 15 CHAIRMAN CLOWE: And, then, since we're 16 standing, if you would also join us in a moment of 17 reflection, paying tribute and respect to those 18 thousands of individuals who have lost their lives and 19 the many more who have suffered as a result of what 20 occurred on September the 11th. And also, by our 21 standing, to give a strong symbolism of the unity of 22 people in this country as well as all freedom-loving 23 nations, in support of our President, our government, 24 and our country, as we move into these times which are 25 different than any of us have faced in the past. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 5 1 Thank you very much. 2 We are now ready to go to the agenda as 3 published with the exception of, I would like to call 4 on the chairman of the Bingo Advisory Committee. I 5 believe his report is item number 11, and we're going 6 to consider 11 and 12 at this time as a courtesy to 7 you Bill. Good morning. 8 MR. NEINAST: Good morning, 9 Mr. Chairman, and good morning, Commissioner Criner. 10 I appreciate you moving me up on the agenda, Chairman 11 Clowe. I would like to make a brief report on the 12 meeting -- special meeting of the Bingo Advisory 13 Committee on August the 29th. 14 As you recall, we have set up a 15 schedule where we meet quarterly on specific dates, 16 but the one meeting we had in August, we could not get 17 through all of the items before we lost a quorum. I 18 did not submit to you for inclusion in your notebook, 19 a report of that August the 29th meeting because we 20 really did not take any action requiring or 21 recommending action to the Lottery Commission, with 22 one exception. We did review a large number of 23 proposed rules and rule changes. The committee 24 recommended some specific changes, and some of them 25 were recommended to the Bingo Division that they WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 6 1 consider revising some others, with the instruction 2 that once those changes are made, that they then 3 submit them directly to the Commission for 4 consideration and publishing in the Register and going 5 for a formal adoption. 6 I would like to discuss with you just 7 briefly, though, some of the items that were 8 discussed, and we'll be returning to some of these, 9 but in a way of alerting you to some of the problems 10 that the committee sees that are affecting bingo, some 11 in an adverse way. 12 One of them is the amount of fees that 13 are collected. If you recall, the Bingo Enabling Act 14 was enacted to allow charities to legally conduct 15 bingo and raise money for charitable events, 16 charitable activities. But as frequently is done in 17 the case -- it's been recognized in a way as a kind of 18 a cash cow for the government. The fees collected 19 vastly exceed the amount of money required to run the 20 Bingo Division. And some consideration or thought has 21 been given to whether there should be a substantial 22 reduction in the fees, because this is money that is 23 taken away from the charities, in effect, that goes 24 into the general account of the State Treasury. And 25 we think that maybe it would be more appropriate to WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 7 1 let this money stay with the charities to be used for 2 their charitable purposes. So that is something that 3 will be looked at again, and it's something that you 4 may want to consider when you think about what's going 5 on in the bingo activities. 6 My notes from that meeting are rather 7 sketchy, and I'm not sure that this is correct, but 8 it -- it appeared that something in the neighborhood 9 of 25 million dollars in fees and taxes are being 10 collected from the charities conducting bingo, and it 11 takes only about three million to run the business. 12 So there is definitely a wide disparity between what 13 is being collected and what is being used directly for 14 bingo. 15 CHAIRMAN CLOWE: Bill, I think at this 16 point we should acknowledge that Billy Atkins, who is 17 the director of the Charitable Bingo Division, is not 18 present this morning and is, in fact, in the hospital 19 having undergone an operation yesterday. And in his 20 place is Phil Sanderson, this morning, the assistant 21 director. And my recollection, having attended that 22 portion of your meeting, Bill, is that that would 23 require legislative action. And Phil, can you -- were 24 you at the bingo advisory committee meeting when this 25 subject came up and Billy commented on it? WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 8 1 MR. SANDERSON: I was in and out of the 2 meeting, and I don't recall that specifically. I do 3 know that the 25 million that Mr. Neinast refers to 4 that the State collects off of bingo, 3.4 million is 5 only directly from the charities as license fees. 6 Around 20 million dollars is from prize fees that are 7 collected from the winners who play bingo. And then 8 the other one and a half million is from the rental 9 tax that the lessors pay. 10 CHAIRMAN CLOWE: Okay. And that is a 11 legislative issue -- 12 MR. SANDERSON: They all three are 13 legislative issues. 14 CHAIRMAN CLOWE: -- if any changes were 15 to be brought about. 16 And Bill, are you bringing a 17 recommendation to the Commission on that subject at 18 this time, or was there just -- I don't recall that 19 you took action. I remember the discussion. What is 20 your request at this time on -- 21 MR. NEINAST: Just calling it to 22 your -- to the Commission's attention that this is 23 something that we think you will be asked to act on in 24 the future. This is kind of an alert to some of the 25 things that are being considered by the advisory WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 9 1 commission, action to be taken later. And I'm glad 2 Phil cleared up what that -- that explains my cryptic 3 notes of the 3.5 million versus the 22 million. But 4 there still is a tremendous gap there between the -- 5 those two. 6 CHAIRMAN CLOWE: Very good. 7 MR. NEINAST: The other item that we're 8 looking at, and have considered repeatedly, is the use 9 of debit cards to pay for bingo playing. There are 10 some issues of how to be accounted for because of the 11 lag in using the debit card and when the money is 12 actually credited to the operator's account and how 13 that's accounted for, strictly as a more of a -- an 14 accounting measure than anything else. And I think 15 Kim is looking at that also, are you not, Kim? 16 MS. KIPLIN: The use of debit cards? 17 MR. NEINAST: Yes. Or maybe it's just 18 the auditors that -- 19 MS. KIPLIN: I don't recall. 20 MR. NEINAST: But it is a problem that 21 we're... 22 CHAIRMAN CLOWE: Since we interrupted 23 you, Bill, I want to note for the record that 24 Commissioner Whitaker has now joined us. It is 25 8:40 a.m., and we have the full commission present. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 10 1 Go right ahead, please. 2 MR. NEINAST: In addition to use of 3 debit cards, considering the use of gift certificates. 4 That's been considered several times, and it's a 5 thorny issue that we're having problems working out, 6 with the requirements that puts on the audit people 7 for tracking those. But it's a proposed rule that has 8 been proposed, and we just could not agree on how far 9 it should go or whether it's even a good idea. Again, 10 all of these are items that you're going to see in the 11 future. I thought it might be well that you were 12 aware of them, things that are going to be coming up 13 for you to look at in the future. 14 CHAIRMAN CLOWE: Bill, it brings to 15 mind the purchase of lottery tickets and Scratch Off 16 tickets. This issue has come up before in this 17 regard, hasn't it? 18 MS. CLOUD: We can -- the retailers can 19 use debit cards, but that's in their own locations. 20 We don't even get involved in that. The -- they 21 cannot use credit cards. 22 CHAIRMAN CLOWE: Cannot. 23 MS. CLOUD: No. 24 CHAIRMAN CLOWE: So the debit card is 25 immediate availability of cash to the retail merchant. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 11 1 That's their own decision -- 2 MS. CLOUD: Way of collecting their 3 money for the ticket. 4 CHAIRMAN CLOWE: And, then, no credit 5 cards are allowed. 6 MS. CLOUD: That's right. 7 CHAIRMAN CLOWE: And thinking about 8 on-line gambling and keeping in mind the Internet 9 gambling situation, are you familiar, Linda, with what 10 the practice is in that area from your own personal 11 knowledge? 12 MS. CLOUD: From the information that I 13 have been receiving in meetings where we've discussed 14 Internet gaming and the countries that are -- which 15 are foreign countries, the only ones that I know of 16 that's legally doing Internet gaming, they actually go 17 through and set up bank accounts assigned to an 18 individual. I don't think the credit cards -- 19 Larry King can probably answer this better than I can, 20 but I don't think the credit cards are used in that 21 environment either. It's a predetermined account. 22 CHAIRMAN CLOWE: So they have a credit 23 balance in an account that they draw against. 24 MS. CLOUD: From what I understand. 25 MR. KING: I think they use credit WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 12 1 cards. 2 MS. CLOUD: Oh, they do use credit 3 cards? 4 MR. KING: Credit and debit. 5 MS. CLOUD: Okay. Sorry. 6 MS. KIPLIN: If I might add on that, 7 there have been some reported decisions that are 8 coming out with regard to the use of credit cards. 9 And in jurisdictions where gambling is illegal, 10 including Internet gambling, when the credit card 11 company goes against the holder for the debt owed on 12 the card, there have been -- suits have been filed 13 over the fact that that's an illegal contract, and no 14 debt is owed. And those decisions have been upheld. 15 So using a credit card is risky to those who are 16 looking to the money off that credit card. 17 CHAIRMAN CLOWE: I think this expansion 18 of the subject, Bill, is helpful, as you talk about 19 debit cards and gift certificates, to see what is 20 going on around the country and get a broader view. I 21 think it'll help the Commission understand and keep 22 your subject in the right perspective. 23 MR. NEINAST: Well, Kim just raised an 24 issue that has not been addressed, and I think it's a 25 good one. It's not been considered in the use of WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 13 1 credit cards. It would apply also to using a credit 2 card for bingo, since it's considered a game of 3 chance, so we might have the same problem that -- and 4 that's one that has not been addressed by the 5 Commission -- I mean, by the committee, Kim, is -- 6 MS. KIPLIN: Well, I think so long as 7 the wager is lawful in a jurisdiction, that would not 8 be an issue. But with regard to the Internet 9 gambling, that, in many jurisdictions, is illegal. 10 It's an illegal form of gambling, illegal conduct. So 11 anything, of course, involved with an illegal contract 12 is -- 13 MR. NEINAST: Oh, okay. 14 CHAIRMAN CLOWE: Thank you. 15 MR. NEINAST: But the primary problem 16 with the debit -- using the debit card for bingo is 17 the accounting involved because of the type of record 18 that the operator has to make and account for money 19 on -- on that day, and it's not credited to the 20 account in the bank until the -- a day or two later. 21 So that's the -- one of the problems that -- faced 22 with use of debit cards. 23 CHAIRMAN CLOWE: Bill, is there a 24 policy in bingo halls -- Phil, maybe I ought to ask 25 you this -- of the acceptance of checks offered by WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 14 1 players? 2 MR. SANDERSON: Most halls accept 3 checks. 4 CHAIRMAN CLOWE: It's uniformly 5 generally accepted? 6 MR. SANDERSON: Yes, sir. 7 MR. NEINAST: Another long discussion 8 on -- and apparently there is really no solution to 9 this -- is to the use of -- or establishing by rule or 10 legislation, a minimum price per card in the bingo 11 halls. The large operators are undercutting the small 12 operators, and the small operators are saying, this is 13 unfair competition. The hard question is, what would 14 be the minimum price that you would set, and I don't 15 think there is an answer to that question. But we 16 probably will visit that again, because there is a 17 considerable amount of interest in that problem by the 18 bingo industry. 19 The -- another one that there is no 20 answer to is the concern on the part of some bingo 21 operators who keep their accounts current, but there 22 are others who do not have their accounts current. 23 And the rule requires distributors not to furnish any 24 product to a -- an operator or anyone else, any 25 licensee who is in arrears in their accounts. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 15 1 There -- it's not proper or legal under the rules for 2 distributors to do that. Billy and the division is 3 aware of that, and they do have a delinquent account 4 and watch it, but by the time the account shows up as 5 delinquent, it's already been taken care of. So it's 6 a problem without an apparent solution. But then, 7 again, there are some of the operators who keep their 8 accounts current, are concerned about the problem of 9 distributors, primarily in the field of electronic 10 cards, and electronic operations not being current and 11 still getting to use that. So, again, I'm sure we'll 12 look at it again, and maybe we can come up with a 13 proposed solution. But at this point, there does not 14 appear to be one. 15 CHAIRMAN CLOWE: Phil, do you have a 16 comment? 17 MR. SANDERSON: I have one comment. 18 The law states that a distributor can only provide 19 supplies on a C.O.D. basis. They can still get 20 supplies, they just have to be C.O.D. instead of 21 charge. 22 MR. NEINAST: But the allegation is 23 that that's not being done either. They've been 24 providing them without -- 25 MR. SANDERSON: There is -- we're WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 16 1 looking into it. There are some that do report the 2 organizations as being delinquent, and they do require 3 C.O.D. on delivery -- cash, you know, cash or check 4 there at the hall when they deliver. 5 MR. NEINAST: But apparently some of 6 the distributors don't report it because if they 7 report a company, they're losing a customer, and maybe 8 other customers. And that's -- so there are some 9 accounts that the operators know that are delinquent 10 but never show up on the delinquency list here in the 11 division. But it's a -- a problem and a concern to a 12 number of the -- particularly the smaller operators, 13 licensees. 14 And finally, and you'll be hearing of 15 this one, I'm sure. It probably will require 16 legislation. Is a system whereby all the operators, 17 say, in Corpus Christi, can get together and have some 18 type of generic advertising for bingo. That would 19 come out of the -- be an allowable expense. It's 20 something we visited several times and will visit 21 again to come up with some way that we can have -- or 22 the industry can have generic advertising, just 23 advertise bingo, but not advertise, come play with the 24 local VFW or Elk's Club, or what have you. 25 And that basically are the items we WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 17 1 discussed. A number of those will be on the next 2 agenda, which will be October the 10th, and we have 3 already developed a large agenda for the next meeting. 4 CHAIRMAN CLOWE: Questions? 5 COMMISSIONER WHITAKER: Not at this 6 time. 7 CHAIRMAN CLOWE: Bill, going back to 8 the comment that you made about a minimum price per 9 card. My understanding is that that is not covered by 10 the statute. Is that right, Phil? 11 MR. SANDERSON: The statute allows the 12 Commission to set a price, or a price schedule, by 13 rule. 14 CHAIRMAN CLOWE: Have we done that? 15 MR. SANDERSON: No, sir. 16 CHAIRMAN CLOWE: So it is now left to 17 the individual halls to do that. And you're telling 18 us that the division can look into that and can make a 19 recommendation to the Commission to establish a 20 minimum price. 21 MR. SANDERSON: Just to give you some 22 history. Back in February of '96, the Commission did 23 take up setting a minimum price per card face. And I 24 believe after two meetings and the discussions on it, 25 they decided to let the market regulate the price of WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 18 1 the cards. 2 CHAIRMAN CLOWE: That's interesting. I 3 didn't know that history. It raises in my mind, Bill, 4 the issue of how much government we want here. And 5 whether the Commission as a governmental agency should 6 enter into what seems like a business practice, and I 7 have a question in my mind about that. I'm glad the 8 issue has been raised, but I would imagine the 9 Commissioners would like to, not only have the history 10 prior to deliberations, but a lot of input from the 11 industry before undertaking some action in that area. 12 Those questions are raised in my mind. 13 MR. NEINAST: And it's a very difficult 14 issue. We appreciate and we discussed the same thing 15 that you have just mentioned, Mr. Chairman. And the 16 harder issue, if you decide that this is what is 17 appropriate, this is what the State may want to do, is 18 what should that minimum price be? And I don't think 19 we will ever reach a consensus on that. But it is -- 20 and this was an item that was raised by the general 21 public. It goes back to something we've discussed 22 before; the value of having meetings possibly outside 23 of Austin where we can get more of the operators, 24 licensees, in than we get here. But this is a matter 25 of -- an item of concern to some of the smaller WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 19 1 licensees. 2 CHAIRMAN CLOWE: I'm personally a 3 little bit concerned about the idea of a governmental 4 agency entering into that, and I can liken it to a 5 number of other industries where there has been a 6 beneficial result from having competition, as opposed 7 to regulation. But that's just a -- a reaction that I 8 have, and I've been thinking about it since your 9 meeting. I think we need to hear a lot more in the 10 way of views from industry members and others who have 11 experience in this area, the division, and know the 12 history of the deliberations of the prior commission, 13 before we want to enter into some decision making on 14 that. 15 MR. NEINAST: Would one of those 16 industries you're talking about be the trucking 17 industry? 18 CHAIRMAN CLOWE: The trucking industry 19 is an excellent example and, then, just most recently, 20 you know, the setting of gasoline prices this last 21 week. I have watched that with great interest. And 22 the government has a tremendous tax that's applicable 23 to regular motor fuel. And it's interesting to see 24 the variance in prices around the state, and I hope 25 the State of Texas never regulates the price of WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 20 1 gasoline. I don't think that's a good idea. And I 2 have to think about that in regard to us. 3 MR. NEINAST: Well, I personally agree 4 wholeheartedly with your philosophy, but I also feel, 5 as chairman of the committee, I'm bound to let the 6 public come in and raise these concerns and for us to 7 consider them -- 8 CHAIRMAN CLOWE: Absolutely. 9 MR. NEINAST: -- and keep you advised 10 of what is of concern to the bingo industry. 11 CHAIRMAN CLOWE: I couldn't agree with 12 you more, Bill, and I want to say that my attendance 13 of your meeting this last time was very beneficial. I 14 think you had a good turnout. You had more than a 15 quorum, and there was a very proactive discussion 16 there. And I would like for you to tell the members 17 of the committee, the Commissioners appreciate their 18 taking the time to be involved in that work and 19 bringing us these issues and the feedback that we're 20 receiving from you. Your next meeting is October the 21 10th, I think you said. 22 MR. NEINAST: Yes, sir. 23 CHAIRMAN CLOWE: And I hope you have 24 good attendance, and I think the Commission has 25 signaled to you that they are responsive to the idea WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 21 1 of having meetings around the state if your group 2 feels that will be beneficial. 3 Phil, did you have a comment? 4 MR. SANDERSON: I think the meeting is 5 October the 9th. It was originally scheduled for the 6 10th, which was a Wednesday, because of a -- but 7 because of another commitment in the auditorium and a 8 commitment by Billy, that it was changed to the 9th. 9 But I'll check and make sure on that. 10 CHAIRMAN CLOWE: Would you do that 11 before this meeting is adjourned, and let us all know? 12 MR. SANDERSON: Yes. 13 CHAIRMAN CLOWE: Does that conclude 14 your -- 15 MR. NEINAST: That's all I have, yes, 16 sir. Thank you. 17 CHAIRMAN CLOWE: Then for 18 Commissioner's Whitaker's benefit, we started on item 19 11. 20 COMMISSIONER WHITAKER: I figured that. 21 CHAIRMAN CLOWE: We didn't get there 22 already. 23 And, Bill, did you want to comment on 24 or, Phil, do you want to comment on item number 12? 25 MR. SANDERSON: The Bingo Advisory WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 22 1 Committee appointments? 2 CHAIRMAN CLOWE: Yes. 3 MR. SANDERSON: We had one resignation 4 from a manufacturer distributor representative, 5 Fabian Hoffner. And in your notebook is a letter from 6 Mary Magnuson who is an attorney for NAFTM, which is 7 the North American Fund-raising Ticket Manufacturer 8 Association, where Fabian also worked. In the past, 9 when we've had a person leave the committee, a 10 surviving spouse or somebody has replaced them for the 11 interim of their appointment. And it's the 12 recommendation of staff that, since there were no 13 other nominations in that category and Mary Magnuson 14 has offered to complete Fabian's appointed term, that 15 our recommendation is to go ahead and appoint her for 16 the remaining time until nominations are sought after 17 the first of the year. 18 CHAIRMAN CLOWE: Very good. And Bill, 19 do you have a comment on that? 20 MR. NEINAST: The only comment I would 21 make -- I do not know this individual, but I was 22 concerned and am still concerned about having members 23 on the Texas Bingo Advisory Committee from outside the 24 State. Now, there may not be anyone else qualified in 25 this particular category, but since we are talking WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 23 1 about Texas bingo, I wonder if it wouldn't be better 2 to have a distributor, if there are some Texas 3 distributors, as the representative of that industry 4 rather than someone from outside the State. Fabian 5 did an excellent job. I'm sorry that he is no longer 6 on the committee, but it's just a -- an item of 7 perception on my part. 8 COMMISSIONER WHITAKER: And he was from 9 Texas? 10 MR. NEINAST: No, ma'am. 11 COMMISSIONER WHITAKER: He was out -- 12 MR. NEINAST: No, ma'am. Minnesota. 13 COMMISSIONER WHITAKER: All right. So 14 we'd basically be continuing that particular pattern 15 in this one instance. 16 MR. SANDERSON: Yes, ma'am. 17 CHAIRMAN CLOWE: And your interest, if 18 not concern, would be considered perhaps as the 19 nominations are considered for the next slate. 20 MR. NEINAST: Yes. That if there are 21 any Texas distributors that are interested and are 22 nominated, I think they should be given the primary 23 consideration. It's more a matter of perception than 24 anything else, because Mr. Fabian was a -- really a 25 great addition to the committee when he was serving. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 24 1 CHAIRMAN CLOWE: I understand. 2 Does this require a motion? 3 MS. KIPLIN: For an appointment to the 4 Bingo Advisory Committee, yes, it would. It will 5 require an action by the Commission. 6 CHAIRMAN CLOWE: Is there a motion? 7 I move that the commission appoint -- 8 may I have the lady's name correctly? 9 MR. SANDERSON: Mary Magnuson. 10 CHAIRMAN CLOWE: Ms. Mary Magnuson. 11 And her affiliate corporate-wise? 12 MR. SANDERSON: She's the attorney for 13 NAFTM, North American Ticket -- National Association 14 of Fund-raising Ticket Manufacturers. 15 CHAIRMAN CLOWE: That she be appointed 16 to the Bingo Advisory Committee. Is there a second? 17 COMMISSIONER WHITAKER: Second. 18 CHAIRMAN CLOWE: The motion is made and 19 seconded. All in favor please -- 20 COMMISSIONER CRINER: Question: Is 21 this nomination just for the end of the year? 22 CHAIRMAN CLOWE: Correct. 23 COMMISSIONER CRINER: And then we'll 24 deal with what Bill is talking about later, folks from 25 Texas. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 25 1 CHAIRMAN CLOWE: What is the time of 2 appointment, Phil? 3 MR. SANDERSON: I believe Billy said 4 that they were hoping to get the nomination forms out 5 after the first of the year, in January. 6 CHAIRMAN CLOWE: And what would the 7 term beginning date be? 8 MR. SANDERSON: I believe it's either 9 the end of March or the first part of April. 10 COMMISSIONER WHITAKER: So she is being 11 appointed for the rest of his term, which goes through 12 March or April of next year. 13 MR. SANDERSON: Yes, ma'am. 14 COMMISSIONER WHITAKER: Okay. 15 CHAIRMAN CLOWE: Virtually six months. 16 MR. NEINAST: As it stands now, that 17 would be two meetings. And we'll have a meeting in 18 October, and another one in February. And I think -- 19 I agree with Phil, it's somewhere -- March the 1st or 20 March the 30th is when the term is up. 21 COMMISSIONER CRINER: My point, 22 Mr. Chairman, is Bill's perception of having someone 23 from Texas in that seat in the future and would like 24 them to be able to have something to say about it 25 before we just wipe them out. I think that answers my WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 26 1 question. 2 CHAIRMAN CLOWE: Very good. Any 3 further questions? 4 COMMISSIONER WHITAKER: Well, I would 5 just -- well, let's go ahead and move, and then I'm 6 going to make a comment. 7 MS. KIPLIN: One thing I would say is 8 that it's not a finite term. They serve until you 9 vote to put somebody else in that spot, just like a 10 vacancy on a commission, so... 11 COMMISSIONER CRINER: Does the -- does 12 the -- 13 MS. KIPLIN: Yes, sir. 14 COMMISSIONER CRINER: The advisory 15 committee -- 16 MS. KIPLIN: Yes, sir. 17 COMMISSIONER CRINER: Make the 18 recommendations to us? 19 MS. KIPLIN: You know, I don't recall, 20 Commissioner, whether in the past that has occurred or 21 not, and I would defer to Mr. Sanderson. 22 MR. SANDERSON: In the past, it's -- we 23 sent out nomination forms and received them from 24 organizations, and the conductors, distributors, 25 lessors, to make their nominations. After all the WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 27 1 forms have come in, we provide the Commissioners with 2 a summary of the nominations, along with staff 3 recommendations. And in the past, the Bingo Advisory 4 Committee, I believe, has not offered direct input 5 into the nomination process. 6 CHAIRMAN CLOWE: That is correct as far 7 as my discussions with Billy Atkins. The 8 recommendations for nominations have come from the 9 director of the Charitable Bingo Division and staff. 10 COMMISSIONER CRINER: Okay. Do you 11 have any input in that? 12 MR. NEINAST: Yes. I would like to add 13 that that was a specific item on -- agenda item at our 14 last meeting, and it appeared that I was the only one 15 really concerned about it, thinking that the committee 16 should review those and have some input. But there 17 was no interest on the part of any other member 18 expressed to do that, so -- 19 COMMISSIONER CRINER: Nobody wants to 20 take that shot but you. 21 CHAIRMAN CLOWE: That's my recollection 22 of the discussion. 23 MR. NEINAST: But I feel strongly that 24 the committee should at least take a look at them 25 because they may know, and this is a remark I made at WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 28 1 that meeting, that there might be someone on there 2 that a committee member would say, that would be the 3 first person to put on the committee out there that 4 would know something about a nominee that the division 5 may not know. 6 COMMISSIONER WHITAKER: Well, I would 7 hate to have an advisory committee and not give you 8 the opportunity to look at it if you chose to. So I 9 would make that recommendation to you, sir. And also, 10 I would feel uncomfortable with approving Ms. Magnuson 11 if she was going to stay on by default past April. I 12 do think that it's important that we understand that 13 this just be for the stub period. 14 MR. SANDERSON: The committee serves 15 until the Commission appoints new members, so when the 16 nomination forms go out, at that point in time when it 17 comes time to make the appointments, then you can 18 reappoint Ms. Magnuson, if you so desire, or any other 19 nominee from the manufacturer distributor category. 20 COMMISSIONER WHITAKER: And we'll be 21 given that chance in April. Correct? 22 MS. KIPLIN: We'll be glad to notice it 23 up whenever the Commission would like. The one -- I 24 guess the point of clarification I would say is that 25 the members are appointed for a one-year term. And WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 29 1 they'll -- but they -- and they serve at the pleasure 2 of the Commission. They continue to serve in that 3 capacity until the Commission appoints a successor. 4 Just as if there was a vacancy on the Commission, if 5 somebody were to resign from a commission, they 6 continue to actually serve until there is an 7 appointment made. So that would be the same with 8 regard to somebody who is a holdover. For example, if 9 your term is six years and there is a holdover, that 10 continues on until there is an appointment. And it 11 would be the same. 12 CHAIRMAN CLOWE: Did you know that? 13 COMMISSIONER WHITAKER: My goodness. 14 CHAIRMAN CLOWE: It's sort of like for 15 life if the Governor doesn't let you off the hook. 16 MS. KIPLIN: The only true vacancy for 17 a commission is death. 18 COMMISSIONER WHITAKER: Well, if you 19 put it that way... 20 CHAIRMAN CLOWE: And I might -- Bill, 21 correct me if I'm wrong on this. The problem has not 22 been people who wanted to stay on the Bingo Advisory 23 Committee forever, and we couldn't get them to move 24 off. The problem has been really finding and getting 25 proactive individuals who will come to the meetings WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 30 1 and take active parts. That is really the challenge, 2 I think, of the staff, in coming to the Commission 3 with nominations and getting people that will be 4 active and productive members. And, Bill, you've had 5 a lot to do with the activity of the Bingo Advisory 6 Committee. Do you share in that concern or that 7 observation that I made or not? 8 MR. NEINAST: I've got to defer to Phil 9 on that because we've not been -- the committee has 10 not been involved in the process up until this point, 11 so I will defer to Phil. 12 COMMISSIONER CRINER: Well, we're kind 13 of putting you in that chair and rolling you in that 14 direction right now. 15 MR. NEINAST: Which I don't object to. 16 As I mentioned, that would be my recommendation. 17 COMMISSIONER WHITAKER: Well, have we 18 tried to find a Texas distributor manufacturer 19 representative to take this place? Has there been an 20 effort made? 21 MR. SANDERSON: At this point in time, 22 there has not. Because the resignation just took 23 place about a month to six weeks ago, and then we 24 received the letter from Ms. Magnuson that she would 25 be glad to fill this term. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 31 1 COMMISSIONER WHITAKER: Mr. Neinast, 2 let me put you on the hot spot. Is it your 3 recommendation that we make that effort this time, or 4 would you feel it acceptable to approve Ms. Magnuson 5 until April? 6 MR. NEINAST: I think, in view of the 7 fact that we have only two more meetings left on what 8 you might consider the current term, and Fabian did an 9 outstanding job, and I'm sure Ms. Magnuson would also, 10 Because she is also an attorney and Fabian was an 11 attorney. 12 And you have no other request or 13 nomination, Phil, that you have received? 14 MR. SANDERSON: We've not received any 15 other requests. 16 MR. NEINAST: For that reason, I would 17 not object to it, but look at it when we get around to 18 having a whole new slate. Again, as I -- I want to 19 repeat that my objection is one of the perception of 20 having a Texas advisory committee, you might call it, 21 and representation from outside the state on the 22 committee. 23 COMMISSIONER WHITAKER: Okay. 24 CHAIRMAN CLOWE: Any further questions? 25 I think we have a motion and a second. All in favor WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 32 1 say aye, please. Opposed, no. 2 The vote is three-zero in approval. 3 MR. NEINAST: That's all I have, 4 Mr. Chairman. Thank you, Mr. Chairman. 5 CHAIRMAN CLOWE: Thank you, Bill. 6 COMMISSIONER WHITAKER: I want to thank 7 you for the compliment you made generally about 8 lawyers. 9 CHAIRMAN CLOWE: I noticed that, and I 10 voted for her, not because she is an attorney. I want 11 you to know that. That was a pretty all-inclusive 12 remark, wasn't it? 13 We're now ready to go to item number 14 two on the agenda: Report, possible discussion and/or 15 action on lottery sales and trends. 16 Good morning, Toni. 17 MS. SMITH: Good morning, 18 Commissioners. For the record, I'm Toni Smith, 19 marketing director of the Texas Lottery Commission. I 20 usually start out reporting year-to-date total sales, 21 but I want to make note that the Commission's fiscal 22 year just started September 1. So in this reporting 23 we're going to see a difference between fiscal year 24 '02 which represents, in this report, the last three 25 weeks of sales, and fiscal year '01. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 33 1 In the first two weeks of fiscal year 2 '01, our Lotto Texas jackpots ranged from 29 million 3 to 60 million in the first two weeks. So the result 4 of that is a 28.68 percent decrease in sales, when you 5 look at total fiscal year '02 sales to date of 6 105,389,429. And that's down, compared to 7 147,764,730. 8 Our current weekly average for those -- 9 the past three weeks is 35,129,709, compared to the 10 first few weeks of last fiscal year of 49,254,910. 11 To look at a year-to-date comparison by 12 product, again, we will see a decline. The Instant 13 product currently is at 66,696,731. It represents 14 63.29 percent of sales, compared to the first few 15 weeks of fiscal year '01 at 71,722,674, and at that 16 time, represented 48.54 percent of sales. 17 To look at Lotto Texas in that same 18 time frame, we're currently at 21,427,475, 19 representing 20.33 percent of sales, compared to last 20 year's 58,049,295. And at that time, it represented 21 39.28 percent of sales. So with that product, alone, 22 in those first two weeks, we're seeing a 63 percent 23 decline, but it's because of the larger jackpots. 24 And if you look at the last page of my 25 report, you'll see that in those first few weeks, the WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 34 1 week ending the 2nd, we had a jackpot on Wednesday of 2 29 million, and a jackpot of 36 million. And then the 3 next week, we had a 46 million dollar jackpot and a 60 4 million jackpot. So that really is the difference in 5 such a short time frame that we see the decline in 6 these first few weeks, compared to this year. 7 And then to look at just this week, 8 compared to last week, total sales for the week ending 9 9-15-01, were 46,718,422. This is down 5.27 percent 10 from the previous week ending 9-8-01, with total sales 11 of 49,319,865. The primary factor this past week has 12 been a decline in Instants. They were down nearly 13 nine percent. But in light of this week's events, you 14 know, people's spending habits are just not the same, 15 and we feel that that's probably what has had an 16 impact on our sales this past week. 17 Because we didn't, in the last 18 meeting -- the scheduling -- I would like to go back 19 for just a moment and look at year-end sales 20 comparison for fiscal year '01 versus fiscal year 21 2000. Because we have ended the fiscal year in 22 between these. These are unaudited figures, and I'm 23 sure Bart can give us audited figures once we have 24 those. 25 But looking at the total year for WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 35 1 fiscal year '01, sales were 2,826,223,010 dollars, 2 compared to fiscal year 2000, of 2,658,040,572. So 3 this resulted in a 6.33 percent increase of fiscal 4 year 2001, compared to fiscal year 2000. I just 5 wanted to make note of that, for the record, that we 6 did see an increase over that whole year. 7 And that's all I have, Commissioners. 8 I would be happy to answer any questions regarding 9 sales if you have any. 10 COMMISSIONER CRINER: Well, Toni, in 11 light of the events of last week -- 12 MS. SMITH: Yes, sir. 13 COMMISSIONER CRINER: -- and the 14 projected layoffs from Texas-based companies, what are 15 we going to do? To me, that says that our market is 16 not going to have as much money. 17 MS. SMITH: Right. Right. 18 COMMISSIONER CRINER: So what do we do 19 to maintain? 20 MS. SMITH: I think the main thing is 21 to continue to do what we've always done and to get 22 the product out there on time, have it available for 23 our players. We -- because we are at the beginning of 24 the fiscal year, we have the plans to put in place 25 that we were going to put in place for the new year WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 36 1 anyway. One of those is some customization of the 2 Instant product so that we really take a good look at, 3 not only the product and the inventory our retailers 4 have, but the product and inventory that we have in 5 our warehouse. And we are moving towards a 12-week 6 inventory for each game that we introduce, and we will 7 produce smaller print runs on the Scratch Off tickets 8 in hopes that they will sell out in 12 weeks, so that 9 we can keep the games available to the players fresh 10 and have new games out there for them. And that's a 11 move we had planned on making, and I think will also 12 keep those games exciting for players. When they go 13 into the store, there will be something new there for 14 them. 15 And we're also looking at some 16 enhancements to -- we're talking about, both Cash 5, 17 and Pick 3. I don't know if Linda wants to elaborate 18 on that, but we are looking at both of those games. 19 Those are the two on-line games that we have not -- 20 that we have left that we could maybe tweak a little 21 bit. And, then, we are also working on our 22 advertising. We have found out in the past that 23 players enjoy, and it adds to the credibility of the 24 Lottery, advertising that shows real winners, or the 25 fact that real people do win or just, you know, the WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 37 1 concept that people are winning. So we're working 2 with both King Group and Fogarty, Klein & Lowe on 3 campaigns for this coming year that actually show some 4 real winners or people in situations of winning that 5 are true stories of what could happen to them. So I 6 think as we implement our plans for this year, 7 hopefully, that will help, you know, with the events 8 that are going on and keep people enthused about the 9 Texas Lottery. 10 COMMISSIONER CRINER: Do we have any 11 historical -- we can't have any Texas historical data 12 on what happens when the economy takes a dip because 13 we didn't have a lottery in the '80s. 14 MS. SMITH: Right. 15 COMMISSIONER CRINER: But anybody that 16 rode out the '85 to '90, '91, has some bruises. 17 MS. SMITH: And with regard to other 18 lottery jurisdictions? 19 COMMISSIONER CRINER: No. Just -- yes. 20 In regards to the economy. The Texas economy kind of 21 got up and went in 1985. And it didn't show back up 22 until '90 something. So what can we do to plan for 23 what happens if our economy takes such a dip? 24 MS. SMITH: We can definitely take a 25 look at that. And I would also like to look at other WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 38 1 states, if they have been a situation with a decline 2 in the economy, what those lotteries did. And we'll 3 look at both of those. 4 COMMISSIONER CRINER: Mr. Chairman, I 5 would like to propose a motion at this time, if I 6 could, about forecasting. I would like to have -- 7 propose that at our next regularly-scheduled meeting, 8 we get a preliminary, not a finite, but some kind of a 9 draft of what our plan of action will be, based on the 10 projections of the Texas economy, after what has 11 happened. 12 CHAIRMAN CLOWE: I think you can just 13 direct staff to do that, Commissioner. 14 MS. SMITH: We will have that for you. 15 COMMISSIONER CRINER: All right. Thank 16 you. 17 CHAIRMAN CLOWE: Any other questions or 18 comments for Toni? 19 COMMISSIONER WHITAKER: Well, let me 20 ask you this: Do you -- are we seeing the buying 21 picking back up as of yesterday and Friday and 22 Saturday? 23 MS. SMITH: I can look at today's daily 24 sales and then report back to you later on in the 25 meeting, if that would help. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 39 1 COMMISSIONER CRINER: Toni, my point 2 is, let's have a plan. 3 MS. SMITH: Yes, sir. 4 COMMISSIONER CRINER: So if we end up 5 looking at a real bad economy, we know what we have 6 got to do. 7 MS. CLOUD: Well, I think some of the 8 things that we had already established as being this 9 year's go-forward plan on customizing the inventory 10 and not printing 20 million tickets per game, only 11 printing 12, cutting down on that part of our 12 inventory process, is a step in the right direction, 13 especially under the circumstances that we're facing. 14 And tweaking our games -- all we can do is do the best 15 we can to keep the games interesting and on the 16 street. And we'll be more than happy to -- there is 17 lotteries out there that are over 20 years old. 18 They've been up and down and up and down, and those 19 are the lotteries we need to look at, and we will. 20 I'm sure Gtech can help us get some of those numbers 21 as well. 22 CHAIRMAN CLOWE: Very good. Thank you, 23 Toni. 24 MS. SMITH: Thank you, Commissioners. 25 CHAIRMAN CLOWE: The next item, number WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 40 1 three, also includes advertising, promotions, and 2 media criteria, which you're discussing to some 3 extent. Do you have something further on that for us? 4 MS. SMITH: With regard to advertising, 5 nothing in addition to what I had just mentioned about 6 the campaigns we have planned. But we continue to do 7 our promotions throughout the state at other events 8 and fairs and festivals. And we are gearing up for 9 the State Fair that starts the end of this month and 10 runs through the first couple of weeks of October. So 11 we always have a huge presence there and have become a 12 very popular site to visit for State Fair goers. So 13 we're looking forward to that exposure, too. That's 14 all I have, Commissioners. 15 CHAIRMAN CLOWE: Anything further, 16 Linda? 17 MS. CLOUD: Nothing. 18 CHAIRMAN CLOWE: Any questions? 19 Thank you, Toni. 20 MS. SMITH: Thank you. 21 CHAIRMAN CLOWE: The next item is a 22 report, possible discussion and/or action on the 23 operator -- lottery operator procurement and the 24 lottery operator consultant. 25 MR. BENNETT: Good morning, WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 41 1 Commissioners. For the record, my name is Ridgely 2 Bennett. I'm the Deputy General Counsel of the Texas 3 Lottery Commission. It's actually going to be a very 4 short report. We remain in negotiations with Gtech 5 Corporation for the Lottery operations and services 6 contract. I'll be happy to respond to any questions 7 that you may have. 8 COMMISSIONER WHITAKER: What is your 9 deadline at this point in time? 10 MR. BENNETT: We don't have a set, firm 11 deadline at this point in time. There is no current 12 drop-dead date. 13 COMMISSIONER WHITAKER: Right. But 14 what is your goal at this point? 15 MR. BENNETT: Within the next few 16 weeks, next couple of weeks. 17 MS. CLOUD: Hopefully, before the next 18 commission meeting. 19 CHAIRMAN CLOWE: Any other comments or 20 questions? 21 Thank you, Ridgely. 22 MR. BENNETT: Thank you, Commissioners. 23 CHAIRMAN CLOWE: The next item, number 24 five, consideration of and possible discussion and/or 25 action on external and internal audit activities and WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 42 1 the internal audit department's activities. 2 Good morning, Debra. 3 MS. McLEOD: Good morning, 4 Commissioners. For the record, I'm Debra McLeod, 5 internal audit director. We finished the fiscal year 6 and completed or started all scheduled audits that 7 were asked of us to perform. As a result, we have 8 draft reports with management for their comment, 9 including the gameplan verification, advertising 10 performance measures, the bingo debit card controls, 11 accounts receivable, and the bingo licensing 12 background. 13 Two audits that are currently in 14 process are the bingo compliance audit, which is 95 15 percent complete, and the bingo tracking information, 16 which is 45 percent complete. We are currently 17 working with management on their annual risk 18 assessment plan. That's what I would like to report 19 for internal audits activities. 20 With the Comptroller of Public 21 Accounts, they have performed a claims audit. We're 22 still waiting for their findings and their draft. The 23 State auditor's office is still here with their MAS 24 group. They have done a statewide survey of a certain 25 issue with internal -- with information technology. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 43 1 We have not received any additional requests for 2 information or result of that survey as of yet. And 3 to my knowledge, that's all the audits that I'm aware 4 of. 5 I would like to say that Linda, and 6 Mike Pitcock, and myself, attended a meeting with the 7 State Auditor's Office. It was a breakfast networking 8 opportunity for all of the executive directors through 9 every State agency, their security directors, and 10 internal audit directors to meet to discuss -- it was 11 a breakfast meeting right before a fraud conference 12 for the State Auditor's Office. And it was an 13 opportunity for us to meet our counterparts in other 14 state agencies to discuss certain issues, and I 15 thought it was beneficial. 16 CHAIRMAN CLOWE: Very good. I believe 17 there are no comments or questions, Debra. Thank you. 18 The next item, number six, report, 19 possible discussion and/or action on the drawing 20 studio. 21 MS. CLOUD: Vance, would you like to 22 come up and give an update on the construction? 23 MR. DEVINE: Good morning, 24 Commissioners. For the record, my name is 25 Vincent James Devine. I'm the Texas Lottery WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 44 1 Operations and Facility manager for support services. 2 And I guess I'll be reporting to you on the progress 3 thus far of the studio and claim center building. I 4 have some notes here if I can get them real quick, and 5 I apologize. I didn't know that we were number six on 6 the list. 7 As you are aware, on August 31st, we 8 vacated the 501 I-35 studio facility and occupied, 9 what I call, the 601 East Six Street studio facility 10 here at the Texas Lottery headquarters. It began 11 operating that evening, Saturday, had a live draw. 12 And I guess we're on, what, our 20th draw now? So 13 we're doing real well. 14 On the 7th of September, the claim 15 center staff and the rest of the security staff 16 occupied the rest of the building. And I guess the 17 best way to report is, today, we're doing the little 18 punch-out items that are typical in construction, in 19 remodeling. And we anticipate, on about the 24th, 20 little patches, paint jobs, and items such as that 21 will be completed. 22 We're very happy with the project. We 23 had some outstanding vendors, contractors, architects, 24 and some amazing internal staff here in both 25 purchasing, information technology, legal -- legal WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 45 1 helped me push some interesting procurements through 2 quickly, just some outstanding crew. And I was very, 3 very happy to work with all of the staff. To say the 4 least, Linda and I and other people were standing on 5 the sidewalk watching the studio draw the first night, 6 from the window out on the street. And it was a neat 7 thing to see. 8 That's about all I have to report. 9 COMMISSIONER CRINER: Well, I'll 10 have -- 11 COMMISSIONER WHITAKER: Is that the 12 Walter Criner window? 13 MR. DEVINE: I'm not sure how that got 14 coined. It almost got engraved over the top of it, 15 but I wasn't sure that that would be appropriate, but 16 yes, ma'am. 17 CHAIRMAN CLOWE: I don't think he wants 18 his name up there. 19 MS. KIPLIN: That was one of those 20 purchases we helped them on a little -- 21 COMMISSIONER CRINER: I'll have you 22 know that I was hanging in that window last night and 23 saw the drawing and then went down on the street and 24 watched the drawing, watched them prepare. It's a -- 25 it's really interesting. I don't think the world WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 46 1 knows it's really happening. But as people pass by 2 and watch it, I think it'll be a really nice 3 attraction to the city. And, especially, once the 4 Convention Center -- because there were several people 5 came up last night and saw the logo on the sidewalk 6 that's beamed down on the sidewalk and ran down the 7 street to buy tickets and then come back and stand 8 there and watch the drawing, which was -- I like that 9 part. And so it's a -- 10 MS. CLOUD: Well, I'm happy you got to 11 witness the draw. And I'm excited. The first 12 night -- I haven't been there at night since the first 13 night, with traveling that I've been doing, but I plan 14 to be there. Our first real busy Sixth Street event 15 is coming up, Pecan Street Festival, is I don't think 16 this weekend, but next weekend, and I plan to be here 17 for that because I want to see what it's like when we 18 really have a crowd on Sixth Street. 19 And we have been getting, from what I 20 have been told, anywhere from 20 people to 50 people 21 standing at those windows. That's a wonderful, 22 wonderful opportunity for us to have witnesses to the 23 actual drawing, so that we hear less of this, that our 24 drawings are rigged. People can see what is going on, 25 and they understand it a lot better. And I'm very -- WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 47 1 I'm very happy with the project. And, you know, 2 knowing that we've improved the facility, but also, 3 the viewing, for the public as well as saved the State 4 a million dollars, it's a good -- I think it's a good 5 thing. 6 COMMISSIONER CRINER: I enjoyed it. 7 MS. CLOUD: Good. 8 COMMISSIONER CRINER: Thank you. 9 CHAIRMAN CLOWE: And, Vince, I talked 10 with Mike this morning, who is in charge of security 11 on Sixth Street, and he tells me that the lights are 12 going to be installed out there very shortly, as well 13 as sound. So when Commissioner Criner is on the 14 street again, he can hear as well as see the drawing 15 through his window. 16 MS. CLOUD: I'm sure he had security 17 wrapped around him pretty good, though. They're 18 really good at that. 19 COMMISSIONER CRINER: Yes, they were. 20 CHAIRMAN CLOWE: And the bars, or 21 grill, is being fabricated now for the windows, which, 22 hopefully, will be in before the Pecan Street Festival 23 occurs. That will give us an extra measure of 24 security there. 25 I would like to also mention that we WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 48 1 have a new security video system installed, with the 2 claims center people moving out of the foyer here into 3 the claims center, which, by the way, is very 4 attractive and is very welcoming and accommodating to 5 winner ticket holders. 6 The security area now has been 7 refurbished, and for the Commissioners' benefit, if 8 you haven't seen that as well, there is a 9 state-of-the-art latest digital camera system which 10 protects this building and many of the areas outside 11 on the sidewalk and the street, as well as internal 12 security. Mike, I don't know how much of that you 13 want to talk about, but I invite you to come up and 14 tell the Commissioners and those in attendance 15 whatever you would like us to know about that. 16 MR. DEVINE: While he's getting seated, 17 I can tell you the bars for the windows are going up 18 tomorrow and Friday. And we're going to punch them 19 out, clean them up, and shape them up over the 20 weekend. The glass and everything that you see now 21 installed is what we call, the choice that our 22 security chose for very defensive glass. So with the 23 bars, the glass combination, it's a nice combination. 24 The gates will be going up. I'll let Mike speak more 25 to that. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 49 1 But you're absolutely right. A lot of 2 the security features that we felt necessary at this 3 facility, with this studio, now have been put in 4 place. And, you know, I overlooked mentioning the 5 security staff were outstanding. We had one minor 6 injury on this accident, a painter fell off a ladder. 7 And we had no theft, we had no injuries. And that's 8 an amazing feat. Mike's group runs risk management 9 and security, so that doesn't always happen on 10 construction projects of this speed. 11 MR. PITCOCK: Mike Pitcock, director of 12 security of Texas Lottery. The only comments I'll 13 make -- I'm not going to get into the details of our 14 security system because I think that's something that, 15 you know, I want to keep, you know, as well organized 16 as I can. But I think our security system is a 17 state-of-the-art system, and just some of the comments 18 I've heard from other law enforcement is that we have 19 one of the best that's out there for State agencies. 20 Based on the events that have happened this week, it's 21 come into play, we've stepped up security around the 22 building. And it's one that the system offers us the 23 ability to not only secure the buildings, but make it 24 a safe work environment for the people who come work 25 here. Plus, any individuals that want to watch the WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 50 1 Lottery, we have to take into concern their safety, 2 also. And out on the sidewalk or inside, we have an 3 area inside also that allows people to come in and 4 watch the drawings inside if they want to sit and 5 watch the process. 6 Security is all encompassing, and I 7 think it's one that each of us need to understand that 8 it's the whole Lottery staff that has to be concerned 9 with security. And I compliment our staff because the 10 Lottery staff, as a whole, takes that very seriously. 11 And my staff, you know, the police officers and the 12 security staff that do the draw and the security staff 13 that work inside our office, it's a coordinated effort 14 with Linda and legal and all the other entities to 15 work this, and it has to all work together for it to 16 be successful. 17 And I think from 1992 to the present, 18 you know, we've gotten better, and we're going to get 19 better. And we have to keep looking at new 20 technology, new ideas about security, and I will tell 21 you that I watch and try to learn to see what is 22 happening in other buildings in security-type 23 situations. And we're going to continue to do that to 24 improve our system, not only by personnel, but 25 technology also, but it is a coordinated effort of WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 51 1 everybody. Security today, especially today, is not a 2 simple process, and is one that we have to take it 3 very seriously. 4 MS. CLOUD: Commissioners, I would like 5 to -- 6 CHAIRMAN CLOWE: Just a minute, Linda. 7 Mike, while you are speaking to us, are you still 8 moving the machines into the secured area at the end 9 of the drawings every night now, or are you planning 10 to leave them in place at some point? 11 MR. PITCOCK: We are moving them into 12 the vault areas, we call it, every night, because 13 there is lot of construction, as Vince said, punch out 14 and work in the actual studio area that is going on 15 and a lot of testing, you know, for different things. 16 So we have elected to move it each night, out, so we 17 don't hamper that process. As you see, the windows 18 are not completed, and some of the things that they 19 have to do, you know, they need access inside that. 20 If we leave the machines out, we have to have an 21 auditor come over and to break seals and stay there 22 that continuous time. So we felt that it's better to, 23 each night, for the time being, to leave them in the 24 vault. 25 CHAIRMAN CLOWE: I think we all WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 52 1 understand that concern. When do you see that 2 practice stopping? 3 MR. PITCOCK: I -- actually, I've been 4 talking to Captain Jim Ziegler, which is over the 5 draws, and he has recommended that we start looking 6 towards October, maybe November, of possibly leaving 7 the machines out. We've still got to work out some of 8 the technical things on that to make sure our machines 9 are covered, the cameras are covered, access is 10 covered, basically, as far as security to those 11 machines. Because Linda puts the highest security on 12 those machines, and she does not want that to be 13 compromised in any way, so we had to study that to 14 make sure we are intact for with what she wishes for 15 us to do. 16 MS. CLOUD: Commissioners, I just 17 wanted to make a point that this new ADT security 18 system that has gone into this whole building is a 19 replacement of a unit and an upgrade of what we had 20 when we moved in the building. The bid was -- the 21 contract with ADT was out, we bid the contract out, 22 and the replacement of the security that we have, as a 23 result of that bid process, was in the making. It was 24 not something that we did that was because we put the 25 studio and the claim center there. It was part of the WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 53 1 process. Had we not had the studio in this facility, 2 part of the ADT equipment would have gone in the TPFV 3 location. So this is not because of anything that 4 we've done. It was a matter of a contract running out 5 and us rebidding the contract, and this is what came 6 out of the bid process. 7 CHAIRMAN CLOWE: Since you mentioned 8 that, Linda, the new passes do not have the photograph 9 on them. Would you speak to that issue? 10 MS. CLOUD: The security auditors for 11 two audits have commented on us having the name of the 12 organization, as well as a picture of the individual 13 and their titles. In the event those badges get lost, 14 we do -- we are going to have an address so the badge 15 can be returned to us, if people would do that if they 16 find a badge that's missing. 17 Am I on track with that, Mike? 18 MR. PITCOCK: Yes. Partially, the 19 reason is that, again, in punch out, we still haven't 20 gotten the camera from ADT that takes the photographs 21 of the individuals. The actual template, it's already 22 in place in the computers, and we're waiting for ADT 23 to finish that part and install the camera that takes 24 the actual picture. The pictures that the staff have 25 are their old pictures from our old system. They're WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 54 1 glued on there and what we're going to do is, we'll 2 take the new pictures and with the new templates that 3 Linda is describing, and that will be forthcoming. 4 It's just one of the things that they're completing. 5 Actually, this last week they completed the actual 6 desk out front. And we have to incorporate the camera 7 system and stuff in the back, so they're at that part 8 now. That's what they're this week doing. 9 MS. CLOUD: Okay. Let me correct what 10 I said. Part of that security audit didn't take the 11 pictures, but it just took the titles. 12 MR. PITCOCK: It took -- what they were 13 concerned is the address, any type of identification. 14 There was two things that the security audit was 15 concerned about, is the two-part badge, and the actual 16 address and logo and anything that identifies the 17 Texas Lottery. They feel like that these badges were 18 given, and if -- like, for example, I'm the commander. 19 If it's given out, somebody got it in the wrong hands, 20 they could utilize it. Our system wouldn't allow 21 that, because if we lose a badge, the employees are 22 required to report it so we can, you know, immobilize 23 that badge immediately. 24 The two part, I spoke against, because 25 in studying it with ADT, we had them look at a study WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 55 1 as to the one-part badge versus the two-part. We felt 2 like that the two-part badge offered us some benefits 3 far-reaching the one-part badge. One-part badges are 4 still new in the technological field because you have 5 got to incorporate sensors and different things inside 6 these badges. And the one-part badge, right now, did 7 not fit what I thought we needed at this building, so 8 we're going to stay with the two-part badge in lieu of 9 what the security audit told us because of the 10 features that it offers us and the benefits as far as 11 security. So we decided to stay with two-part badges. 12 CHAIRMAN CLOWE: Define, for our 13 benefit, one-part and two-part badges, if you would. 14 MR. PITCOCK: Well, if you look at the 15 badge, which you can't see, but it -- the two-part 16 would actually be -- the front of it would be the 17 picture and the identification of the individual from 18 the Lottery, which is taken through one computer 19 system. The back part is a flat gray area that 20 incorporates the computer chips and the necessary 21 technical mechanisms to activate our door sensors and 22 the other parts into the building. It's one that, 23 again, at a later date, I would be glad to explain, 24 you know, the security aspects of it, but at this time 25 I would not like to do that. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 56 1 CHAIRMAN CLOWE: So we are, then, going 2 to go to the two part, and we will have the photograph 3 of the individual as well as the address of the agency 4 that will be a visual representation? 5 MR. PITCOCK: We're going to stay with 6 the two part and not go to the one part as recommended 7 because of the benefits offered, security benefits 8 that I think far reach the one part. 9 MS. CLOUD: But you will have the 10 pictures -- 11 MR. PITCOCK: We will have the 12 pictures. 13 MS. CLOUD: Okay. And you will have 14 the address of the building? But not the name of the 15 agency? 16 MR. PITCOCK: We'll have the address, 17 but not the name. 18 MS. CLOUD: Right. 19 MR. PITCOCK: That's correct. 20 CHAIRMAN CLOWE: Well, since we're 21 going to be changing the photographs, I have a high 22 school photograph that I would like to use. If that's 23 all right. 24 MS. CLOUD: Commissioners, I just want 25 to add one more thing before Vince gets away from me. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 57 1 CHAIRMAN CLOWE: Commissioner Whitaker 2 just made a very uncomplimentary remark which is off 3 the record. 4 MS. CLOUD: We have had a lot of 5 projects that we've had to be involved in, since 1992. 6 And I think Vince came on board in about '93. 7 MR. DEVINE: '94. 8 MS. CLOUD: '94. And he has been one 9 of the most tremendous employees that this agency has 10 ever had. He has handled these projects. He has not 11 had -- he has made sure that he has kept me informed 12 on what was going on. He has not come whining or 13 begging or -- he has always got a plan. He lays his 14 plans out, and I just want to say, it's a -- it's a -- 15 it's a great honor to have him on our staff. And I 16 really -- he has given everybody else kudos, but I 17 think he deserves the most. 18 CHAIRMAN CLOWE: I think the 19 Commissioners share in that appreciation of the job 20 you've done, Vince. And we've asked you, from time to 21 time, are we on schedule and are we under budget, and 22 you've always answered affirmatively. And I assume -- 23 we know we're on schedule, but I assume we're still on 24 budget. Is that correct? 25 MR. DEVINE: Yes, sir. We actually had WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 58 1 somewhat of a mild surprise and have some reserve, 2 which was nice. 3 CHAIRMAN CLOWE: Well, that's most 4 unusual. And we are all grateful, I think, all three 5 of the Commissioners, for the good job you've done. 6 And I think you are wise to give credit to the subs 7 and the others who have participated. Excellent job. 8 COMMISSIONER WHITAKER: Let me just 9 say, my perception has been, it's gone very, very 10 smoothly. Normally, when I think of construction, I 11 think of delays, but not in this case. And I am -- 12 those are wonderful comments, and you are to be 13 commended. Thank you. 14 MR. DEVINE: Thank you. 15 COMMISSIONER CRINER: And since I stood 16 outside your window last night, it was very good. 17 MR. DEVINE: It's your all's window 18 now. 19 CHAIRMAN CLOWE: Now, Keith, if you'll 20 come up, I have a question or two for you and perhaps 21 the other Commissioners do, as well. 22 One of the questions that we have 23 received continuously about this studio in the request 24 for capital funds was the pick-up of the signal by the 25 TV stations and the statewide broadcasting. And our WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 59 1 answers were that we feel it's vitally important that 2 these drawings be televised and that you are working 3 to enhance our coverage and the interest of the TV 4 stations in broadcasting these drawings. I'm not 5 going to ask you specifically this morning for any 6 details. You have furnished that to the leadership 7 and to us in the past, but I want to express, on 8 behalf of the Commission, a continuing interest, high 9 interest, in that work and in doing everything 10 possible to see that these broadcasts are picked up, 11 and that the new format which the new production has 12 enabled us to have, which I think is more attractive 13 than those which we've used in the past, is used to 14 see that we get a broader coverage. 15 I know there is an item on the agenda, 16 Linda, today in regard to that. But since we're 17 talking about the production studio right now, I want 18 you to know, the Commissioners are very interested in 19 that, and it's my expectation that we will be asked to 20 report back to the leadership, results on this 21 project, and where we stand in regard to that 22 particular issue. Have you got any comments for us in 23 that regard? 24 MR. ELKINS: Yes, just a few comments. 25 Just a few comments, Mr. Chairman. For the record, WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 60 1 Keith Elkins, Communications Director, Texas Lottery. 2 Good morning. We share, here at the 3 Commission, your same concerns. We have been working 4 now for the better part of a year in addressing that 5 very issue, trying to look for ways that we can get 6 more TV interest in carrying the live drawings. We 7 have superior coverage right now, as you know, on the 8 results. All the stations have found that that is 9 something that their viewers certainly want, is to 10 know what the winning results are. I think that it is 11 a testament to what we do here from a security 12 standpoint that the TV stations don't feel the need to 13 carry the drawings live because they don't question 14 the integrity of that drawing. But we're trying to 15 show them now that this is also a benefit to them, and 16 we do have some plans that we are recommending to the 17 executive director that we'll be ready to share with 18 you at a later time. 19 Also, I might add that since we have 20 made the switch to the new studio, starting September 21 1, we do now have the capability also of watching the 22 drawings live via Internet. You can either watch on 23 the Internet live, or you can call it up on demand 24 minutes, hours, days later, by date. We will be 25 broadcasting that as well at the proper time. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 61 1 MS. CLOUD: Commissioners, that's a 2 real asset. That's something we've never had before. 3 So it provides all of our players who have computers, 4 if they can't get the drawing aired on their 5 television stations, they can actually go to their 6 computer and watch it live. 7 COMMISSIONER WHITAKER: Do we have, 8 like, RealPlay, or does any interface work? 9 MR. ELKINS: There is about four or 10 five different players, depending on the type of 11 computer system that you have. Our website 12 coordinator and broadcast studio manager working with 13 the private vendor, the M&S Works Company, have tried 14 to address every potential computer need out there, 15 all the way from Macintosh to personal computers, and 16 the different browsers that people use. 17 COMMISSIONER WHITAKER: It would be 18 nice to have a report as we get into that as to how 19 many viewers utilize that service. 20 MR. ELKINS: We can make that available 21 to you. I would just caution that at this point we 22 haven't advertised that far and wide. I know that the 23 first night, September 1st, we had, I think, 40 people 24 that were on the Internet watching the live drawing. 25 I can't tell you how many of those were staff or, you WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 62 1 know, vendor employees, but we did have interest. We 2 have just not put out the word yet because we wanted 3 to roll it all out at one time. We wanted to make 4 sure all the bugs were out as well. 5 COMMISSIONER WHITAKER: That's a good 6 idea. 7 MS. CLOUD: And this -- we actually 8 really didn't expect to be able to start the -- the 9 day we started with our own studio here, that the 10 vendor would be able to provide the on-site, on-line 11 capability at the up-front. We thought it was going 12 to be several weeks into the contract before that part 13 of it would be available. But they had it ready, and 14 it was available the night of the first draw. 15 MR. ELKINS: The only final comment I 16 would like to add is, with the plans that we're 17 looking at that we will be bringing to you, if those 18 do go forward, I feel convinced that we will have good 19 coverage across the state as far as getting live TV 20 coverage for our drawings. 21 CHAIRMAN CLOWE: Thank you, Keith. 22 COMMISSIONER CRINER: In looking 23 through that window, I saw that last night. 24 COMMISSIONER WHITAKER: Uh-huh. 25 COMMISSIONER CRINER: At least, the WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 63 1 security took me and the web designer was there in the 2 back, in the control room, the little control room 3 where they were actually feeding everything to the Web 4 site, and they bring it up and you could see it live. 5 They're really working on it. 6 COMMISSIONER WHITAKER: Well, I've got 7 to look at it next time. 8 MR. ELKINS: Thank you. 9 CHAIRMAN CLOWE: Thank you, Keith. 10 The next item is number seven, 11 consideration of and possible discussion and/or 12 action, including procurement, on the instant tickets 13 and services contract. Linda? 14 MS. CLOUD: Commissioners, this is just 15 to let you know that we are at the point in our 16 instant ticket contracts to put them back out for bid 17 again. We're going to be working on the RFP process 18 for our instant product. And we just wanted you to 19 know we were going out for bid for the instant ticket 20 procurement. 21 MS. KIPLIN: Commissioners, ordinarily 22 this is the type of contract that in the past the 23 Commission has wanted to have oversight on, whether to 24 go out to bid or to exercise an extension. This 25 contract had no extensions; it only had a primary term WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 64 1 of three years, so there is -- there is really no 2 option other than to go out to bid. 3 CHAIRMAN CLOWE: What's the expiration 4 date of the current contract, please? 5 MS. CLOUD: I think it's August 31st, 6 isn't it, of 2002. 7 CHAIRMAN CLOWE: '02. 8 MS. CLOUD: So it takes about a year. 9 We'll be rewriting just like we did the lottery 10 operator contract, rewriting the RFP, having 11 briefings, and the actual bid process, and the 12 evaluation, and then the award. 13 CHAIRMAN CLOWE: This is the second 14 largest contract the Commission awards, if my memory 15 serves correctly. And there are issues around this 16 contract which came up when we awarded it the last 17 time, which we would appreciate you dealing with in 18 the bidding process so that we have the greatest 19 number of vendors interested that are, of course, 20 qualified, and we have the broadest coverage in the 21 industry that's possible. I'm sure you'll advertise 22 and qualify those vendors so we can have a goodly 23 group competing for this contract. 24 MS. CLOUD: When you talk about goodly 25 groups, there are only three vendors that are out WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 65 1 there manufacturing instant tickets. So I'm sure all 2 three will be bidding. 3 CHAIRMAN CLOWE: We want all three. 4 MS. CLOUD: Yeah. They'll all three be 5 bidding, I'm sure. 6 CHAIRMAN CLOWE: Any comments on that, 7 or questions about it? 8 COMMISSIONER WHITAKER: No. 9 CHAIRMAN CLOWE: Thank you, Linda. 10 Nelda, I think we're ready for your 11 item, number eight, possible discussion, action, 12 report on the Council on Competitive Government's 13 activities relating to the Commission. 14 MR. SANDERSON: Mr. Chairman, while 15 Nelda is passing those out, the BAC meeting is 16 scheduled for October the 9th. It's a Tuesday, at 17 10:00 a.m. 18 CHAIRMAN CLOWE: Thank you, Phil. 19 MS. TREVINO: Good morning, 20 Commissioners. For the record, I'm Nelda Trevino, the 21 Director of Governmental Affairs. What I have 22 provided each of you is a copy of the project plan 23 that's been provided to us by the Council on 24 Competitive Government staff that was provided to us 25 this last Monday. And what I would like to do is just WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 66 1 briefly highlight a couple of items that are stated in 2 the project plan. 3 Starting with the background, that 4 basically states the rider language that's in our 5 agency bill pattern. The council is also to submit 6 the final report to the Governor and to the LBB, no 7 later than January the 15th. In regards to the 8 purpose and the scope of the work, you will note that 9 in addition to the review of the agency's public 10 information, media, and advertising functions, the 11 review will also include the in-sourcing versus 12 out-sourcing of the Lottery drawing studio. 13 The project team is clearly identified 14 in the project plan, and with us today are some 15 members of the project team, including Dan Contreras, 16 who is the director of the Council's -- for the 17 Council. 18 On the second page where deliverables 19 are noted, I wanted to highlight just a couple of 20 dates that are noted on there, and particularly, 21 December 20th, 2001. That is an open meeting of the 22 Council to discuss the draft report. It is my 23 understanding that that will be the opportunity for 24 the agency to provide comment in regards to the draft 25 report. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 67 1 Also, in discussing with the CCG staff, 2 my understanding is that we will receive a copy of the 3 draft report -- an advance copy of the draft report 4 sometime after that December 10th date, where it's 5 noted that the Council members will be receiving a 6 copy of the draft. So that leaves us a pretty short 7 period of time from the time that we receive the draft 8 in order for us to review and prepare comment for that 9 December 20th meeting. 10 Another date is the January 8th, 2002 11 date. And that's also noted as another open meeting 12 for the Council to approve the report. And then 13 again, that final -- final report due to LBB and the 14 Governor on January the 15th, 2002. In regards to the 15 time line, while it's not noted on the project plan, 16 we have worked with the Council over the last several 17 months providing them information and documentation in 18 regards to the items that they're going to be 19 reviewing. 20 Based on where we are today, the 21 Council staff will be interviewing staff from the 22 marketing division this week and meeting with some of 23 our vendors next week. I believe that they will begin 24 interviews with our communications staff at the 25 beginning of November. And, again, as I've already WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 68 1 highlighted, that final report is due on January 15th, 2 so, again, a very short time period for the council to 3 do their work and a short period of time for us to be 4 able to review their draft report. 5 At this point, I'm happy to answer any 6 questions, and, as I mentioned, Dan Contreras, who is 7 the director of the council, is also here and, I 8 think, available to answer any questions that you may 9 have. 10 COMMISSIONER CRINER: Mr. Chairman? 11 CHAIRMAN CLOWE: Yes, sir. 12 COMMISSIONER CRINER: I'm looking at 13 your time line, Nelda, and I wonder if you could bring 14 the Council over to look through the window at a 15 drawing. 16 MS. TREVINO: I would like to defer to 17 Dan on that. I know that they have made -- they made 18 a site visit. 19 COMMISSIONER CRINER: Can Dan hold his 20 hand up so I know who he is? 21 MR. CONTRERAS: How are you doing, sir? 22 COMMISSIONER CRINER: Mr. Contreras. 23 MR. CONTRERAS: Good morning. Dan 24 Contreras, Director of the State Council on 25 Competitive Government. The answer is, yes, I've WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 69 1 asked Keith Young (phonetic) to attend the drawing, 2 the evening of the Pecan Street Festival, so... 3 COMMISSIONER CRINER: Oh, okay. As you 4 can see, we're kind of excited about that. 5 COMMISSIONER WHITAKER: Are you going 6 to visit our website, too? 7 MR. CONTRERAS: Is he smiling right 8 now? 9 COMMISSIONER WHITAKER: Yes. 10 MR. CONTRERAS: Yes. We had attended a 11 drawing at the -- at the 501 post, with the Lottery 12 Commission. We -- I think we got there about 6:00 13 o'clock one evening and stayed through the entire 14 preparation. And Lottery staff was very gracious in 15 taking us around, showing us the process, behind the 16 scenes, all of the activities that they went through. 17 We were there before the internal auditors showed up 18 and the internal auditors breaking the seals and 19 going through the entire process, and we stayed 20 through the drawing. Linda came out and the -- I 21 think the majority of the project staff was there at 22 that time, too. So we did definitely want to come out 23 and take a look at the drawing at new studio and see 24 how the process goes there, also. 25 COMMISSIONER CRINER: I just wanted to WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 70 1 make sure -- 2 MS. CLOUD: Was this individual that 3 you were going to have come from -- to be with me on 4 the Pecan Street Festival, was he at TPFV the night 5 you saw that drawing? 6 MR. CONTRERAS: No. Keith Young is 7 new. 8 MS. CLOUD: I think the people that 9 were at the studio there needs to be at the studio 10 here. 11 MR. CONTRERAS: All of the project team 12 will be at the new studio, also. 13 COMMISSIONER CRINER: We're kind of 14 excited about that window. So we want you to see it, 15 too. Thank you. That's all. 16 CHAIRMAN CLOWE: Dan, we really 17 appreciate you being here with members of your staff 18 this morning. And I want to assure you on behalf of 19 the Commissioners that we want our staff, Linda and 20 all of her directors, to provide to you whatever 21 information you need. 22 Nelda, are you convinced at this point 23 that we have done everything for his -- for Dan's 24 group that you can do and others as well to provide 25 that information? WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 71 1 MS. TREVINO: Yes, sir, I feel very 2 confident about that. 3 CHAIRMAN CLOWE: The only exception, 4 Dan, is this agency is involved in a lawsuit regarding 5 some issues that require us to follow legal 6 guidelines. And we want you to understand we're 7 trying to follow good practice there, but save and 8 except for that area of litigation, we want to be 9 totally forthcoming and eager to supply you with 10 whatever you need. 11 And if there is ever any question of 12 that in your mind, I would invite you to contact any 13 one of the three Commissioners, and we will come to 14 your support and assistance readily. 15 MR. CONTRERAS: Great. Also, too, I 16 believe that the Lottery Commission staff has been 17 very responsive to our requests, and we understand the 18 situation with the lawsuit. 19 CHAIRMAN CLOWE: Great. Well, again, 20 thank you for being here today. We really appreciate 21 it. 22 COMMISSIONER WHITAKER: If you couldn't 23 introduce the folks that came with you. 24 MR. CONTRERAS: I'm sorry. We have 25 Keith Young as a project analyst with the Council on WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 SEPTEMBER 19, 2001 72 1 Competitive Government, and Shannon Franklin is a 2 senior project analyst with the Council, also. 3 COMMISSIONER WHITAKER: Great. Thank 4 you. 5 CHAIRMAN CLOWE: They can buy lottery 6 tickets, can't they? 7 MS. KIPLIN: We have no contract with 8 them currently. 9 CHAIRMAN CLOWE: Okay. Nelda, I 10 believe the next item, number nine, was yours as well. 11 Report, possible discussion, action on the 77th 12 Legislature, including the agency's implementation of 13 legislation involving the agency. 14 MS. TREVINO: Yes, sir. Not much -- 15 not much new news to report from our last commission 16 meeting. Our implementation task forces continue to 17 meet and implement any necessary actions that need to 18 take place in regards to legislation. Today you will 19 be taking up a rule as a result of one of the bills 20 that did pass in relation to a vehicle inscription 21 requirement. And we will continue to bring those to 22 your attention as appropriate. So unless you have any 23 other questions, I don't have anything else to report. 24 CHAIRMAN C