0001 1 TRANSCRIPT OF PROCEEDINGS 2 BEFORE THE 3 TEXAS LOTTERY COMMISSION 4 AUSTIN, TEXAS 5 16 TEXAS ADMINISTRATIVE CODE § 6 §402.409 § 16 TEXAS ADMINISTRATIVE CODE § 7 §402.412 § 16 TEXAS ADMINISTRATIVE CODE § 8 §402.424 § 9 10 PUBLIC COMMENT ON RULEMAKINGS 11 WEDNESDAY, JANUARY 21, 2009 12 13 BE IT REMEMBERED THAT on Wednesday, 14 the 21st day of January 2009, the above-entitled 15 public comment hearing was held from 10:05 a.m. to 16 10:30 a.m., at the Offices of the Texas Lottery 17 Commission, 611 East 6th Street, Austin, Texas 78701, 18 before SANDRA JOSEPH, SPECIAL COUNSEL. The following 19 proceedings were reported via machine shorthand by 20 Aloma J. Kennedy, a Certified Shorthand Reporter of 21 the State of Texas, and the following proceedings were 22 had: 23 24 25 0002 1 APPEARANCES 2 3 SPECIAL COUNSEL: Ms. Sandra Joseph 4 5 AUDITOR: Mr. Marshall McDade 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 0003 1 P R O C E E D I N G S 2 WEDNESDAY, JANUARY 21, 2009 3 (10:05 a.m.) 4 MS. JOSEPH: Good morning. My name is 5 Sandra Joseph. I'm Special Counsel for the Legal 6 Division of the Lottery Division. And with me is 7 Auditor * McDade, and we are here to receive comments 8 on three proposed rules. These are new draft rules. 9 The first one is proposed Rule 16 TAC 402.409 10 concerning lease termination and abandonment. The 11 second one, 16 TAC 402.412 relating to signature 12 requirements. And the third is 16 TAC 402.424 13 relating to amendment of a license by telephone or 14 facsimile. 15 These rules have been published in the 16 Texas Register for public comment, and we are here to 17 receive comments on these today. I would like to ask 18 that anyone planning to offer testimony be sworn at 19 this time, although this is not an evidentiary 20 proceeding. 21 And I have an appearance slip from 22 Mr. Steve Bresnen. 23 (Witness sworn) 24 MS. JOSEPH: All right. Mr. Bresnen, 25 you are the only person who has presented a witness 0004 1 affirmation form or that is present in the room, so I 2 would like to go ahead and ask you to offer comments 3 that you have. 4 MR. BRESNEN: Okay. Thank you. I'm 5 Steve Bresnen. I'm here on behalf of the Bingo 6 Interest Group, and I'm also here on behalf of Steve 7 Fenoglio who represents numerous folks involved in 8 charitable bingo, as y'all well know. 9 I might just cut to the chase and say 10 that we are fine with proposed Rule 402.412, signature 11 requirements, and we are fine with proposed Rule 12 402.424 relating to some other subject, amendments of 13 license by phone and fax. 14 I do want to comment, though, fairly 15 extensively on proposed Rule 402.409. My first 16 comment -- I'm working off of the version that I 17 printed off the website. Will that be satisfactory or 18 do you want me to run get one of what's on the table 19 out there, or are they the same? 20 MS. JOSEPH: Let me look just a second 21 and see if I have a similar one. 22 MR. BRESNEN: I'm just going to grab 23 one. 24 MS. JOSEPH: Okay. 25 (Brief pause) 0005 1 MR. BRESNEN: In my comments, I'll refer 2 to the version that's on the table out front, which is 3 a two-column document. It's a Xerox copy of the 4 actual Texas Register pages. Some of my comments will 5 be designed to get some legislative history, if 6 possible. Without Phil here, Marshall may be able to, 7 you know, help with that. If not, we'll work on it. 8 My first comment relates to Page 33 9 TexReg 10404 in the right-hand column, proposed 10 §402.409(a)(3). The statute does not limit the time 11 during which a person may file an application when an 12 organization ceases to conduct bingo, either by 13 abandoning the premises or having their lease 14 terminated, especially in the case of abandonment. 15 The statutory provision for abandonment includes both 16 abandoning and will abandon. 17 So knowing when a person has aban- -- 18 well, let me back up. The statute also talks about 19 ceasing. It says if the organization ceased or will 20 cease; whereas, (a)(3) only refers to ceasing to 21 conduct. 22 So we're going to have circumstances in 23 which it's difficult to determine whether the 24 organization has, quote, ceased to conduct within the 25 meaning of the statute. Now, I wrote all of this in 0006 1 negotiation with the prior director, so I have some 2 intimate knowledge of the legislative intent here. 3 And the situation that the Legislature was addressing 4 was one of two circumstances in which the object here 5 is to not leave a gap in the schedule so the other 6 organizations don't face a situation where somebody 7 chose to play at one session, the organization hasn't 8 shown up, doesn't have its operator there or whatever 9 is required, people are turned away and then they 10 don't stop and -- you know, they don't stay for the 11 second session, or the other organizations have to 12 pick up and carry rent and other expenses that are not 13 being carried by one of the organizations at that 14 location. 15 So we're dealing with circumstances 16 where there's probably been some kind of a conflict or 17 some kind of a failure on the part of the conducting 18 organization to live up to its obligations, both to 19 the lessor and to its other -- to its fellow tenants. 20 Consequently, limiting this to 21 21 calendar days of an organization ceasing to conduct 22 bingo I think, as a practical matter, is not going to 23 work, and I don't think the statute limits your 24 ability to file that application. I also think when 25 you consider it's "will cease," "will abandon" or 0007 1 "will be terminated," the 21 days doesn't relate to 2 anything definitive under those circumstance. So I 3 would strike (a)(3). We would propose that you strike 4 (a)(3). 5 MS. JOSEPH: So you believe there 6 shouldn't be any limit at all? 7 MR. BRESNEN: No, ma'am. 8 MS. JOSEPH: Okay. 9 MR. BRESNEN: I think the facts about 10 this are uniquely under the control of the folks on 11 the ground there and it really doesn't -- I don't see 12 how it affects the Commission's administrative 13 considerations, because you're going to have to act 14 within a certain amount of time of an application 15 being filed, whether it's filed 21 days or 22 or 100 16 days. There is an incentive on behalf of the lessor 17 and the other organizations to act promptly, so I 18 don't really think you need this 21 days. 19 Subsection (b) is problematic in its 20 definition of "abandonment." The totality of (b) and 21 (c) seems to require the applicant to show the 22 intention of a third party or the two applicants to 23 show the intention of the third party, and I think 24 that's going to be very, very difficult. 25 In some circumstances, the people have 0008 1 written you a letter and said, "We ain't coming back." 2 But in other circumstances what's happening is, people 3 are gone and they're not communicating. And I know 4 the circumstance has happened before to my clients. 5 And so, you know, other than filing an affidavit 6 saying they've abandoned, I don't know. And saying, 7 "Well, they don't call me back," or if there is a 8 dispute over a lease or something else going on in the 9 hall, the people may be hard-headed or they may be 10 locked down trying to seek leverage over a particular 11 situation and just clam up. 12 So I think this needs to be reworked. 13 And what I would like to do is work with the staff and 14 Steve Fenoglio to see if we can make this work. 15 Obviously, we don't want to have somebody going and 16 claiming someone has abandoned when they haven't 17 abandoned and knocking them out of their licensed 18 time. On the other hand, I think the way it's written 19 right now, it might be that we would want to say 20 something like if the -- assert that the -- it means 21 that a reasonable -- based on the facts of the 22 situation, a reasonable person would conclude that the 23 licensed authorized organization had effectively 24 abandoned this time. 25 I really get worried about a situation, 0009 1 too, where somebody shows up one time, they don't show 2 up the next week, then they show up another time and 3 they're so intermittent. Now, most of the people -- 4 as a practical matter, most of the lessors are going 5 to have a lease agreement in effect with a 30-day 6 termination clause. I think that's pretty standard, 7 so that situation may be able to handled in that 8 manner. But again, I don't want to tie anybody's 9 hands, if I can, by having to prove some third party's 10 intention. 11 Let's see here. On proposed Subsection 12 (c)(3), we would oppose that existing language. It 13 seems to indicate that you have actually provided them 14 a copy. And we need some language in there that says, 15 you know, that you've exercised reasonable efforts to 16 provide a copy or something like that because, again, 17 if people don't want to be found, they won't be found. 18 And if they absconded or tried to be uncommunicative, 19 it may be hard to provide them with a copy. So some 20 kind of reasonable notice, reasonable effort, we 21 understand. But to have actually completed the 22 provision of providing a copy is going to be 23 problematic in some circumstances. 24 Proposed Subsection (c)(4) where you 25 give examples of the kind of additional supporting 0010 1 documentation related to lease termination or 2 abandonment, one example is correspondence from the 3 licensed authorized organization that abandoned, 4 indicating intent to abandon, I suppose that's only 5 intended just for legislative intent here. I'm 6 assuming those are intended to be examples and not 7 required in each case, because that's going to be a 8 problem. Particularly in an abandonment situation, a 9 lot of times the folks have quit communicating. 10 So I think, as a practical matter, we're 11 going to mostly end up with statements from persons 12 with direct knowledge of pertinent events. And if it 13 helps to impede fraud, if there is an affidavit or a 14 form the Commission could use maybe in the form of an 15 affidavit where someone was making statements to you 16 that they could later be held accountable for if they 17 were wrong, that you might jockey that language a 18 little bit there to beef that up. 19 Let's see here. Just as a matter of 20 cleanup, at Subsection (c)(5) -- again, all these are 21 on the same page that we were on before -- where you 22 asked for the license of the organization that has 23 abandoned the premises. I would suggest that you -- 24 you're limiting that to the abandoned when we have the 25 both abandonment and termination. So I would say 0011 1 "ceased" or "will cease" there, just to make that 2 applicable to all circumstances again but leave in the 3 "if it's available." That's a very important thing. 4 On proposed Subsection (e) -- let me 5 compare the statute here for just a minute. In the 6 case of an abandonment, the statute gives you 10 days, 7 period, from the time the application is complete or 8 is filed, to act on the application. The way (e) is 9 worded, it appears that the phrase "whichever is 10 later" modifies both the first part of the sentence, 11 "No later than ten calendar days after the date the 12 application is filed with the Commission or the 13 effective date of the licensed authorized 14 organization's lease termination, whichever is 15 later . . ." 16 In the statute, it gives you a longer 17 time for lease terminations and a shorter time for 18 abandonments. So this section should be rewritten to 19 take account of that. In the statute I'm referring to 20 2001.108(b) in the case of an abandonment and (c) in 21 the case of a termination. 22 Just as a matter of drafting, in the 23 copy I have -- well, I think in both these copies -- 24 under Subsection (f), there appear to be some 25 sub-subsections (1) and (2) which do not appear to me 0012 1 basically to relate to or add anything to Subsection 2 (f). So you might want to renumber those or reletter 3 them. 4 But dealing with the substance of (f), 5 (f) requires in case the Commission does not timely 6 act on an application as required in Occupation Code 7 2001.108, the organization must submit written 8 notification to the Commission under this proposed 9 rule of its intent to begin conducting. That would 10 seem to be something that it tells you before it 11 actually begins conducting. 12 But in the statute it provides that if 13 the Commission fails to timely act, then the 14 organization, quote, ". . . may act as if the change 15 in premises or bingo occasions has been approved by 16 the commission and may conduct bingo at the new 17 premises or during the new bingo occasion until the 18 commission acts on the application." 19 The statute does not require any notice 20 to the Commission prior to actual conduct of bingo 21 beginning by the new applicant; and, yet, (f) seems to 22 do that. Under the statute, they could begin to 23 conduct and then the Commission could continue working 24 on the application. So we would like to see (f) 25 rewritten to correspond to the statute. 0013 1 I don't think we would oppose some 2 notification that they actually begin conducting, but 3 we don't want to have somebody act under the statute 4 and then have the Commission say, "Well, you didn't 5 give us notice before you started conducting." 6 obviously, the statute would be a defense there, but 7 it seems like a waste of administrative resources and 8 a potential trap for people. 9 Secondly, (f)(1) and (f)(2) seem to 10 imply that you can conduct while waiting. And if 11 that's how (1) and (2) relate to (f) -- in other 12 words, the statute says you can conduct -- if the 13 Commission doesn't act on a timely basis that you can 14 conduct. If (1) and (2) are intended to say you may 15 conduct while you wait, then it could be more clear. 16 MS. JOSEPH: Okay. 17 MR. BRESNEN: And I gather that (f)(1), 18 now that I'm thinking about it, (f)(1) probably is 19 intended to act in the place of a license before it's 20 been issued. We don't have any problem with having 21 that posted on the wall as long as the rule reflects 22 that a person can go forward and conduct without 23 providing this intent to begin in (f). And then 24 No. (2) -- then No. (2) would make sense to me, too, 25 if that's the situation. So (f) needs a little help, 0014 1 I think. 2 Now, back in (f)(1), it says, 3 ". . . display a copy of the written notification to 4 the Commission at the premise at which bingo is 5 conducted. . ." It needs to be made clear that this 6 is the new premises, because these are licensed 7 authorized organizations who will have been licensed 8 to conduct at another location. 9 If the intent is to say the new 10 premises, that needs to be made clear. If the intent 11 is to say the old premises, then I would question why 12 you've got to do that at the old premises. So I'm 13 gathering that the intention is to tell people the 14 circumstances under which you can start at the new 15 place. 16 MS. JOSEPH: Okay. 17 MR. BRESNEN: Okay? And my final 18 comment is to suggest an addition to the rules. I 19 don't have specific language to suggest to you today, 20 but I would propose that we work with the staff to 21 insert this prior to the Commission acting on this 22 rule, even though it may delay the adoption of the 23 rule, because it will be a significant -- well, it 24 will be a significant addition. 25 Under Occupation Code 2001.108(e), the 0015 1 Commission is authorized to issue temporary licenses 2 to one or more conducting organizations that conduct 3 at the same location where there has either been an 4 abandonment or a termination or will be one of those. 5 And those temporary licenses are in addition to the 6 temporary licenses that each organization is entitled 7 to under the chapter. 8 The rule, however, does not implement 9 that section. I don't know that it's required, 10 legally required, that there be a rule to implement 11 the statute, since it grants you authority and you can 12 do it. But I think it would be helpful to the 13 regulated community to say that the Commission, on 14 request, will grant those temporaries. And that may 15 mitigate these circumstances of deadlines and 16 applications maybe being returned for not being 17 complete, because the object here is to fill the hole 18 and not have businesses where there's somebody who is 19 unqualified or not conducting at a time that they're 20 supposed to be conducting. 21 Commercial lessors depend on the 22 schedule that's been established for their cost 23 structure and revenue in the bingo hall. So if the 24 Commission doesn't act promptly in conjunction with 25 the lessor and the other organizations at that place, 0016 1 the purpose of the statute will be defeated. And I 2 think you can, by putting a paragraph in here that 3 says, you know, except for some reason otherwise, the 4 Commission will issue temporary licenses under 5 2001.108(e) to another organization at the location to 6 conduct at the time at which somebody has ceased or 7 abandoned or been terminated, assuming there is a gap. 8 I don't want to knock anybody out who 9 has an existing license and is continuing to go on. 10 If they have been terminated under a 30-day lease 11 clause and they want to conduct during their times, 12 we're not suggesting that they be displaced using 13 Subsection (e) of the statute. But where there is a 14 gap and it can be demonstrated by the people, we would 15 like for y'all to be on the hook for your own rules to 16 promptly issue those temporaries. And you were 17 talking about existing licensees, so some of the 18 concerns about reviewing applications and everything 19 ought to be moot. 20 That's the sum total of my comments, 21 unless y'all need me to clarify anything. 22 MS. JOSEPH: Do you have any questions? 23 MR. McDADE: No. 24 MS. JOSEPH: Thank you very much for 25 your comments, Mr. Bresnen. 0017 1 MR. BRESNEN: Thank y'all for your work. 2 MS. JOSEPH: Okay. If there is nothing 3 further, this hearing is adjourned at 10:30. 4 (Hearing adjourned: 10:30 a.m.) 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 0018 1 C E R T I F I C A T E 2 STATE OF TEXAS ) 3 COUNTY OF TRAVIS ) 4 I, Aloma J. Kennedy, a Certified 5 Shorthand Reporter in and for the State of Texas, do 6 hereby certify that the above-mentioned matter 7 occurred as hereinbefore set out. 8 I FURTHER CERTIFY THAT the proceedings 9 of such were reported by me or under my supervision, 10 later reduced to typewritten form under my supervision 11 and control and that the foregoing pages are a full, 12 true and correct transcription of the original notes. 13 IN WITNESS WHEREOF, I have hereunto set 14 my hand and seal this 30th day of January 2009. 15 16 17 ________________________________ 18 Aloma J. Kennedy Certified Shorthand Reporter 19 CSR No. 494 - Expires 12/31/10 20 Firm Certification No. 276 Kennedy Reporting Service, Inc. 21 Cambridge Tower 1801 Lavaca Street, Suite 115 22 Austin, Texas 78701 512.474.2233 23 24 25