1 1 2 3 4 * * * * * * * * * * * * * * * * * 5 6 TEXAS LOTTERY COMMISSION 7 MEETING 8 9 OCTOBER 16, 2002 10 11 * * * * * * * * * * * * * * * * * 12 13 14 15 16 17 18 BE IT REMEMBERED that the TEXAS LOTTERY 19 COMMISSION meeting was held on the 16TH of OCTOBER, 20 2002, from 8:30 a.m. to 1:40 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: 2 1 APPEARANCES 2 3 Chairman: Mr. C. Tom Clowe, Jr. 4 Commissioners: 5 Ms. Elizabeth D. Whitaker Mr. James A. Cox, Jr. 6 General Counsel: 7 Ms. Kimberly L. Kiplin 8 Acting Executive Director: Mr. Gary Grief 9 Charitable Bingo Operations Director: 10 Mr. Billy Atkins 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 3 1 INDEX 2 3 Appearances...................................... 2 4 AGENDA ITEMS 5 Item Number 1.................................... 4 6 Item Number 2.................................... 4 Item Number 3.................................... 5 7 Item Number 4.................................... 5 Item Number 5.................................... 10 8 Item Number 6.................................... 45 Item Number 7.................................... 57 9 Item Number 8.................................... 59 Item Number 9.................................... 77 10 Item Number 10................................... 78 Item Number 11................................... 79 11 Item Number 12................................... 90 Item Number 13................................... 96 12 Item Number 14................................... 104 Item Number 15................................... 106 13 Item Number 16................................... 111 Item Number 17................................... 113 14 Item Number 18................................... 116 Item Number 19................................... 116 15 Item Number 20................................... 117 Item Number 21................................... 120 16 Item Number 22................................... 134 Item Number 23................................... 139 17 Item Number 24................................... 139 18 Reporter's Certificate........................... 140 19 20 21 22 23 24 25 4 1 OCTOBER 16, 2002 2 CHAIRMAN CLOWE: Good morning. It is 08:31 3 8:35 a.m., October the 16th, 2002. My name is Tom 08:31 4 Clowe. Commissioner Whitaker and Commissioner Cox are 08:31 5 here. We have a complete board present. We're ready 08:31 6 to go forward with today's agenda. 08:31 7 We'll move to item number two, report, 08:31 8 possible discussion and/or action on lottery sales and 08:31 9 trends. Toni Smith. Good morning, Toni. Are you and 08:31 10 Bart going to cover this item? 08:31 11 MS. SMITH: Yes, sir. For the record, 08:31 12 I'm Toni Smith, marketing director of the Texas 08:31 13 Lottery Commission. 08:31 14 MR. SANCHEZ: For the record, my name 08:32 15 is Bart Sanchez, financial administration director. 08:32 16 MS. SMITH: Commissioners, total fiscal 08:32 17 year '03 sales to date are 308.9 million. You have in 08:32 18 your packets the usual information that we submit, and 08:32 19 Bart and I are both here and would be happy to answer 08:32 20 any questions that you have regarding sales. 08:32 21 CHAIRMAN CLOWE: Thank you, Toni. Are 08:32 22 there any questions? I believe not. Thank you very 08:32 23 much. 08:32 24 Do you have any following comments, 08:32 25 Toni, on the next agenda item, which is the lottery 08:32 5 1 advertising, promotions, and advertising procurements? 08:32 2 MS. SMITH: No, sir, I have nothing new 08:32 3 to report today. 08:32 4 CHAIRMAN CLOWE: Are there any 08:32 5 questions in regard to that? Hearing none, thank you, 08:32 6 Toni. 08:32 7 The next item is number four, report, 08:32 8 possible discussion and/or action on the Legislative 08:32 9 Appropriations Request for fiscal year '03 and '04, 08:32 10 including report on the September 30th, 2002 hearing 08:32 11 on the Commission's LAR. I believe our Acting 08:33 12 Executive Director, Gary Grief, Billy Atkins, as well 08:33 13 as Bart, are going to handle this. Good morning, 08:33 14 gentlemen. 08:33 15 MR. GRIEF: Good morning. I would like 08:33 16 to start out, Commissioners, I want you to let you 08:33 17 know that an LAR hearing was held on September 30th, 08:33 18 in which Billy Atkins and I laid out the agency 08:33 19 appropriation request for both the Lottery and Bingo 08:33 20 business sides of our agency. This hearing was 08:33 21 conducted in front of the staff from the Legislative 08:33 22 Budget Board and staff from the Governor's Office of 08:33 23 Budget and Planning. The hearing was largely routine 08:33 24 in nature. They did ask us some questions that we 08:33 25 responded back to them by letter. In addition, we 08:33 6 1 have received some additional guidance from the LBB 08:33 2 regarding that section of our LAR dealing with rider 08:33 3 four. After Billy has a chance to make any comments 08:33 4 he would like to make, I would like to call on Bart 08:34 5 Sanchez, our financial administration director, to 08:34 6 explain about the guidance we received from the LBB, 08:34 7 along with a change that we need to make to our LAR 08:34 8 submission. 08:34 9 MR. ATKINS: One change that I would 08:34 10 point out that came up about as a result of our LAR 08:34 11 hearing, and I'll also ask Bart to highlight this 08:34 12 further, is the budget staff did ask that we account 08:34 13 for the prize fees that we receive from the conduct of 08:34 14 bingo as income and, also, report them as an expense 08:34 15 when it's allocated back to the appropriate 08:34 16 jurisdiction, under the appropriate strategy. And 08:34 17 that's the only change that I'm aware of involving 08:34 18 bingo. 08:34 19 CHAIRMAN CLOWE: And I believe the 08:34 20 Commissioners have all received a copy of the letter 08:34 21 where you answered the questions that were put to you 08:34 22 in the meeting and, to the best of your knowledge, 08:34 23 that satisfied all of the inquiries that came up at 08:35 24 that meeting? 08:35 25 MR. GRIEF: Yes, sir, it did. 08:35 7 1 CHAIRMAN CLOWE: Great. Then you have 08:35 2 one change that Bart is going to explain. Is that 08:35 3 correct? 08:35 4 MR. GRIEF: Yes, sir, we do. 08:35 5 Bart, if you would. 08:35 6 MR. SANCHEZ: Yes, sir. If I may, can 08:35 7 I pass out a package. 08:35 8 CHAIRMAN CLOWE: Sure. 08:35 9 MR. SANCHEZ: Again, my name is Bart 08:35 10 Sanchez. I'm the financial administration director. 08:35 11 Before you, sir, you have a change log, and these are 08:35 12 basically all the changes that have been discussed 08:35 13 with Rick Travis of the LBB, our financial analyst, 08:35 14 regarding his review of the LAR. The cover sheet 08:36 15 basically gives you a summary of all the changes, even 08:36 16 small. We decided to go and disclose them. But the 08:36 17 major change is -- the material change is the one 08:36 18 involving rider four. It has been the recommendation 08:36 19 of the LBB, along the Governor's Budget Office, to 08:36 20 present that request for funding through an 08:36 21 exceptional item request. 08:36 22 Again, if I need to briefly go over 08:36 23 rider four, that's the request from the agency that we 08:36 24 ask for funding beyond our baseline appropriated 08:36 25 amount if sales exceed a certain level amount. Like, 08:36 8 1 for example, 2.6 billion. And the way we compiled and 08:36 2 prepared the LAR, we did it under the same methodology 08:36 3 that has been done for the last two bienniums. Under 08:36 4 rider four, we thought that that was sufficient to 08:36 5 request the funding. And we had discussed this rider 08:37 6 four very closely with Rick Travis. But it seems like 08:37 7 after the hearing, there were a lot of questions 08:37 8 regarding rider four in the hearing, and afterwards, 08:37 9 we received a call from his office, and I guess 08:37 10 discussions with maybe his -- his supervisors, that 08:37 11 the best presentation and the best request format for 08:37 12 that additional funding beyond the baseline request 08:37 13 would be via an exceptional item request. 08:37 14 CHAIRMAN CLOWE: Any questions? 08:37 15 Does this require action on behalf of 08:37 16 the Commission? 08:37 17 MS. KIPLIN: Commissioners, you all 08:37 18 voted to approve the LAR, and I have discussed this 08:37 19 with Bart and I do believe that it is a material 08:37 20 change to the LAR and the change is an exceptional 08:38 21 item, and I do think -- it is a request by the LBB, 08:38 22 and if we want to comply with it, then I do think it 08:38 23 takes action on the part of the Commission. 08:38 24 CHAIRMAN CLOWE: And Bart, my 08:38 25 understanding is, as you have stated, I think, more 08:38 9 1 than once, it's at the request of Rick Travis and the 08:38 2 Governor's Budget Office, and there is a clear 08:38 3 understanding that we are considering this and if the 08:38 4 Commission were to approve it, it is for the purpose 08:38 5 of, if not highlighting this item, at least 08:38 6 identifying it clearly so that there is no 08:38 7 misunderstanding of what the item is. Although it's 08:38 8 listed as an exceptional item, there is good reason 08:38 9 for it. 08:38 10 MR. SANCHEZ: Yes. I believe the good 08:38 11 reason would be, it's better accounting for the LBB 08:38 12 and the Governor's Budget Office. When you're 08:38 13 requesting any amounts beyond the baseline, they would 08:38 14 like to have an amount that they can really identify. 08:38 15 Through rider four, I could see their point of view 08:39 16 that that wasn't identified as clear. 08:39 17 CHAIRMAN CLOWE: So this makes it very 08:39 18 definitive and -- 08:39 19 MR. SANCHEZ: Very definitive. But if 08:39 20 I may add, we're not asking for anything more than 08:39 21 what was already requested through rider four. 08:39 22 CHAIRMAN CLOWE: All right. We're 08:39 23 giving great clarification to this. And as we have 08:39 24 questions, possibly, from members of various 08:39 25 committees and legislators, we'll be able to explain 08:39 10 1 this hopefully to their satisfaction. 08:39 2 MR. SANCHEZ: Yes. And I invited Rick 08:39 3 Travis to come before us today, but unfortunately, he 08:39 4 was not here. But he certainly is going to be with us 08:39 5 through the legislative process to explain his 08:39 6 reasoning as to why he requested the agency to change 08:39 7 the reporting format to an exceptional item request. 08:39 8 CHAIRMAN CLOWE: Any questions? 08:39 9 I move the adoption of this change in 08:39 10 the Commission's LAR. 08:39 11 COMMISSIONER WHITAKER: Second. 08:39 12 CHAIRMAN CLOWE: All in favor, please 08:39 13 say aye. Opposed, no. The vote is three-zero. 08:39 14 Thank you, Bart. Thank you, Gary. 08:40 15 Anything further? 08:40 16 MR. GRIEF: No, sir. 08:40 17 CHAIRMAN CLOWE: Billy, anything 08:40 18 further on this item? 08:40 19 MR. ATKINS: No, sir. 08:40 20 CHAIRMAN CLOWE: Thank you. We're 08:40 21 ready to take up item number five, report, possible 08:40 22 discussion and/or action on the Sunset process 08:40 23 involving the agency, include the agency's 08:40 24 recommendations regarding the Charitable Bingo 08:40 25 distribution, grandfathered lessor license, and/or 08:40 11 1 transferability of lessor licenses issues in the 08:40 2 Sunset Commission staff report. 08:40 3 Nelda, we have you and Billy and, I 08:40 4 believe, Gary, to help us with this item. 08:40 5 MS. TREVINO: Good morning. 08:40 6 Commissioners. For the record, I'm Nelda Trevino, 08:40 7 director for governmental affairs. I have a very 08:40 8 brief report before Billy specifically discusses the 08:40 9 issues related to the recommendations in the Sunset 08:40 10 staff report. 08:40 11 As you know, the Sunset Commission's 08:40 12 public hearing on the Lottery Commission occurred on 08:40 13 September the 24th. We have provided the Sunset 08:40 14 Commission members and the staff with all of the 08:41 15 information requested at the hearing. Each of you 08:41 16 have also been provided a copy of this information. I 08:41 17 believe we have been thorough and complete in our 08:41 18 responses. 08:41 19 The Sunset Commission is scheduled to 08:41 20 meet on November the 12th and 13th, at which time they 08:41 21 will make their decisions on the recommendations 08:41 22 related to our agency. The agenda for the Sunset 08:41 23 Commission hearing has not been posted, so I'm unable 08:41 24 at this time to tell you which date the Commission 08:41 25 will be considering our agency. As soon as we receive 08:41 12 1 more information on the agenda, we will certainly 08:41 2 forward that information to you. 08:41 3 It is my understanding that the Sunset 08:41 4 staff prepares and provides a hearing decisions 08:41 5 document on the agency that will be used for their 08:41 6 deliberations and discussions. We anticipate 08:41 7 receiving a copy of this document about one week 08:41 8 before the Sunset hearing. No public testimony will 08:41 9 be taken as it relates to our agency, but the agency 08:42 10 may be called upon to answer questions that the Sunset 08:42 11 Commission members may have. 08:42 12 I'll be happy to answer any questions 08:42 13 at this time, or I can turn it over to Billy for his 08:42 14 presentation. 08:42 15 CHAIRMAN CLOWE: I think we probably 08:42 16 would like to hear from Billy next, if we may. 08:42 17 MR. ATKINS: And Commissioners, with 08:42 18 your indulgence, if I can move over here, because 08:42 19 there is a lot of information that I want to convey to 08:42 20 you. I just thought it would be easier in a 08:42 21 face-to-face type setting. 08:42 22 The staff of the Bingo Division has 08:42 23 been meeting with representatives from the bingo 08:42 24 industry, actually prior to the Sunset hearing taking 08:42 25 place, discussing the issues that seem to have 08:42 13 1 generated the most interest among the industry, 08:42 2 specifically, issue 4.1, relating to changes to the 08:42 3 charitable distribution formula; and issue five, which 08:42 4 calls for the elimination of grandfathered commercial 08:42 5 lessors and the repeal of the transferability of those 08:42 6 licenses. 08:42 7 You heard, I believe, a considerable 08:42 8 amount of testimony at your commission meeting and 08:43 9 there was testimony before the Sunset hearing that 08:43 10 there was a concern that those recommendations made by 08:43 11 the Sunset staff could have an adverse effect on the 08:43 12 conduct of bingo in the State of Texas, as well as the 08:43 13 charitable organizations that rely on those funds to 08:43 14 benefit their activities. As I mentioned, we've been 08:43 15 meeting continuously with representatives of the 08:43 16 industry. We've had the benefit of having 08:43 17 Commissioner Cox at one of our meetings and getting 08:43 18 his insight. At his suggestion, we have reached out 08:43 19 to the Comptroller's Office and provided them with the 08:43 20 raw data to look at and run the calculations. We 08:43 21 think it would be beneficial to, if you will, have a 08:43 22 fresh set of eyes on these figures and get their 08:43 23 input. 08:43 24 I think after these meetings that the 08:43 25 staff has come up with recommendations that we're 08:43 14 1 going to be prepared to make to you on both of these 08:43 2 issues. I'm not able to tell you that these 08:44 3 recommendations are going to receive universal acclaim 08:44 4 and support. There is still going to be opposition to 08:44 5 them. But in doing our own analysis, we have tried to 08:44 6 look to what is ultimately best for the industry. In 08:44 7 each of the recommendations, there is still the 08:44 8 possibility that individuals or organizations may not 08:44 9 be able to be involved in bingo. But we have looked 08:44 10 to the Sunset findings to maximize revenue and to, 08:44 11 where possible, simplify processes and procedures. 08:44 12 So having said that, if you don't have 08:44 13 any other questions, then I would like to start 08:44 14 discussing specifically issue 4.1, relating to the 08:44 15 charitable distribution. 08:44 16 What we've -- what we began to do is, 08:44 17 we developed roughly about five different scenarios 08:44 18 that we looked at, the first one being no changes to 08:44 19 the act, everything staying as is. And our, you know, 08:45 20 on-face analysis came up with, if you keep doing what 08:45 21 you've always done, you're going to get what you've 08:45 22 always got. 08:45 23 Then we looked at making -- keeping, 08:45 24 essentially, the same current formula, but requiring 08:45 25 the organizations, when the formula resulted in a 08:45 15 1 required zero proceeds being made, look at adding 08:45 2 language that would require them -- that organization 08:45 3 to still make some distribution. And, you know, we 08:45 4 included a percentage of one percent of that 08:45 5 organization's total gross receipts. 08:45 6 We've looked at the formula that the 08:45 7 Sunset staff came up with, using a variety of 08:45 8 different percentages, from 25 percent all the way 08:45 9 down to one percent. And we found, even at one 08:45 10 percent, approximately eight percent of the 08:45 11 organizations conducting bingo wouldn't be able to 08:46 12 make the distribution, and that distribution amount 08:46 13 would, of course, be very small. 08:46 14 And then we began to look at some 08:46 15 formulas that are relatively common in some form or 08:46 16 another in other jurisdictions, and that is, taking 08:46 17 total gross receipts from the sale of bingo products, 08:46 18 as well as rental income, and deducting prizes and 08:46 19 deducting expenses, with the net proceeds, 100 percent 08:46 20 of the net proceeds then being the required 08:46 21 distribution. We looked at two different versions of 08:46 22 that, one where the expense credit was limited in the 08:46 23 formula at like 90 percent, and one where the 08:46 24 organizations were allowed to take all of their 08:46 25 expenses. 08:46 16 1 In our final analysis, we believe that 08:46 2 the best recommendation would be a formula where total 08:46 3 prizes and all allowable expenses would be allowed to 08:46 4 be deducted from total gross receipts with those net 08:47 5 proceeds being the charitable distribution. This 08:47 6 formula, we anticipate, would require the adoption of 08:47 7 some rules, we think, in order to prevent the 08:47 8 possibility that some organizations could experience, 08:47 9 say, expenses to such a degree that they are -- that 08:47 10 their net proceeds would still be zero, that we need 08:47 11 to go in and, through rule, look at the allowable 08:47 12 expenses as they're laid out in the Act and allow for 08:47 13 some type cap or limit. We do recognize the need for 08:47 14 organizations to be able to have an operating account, 08:47 15 or -- so we would recognize a certain percentage of 08:47 16 those net proceeds to be allowed to be transferred to 08:47 17 that. And we would look at capping what that 08:47 18 operating amount could be also, through rule. 08:48 19 And then, finally, in accordance with 08:48 20 recommendation 4.2 of the Sunset staff report, we 08:48 21 would look at, through rule, further clarifying those 08:48 22 allowable charitable distributions. We think that 08:48 23 this will result in those organizations, again, that 08:48 24 aren't able to maintain a positive cash flow, we would 08:48 25 anticipate that action would be taken against their 08:48 17 1 license and that they would no longer be allowed to 08:48 2 conduct bingo. But we think that this formula will 08:48 3 help emphasize in the Act the importance of charitable 08:48 4 bingo and the use of those proceeds for charitable 08:48 5 purpose. We believe that the formula is -- is simple 08:48 6 enough for organizations to understand and comply 08:48 7 with, and that it will go towards the Sunset 08:48 8 recommendation of maximizing distributions. 08:49 9 CHAIRMAN CLOWE: Questions? 08:49 10 MR. ATKINS: Just -- 08:49 11 COMMISSIONER COX: I've got a couple. 08:49 12 CHAIRMAN CLOWE: Yes, sir. 13 COMMISSIONER COX: Billy, the formula 08:49 14 that you're talking about going to, as I understand, 08:49 15 would take the bingo revenue, less prizes, less 08:49 16 expenses, and that will be the distribution? 08:49 17 MR. ATKINS: Yes, sir. 08:49 18 COMMISSIONER COX: Now, you said a 08:49 19 little earlier that, I think, a one percent 08:49 20 distribution will require that eight percent of the 08:49 21 charities would be unable to make it. 08:49 22 MR. ATKINS: Yes, sir. 08:49 23 COMMISSIONER COX: So that would say 24 that -- or at least eight percent of the charities, 08:49 25 there would be little or nothing to distribute under 08:49 18 1 that formula? 08:49 2 MR. ATKINS: Least me try and clarify 08:49 3 that. Based on historical information, those 08:49 4 organizations would not be able to make it. In a 08:49 5 go-forward basis, any changes that they may make to 08:49 6 their operations, they could not be affected. 08:49 7 COMMISSIONER COX: Okay. You're 08:49 8 talking about an operating account, which is the 08:49 9 working capital of the organization. What are you 08:50 10 thinking about as to adequacy of that amount? You 08:50 11 talked about excessiveness of it, but I didn't hear 08:50 12 anything about adequacy. 08:50 13 MR. ATKINS: And that is something that 08:50 14 we would need to, I think, address through rule. I 08:50 15 think it would require a lot of input from the 08:50 16 industry. I don't know if we're right now -- as a 08:50 17 matter of fact, I know right now we don't know exactly 08:50 18 what that dollar amount or percentage amount is. But, 08:50 19 you know, we fully anticipate that, of course, a 08:50 20 larger organization will need a larger amount than a 08:50 21 smaller organization. 08:50 22 COMMISSIONER COX: Sure. So if an 08:50 23 organization is unable to make a distribution, but is 08:50 24 yet through -- through the money that it raises from 08:50 25 its game or from external sources is able to maintain 08:50 19 1 the adequate working capital, would there be any 08:50 2 reason that they couldn't remain in business? 08:51 3 MR. ATKINS: It's -- as I understand 08:51 4 it, it's our anticipation that we would look for the 08:51 5 bingo operation to have a positive cash flow. We 08:51 6 would look for there to be net proceeds after the 08:51 7 formula. 08:51 8 COMMISSIONER COX: So you're going 08:51 9 to -- when you say a positive cash flow, you're saying 08:51 10 from operations. 08:51 11 MR. ATKINS: Yes, sir. 08:51 12 COMMISSIONER COX: That they couldn't 08:51 13 continually bring money in from the outside to build 08:51 14 their operation from its infancy, let's say. 08:51 15 MR. ATKINS: We do recognize that there 08:51 16 are going to be situations, a bad quarter or bad 08:51 17 night, whatever it is, where -- 08:51 18 COMMISSIONER COX: Start-up. 08:51 19 MR. ATKINS: Exactly. Where they may 08:51 20 need to use funds from that -- from that operating 08:51 21 account, to, if you will, supplement their bingo 08:51 22 operations. But we would expect, in a long term, 08:51 23 that -- that the game overall, the operation overall, 08:51 24 would be -- would be positive. 08:51 25 COMMISSIONER COX: Thank you, Billy. 08:51 20 1 It sounds like y'all have been really thorough. 08:51 2 MR. ATKINS: I do want you to know, 08:52 3 Commissioners -- and, again, you know, Commissioner 08:52 4 Cox, I can't thank you enough for your help. I know 08:52 5 that we even butted heads a couple of times, but you 08:52 6 finally got information through to me. Again, I 08:52 7 anticipate, at a minimum, there being concern and 08:52 8 objections from the industry in terms of the 08:52 9 rulemaking recommendations relating to expenses. As 08:52 10 well as there is -- there is still, I think, for some 08:52 11 members of the industry, an issue on a table regarding 08:52 12 that transferability, and what I will call the ease of 08:52 13 the transferability. We're going to want certain 08:52 14 controls in place over those funds being transferred 08:52 15 from account to account, so that we're making sure 08:52 16 that these proceeds or whatever aren't just paper 08:52 17 proceeds, but that they're actual real dollars. So 08:52 18 that's another issue that I anticipate being brought 08:53 19 forward to the Commission. 08:53 20 CHAIRMAN CLOWE: Billy, I think both 08:53 21 Commissioner Whitaker and I want to emphasize our 08:53 22 appreciation, as you expressed it to Commissioner Cox, 08:53 23 for meeting with you and members of the public. We 08:53 24 really appreciate his attention to detail and being 08:53 25 able to have his background and his knowledge brought 08:53 21 1 to bear here. 08:53 2 I think I understand what you have told 08:53 3 us about your preliminary thinking at this point on 08:53 4 item 4.1. My experience is that the devil is in the 08:53 5 details. And when you get down to identifying what 08:53 6 are reasonable operating expenses and what is a 08:53 7 reasonable operating fund, the working capital of an 08:53 8 organization, that's where the real disagreement is 08:53 9 going to occur in the rulemaking and in auditing and 08:53 10 bingo operations being put under that scrutiny. It 08:54 11 sounds good initially, but it's going to be very 08:54 12 difficult in the enforcement of it and the compliance 08:54 13 with it. And how well those items are defined and how 08:54 14 clearly they're set forth and people are able to 08:54 15 understand what is the definition of acceptable 08:54 16 operating expenses and acceptable operating accounts, 08:54 17 will probably save a lot of heartache when you get 08:54 18 into the working of that, if that's what the 08:54 19 Commission recommends ultimately and that's what is 08:54 20 adopted by the legislature. 08:54 21 MR. ATKINS: And I would just say, 08:54 22 Mr. Chairman, that I agree wholeheartedly that the 08:54 23 rulemaking process will be interesting. But I think 08:54 24 if we can get good participation and can get a good 08:55 25 rule, then I think going back past that, it will 08:55 22 1 actually make the auditing by our staff and the 08:55 2 compliance by the industry easier, because they will 08:55 3 have that information up front. 08:55 4 CHAIRMAN CLOWE: I couldn't agree with 08:55 5 you more. And that's where some really hard work and, 08:55 6 hopefully, some good answers can be offered up in 08:55 7 regard to those definitions. 08:55 8 MR. ATKINS: Well, we're ready to -- 08:55 9 we're ready to move forward. 08:55 10 CHAIRMAN CLOWE: Now, you're not 08:55 11 commenting on items 5.1 and 5.2, and I assume you're 08:55 12 not ready to do that at this time. 08:55 13 MR. ATKINS: Actually, I would like to 08:55 14 make a preliminary comment on that. 08:55 15 CHAIRMAN CLOWE: Okay. Any further 08:55 16 questions on this item at this time? Thank you. 08:55 17 MR. ATKINS: Again, Commissioners, 08:55 18 going back to the testimony that I believe you heard 08:55 19 at a previous Commission meeting, as well as what was 08:55 20 presented to the Sunset staff, we looked at -- we 08:56 21 looked at two things. We looked at the considerable 08:56 22 amount of capital that grandfathered lessors bring to 08:56 23 the bingo industry, and we also looked to, again, the 08:56 24 complexity of the current lessor licensing structure 08:56 25 and bingo. That is, we have grandfathered lessors, we 08:56 23 1 have nongrandfathered lessors, we have associations, 08:56 2 we have grandfathered conductor lessors. The list 08:56 3 goes on and on and on. And the situation that we find 08:56 4 ourselves in when we're dealing with the public, when 08:56 5 we're dealing with organizations that want to start 08:56 6 playing the bingo game, and we get into these 08:56 7 explanations of the law and what is required of them, 08:56 8 they throw up their hands and they're done. They 08:56 9 don't -- no wonder nobody plays bingo. I don't want 08:56 10 to have anything to do with it. 08:57 11 The issue that was raised several times 08:57 12 at the Sunset Commission we can't comment on and we 08:57 13 don't know how to comment on, that the -- the comment 08:57 14 that several legislators made that when they 08:57 15 grandfather a lessor's license -- or when they 08:57 16 grandfather a license, they have an expectation that 08:57 17 eventually grandpa is going to die. I think that is a 08:57 18 decision for the legislature. Since 1989, when those 08:57 19 licenses were grandfathered, grandpa has died to some 08:57 20 degree. There has been a reduction in the number of 08:57 21 grandfathered lessor licenses. It's just that his 08:57 22 life support is very good and he has a -- he hasn't 08:57 23 died completely. 08:57 24 So we began to look at the complexity 08:57 25 issue that we have and the public has. And our 08:57 24 1 recommendation to you would be the elimination of what 08:57 2 we call the tiered lessor system. And that is a 08:58 3 situation where if I am a charity that wants to play 08:58 4 bingo at a -- you know, an abandoned Wal-Mart, the -- 08:58 5 the landlord or the owner of that abandoned Wal-Mart 08:58 6 has to get a lessor's license in order to lease to me. 08:58 7 Well, if -- for me to be the only conductor there, I 08:58 8 then have to turn around and get a lessor's license 08:58 9 and demonstrate to the Commission through an affidavit 08:58 10 that I have tried to lease to other charities to 08:58 11 conduct, but they don't want to. So I as a charity am 08:58 12 paying for two licenses. I'm paying for my 08:58 13 conductor's license, and I'm paying for my lessor's 08:58 14 license, even though I as the charity am not leasing 08:58 15 to anyone. 08:58 16 What we would like to recommend and 08:59 17 what we're working on in its final format is the 08:59 18 elimination of the tier structure. Now, if there were 08:59 19 a situation where there was -- well, let me use this 08:59 20 situation. Let's say, there is a church and the 08:59 21 Knights of Columbus wants to play bingo at the church. 08:59 22 The church would still have to get a lessor's license 08:59 23 in order to lease to the Knights of Columbus, but we 08:59 24 would not require the Knights of Columbus to get their 08:59 25 lessor's license and verify to us that they tried to 08:59 25 1 lease even though no one else wanted to. We would 08:59 2 like to move to a situation where there could be just 08:59 3 that relationship between the landlord and the single 08:59 4 organization. And we want to move closer towards the 08:59 5 situation where if there is, say, a Knights of 08:59 6 Columbus and a VFW that both want to play bingo, then 08:59 7 they can go in as an association. And they can obtain 08:59 8 the location, they can conduct bingo at the location, 09:00 9 and they can subsequently lease to other organizations 09:00 10 without having this top of the tier lessor. 09:00 11 Again, it is going to impact, we think, 09:00 12 up to 89, you know, current lessor licensees. We 09:00 13 think that the trade-off, though, in terms of the 09:00 14 additional rental income and rental tax that these 09:00 15 organizations that are now serving these nonprofit 09:00 16 charitable organizations that are now serving as the 09:00 17 lessor, what they receive will offset what is being 09:00 18 lost by this top tier lessor who is only able to lease 09:00 19 to one licensee. 09:00 20 This issue is a little more complex. 09:00 21 We're trying to, you know, finalize our comments and 09:00 22 how we anticipate laying it out to you. But, again, 09:00 23 we haven't found any additional information in our 09:01 24 research that would support the concept of eliminating 09:01 25 grandfathered lessor licenses or the transferability 09:01 26 1 of them. So we've looked to this tier lessor system 09:01 2 that we find to be very confusing and burdensome for 09:01 3 licensees, particularly, smaller organizations in 09:01 4 rural areas. 09:01 5 Now, I don't know if I have -- 09:01 6 CHAIRMAN CLOWE: You either answered 09:01 7 all our questions or you dazzled us to the point 09:01 8 that -- 09:01 9 COMMISSIONER COX: I do have one 09:01 10 question. 09:01 11 CHAIRMAN CLOWE: Yes, sir. 12 COMMISSIONER COX: Billy, could you 09:01 13 tell us how those 89 licensees would be adversely 09:01 14 affected? 09:01 15 MR. ATKINS: They would not be leasing 09:01 16 to the -- to the organizations. The -- if there was 09:01 17 an association forum. They wouldn't be affected, 09:02 18 Commissioner Cox, if it was just a one-on-one 09:02 19 relationship. They would still have their lessor 09:02 20 license, they would still be -- in the case of the 09:02 21 church, the church would still have their lessor 09:02 22 license, they would still be leasing to just the 09:02 23 Knights of Columbus. It only becomes if the Knights 09:02 24 of Columbus wants to form with another organization, 09:02 25 then that top tier license held by the church wouldn't 09:02 27 1 be required. Those two organizations would, in 09:02 2 essence, become the lessor. 09:02 3 COMMISSIONER COX: Thank you. 09:02 4 MR. ATKINS: And, again, we would 09:02 5 anticipate through this recommendation including some 09:02 6 sort of phase-in period so that these people aren't 09:02 7 cut off all at once. There is currently -- we're 09:02 8 recommending kind of the continued promotion of a 09:02 9 concept that's already in the Bingo Enabling Act, and 09:02 10 that is, charitable organizations forming an 09:02 11 association and serving as their own lessor. 09:02 12 CHAIR CLOWE: Billy, your 09:03 13 recommendations to this point are what we might 09:03 14 consider in draft form? You're not asking any action 09:03 15 of the Commission? 09:03 16 MR. ATKINS: I am not -- 09:03 17 CHAIRMAN CLOWE: At this time? 09:03 18 MR. ATKINS: No, sir. And, again, I 09:03 19 anticipate that there are members of the industry that 09:03 20 will want to address you on these. 09:03 21 CHAIRMAN CLOWE: Well, it's good to 09:03 22 give an up-front position statement, which is what I 09:03 23 consider what you are doing this morning on the 09:03 24 direction that you're headed in. And we do have 09:03 25 members of the public here who have said they want to 09:03 28 1 speak to this. 09:03 2 Now, my understanding is, we have a 09:03 3 meeting noticed up for the 23rd of this month where we 09:03 4 would anticipate you come forward with some final 09:03 5 recommendations, and that would be timely for the 09:03 6 Commissioners to deliberate prior to the Sunset 09:03 7 committee meeting. 09:03 8 MR. ATKINS: Yes, sir. 09:03 9 CHAIRMAN CLOWE: Okay. Anything 09:04 10 further before we call on members of the public? 09:04 11 MR. ATKINS: No, sir. 09:04 12 CHAIRMAN CLOWE: Then I'll just ask the 09:04 13 people who I have had affirmation forms handed to me, 09:04 14 in the order that they've come to me, to come forward. 09:04 15 Mr. Bill Pewitt, representing the Texas Charitable 09:04 16 Bingo Association. 09:04 17 Good morning, sir. 09:04 18 MR. PEWITT: Good morning. My name is 19 Bill Pewitt. I'm the administrator of the Texas 09:04 20 Charitable Bingo Association. There will be others 09:04 21 who will testify similar to my testimony. 09:04 22 I wanted to thank Billy Atkins for, you 09:04 23 know, bringing in the public on our deliberations and 09:04 24 discussions. As you said, Mr. Clowe, the devil is in 09:04 25 the details. Questions as to, you know, expense caps 09:04 29 1 and things, but I think we're headed in the right 09:04 2 direction. And our group, which comprises about ten 09:05 3 lessors that lease to about 120 charities, will 09:05 4 anticipate looking at any drafts that we can and run 09:05 5 those numbers to see what the effect will be on our 09:05 6 charities. So that's our testimony for now. We just 09:05 7 anticipate taking a look at any documents we can to 09:05 8 analyze those. But I think we're, you know, headed in 09:05 9 the right direction. So -- all right. 09:05 10 CHAIRMAN CLOWE: Any questions? 09:05 11 We're -- let me just say this. We're appreciative of 09:05 12 you being here this morning. And I think the 09:05 13 Commission encourages and very much wants you to take 09:05 14 part in this activity. 09:05 15 MR. PEWITT: We have. I've been to two 09:05 16 meetings. I did not make the meeting where 09:05 17 Commissioner Cox was present, but the last two 09:05 18 meetings we've had, we've tried to flesh out a lot of 09:05 19 these questions. But, again, the devil is in the 09:05 20 details, and we need to take a look at, you know, what 09:06 21 is proposed and see what the effect of that will be. 09:06 22 CHAIRMAN CLOWE: My personal hope is 09:06 23 that, on the 23rd, if that's the meeting where a 09:06 24 recommendation is ripe for consideration, the 09:06 25 Commissioners will deliberate and will be in a 09:06 30 1 position to go back to Sunset with a recommendation. 09:06 2 That's a promise I made as an individual Commissioner 09:06 3 to the Sunset committee, and I hope that happens. So 09:06 4 stay with us and be involved. 09:06 5 MR. PEWITT: I will. And I might ask. 09:06 6 I may have missed it when Mr. Atkins had said it, as 09:06 7 to when we might be able to obtain any documents or 09:06 8 any drafts of any proposals. I -- is that forthcoming 09:06 9 or... 09:06 10 CHAIRMAN CLOWE: Okay. 09:06 11 MR. PEWITT: No? 09:06 12 CHAIRMAN CLOWE: Great. Thank you. 09:06 13 And then we have Mr. Stephen Fenoglio 09:06 14 next, representing 950 charitable and business 09:06 15 organizations. 09:06 16 MR. FENOGLIO: Good morning, 09:06 17 Mr. Chairman and Commissioners. Thank you again, 09:06 18 Mr. Cox, for attending the session where we, I think, 09:07 19 covered a lot of ground. 09:07 20 It has been difficult to get, I think, 09:07 21 collectively our arms around some of the Sunset 09:07 22 recommendations for the simple reason and it's -- some 09:07 23 of the comments I made here as well as in the Sunset 09:07 24 Commission, that the recommendations are flawed and 09:07 25 based on -- however good faith they were attempting to 09:07 31 1 reach some recommendations, they were based on flawed 09:07 2 data. And I think we've established that. In 09:07 3 meetings with the Commission staff, they've 09:07 4 acknowledged that. That, for example, the attempt to 09:07 5 compare different states to Texas is flawed. I think 09:07 6 a comment from the staff was that if you have 27 or 50 09:07 7 of 46 states that are regulating bingo, there are 27 09:07 8 of 46 different ways to approach it. 09:07 9 Yesterday, I was produced -- or 09:07 10 provided a document from the Commission staff where 09:07 11 they've tried to compare different states on, for 09:08 12 example, on how they calculate net proceeds. It is 09:08 13 all over the board. And so any type of a comparison 09:08 14 will be extremely difficult to do, if it's -- if it's 09:08 15 possible to do it, because you've got different ways 09:08 16 that they calculate expenses, different ways of 09:08 17 conducting bingo. With that in mind -- and the same 09:08 18 is true on the commercial lessor issue that y'all have 09:08 19 already recognized. With that in mind, we agree with 09:08 20 what Billy, in principle, has laid out. Although as, 09:08 21 Chairman Clowe, you observed, the devil is in the 09:08 22 details. And so we're -- I've attended -- I think 09:08 23 we've had four working group meetings or five, and 09:08 24 I've attended all five. I'm leaving today to go out 09:08 25 of state and probably will not be back until the 23rd 09:08 32 1 or 24th, so I'll miss those, but I'll be able to stay 09:08 2 in touch with Mr. Bresnen and others, and Mr. Pewitt. 09:09 3 The one thing that we haven't heard, 09:09 4 and it's a comment that we made with Commissioner Cox 09:09 5 and we've made with the Chairman and Commissioner 09:09 6 Whitaker, is the positive agenda. And we understand 09:09 7 the Commission's position, that y'all cannot actively 09:09 8 advocate for reasonable and necessary legislative 09:09 9 changes, but if bingo isn't given new tools -- and, 09:09 10 again, it's only anecdotal at this point in time. But 09:09 11 the pull tab rule that y'all approved, I have certain 09:09 12 halls that have been aggressively selling and 09:09 13 marketing those new innovative pull tabs. They've 09:09 14 seen a three-times increase in pull tab sales. 09:09 15 Whether that trend will hold up, who knows. You know, 09:09 16 sometimes it's a new product and it'll fade. We don't 09:09 17 know yet. But we do know that it's been a shot in the 09:09 18 arm to some halls who have aggressively -- and who 09:09 19 have spent some more money, by the way, in hiring 09:10 20 different sales staff. But have aggressively 09:10 21 increased their sales. 09:10 22 You see the same thing on the Lottery 09:10 23 side all the time with new product. Anyhow, that's 09:10 24 the thing that's missing in this issue, and that's 09:10 25 something that we're going to continue to talk with 09:10 33 1 y'all about. We understand that most of those changes 09:10 2 will be legislative in nature, and that will take us 09:10 3 to the 2003 session. But we need -- the bingo 09:10 4 industry needs new and innovative products, similar to 09:10 5 the type of new and innovative product that is 09:10 6 regularly rolled out in other industries, Lottery, any 09:10 7 other type of entertainment venue. 09:10 8 I'll be happy to answer any questions. 09:10 9 CHAIRMAN CLOWE: Steve, I'm glad you 09:10 10 have touched on that last point because I have 09:10 11 discussed that with staff. I don't know what the 09:10 12 other Commissioners' position is, but I think you've 09:10 13 got that in focus, that I see our role to focus on the 09:10 14 Sunset staff report, which didn't include the agenda 09:11 15 that you have added for consideration in your scope of 09:11 16 view. And I don't think the Commission is going to be 09:11 17 able to get into that in a proactive way. I don't see 09:11 18 it happening. And I'm glad that you have said now 09:11 19 that you think most of those items you brought up are 09:11 20 legislative. I share in that view. I think the 09:11 21 Commission is aware of the declining market in bingo. 09:11 22 I feel like where the staff comes forward with issues 09:11 23 and makes recommendations and where we have the 09:11 24 recommendation of the Sunset staff, we can deal with 09:11 25 those as a commission. But I think it's up to you to 09:11 34 1 work on your agenda in the venue that you've 09:11 2 identified, and I think you're on the right track 09:11 3 there. I just wanted to respond to your comment 09:11 4 because that's sort of where I am in the process. 09:11 5 MR. FENOGLIO: Understood. Thank you. 09:12 6 CHAIRMAN CLOWE: Thank you. Mr. Steve 09:12 7 Bresnen, representing the bingo interest -- a Bingo 09:12 8 Interest Group. Good morning, sir. 09:12 9 MR. BRESNEN: Good morning, Mr. 09:12 10 Chairman and Commissioners. I'm Steve Bresnen, on 09:12 11 behalf of the Bingo Interest Group and several 09:12 12 charities out in the Midland area. 09:12 13 The kind of meeting that we've been 09:12 14 having with the staff on these issues is the sort of 09:12 15 thing that I have been pressing for for a couple of 09:12 16 years on the rulemaking end. It's a stakeholder type 09:12 17 of process. Lots of things getting out there. And I 09:12 18 think some of it's been taken, from our perspective, 09:12 19 so I feel good about that part. I'm not going to say 09:12 20 that the devil is in the details because it's already 09:12 21 been said twice. 09:12 22 COMMISSIONER WHITAKER: Three times. 09:12 23 MR. BRESNEN: But -- 09:12 24 CHAIR CLOWE: Easy to say, hard to deal 09:12 25 with. 09:12 35 1 MR. BRESNEN: I do think there are some 09:12 2 really serious issues that need to be thought about 09:13 3 going forward before you select one of the options 09:13 4 that's been laid out. 09:13 5 The Sunset staff recommendation was to 09:13 6 say, you subtract prizes and take 25 percent of the 09:13 7 difference and you can have the 75 percent of the 09:13 8 difference remaining for your expenses. I could 09:13 9 achieve the same result by saying, subtract your 09:13 10 prizes, take 75 percent of the difference for 09:13 11 expenses, and the rest it's your distribution. So as 09:13 12 a matter of pure math, when we get around to the 09:13 13 expense side of this, if the objective is to drive 09:13 14 distributions by setting expenses in a way that bears 09:13 15 no resemblance to the market or what is reasonable and 09:13 16 necessary, we will have had a bunch of meetings to 09:13 17 come back and meet ourselves coming the other 09:13 18 direction. So I've got a lot of concern about that 09:13 19 approach. 09:13 20 The additional material that the staff 09:13 21 handed out to the Sunset Commissioners, within the 09:13 22 last few days, shows violation, by violation type, the 09:14 23 number of violations that have occurred in each of the 09:14 24 last three years. And there is about 800 categories 09:14 25 of violation types. And in the category of spending 09:14 36 1 money in a way that wasn't reasonable and necessary, 09:14 2 which you have the power to regulate under current 09:14 3 law, there were about 40 to 50 violations per year in 09:14 4 each of the last three years. That represented a 09:14 5 declining percentage of the audits starting out in the 09:14 6 first year in about a third of the audits, and in the 09:14 7 last year, about 20 percent of the audits. So a 09:14 8 reasonable person, it would seem to me, would ask, 09:14 9 what is the problem. 09:14 10 Commissioner, when you visited with us, 09:14 11 and I really appreciate you taking your time, we felt 09:14 12 like -- we felt like we really got to do Bingo 101 09:15 13 that day, and I really appreciate the time you spent 09:15 14 doing that. But we focused a lot on this expense 09:15 15 issue, and what we were each able to come up with was 09:15 16 some anecdotal examples of where people had busted the 09:15 17 curve on expenses. What we couldn't come up with was 09:15 18 an assessment that industry-wide, expenses were too 09:15 19 high. So, you know, how you do that, how you go 09:15 20 about -- I think you have the power under current law, 09:15 21 and there have been some rules in the past that dealt 09:15 22 with one element of expenses or another, but if you 09:15 23 just decide arbitrarily that 50 bucks a session is 09:15 24 about enough to pay somebody who walks around on the 09:15 25 floor and sells pull tabs, or that there is an 09:15 37 1 aggregate limit, then in the hall Mr. Fenoglio 09:15 2 referred to, they wouldn't have been able to increase 09:15 3 the sales staff to push these new products to drive 09:15 4 their revenues up. So you can set that collar in a 09:16 5 way that will, A, achieve the same across the board, 09:16 6 one-size-fits-all approach, and you can do it in a way 09:16 7 that really has no -- makes no business sense. So we 09:16 8 have some trepidation about that. 09:16 9 On the other hand, I have been one to 09:16 10 recognize that there is money built up in bingo 09:16 11 accounts that the industry does not get credit for. 09:16 12 And unless we're going change to a net proceeds 09:16 13 concept, or we're going to stay with this artificial 09:16 14 distribution concept, money is going to cross that 09:16 15 line out of those accounts and into the general fund 09:16 16 account. 09:16 17 Now, there has also been the suggestion 09:16 18 that y'all would define by rule what a charitable 09:16 19 purpose is, or further illuminate the statute. The 09:16 20 statute -- that part of the statute needs to be 09:16 21 scrapped. And if y'all just take a little time 09:16 22 between now and the 23rd and read that, if you can 09:16 23 figure out -- it actually says that the benefit has to 09:16 24 be to an indeterminate number of people. I have no 09:16 25 idea what that means, and I'll challenge y'all to 09:17 38 1 figure it out. Unless it means that you can't give 09:17 2 out a scholarship to a given high school student, 09:17 3 that's a determinant number of people. If I decide 09:17 4 I'm giving five scholarships out, that's a determinate 09:17 5 number of people. It's ridiculous. These charities 09:17 6 ought to be free to give their money out, consistent 09:17 7 with their tax exempt status. There are certain 09:17 8 things they can do with their money and maintain their 09:17 9 tax exempt status under federal law. They know what 09:17 10 those rules are. It's a common body of law and y'all 09:17 11 can implement them. So I would add to the list of 09:17 12 things relative to issue 4.2 that you consider 09:17 13 broadening that to where we're all on the same page. 09:17 14 And I'm not going to say finally, 09:17 15 because I've made that mistake before. We also 09:17 16 brought forward the concept of a revenue share. I 09:17 17 would like to get that on the table for you. And all 09:17 18 that means is that everybody in the hall operates out 09:18 19 of the same pot. Right now, if you have seven 09:18 20 charities in a hall, you have to spend -- you have to 09:18 21 write seven checks to the person who sells the product 09:18 22 on the floor. You have to write seven checks to the 09:18 23 lessor. Seven utility checks, if you're paying your 09:18 24 utilities separately. They file seven reports with 09:18 25 y'all. Y'all audit seven sets of books. You may go 09:18 39 1 out there seven times a year. So there are other -- 09:18 2 and the point -- how that ties to issue number four 09:18 3 is, issue four is predicated on the idea that a whole 09:18 4 bunch of people are not required to make a 09:18 5 distribution. But if they revenue shared, all of 09:18 6 those people would be required to make a distribution, 09:18 7 because the strong ones pull the weak ones up. So I 09:18 8 would like to tie that in. I would like for y'all to 09:18 9 consider tying that in. 09:18 10 On the commercial lessor issue, we 09:18 11 think the charities ought to able to be commercial 09:18 12 lessors, they ought to be able to charge as much as 09:18 13 grandfathered lessors. We think that we agree with 09:18 14 the staff that the tiered structure is goofy at best. 09:18 15 There just needs to be one entity at the end of the 09:19 16 chain that's had the criminal background check, that's 09:19 17 paying the same license fees, so everybody is on a 09:19 18 competitive basis. After that, turn them loose. 09:19 19 Transferability? We don't think you ought to be 09:19 20 creating additional for-profit lessors. I think the 09:19 21 legislature has been very clear on that. And, 09:19 22 frankly, we don't need a whole lot more bingo halls to 09:19 23 begin with in a declining environment. But we do 09:19 24 think that the grandfathered lessor has an interest in 09:19 25 a business that's been built up over the years. 09:19 40 1 They've played by the rules and they ought to be able 09:19 2 to maintain that interest and they ought to be able to 09:19 3 transfer those licenses as long as they're in 09:19 4 compliance with the law and whoever they would 09:19 5 transfer them to would be as well. 09:19 6 I look forward -- and I appreciate the 09:19 7 opportunity, next week, to go into greater detail and 09:19 8 have some more folks down here to talk about these 09:19 9 various aspects. And thanks for giving us that 09:19 10 opportunity to do that. I want to thank the staff. 09:19 11 Again, we've had a -- a very forthcoming and candid 09:20 12 set of transfers of information, and I think it's been 09:20 13 good. Thank you. 09:20 14 CHAIRMAN CLOWE: Steve, I think 09:20 15 Commissioner Cox has a question. 09:20 16 COMMISSIONER COX: Steve, the points 09:20 17 you raised about the charitable purpose. 09:20 18 MR. BRESNEN: Yes, sir. 19 COMMISSIONER COX: And what was the one 09:20 20 you raised right after that? 09:20 21 MR. BRESNEN: Well, it's hard to 09:20 22 remember -- in a way, I think it's hard to remember 09:20 23 sequence. Well, the point is that my -- the point I 09:20 24 was trying to make is, if you're driving expenses on 09:20 25 the one side and in some detail, and you're driving 09:20 41 1 this charitable purpose on the other side in some 09:20 2 detail, pretty soon you're running the joint. And I 09:20 3 don't think we need to be doing that. I was talking 09:20 4 about the revenue share, I think, what may have come 09:20 5 next. 09:20 6 COMMISSIONER COX: Well, the -- on 09:21 7 the -- I'm drawing a blank. Excuse me. 09:21 8 CHAIRMAN CLOWE: You're not old enough 09:21 9 for this, you know. You've got to be my age before 09:21 10 you can start doing this. 09:21 11 COMMISSIONER COX: What were we talking 09:21 12 about Steve? Help me. 09:21 13 MR. BRESNEN: Well, the several points 09:21 14 were, you know, how do you address this expense issue. 09:21 15 I'm understanding -- 09:21 16 COMMISSIONER COX: Okay. Charitable 09:21 17 purpose. Let's talk about the charitable purpose. 09:21 18 MR. BRESNEN: Yes, sir. 19 COMMISSIONER COX: I understand what 09:21 20 you're talking about, and we talked at some length 09:21 21 when we met with you and Billy and Stephen about that. 09:21 22 Is that on the table from the Sunset point of view? 09:21 23 MR. BRESNEN: Yes, sir. It's item 4.2, 09:21 24 says that y'all should define by rule what is an 09:21 25 acceptable charitable purpose. And my point is this: 09:22 42 1 Under the existing statute, in responding to that, 09:22 2 what I would suggest your recommendation be is that 09:22 3 the statute be rewritten to provide that -- that the 09:22 4 charitable purpose is whatever is consistent with 09:22 5 your -- whatever -- C whatever you're exempt for, 09:22 6 under the Internal Revenue Code. Because the 09:22 7 current -- you get into defining -- trying to define 09:22 8 what the current statute means? Good luck. 09:22 9 CHAIRMAN CLOWE: And I think our 09:22 10 practice is, we don't give opinions, so that's -- put 09:22 11 this issue in sort of an undefined category. Isn't 09:22 12 that part of the problem that's come up? 09:22 13 MR. BRESNEN: Yes, sir. It's -- 09:22 14 CHAIRMAN CLOWE: You don't know if you 09:22 15 can, and you don't know if you can't until you get 09:22 16 audited. 09:22 17 MR. BRESNEN: That's right. And 09:22 18 everybody is -- these people in these charities, for 09:22 19 many years, for some of them a couple of hundred 09:22 20 years, have been compliant with the Tax Code and its 09:22 21 variations. And if you say, for example -- I mean, 09:23 22 one of the big contentious issues is convention 09:23 23 expenses. Can you go to the national -- can you spend 09:23 24 your charitable proceeds for a veterans group to go to 09:23 25 its national convention or to go to lay a tomb at 09:23 43 1 the -- a wreath at the Tomb of the Unknown Soldier. 09:23 2 Those are just examples. I believe you can do that. 09:23 3 Now, I may be wrong about that. But one thing is, it 09:23 4 would be decided. It is known. And those things are 09:23 5 policed under a common body of law, and the current 09:23 6 statute is a morass and you're never going to be able 09:23 7 to straighten that out. It gives you no guidance. 09:23 8 You can decide by rule whether you can pay convention 09:23 9 expenses or, you know, have dinner at Shoney's for 09:23 10 your board meeting, but you're just going to get 09:23 11 sucked further and further into the day-to-day 09:23 12 operation of the charities. And it's not -- I don't 09:23 13 believe -- it's an inappropriate role for government 09:23 14 to begin with. And it's a -- it's a -- it's a 09:24 15 function you are never going to get to the bottom of. 09:24 16 COMMISSIONER COX: Thank you. 09:24 17 MR. ATKINS: Let me, Commissioner Cox, 09:24 18 clarify one thing. 4.2, there is a definition in the 09:24 19 Act for those charitable purposes. And the 09:24 20 recommendation of 4.2 isn't that we define charitable 09:24 21 purposes, but clarify that definition. 09:24 22 MR. BRESNEN: I understand. You 09:24 23 have -- you don't have to do it based on the statute. 09:24 24 Any rule you adopt has to be consistent with or 09:24 25 illuminating an existing statute. So where it's 09:24 44 1 things are more -- are undefined or vague, the current 09:24 2 statute is -- doesn't help you. 09:24 3 COMMISSIONER COX: And that goes to my 09:24 4 point. Are you asking that we work to change the 09:24 5 statute or that we do everything we can within 09:24 6 rulemaking? 09:24 7 MR. BRESNEN: I'm asking you to respond 09:24 8 to item 4.2 by saying, rather than the agency 09:24 9 attempting to work with the existing statute and 09:24 10 clarify it, it's an appropriate role for the 09:25 11 legislature to clarify that, and the best way from an 09:25 12 administrative point of view, is to -- and from a 09:25 13 policy point of view, is to do it by allowing people 09:25 14 to operate at the broadest parameters of their tax 09:25 15 exempt status. If it's good enough for the feds, it 09:25 16 ought to be good enough for us. 09:25 17 CHAIRMAN CLOWE: Thank you. And Billy, 09:25 18 I don't have the Sunset staff report in front of me. 09:25 19 What was the recommendation on 4.2? 09:25 20 MR. ATKINS: 4.2 is that the Commission 09:25 21 should clarity the definition of a charitable purpose 09:25 22 and authorized expense. 09:25 23 CHAIRMAN CLOWE: That's -- that's what 09:25 24 we started with as a staff recommendation. 09:25 25 MR. BRESNEN: Yes, sir. And, frankly, 09:25 45 1 on the authorized expense, it's pretty clear. You 09:25 2 know, here is the editorial, advertising, et cetera. 09:25 3 It's highly enumerated. On the charitable purpose 09:25 4 side, it's a much more amorphous concept to begin 09:25 5 with. And just read it. I'll bring you a copy. It's 09:25 6 amazing. So it doesn't seem to me an appropriate role 09:26 7 for a State agency to have to go clarify a statute 09:26 8 that's a -- sorry. I almost got ahead of myself. 09:26 9 That's not workable. So I would recommend that you 09:26 10 ask them to clarify it. Thank you. 09:26 11 CHAIRMAN CLOWE: And we thank you for 09:26 12 your participation in these meetings and your 09:26 13 continued involvement as we come to, hopefully, the 09:26 14 Commission deliberating a recommendation. 09:26 15 MR. BRESNEN: Yes, sir. Thank you. 09:26 16 CHAIRMAN CLOWE: Billy, anything 09:26 17 further on this? 09:26 18 MR. ATKINS: No, sir. 09:26 19 CHAIRMAN CLOWE: I believe there are no 09:26 20 other questions. We will go to item number six, 09:26 21 consideration of and possible discussion on 09:26 22 continuation of the Bingo Advisory Committee. 09:26 23 MR. ATKINS: Again, Mr. Chairman, just 09:26 24 for convenience, do you mind if I move? 09:26 25 CHAIRMAN CLOWE: Go right ahead. 09:26 46 1 MR. ATKINS: Mr. Grief has very 09:27 2 graciously brought us into the 21st century and now I 09:27 3 need to coordinate laying things out a little better. 09:27 4 CHAIRMAN CLOWE: Before you begin. 09:27 5 Phil, it's cold enough in here, wherever you are. You 09:27 6 can turn the air conditioning off. Thank you. 09:27 7 Billy, go ahead. 09:27 8 MR. ATKINS: Yes, sir. You have some 09:27 9 background information in your notebooks, 09:27 10 Commissioners. The reason that this is coming up 09:27 11 before you, and staff is not seeking a recommendation 09:27 12 today. If anything, we would be seeking guidance on 09:27 13 how you would like us to proceed. 09:27 14 Very briefly, Chapter 2110 of the 09:27 15 Government Code requires that agencies with advisory 09:27 16 committees establish a date that those committees will 09:27 17 be abolished, unless the agency specifically, through 09:27 18 rule, continues them. There -- I believe your last 09:28 19 meeting, you voted to publish for publication in the 09:28 20 Texas Register, Charitable Bingo Administrative Rule 09:28 21 402.567, relating to the Bingo Advisory Committee, 09:28 22 containing a number of amendments. So staff believes 09:28 23 that the time is ripe to consider the issue of whether 09:28 24 or not the advisory committee should be continued. 09:28 25 Currently, the abolition date in the advisory 09:28 47 1 committee is, I believe, March 6, 2003. So what we 09:28 2 are preparing to do is gather information that will 09:28 3 allow us, at a future meeting, to make a 09:28 4 recommendation to you regarding the continuation of 09:28 5 the Advisory Committee. And what I wanted to do very 09:28 6 briefly is just lay out to you some of the areas that 09:28 7 we are considering in making our evaluation and see if 09:29 8 there are specific areas that you would also like us 09:29 9 to look to. 09:29 10 First of all, I want you to know that 09:29 11 we are going to look to other jurisdictions that may 09:29 12 have advisory committees and how they operate in those 09:29 13 jurisdictions. We're also going to look to some other 09:29 14 jurisdictions -- not other jurisdictions, but other 09:29 15 state agencies in Texas with advisory committees. 09:29 16 Specifically, the staff of the Sunset Commission, 09:29 17 since they just finished our study, had made their 09:29 18 recommendation to us, they suggested that we look to 09:29 19 the Department of Licensing and Regulation, which has 09:29 20 approximately 11 advisory committees. They felt that 09:29 21 those operated pretty efficiently. 09:29 22 In talking to the Sunset staff as to 09:29 23 why it is that they felt the advisory committees at 09:30 24 the Department of Licensing operated efficiently, they 09:30 25 couldn't really pinpoint one thing, but they thought 09:30 48 1 that there were probably three elements relating to an 09:30 2 effective advisory committee. And that is, one, that 09:30 3 they report directly to the board, which our advisory 09:30 4 committee does. That they have staff support, which 09:30 5 we do. As you know, we coordinate with the chair to 09:30 6 get the meetings scheduled, posted, the facilities 09:30 7 available, notebooks and background information put 09:30 8 together, and staff is available at their meetings to 09:30 9 assist with answering questions, et cetera. But most 09:30 10 importantly, the Sunset staff stated that the really 09:30 11 effective advisory committee has a very specific 09:30 12 purpose in what they do. So what we are doing is 09:30 13 we're going back to the Bingo Enabling Act itself and 09:30 14 the provisions in it that lay out the advisory 09:30 15 committee and the advisory committee's 09:31 16 responsibilities. And there are four kind of broad 09:31 17 areas, and the number one being to advise the 09:31 18 Commission on the needs and problems of the bingo 09:31 19 industry. And so we would suggest as staff that the 09:31 20 advisory committee could be of better service to you 09:31 21 by focusing specifically on the bingo industry and 09:31 22 what could be done to benefit the bingo industry in 09:31 23 real terms before they started looking at maybe other 09:31 24 forms of gaming, et cetera. There have been a number 09:31 25 of proposals that have been floated around, such as 09:31 49 1 progressive bingo games, linked bingo games, different 09:31 2 types of pull tabs. There is emerging technologies. 09:31 3 We think it would be very beneficial for the advisory 09:31 4 committee to study those in detail, for the members of 09:31 5 the committee to have the opportunity to get input 09:31 6 from halls that they either deal with or are in their 09:32 7 local communities that they would bring back to the 09:32 8 table with specific recommendations. We think a 09:32 9 progressive game would be great because, A, B, C, D. 09:32 10 We also think that the advisory 09:32 11 committee should focus on changes that have occurred 09:32 12 in the past and report back to you on those effects. 09:32 13 You know, for example, several years ago, legislation 09:32 14 was changed to increase the prize amount at an 09:32 15 occasion, from 500 dollars to 750 dollars. We think 09:32 16 it would be beneficial if they reported back to you 09:32 17 the effect that that increase had. You know, 09:32 18 Mr. Fenoglio reported that he is aware of some halls 09:32 19 whose pull tabs have increased three-fold. I think 09:32 20 specific information back to the Commission on those 09:32 21 changes would be very beneficial to you as you move 09:32 22 forward and consider other changes to -- to either the 09:32 23 Enabling Act or the rules. 09:32 24 Speaking of rules, that brings me to 09:33 25 their second requirement, which is to advise the 09:33 50 1 Commission on rules during their development and prior 09:33 2 to their adoption. Quite frankly, this has been a 09:33 3 sore point between the advisory committee and the 09:33 4 staff. It seems like most of the times, not all of 09:33 5 the times, but most of the time when the staff comes 09:33 6 forward with a rule, the primary comments that we get 09:33 7 are that it's too long, there are too many pages 09:33 8 associated with this rule, et cetera. Again, I think 09:33 9 it's been demonstrated time and time again that when 09:33 10 we have open discussions on specific elements of the 09:33 11 rules, we get a final product that is both workable 09:33 12 and acceptable to both parties. So we would hope that 09:33 13 as we move forward, we're able to get that type of 09:33 14 meaningful comment on any rules that we could bring 09:33 15 forward. And if there are objections to rules or 09:33 16 language that we have in the rules, you know, 09:34 17 hopefully the advisory committee will submit alternate 09:34 18 language for us to consider. But from a staff 09:34 19 position, we feel that that is where they could really 09:34 20 be beneficial. 09:34 21 The other requirements are that they 09:34 22 report annually to the Commission. They do that in a 09:34 23 forum. We're also, again, going to look to these 09:34 24 other advisory committees and how they report. 09:34 25 And then, finally, is to perform other 09:34 51 1 duties as determined by the Commission. And, again, I 09:34 2 would remind you that our proposed rule does have in 09:34 3 there a requirement that, at least annually, the 09:34 4 advisory committee will report on you -- or will 09:34 5 report to you with specific recommendations on ways to 09:34 6 address areas for improvement. Issues such as gross 09:34 7 receipts, charitable distributions, expenses, and 09:34 8 attendance. 09:34 9 So that is kind of what we've been 09:35 10 looking at so far and the direction that we've been 09:35 11 going. And I guess right now, we would just ask if 09:35 12 that sounds okay to you or if there are other areas 09:35 13 that you would like us to research, also. 09:35 14 COMMISSIONER WHITAKER: It sounds good. 09:35 15 COMMISSIONER COX: It sounds very 09:35 16 thorough. 09:35 17 CHAIRMAN CLOWE: Billy, I would like to 09:35 18 add a comment in addition to what you heard from the 09:35 19 other Commissioners. At this point in time, I am in 09:35 20 favor of continuing the Bingo Advisory Committee. I 09:35 21 am responsive to the Sunset staff's comments and I 09:35 22 think, frankly, some of those can be characterized as 09:35 23 criticisms that have come out of their review. I 09:35 24 think that it's fair to say there is a high level of 09:35 25 participation on behalf of the Bingo Advisory 09:36 52 1 Committee members now, compared to what maybe it had 09:36 2 been in the past. Although I have the longest history 09:36 3 with the BAC, it's not all that long. And I think 09:36 4 that the input from members of the industry to the 09:36 5 Commission is vital to the Commission understanding 09:36 6 the problems of the industry, and to the extent that 09:36 7 they can and wish to deal in a positive way with those 09:36 8 problems. In my personal opinion, the industry is 09:36 9 very fragmented. It does not speak at the BAC 09:36 10 meetings or to the Commission with some unity about 09:36 11 the problems the industry faces. And I would hope the 09:36 12 BAC can continue to be a voice and be more focused in 09:36 13 its representation of not only problems, but proposed 09:37 14 solutions to the industry that would be helpful to the 09:37 15 Commission. I think a program of work and more 09:37 16 direction from the Commission to the BAC is a step in 09:37 17 the right direction. I think that the meetings of the 09:37 18 BAC need to be more orderly and need to be those 09:37 19 agenda items that are published, and I think the 09:37 20 practice needs to be to stay with the agenda. And I 09:37 21 would hope that giving the members a longer term and 09:37 22 staggered terms, which I think is the recommendation 09:37 23 of Sunset staff, would create perhaps a different 09:37 24 view, a more industry-wide view, and one of longevity 09:38 25 in dealing with problems, rather than maybe bringing 09:38 53 1 some problems which have to do with members' business 09:38 2 experience to the table that oft-times may not be 09:38 3 properly considered at a BAC meeting. 09:38 4 Those are some of my reactions based on 09:38 5 my attendance of meetings, and I hope that is helpful 09:38 6 to you in setting a culture change, maybe is a good 09:38 7 way to deal with it, and I think that's incumbent on 09:38 8 us as Commissioners to help you and help the BAC focus 09:38 9 more on the long term and on positive changes. 09:38 10 And another recommendation of the staff 09:38 11 is that this Commission be enlarged from three to five 09:38 12 members. If that were done, possibly you could have 09:38 13 more attendance at Commission -- or of Commissioners 09:38 14 at BAC meetings and you could have a higher level of 09:39 15 participation, although that would be up to whomever 09:39 16 the Governor appointed and that person's background 09:39 17 and their experience with the bingo industry. But I 09:39 18 see some opportunities here, and I would like to keep 09:39 19 that conduit open as much as possible between the 09:39 20 industry and the commission that regulates it. I 09:39 21 would say that not only is it important that 09:39 22 individuals appear and be involved, but for the 09:39 23 representatives of segments of the industry to 09:39 24 continue to be involved and work with the staff where 09:39 25 problems are identified. It's a difficult thing to 09:39 54 1 deal with, but I think it has value as I see it at 09:39 2 this point in time. 09:39 3 MR. ATKINS: And if I could touch 09:39 4 briefly on your comments. I think that several of the 09:39 5 issues that you have raised were issues, as you 09:40 6 pointed out, that the Sunset staff noted in their 09:40 7 report, and that, also, I think are addressed in 09:40 8 the -- in the proposed rule that's out there. The 09:40 9 lengthening of the terms, plus the staggered terms. 09:40 10 In just the review I've done of other advisory 09:40 11 committees so far, that's a common theme, so that they 09:40 12 don't have a sudden turnover of the majority of 09:40 13 members, but they have a sense of continuity and 09:40 14 history that comes with that -- that comes with the 09:40 15 committee. We have, as you know, based on the Sunset 09:40 16 recommendation, an attorney now that attends those 09:40 17 meetings in order to assist the chair, much as you 09:40 18 look to the General Counsel to make sure items that 09:40 19 are discussed are appropriately noticed, et cetera. 09:40 20 And, you know, just so you know, the advisory 09:40 21 committee themselves have addressed some of this. 09:40 22 They've had discussions about the possibility of 09:41 23 formulating their own subcommittees to start looking 09:41 24 in more detail at some of these issues. We haven't 09:41 25 gotten there yet. This culture change that you're 09:41 55 1 talking about, Commissioner Clowe, I think, is -- I 09:41 2 think is on the horizon. I think we're moving there. 09:41 3 And I think that working with those subcommittees and 09:41 4 trying to help them focus their agenda more on issues 09:41 5 beneficial to you as a commission will help them 09:41 6 increase their effectiveness. And we'll work with 09:41 7 them any way we can. 09:41 8 CHAIRMAN CLOWE: And that's not to take 09:41 9 anything away from many of the members who have served 09:41 10 on the committee and have attended many meetings and 09:41 11 done a lot of really productive work. But I think we 09:41 12 need to help that focus sharpen up and, clearly, the 09:41 13 agenda of work could be better defined and the goals 09:42 14 and objectives of the group. And then it's -- it is a 09:42 15 culture change, I think. It's not something that's 09:42 16 going to happen very quickly, but through good 09:42 17 leadership, can develop and grow. And that input from 09:42 18 citizens and members of that industry, I think, is 09:42 19 important to this regulatory body. 09:42 20 MS. KIPLIN: Commissioners, if I could 09:42 21 provide just a little bit of information. The statute 09:42 22 that Mr. Atkins referenced, the section 2110.00(a), 09:42 23 there is a provision that does indicate that the 09:42 24 committee may continue in existence after the date 09:42 25 that's identified in the rule, only if the agency 09:42 56 1 amends the rule to provide for a different abolishment 09:42 2 date. We do have a current proposed rulemaking out on 09:42 3 the Bingo Advisory Committee, so I wanted to have 09:42 4 y'all start thinking about the interplay between your 09:43 5 action, should you decide to continue the Bingo 09:43 6 Advisory Committee, and the rulemaking that's out. 09:43 7 That rulemaking will -- and I counted on my fingers, 09:43 8 so it's kind of roughly -- a rough count, but we've 09:43 9 got six months from the dates proposed before that 09:43 10 rulemaking will expire, and I'm thinking that's going 09:43 11 to be in March. So if y'all decide that you do want 09:43 12 to continue the Bingo Advisory Committee, I would 09:43 13 suggest that we go ahead and make that change in the 09:43 14 rule to whatever date certain in the future. I don't 09:43 15 think that would require republication because I think 09:43 16 it's out there and in -- and would not affect other 09:43 17 people who would not other have been -- have had 09:43 18 notice of the rulemaking. 09:43 19 CHAIRMAN CLOWE: So you're saying you 09:43 20 think that issue is ripe for the deliberation and 09:43 21 action of the Commissioners today at this meeting? 09:43 22 MS. KIPLIN: No. I'm saying, in the 09:43 23 future, I want people to be mindful that we've got a 09:43 24 rulemaking that's out there, and we need to go in 09:43 25 there and make this change, should you decide you want 09:43 57 1 to continue the Bingo Advisory Committee, and there 09:44 2 are two clocks that are ticking right now. One, on 09:44 3 the abolishment of the Bingo Advisory Committee, which 09:44 4 is March 6th, 2003, and one on the rulemaking that 09:44 5 unless it's -- unless y'all take action on it, it will 09:44 6 expire six months from when it was published. So the 09:44 7 timing is pretty good to coincide together, but it 09:44 8 would require an amendment to the proposed rulemaking. 09:44 9 CHAIRMAN CLOWE: Okay. Good. 09:44 10 Billy, timely. Thank you. 09:44 11 Any other comments or questions? 09:44 12 Billy, I think the next agenda item is yours as well. 09:44 13 MR. ATKINS: And also, Commissioners, 09:44 14 just for informational purposes. Ricky Turman, who is 09:44 15 the general public member on the Advisory Committee, 09:44 16 due to professional reasons, has had to submit his 09:44 17 resignation. We have sent out nomination forms. As 09:44 18 your background information in your notebook 09:44 19 indicates, historically, we've had some trouble 09:44 20 getting qualified nominees for this position. What we 09:44 21 have done is, we have mailed a notice to all bingo 09:45 22 locations about the vacancy along with signage that 09:45 23 they can post on their bulletin board, as well as 09:45 24 nomination forms that they can supply to any members 09:45 25 of the general public who may be interested in 09:45 58 1 attending. Additionally, the publishers of the Bingo 09:45 2 Bugle, which is an industry publication that's 09:45 3 distributed largely in bingo halls, has run a notice 09:45 4 in their October issue about the vacancy and provided 09:45 5 information on how organizations can -- or individuals 09:45 6 can obtain a nomination form if they're interested in 09:45 7 serving. 09:45 8 We have received, to date, a total of 09:45 9 two nominations. We've set a cut-off date of October 09:45 10 31st so, hopefully, we will receive more in that time 09:45 11 period. Again, we're not seeking action today, just 09:46 12 letting you know. And we are going to make the 09:46 13 assumption that once we receive the nominations, the 09:46 14 Commission would prefer to follow the process with the 09:46 15 last nomination and share those with the advisory 09:46 16 committee, get their input, and come to you with a 09:46 17 consensus on an individual for a replacement? 09:46 18 CHAIRMAN CLOWE: That's good, Billy. 09:46 19 And are you talking to the members of the BAC about 09:46 20 being proactive in soliciting nominations? 09:46 21 MR. ATKINS: We haven't to date, but we 09:46 22 will. 09:46 23 CHAIRMAN CLOWE: I think that's a good 09:46 24 source to touch. 09:46 25 MR. ATKINS: Okay. Great. 09:46 59 1 CHAIRMAN CLOWE: Thank you. 09:46 2 The next item is number eight, 09:46 3 consideration of and possible action on the 09:46 4 appointment and employment of an Executive Director 09:46 5 and/or the Deputy Executive Director. Jim Richardson. 09:46 6 Good morning, Jim. 09:46 7 MR. RICHARDSON: How are you? 8 For the record, my name is Jim 09:47 9 Richardson. I'm the human resources director. 09:47 10 Commissioners, in your notebook, I have 09:47 11 provided you a list of advertisement options for this 09:47 12 position. I would also like to add to that list three 09:47 13 papers: La Prenza, The Villager, and I'm hoping I'm 09:47 14 pronouncing this right. The Nakoa Observer. Those 09:47 15 are minority publications that I would like to add to 09:47 16 my recommendations. They're in -- to advertise in 09:47 17 those three papers would be about 400 dollars. The 09:47 18 only other recommendations besides the advertisement 09:47 19 that I have is that we should consider posting this 09:47 20 position for a minimum of 30 days. We'll probably 09:47 21 want to go through the end of November to be able to 09:47 22 get in some of the publications like (inaudible), who 09:47 23 runs a monthly publication. And then any applicant 09:48 24 who is allowed to -- or who is going to apply for this 09:48 25 position, we should not let them be involved in any 09:48 60 1 part of the process. So if we have anyone internally 09:48 2 who is going to apply for this position, we should not 09:48 3 include them in any part of the process that we're 09:48 4 having. Okay? Other than that, I just am here for 09:48 5 questions. 09:48 6 CHAIRMAN CLOWE: Okay. Thank you, sir. 09:48 7 Is that all right with you, Commissioner Whitaker? 09:48 8 COMMISSIONER WHITAKER: Absolutely. 9 CHAIRMAN CLOWE: Jim, I have a few 09:48 10 thoughts that I want to mention to you, and if there 09:48 11 is any agreement or disagreement from the 09:48 12 Commissioners, I think this would be a good time to 09:48 13 hear. 09:48 14 My hope is that the Commission will go 09:48 15 forward posting this position, certainly, for 30 days 09:48 16 of the Executive Director's position. Now, my 09:48 17 understanding is the -- the Deputy Executive Director 09:48 18 position is posted now. 09:48 19 MR. RICHARDSON: It is posted and 09:49 20 expires, I believe -- or closes on 10-25. 09:49 21 CHAIRMAN CLOWE: 10-25. How long has 09:49 22 it been posted? 09:49 23 MR. RICHARDSON: I think we posted that 09:49 24 somewhere around the middle of September. 09:49 25 CHAIRMAN CLOWE: So it's been open 60 09:49 61 1 days. 09:49 2 MR. RICHARDSON: 30 days or more -- 09:49 3 CHAIRMAN CLOWE: 30 days. And what is 09:49 4 the rule that if a person applies for both positions, 09:49 5 now that -- if the Commission acts to bring up the 09:49 6 Executive Director position? 09:49 7 MR. RICHARDSON: There wouldn't be any 09:49 8 particular rule that would apply. If the person did 09:49 9 get the Executive Director's position, they would just 09:49 10 bow out of the Deputy Executive position. They could 09:49 11 certainly be considered for either position. 09:49 12 CHAIRMAN CLOWE: If I were a member of 09:49 13 the public or a member of the current employed group 09:49 14 of the Commission, I could apply for both positions 09:49 15 and be considered equally and there wouldn't be any 09:49 16 conflict there? 09:49 17 MR. RICHARDSON: No, sir. 09:50 18 CHAIRMAN CLOWE: Well, I would hope the 09:50 19 Commission would post the Executive Director position 09:50 20 and keep the Deputy Executive Director position open 09:50 21 and consider those equally. 09:50 22 Additionally, I want to thank you for 09:50 23 what you've given us in the way of communication to 09:50 24 the public through media outlets and the cost. How do 09:50 25 we pay for that? 09:50 62 1 MR. RICHARDSON: In the human resources 09:50 2 budget, I have advertisements, included with that, 09:50 3 35,000 dollars a year for advertisement and newspaper 09:50 4 advertisements. 09:50 5 CHAIRMAN CLOWE: And you can cover 09:50 6 that? 09:50 7 MR. RICHARDSON: Yes, sir. 09:50 8 CHAIRMAN CLOWE: My hope is that the 09:50 9 Commission can notify the public and those who might 09:50 10 be interested in this, effectively, and thereby cast a 09:50 11 wide net and draw in the best group of applicants 09:51 12 possible at a reasonable cost. And I think we have to 09:51 13 be realistic about the desire that's probably in place 09:51 14 for as rapid resolution of this search as possible on 09:51 15 the one hand, and on the other, spending reasonable 09:51 16 money to achieve notification to the industry and 09:51 17 others who might be interested, and giving 09:51 18 opportunities to all who might be qualified to make 09:51 19 application for the position. There is a balance 09:51 20 there, and I would hope that the Commission would act 09:51 21 as the search committee, as I see it, and make the 09:51 22 decision -- I believe that's our responsibility, but 09:52 23 that you and the General Counsel would coordinate and 09:52 24 support in the areas that the Commissioners would need 09:52 25 your help, in that we cannot communicate with each 09:52 63 1 other and cannot work together except in a 09:52 2 publicly-noticed meeting to deliberate these choices, 09:52 3 except in executive session, as it is proper. 09:52 4 MS. KIPLIN: Correct. 09:52 5 CHAIRMAN CLOWE: I just throw that out 09:52 6 and give some thoughts that I have, and I think the 09:52 7 public venue is the correct place for us to be 09:52 8 discussing this. And Commissioners, that gives you 09:52 9 something to knock down if you don't like it. 09:52 10 MR. RICHARDSON: If I could clarify one 09:52 11 point real quick. You mentioned, keep open the Deputy 09:52 12 Executive. Now, that position is scheduled to close 09:52 13 on the 25th. We can extend that to say, keep it open 09:52 14 until filled if you want to. Otherwise, what will 09:52 15 happen is, we'll close it on the 25th and only those 09:52 16 applicants who have applied before that date will be 09:53 17 considered. If we don't fill the Executive Director's 09:53 18 position until December or so, that pool could get a 09:53 19 little bit stale. So we may want to, if we're going 09:53 20 to keep it open, change our posting to say, open until 09:53 21 filled. 09:53 22 CHAIRMAN CLOWE: So that's an option? 09:53 23 MR. RICHARDSON: Yes, sir. 09:53 24 CHAIRMAN CLOWE: Okay. That's good to 25 know. 64 1 MS. KIPLIN: Or another option is to 09:53 2 pull it, and then -- at another point in time, once 09:53 3 you have an Executive Director on board, who may want 09:53 4 to revisit the structure of that, re-post it. Those 09:53 5 people who are part of the pool for the Deputy