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					                  Debbs Potts Oregon State Lottery Commission Building
                  500 Airport Road SE
                  Salem, OR 97301


                      OREGON STATE LOTTERY COMMISSION
                      MEETING MINUTES for AUGUST 22, 2008
Lottery Commission:         Commissioner Steven Ungar, Chair
                            Commissioner Bill Ihle, Vice Chair
                            Commissioner Pamela Fogg
                            Commissioner Amy Lowery
                            Commissioner LeRon Howland

Executive Team Present: Dale Penn, Lottery Director
                        Larry Niswender, Assistant Director for Support Services
                        Tim Eaton, Assistant Director for Retail Operations
                        Major Craig Durbin, Assistant Director for Security

Lottery Staff Present:      Ross Armstrong, Rules and Policies Intern
                            Cornell Balagot, Video Product Manager
                            Chuck Baumann, Communications Specialist
                            Sarah Castner, Assistant Attorney General, Department of Justice
                            Linda DeBlasio, Senior Executive Assistant for the Commission
                            Jean Gabriel, Finance Reporting & Analysis Manager
                            Steven Green, Senior Manager for Retail Operations
                            Mark Hohlt, Rules and Policies Manager
                            Mary Mann, General Accounting Manager
                            Marianne Manning, Retail Sales Support Manager
                            Kathy Ortega, Chief Financial Officer
                            Louise Plata, Retail Sales Support Manager
                            Nancy Rivera, Executive Assistant for Support Services
                            Keri Stocks, Materials Manager
                            Brian Sullivan, Mar/Com Manager
                            Larry Trott, Rules and Policies Analyst
                            Valerie Wicklund, Chief Internal Auditor

Guest Speakers:             Dianna Smiley, Executive Director, SOLV
                            Sara Ryan, Program Coordinator, SOLV

Others Present:             Russ Harben, GTECH
                            Bob Klingman, GTECH
                            Chip Lazenby, Chip Lazenby Associates
                            John Powell, GTECH Lobbyist
                            Grover Simmons, Independent Employer Association
                            Lottery retailer(s)

COMMISSION MEETING
     The August 22, 2008, Oregon State Lottery Commission Meeting was called to order by
Chair Ungar. Chair Ungar noted for the record that all Commissioners were present at today’s
meeting. The roll was called. Commissioners present: Commissioner Howland, Commissioner
Lowery, Commissioner Fogg, Vice Chair Ihle, and Chair Ungar.




Oregon State Lottery Commission Meeting
Meeting Date: August 22, 2008                                                             Page 1 of 9
(Note: Item C. on the agenda was presented first.)

C. SOLV’s Report – Annual Presentation
   Presenters from SOLV: Dianna Smiley, Executive Director, Sara Ryan, Program
   Coordinator

        Chair Ungar welcomed the SOLV organization to present their annual report to the
    Commission. For several years the Oregon State Lottery has been a major sponsor for
    SOLV’s “Down by the Riverside,” a “statewide beautification & enhancement project.” One
    aspect of the environmental clean-up event involves volunteers throughout the state working
    to clear stream banks of litter and non-native vegetation. This particular event aligns well
    with the state’s watershed enhancement program, which receives designated Lottery
    funding.

        Ms. Smiley offered her thanks for the Lottery’s partnership with SOLV. Ms. Smiley gave
    an overview to the Commission of the transition of SOLV following the retirement of former
    Director Jack McGowan. Ms. Smiley introduced the “Down by the Riverside” Program
    Coordinator, Sara Ryan. Ms. Ryan reported on this year’s event held May 17, 2008, which
    drew thousands of volunteers across Oregon.

       In the coming year, SOLV will be partnering with Rural Development Initiatives and
    Oregon Volunteers. Additionally, SOLV has been commissioned by Oregon 150 to organize
    “Take Care of Oregon Days” which is planned for May 2009, the same month as the annual
    “Down by the Riverside” event.

        The Commission received “Down by the Riverside” information packets containing event
    brochures that were designed and printed by the Lottery, as well as SOLV’s business
    reports. Ms. Ryan gave an overview of SOLV’s major projects and accomplishments in the
    past year and highlighted some of the individual events throughout Oregon. Ms. Ryan had
    on hand the promotional items that were given to all the event volunteers. The items, a pair
    of gardening gloves and a recycled, reusable shopping bag, were also provided by the
    Lottery.

A. MINUTES OF THE PREVIOUS COMMISSION MEETING
    Presenter: Chair Ungar
       The Commission received the draft minutes of the previous meeting for review prior to
    today’s meeting (Exhibit #1). No revisions to the minutes were requested.

                Chair Ungar called for a motion. Commissioner Fogg moved that the
                minutes of the Oregon State Lottery Commission Meeting held on July 25,
                2008, be approved as presented. Commissioner Howland seconded the
                motion. The motion passed unanimously, 5-0.

The approved minutes will be posted to http://www.info.oregonlottery.org following today’s meeting, or,
are available by contacting Public Affairs at 503.540.1016, in Salem.

B. GOVERNANCE MATTERS AND DIRECTOR’S REPORT
    Presenters: Chair Ungar and Director Penn
        There were no Governance Matters to report.

Oregon State Lottery Commission Meeting
Meeting Date: August 22, 2008                                                                 Page 2 of 9
    DIRECTOR’S REPORT
     MUSL - Powerball®. Director Penn debriefed the Commission on a MUSL-Powerball®
    meeting he attended earlier this week. With the State of Florida joining Powerball® effective
    January 1, 2009, it was necessary for MUSL to make some changes to the Powerball®
    game. As a result, the Oregon Lottery® will also be initiating some rule changes, to be
    adopted by the Commission prior to January 2009.

     Lottery Sales. The FY08 year-end financial statement will be presented for
    Commission approval today. Director Penn noted that FY08 was another record year for
    Lottery sales overall. It was the most successful year ever with the highest transfer of
    revenue to the state of approximately $650 million. The Lottery is on track to transfer
    revenue for the biennium totaling $1.3 billion.

        Additionally, the Lottery has been able to invest significantly in its product lines this year
    with new Video LotterySM games and terminals in an effort to increase future sales

     Smoking Ban. Director Penn listed some of the challenges that are affecting this fiscal
    year’s sales such as the current economic conditions, but that the biggest challenge the
    Lottery will face this year is the smoking ban. Director Penn further stated that the quarterly
    economic forecast for the State of Oregon is due out next week and that, for the very first
    time, the forecast will make note of some negative impact on Lottery sales because of the
    smoking ban.

        Director Penn stated that, with18 months’ notice of the smoking ban, the Lottery has
    been able to help minimize the negative impact to retailer sales by planning to place new
    games into the market at the onset of the ban, with new Video LotterySM terminals slated for
    installation in the spring of ’09, and with increased research into games that can be
    launched into the market quickly if needed.

        The Lottery is also working on compiling best practices for the retailers from other
    retailers who implemented the smoking ban early without harming sales. In addition, the
    Lottery is developing advertising to assist sales during the smoking ban. Chair Ungar stated
    that publicity on the smoking ban’s impact to sales will increase as the date nears.
    Chair Ungar mentioned a recent newspaper article that pointed to the positive impact of the
    smoking ban on sales, since 80 percent of Oregonians are non-smokers.

[End of Governance Matters and Director’s Report.]

D. AUDIT COMMITTEE REPORT
   Presenter: Lottery Commissioner Fogg
       The Audit Committee Charter requires that an annual report on the Committee’s fiscal
    year activities be presented to the Commission. The report was presented by
    Commissioner Fogg, Audit Committee Chair.

        The purpose of the Audit Committee is to assist the Oregon State Lottery Commission in
    overseeing the Lottery’s financial reporting. Financial reporting includes the system of
    internal controls, the process for monitoring compliance with laws and regulations, and the
    process for monitoring compliance with the Lottery’s Ethics Policy and audit activities. The


Oregon State Lottery Commission Meeting
Meeting Date: August 22, 2008                                                              Page 3 of 9
    Audit Committee acts to promote and ensure integrity, security, honesty, and fairness, in the
    operation and administration of the Lottery.

       The Audit Committee also receives and reviews investigation summary reports on
    potential fraudulent activities, and monitors compliance with new fraud reporting processes
    implemented at the Lottery.

        There were nine Audit Committee meetings held in FY08. The Audit Committee meets
    with the Oregon Audits Division to hear reports and to review the results of the annual
    financial statement by the Audits Division. The Audit Committee heard reports on the SAS
    70 audit of GTECH, reviewed action taken on audit findings and followed-up with
    management, as necessary. The Audit Committee also reviewed and approved internal
    audit risk assessments and annual audit plans and received quarterly reports of internal
    audit activities. The Audit Committee provided feedback for the annual performance of the
    Chief Internal Auditor. The Committee heard reports on, and reviewed, audit work
    performed by the Lottery’s Internal Audit Department, including the examinations of the
    effectiveness of Lottery’s internal controls, compliance with laws, rules, policies and
    procedures, and the efficiency and effectiveness of operations.

E. RULES AND POLICIES
    Presenter: Mark Hohlt, Rules and Policies Manager
    La Center Casino
        The waiting period ended August 12, but there has been no federal decision announced
    yet on the La Center casino. Since there is no federal statutory deadline, a decision can be
    made at any time.

         The Columbian newspaper reported that the cities of Vancouver and La Center sent
    letters to the Bureau of Indian Affairs dismissing the massive Environmental Impact
    Statement. The City of Vancouver requested that it be withdrawn based on inadequate
    information, and because the impact of the casino on local traffic was not addressed.

       The City of La Center believes the casino will basically cause the cardrooms to go out of
    business rather than remain in business with the projected 66 percent decline in revenue.
    La Center requested that a supplemental study be done.

        The Columbian ran an editorial on the proposed casino, and the letters from the cities of
    Vancouver and La Center. The editorial contained the "frightening details about traffic" and
    stated that, “the data-driven case for rejecting the casino proposal emerges as more
    convincing than ever."

       By law, the Oregon State Lottery must remain neutral on ballot initiatives. The Lottery
    can respond factually to inquiries. The Commission will continue to receive updates on any
    measure which may impact the business of the Oregon State Lottery.

    Ballot Measure 62 (formerly Ballot Initiative 41).
        This Measure would dedicate 15 percent of Lottery revenues to crime prevention,
    investigation, and prosecution. The Commission previously received a copy of the written
    materials for the Voter's Pamphlet for review prior to today's meeting. (Exhibit #2.)

    Rule Projects Pending

Oregon State Lottery Commission Meeting
Meeting Date: August 22, 2008                                                         Page 4 of 9
        Mr. Hohlt stated that rulemaking had been initiated on the following: (1) the Rules for the
    new Raffle Game; (2) amendment to the End of Game Rule for Scratch-itsSM;
    (3) housekeeping changes to the Video Rules and updating the definition of Video LotterySM
    game terminal; (4) amendment to the BreakopenSM Rule since the Lottery has discontinued
    the game; and, (5) amendment to the Powerball® Rule to increase the average jackpot won
    while making it easier to win other prizes.

[End of Rules and Policies.]

F. SUPPORT SERVICES
    Presenters: Larry Niswender, Assistant Director for Support Services; Kathy Ortega, Chief
    Financial Officer

       June 2008 Year-End Financial Statement (Kathy Ortega)
       The Commission received the FY08 Financial Statement for review prior to the meeting.
    (Exhibit #3.)

        For June 2008, net revenue was $81.9 million on a budget of $83.4 million, for a
    negative variance of $1.5 million. Net profit was $54.6 million on a budget of $56.7 million,
    for a negative variance of $2.1 million.

       For FY08, net revenue was $1.013 billion on a budget of $1.013 billion. Net profit was
    $678.4 million on a budget of $661.0 million, for a positive variance of $17.4 million. Sales
    were slightly under the final forecast for FY08.

       For FY08, Services and Supplies was $8.4 million on a budget of $11.2 million, for a
    positive variance of $2.8 million.

       On the Balance Sheet, operating working capital is capped at $45 million, and money
    has been set aside for committed contracts for the year.

        Ms. Ortega presented the Capital Outlay Status Report for FY08. Total capital outlay
    was $44.2 million on a budget of $49.9 million, for a positive variance of $7.5 million (mostly
    for Video LotterySM terminals). The difference will be carried into FY09.

       There were no questions or comments from the Commission. Ms. Ortega requested
    approval of the FY08 Financial Statement.

                Commissioner Fogg moved that the Oregon State Lottery’s Financial
                Statement for Fiscal Year 2007-2008, ending June 30, 2008, be approved
                for the record as presented today. Commissioner Lowery seconded the
                motion. The motion passed unanimously, 5-0.

     July 2008 Financial Statement
      The Commission received the July 2008 Financial Statement for review prior to the
    meeting. (Exhibit #4.) Ms. Ortega noted for the record that July is the first month of FY09.

        For July 2008, net revenue was $81.0 million on a budget of $85.3 million, for a negative
    variance of $4.3 million. Net profit was $51.7 million on a budget of $53.3 million, for a
    negative variance of $1.6 million.


Oregon State Lottery Commission Meeting
Meeting Date: August 22, 2008                                                           Page 5 of 9
         For July 2008, Actual Services and Supplies were $647,595 on a budget of $1,077,378
    million, for a positive variance of $429,783.

        On the Balance Sheet, operating working capital is capped at $45 million, committed
    assets are slightly down reflecting the receipt of Video LotterySM terminals and,
    correspondingly, that number went up in Fixed Assets.

       There were no questions or comments from the Commission. Ms. Ortega requested
    approval of the July Financial Statement.

                Commissioner Lowery moved that the Oregon State Lottery Financial
                Statement for month ending July 31, 2008, be approved for the record as
                presented today. Commissioner Howland seconded the motion. The
                motion passed unanimously, 5-0.

The FY08 Financial Statement and July 2008 Financial Statement are available @
http://www.info.oregonlottery.org, or by contacting Public Affairs at 503-540-1016.

       Procurement Activity Report (AD Niswender)
         The Commission received the monthly Procurement Activity Report for review prior to
    today’s meeting. (Exhibit #5). The report contains 27 items, for an approximate total of $1.2
    million. There were 12 contracts executed this month primarily for replacement vehicles. All
    contracts executed are within budget.

[End of Support Services Report.]

G. RETAIL OPERATIONS and MARKETING
    Presenters: Tim Eaton, Assistant Director for Retail Operations; Carole Hardy, Assistant
    Director for Marketing; Brian Sullivan, Mar/Com Manager; Louise Plata, Traditional Product
    Manager

        AD Eaton reported that total sales were trending down slightly at year end. Some of the
    outside influences impacting sales are the current economic conditions and higher gas
    prices. Consumer behavior has changed overall, with fewer visits to retail locations and
    fewer dollars being spent. Economic forecasters also factor in periods of hotter weather
    temperatures which results in lower lottery sales.

        AD Eaton informed the Commission that Lottery teams analyze sales on a weekly basis
    and plan accordingly to increase sales. A sales graph was presented – “OSL Sales
    Revenues by Business Year.” (Handout.) AD Eaton provided an overview of the sales
    increases and decreases along the timeline.

        AD Hardy stated that the Marketing is working on the FY09 Business Plan and is on
    track for implementing the Plan.

        Commissioner Howland requested that product sales be compared to product sales
    goals from the Sales & Marketing Plan, and reported on monthly. Commissioner Howland
    stated that this information will help to better follow how the products are doing. This
    information will be added to next month’s Business Year Comparison Sales Report.




Oregon State Lottery Commission Meeting
Meeting Date: August 22, 2008                                                         Page 6 of 9
        Director Penn noted that, in addition to tracking the sales goals set in the Sales &
    Marketing Plan, there are also individual goals set for sales representative, sales goals in
    the budget, and the Lottery is always tracking against an economic forecast. So, there are a
    number of different measures involved with sales goals.

       At Commissioner Howland’s request, AD Eaton will see that a copy of the Sales &
    Marketing Plan is provided to the Oregon Restaurant Association.

       Business Year Comparisons Report (AD Eaton)
        The Commission received the Business Year Comparisons Report for week ending
    August 16, 2008, prior to today’s meeting for review (Exhibit #6). AD Eaton presented the
    Business Year Comparisons Report, which compares year-to-date product sales with those
    of the previous year.

        Total Traditional Only products, year-to-date, are $39,624,161, and 13.62 percent less
    than last year’s total. MegabucksSM and Powerball® jackpots were both significantly larger
    last year compared to the current jackpots. Total Video LotterySM products, year-to-date, are
    $117,128,146, which is 2.05 percent greater than last year. Total year-to-date sales of all
    Lottery products are $156,752,307, which is 2.42 percent less than last year.

    Note: Total sales last year included year-to-date sales of BreakopenSM tickets in the
    amount of $131,220. BreakopensSM were discontinued effective June 30, 2008.

The Business Year Comparisons report is available @ http://www.info.oregonlottery.org, or by contacting
Public Affairs at 503-540-1016.

      Traditional Product Information (Louise Plata)
       Ms. Plata stated that, as the new Traditional Product manager, she has taken the past
    seven weeks to step back and really examine all aspects of the product, including
    marketing.

        Scratch-itSM Tickets for September 2008 (Handout – Sample, voided tickets)
         “Ghostly Green” – is a $1.00 ticket with a top prize of $3,100.
         “Flamingo Bingo” – is a $2.00 ticket with a top prize of $10,000.
         “Aladdin’s Lamp” – is a $3.00 ticket with a top prize of $25,000.
         “Struck By Luck” – is a $5.00 ticket with a top prize of $50,000.

       The specialty game for the month is “Clue.” This game will be displayed in the specialty
    game dispenser. This is a $15 ticket with a top prize of $70,000. The prize payout is 72
    percent. A complimentary ticket will be given to retailers to assist sales.

       Mr. Sullivan played a rough-cut of the television ad for “Clue.” This is an integrated
    campaign that will include TV, radio, outdoor, web, point of sale, and possibly a transit
    opportunity.

        MegabucksSM - The current jackpot is $4.6 million. Current year-to-date sales are less
        than last year. Last year’s jackpot was in excess of $20 million at this time.

        Powerball® - The current jackpot is $52 million. Current year-to-date sales are less than
        last year. Last year’s jackpot was $210 million at this time.


Oregon State Lottery Commission Meeting
Meeting Date: August 22, 2008                                                              Page 7 of 9
        Keno – Current year-to-date sales are less than last year. There is a hold on new game
        development until after the new Traditional System Replacement. Current sales are also
        being affected by the small rolling jackpot amounts.

        Win for LifeSM - Sales year-to-date are up 5.59 percent over the same time last year.

       Retail Operations Update (AD Eaton)
         There are 16 poker-only retailers left in the state; one less than last month.

         Retail Operations field work includes game upgrades on four separate Video
        LotterySM terminals. Upgrading the bill acceptors is approximately 80 percent complete.
        Removing and replacing Instant Ticket Vending machines (ITVMs) with new player-
        operated on-line equipment is approximately 40 percent complete. There have been
        1,443 Imagine terminals installed, approximately 50 percent complete.

       Marketing Department Update (AD Hardy)
             AD Hardy assured the Commission that the Lottery is looking at both short-term and
        long-term strategies to increase sales. The Lottery is continuing to look at network
        gaming and is staying involved with the Gaming Standards Association (GSA) on that.
        The Lottery is working with Canadian jurisdictions on an organized voice to make sure
        lottery standards and issues are addressed by GSA, particularly in the wide-area
        networks. Where Lottery will see new game features is with the G2S standards system-
        to-terminal communications. The Lottery is aggressively moving as quickly as possible
        to that environment.

           The Lottery continues to look at different types of lottery products and work with
        GTECH on evolving technologies to move forward on the Traditional side of the
        business.

       Oregon Wins (Brian Sullivan)
            Mr. Sullivan reported on Oregon Wins’ first campaign of FY09, the Salmon Estuary
        Project, and presented the print advertisement and described the TV spot, which was
        not available to be shown at this time. The Salmon Estuary is located on the Oregon
        coast.

            The second Oregon Wins’ campaign in FY09 will be the “wave energy” project.
        Oregon Lottery® dollars helped create the Oregon Wave Energy Trust, an emerging
        industry which will make Oregon a national leader in wave energy production.

[End of Retail Operations and Marketing.]

H. OTHER BUSINESS – ORS 461.150
       The Commission received the Director’s and Assistant Director’s salary information for
   review prior to today’s meeting (Exhibits #7 and #8). Director Penn reviewed the statutory
   process for salary approval of executive staff. The two-year salary compensation plan for all
   managers was restructured last year by the Governor, and incorporated here at the Lottery.
   Director Penn requested approval from the Commission to implement the second year’s
   step from the Governor’s salary plan. ORS 461.150.

                Chair Ungar read the motion into the record for the Assistant Directors’
                recommended salaries. Chair Ungar recommended approval for the Director

Oregon State Lottery Commission Meeting
Meeting Date: August 22, 2008                                                          Page 8 of 9
                to implement the recommended salaries for the Assistant Directors effective
                July 1, 2008, as outlined on the attached spreadsheet. Commissioner Howland
                seconded the motion. The motion passed unanimously, 5-0.

                Chair Ungar requested a motion for the Director’s recommended salary.
                Commissioner Howland recommended approval for the Lottery to implement
                the recommended compensation for the Director, per the attached
                spreadsheet. Commissioner Fogg seconded the motion. The motion passed
                unanimously, 5-0.

        There was no other business brought before the Commission. Chair Ungar adjourned
    the August 22, 2008, Lottery Commission Meeting. The next meeting is scheduled at the
    Debbs Potts Oregon State Lottery Commission Building on Friday, September 19, 2008.


Respectfully submitted,


__________________________________
Linda DeBlasio
Sr. Executive Assistant to the Commission
Lottery Director’s Office

Approved by:



__________________________________
Commissioner Steven Ungar, Chair
Oregon State Lottery Commission




Oregon State Lottery Commission Meeting
Meeting Date: August 22, 2008                                                     Page 9 of 9

				
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